March 6, 2014

Innovation: Small Businesses Live It, Big Businesses Buy It

There is a recurring theme in the business world.  Large companies are becoming bogged down with processes, are worried of investor confidence and their bloated management system is making it difficult for them to come up with innovative ideas. So what do they do? They gobble up smaller companies.

Take for example search-engine giant Google. I was recently speaking with a contact of mine who had just accepted a position as head of operations for Google Fiber in one of their test cities.  In discussing his new opportunity he told me, “It’s like working for the biggest startup in the world,” a sentiment I’ve heard before about Google.  But one that I doubt every time I hear it. They’re a company worth more $250 billion dollars.  That’s not a startup.  And it doesn’t act like a startup.  In fact, they act like a giant company that eats up smaller companies to gain their innovations.

So for those entrepreneurs thinking they can just sit back and let their business run its course, here are a few reasons why you should be constantly thinking about innovation.

It is necessary for survival. Small businesses and startups are the breeding grounds for innovation.  Unhindered by the same tethers that hold down big businesses, these companies are able to innovate in ways that their larger counterparts cannot.  In fact, innovation is a necessity for small business. They don’t have the financial means to accomplish many of their goals, and thus they have to find creative means to an end.

It has dollar signs all over it. Small business owners and serial entrepreneurs who understand the relationship between big business and innovation are able to exploit it to achieve some awesome financial success.  Understanding pain points of larger businesses, creating an innovative solution and then developing that solution into a scalable product will undoubtedly attract the attention of larger companies. This can result in company buyouts, leases, licensing agreements, or partnerships that provide financial windfalls for the small business.

It could lead to acquisitions. If we were to focus solely on Google’s most recent acquisitions, we would find a host of smaller companies that were purchased for their innovative products.  Here is a list of just a few:

Nest: Home automation
Spider.io: Click fraud
Redwood Robotics: Robotic arms
Meebo: Instant messaging

Big corporations are constantly on the hunt for smaller startups that can fill a void. They not only look for innovative solutions but also companies that already have a strong presence and have scaled. 

Startups and small businesses are the heart that beats the lifeblood of innovation through the business world.  And they should be celebrated for their contributions.  As an entrepreneur, innovation should be the first thing on your mind when you wake up and the last thing on your mind when you go to bed. 

And no matter why you innovate, you can rest assured the business world will take notice.

Source: http://www.entrepreneur.com/article/231962