Economic Crisis As An Opportunity For Innovative Small And Medium Size Technology Companies
Although economic downturn is an inevitable part of the business cycle, its impact does not necessarily have to be the same for every company. While many technological businesses struggle, the innovative ones can thrive in tough times. Better yet, smart innovative small-and-medium-sized (SMEs) technology companies see economic uncertainty as an unique opportunity to expand. The crisis has several negative impacts. Among others, loss of revenue and profit will drive large companies’ managers to focus on cost cutting, which is not good for innovation. However, when managers think about cost reducing, they will be considering which products or parts of their business processes are weak, and so, improvable.
It is a commonly accepted idea that “disruptive innovation” is very important, especially for multinational technology companies. However, the fact of being a first mover company, introducing a new technology in a given market, will never guarantee the firm to assure its success. Therefore, innovation needs to be seen as a core component of any business’ strategy for a large technological company even in a down economy. For this reason, big firms face a huge disadvantage when engaging in breakthrough innovation that is why so their managers look for avant-garde movements to innovate bearing as minimum cost and risk as possible. In the last few years, some of them have decided that this radical innovation may take place outside of the organization. The economic processes of globalisation and the advances in technology have changed the environment where the companies evolve. Cooperation among firms can be an answer to the changing economic environment and to competition strengthening. Venture capital-funded startups or outsourcing of innovation could be considered two real options to radically innovate, cooperating outside of the borders of the company at a low cost. At this stage, innovative small and medium sized technology companies have an important role to play in the value chain of the products or services offered by large companies since they act as catalysts for progress all over the world Furthermore, they are considered the principal generators of innovation and economic activity. As an example, at the Pharmaceutical industry in Europe, biotech SMEs and startups are producing innovative medicines and becoming strategic suppliers collaborating with the large pharmaceutical laboratories.
Some of the drivers considered by different authors in SMEs innovativeness research are: flexibility in new ways of working, market anticipation, customer focus, commitment of managers/owners or novelty in products and processes. Innovation in SMEs is most of the time part of the business strategy and it is based more on developing new ways of working than in new product development. Innovative SMEs companies should make efforts in order to take advantages of the opportunities that a down economy is bringing them.