Working smarter — Is innovation a luxury?
I nnovation is the ability to respond to change in a creative way. It could be a larger-scale venture such as commercializing a new product or a low-cost initiative such as changing a process in your ...
Innovation is the ability to respond to change in a creative way. It could be a larger-scale venture such as commercializing a new product or a low-cost initiative such as changing a process in your company that helps you work more efficiently. Ultimately, innovation is key to how to increase a company’s value in the marketplace.
Business owners may choose to develop an innovation portfolio for the company’s innovation ideas. In this portfolio a business could have any number of possible projects ranging from new ways to market a product online to setting up systematic employee brainstorming sessions or investing substantially in research and development (R&D). Entrepreneurs should avoid throwing money at an innovative idea and hoping it works. Instead they should have several projects in the pipeline. Not all of these initiatives will be on the same scale or give the same return but, by investing in multiple projects, owners avoid the risk of putting all of their eggs in one basket and becoming disheartened when the one big idea doesn’t pan out.
CULTURE OF INNOVATION
Entrepreneurs should first conduct a diagnosis in order to take stock of their company’s innovation capabilities and identify internal and external opportunities for innovation. One of the first things that many small and medium business owners may need to develop is a company culture of innovation. If employees don’t buy into thinking in an innovative way, then entrepreneurs won’t likely succeed with their initiatives.
Plastics companies could also consider investing in basics such as appointing an “innovation champion” who spearheads projects and is accountable for their success in order to formalize the commitment to innovation and ensure follow-up. Entrepreneurs might also invest in effective communications to get the innovation message out to employees or organize company forums that stimulate creativity.
Once the innovation initiatives have been scooped out, business owners are better equipped to determine where they need to spend and how much. The first dollar inevitably has to come from the business but there are ways to leverage the investment by seeking finance for innovation projects. Generally speaking, entrepreneurs need to show that the investment will have a positive effect on the bottom line or help the company grow over a longer period. Once they build a strong business case, they’re more likely to get the capital they need.
PICKING PARTNERS, FINDING FINANCING
Business owners can also strike up alliances or partnerships with other organizations to develop innovative projects involving R&D. Industry grants may be available for projects that have a plastics research component. For
example, the National Research Council has an Industrial Research Assistance Program (IRAP) which provides advisory service and technological expertise and funds innovative research and development for small and medium businesses. The funding enables owners to leverage investment and possibly reduce costs.
Government financing such as Investment Tax Credits (ITC) can also be used to offset the costs of innovation and reduce risks. The Scientific Research and Experimental Development, a program offered by Canada Revenue Agency (CRA) provides ITCs amounting to 35 per cent of qualifying expenditures, including salaries, capital, consulting fees and materials. ITCs are offered to businesses that develop or improve new products in different industry verticals such as manufacturing, software, prototypes, custom machinery, Internet access, manufacturing processes and automated tracking methods.
One of the smartest investments in innovation for small and medium businesses is choosing to work closely with the right consultant who can help ascertain the viability of innovation projects. A BDC consultant can help entrepreneurs identify eligible projects, prepare technical project descriptions and accelerate the process with CRA. A second advantage of working with BDC Consulting is that business owners can seek related innovation project financing from BDC. Getting those services all under one roof is clearly advantageous for small and medium enterprises.
Bruce McConnell is vice-president of Operations Support -Strategic Initiatives for BDC Consulting. He is a chartered accountant with 20 years of experience in consulting with small, medium-size and large Canadian enterprises, and he has hands-on experience in the private industry. BDC is a financial institution wholly owned by the Government of Canada that actively supports the development and growth of Canadian small and medium-size businesses through its complementary financing, investment and consulting solutions. For more information, visit www.bdc.ca.