Are design-led innovation approaches applicable to SMEs?

Abstract

This study analyses the design discourse and approaches in order to identify whether design-led innovation approaches are applicable to SMEs. It discusses the number of concepts that are widely used in design including design-driven innovation, design thinking and user-centred design to identify to what extent these approaches are derived from the findings about SMEs, take SMEs' characteristics into consideration or meet SMEs' specific needs. To explore SMEs' characteristics and design and innovation, not only literature but also a series of interview conducted with SMEs (n=8) and designers (n=9) were consulted. To reflect design innovation discourse, the core literature on design innovation and a number of audiovisual materials that are publicly available were also analysed. It has been found that most of the innovation approaches are exemplified through large enterprises and multi-nationals. Findings indicate that several design innovation concepts encourage businesses to understand their users who can provide valuable insights informing the design process. However, SMEs often have close relationships with their customers, and they already integrate these insights to their innovation processes. Note that SMEs do not incorporate such information into idea generation process systematically. Most of the knowledge within the company is tacit. Thus, design innovation should focus on articulation of this knowledge and integrating into the innovation process. A barrier to innovation is SMEs avoid experimenting due to the risks involved. Rapid prototyping emphasised by design thinking provides a low-cost opportunity to explore whether the new ideas will meet the needs and requirements and address some of the uncertainties involved. Since it is cheap and quick, it is relatively a safe way to address the uncertainty of innovation. Therefore, this aspect of design thinking is applicable to SMEs' innovation processes.

Full text

INTERNATIONAL CONFERENCE ON ENGINEERING AND PRODUCT DESIGN EDUCATION
3 & 4 SEPTEMBER 2015, LOUGHBOROUGH UNIVERSITY, DESIGN SCHOOL, LOUGHBOROUGH, UK
ARE DESIGN-LED INNOVATION APPROACHES
APPLICABLE TO SMES?
Melehat Nil GULARI and Chris FREMANTLE
Gray’s School of Art, The Robert Gordon University, Aberdeen, UK
ABSTRACT
This study analyses the design discourse and approaches in order to identify whether design-led
innovation approaches are applicable to SMEs. It discusses the number of concepts that are widely
used in design including design-driven innovation, design thinking and user-centred design to identify
to what extent these approaches are derived from the findings about SMEs, take SMEs’ characteristics
into consideration or meet SMEs’ specific needs.
To explore SMEs’ characteristics and design and innovation, not only literature but also a series of
interview conducted with SMEs (n=8) and designers (n=9) were consulted. To reflect design
innovation discourse, the core literature on design innovation and a number of audio-visual materials
that are publicly available were also analysed.
It has been found that most of the innovation approaches are exemplified through large enterprises and
multi-nationals. Findings indicate that several design innovation concepts encourage businesses to
understand their users who can provide valuable insights informing the design process. However,
SMEs often have close relationships with their customers, and they already integrate these insights to
their innovation processes. Note that SMEs do not incorporate such information into idea generation
process systematically. Most of the knowledge within the company is tacit. Thus, design innovation
should focus on articulation of this knowledge and integrating into the innovation process. A barrier to
innovation is SMEs avoid experimenting due to the risks involved. Rapid prototyping emphasised by
design thinking provides a low-cost opportunity to explore whether the new ideas will meet the needs
and requirements and address some of the uncertainties involved. Since it is cheap and quick, it is
relatively a safe way to address the uncertainty of innovation. Therefore, this aspect of design thinking
is applicable to SMEs’ innovation processes.
Keywords: Design thinking, design driven innovation, innovation, SMEs.
1 INTRODUCTION
Small and medium-sized enterprises (SMEs) represent over 99% of all businesses in the UK and in
Europe. Yet, the number of studies on innovation management in SMEs is relatively smaller compared
to those on innovation management in large enterprises . Concepts and theories related to innovation
are not always valid for small businesses. In the last decades, scholars have highlighted that SMEs and
large enterprises innovate differently , , . Equally, SMEs’ design needs and design capabilities are
different than large enterprises.
Design innovation has become the focus of many scholars, educators, practitioners, regional
governments and design institutions. Design scholars and practitioners encourage a better exploitation
of design by taking a strategic approach. Approaches such as design thinking and design strategy
which focus on using design as a strategic business tool rather than developing discrete services and
products for business have created considerable interest. ‘Intuition’, ‘creativity’, ‘holistic’ and ‘lateral
thinking’ are amongst important business values which supplement and even replace the traditional
values of business such as rationality and calculation . Despite the intrinsic appeal of the design
approaches, they have been hardly adopted by SMEs. Although the problem is often explained by
SMEs’ hesitation and their lack of knowledge using design methods, the applicability of design
concepts by SMEs has been seldom explored.
The research reported in this paper raises the following questions: (1) Are design models and
approaches applicable to SMEs? (2) Are these models developed according to the needs and
characteristics of SMEs? To address these questions, the paper analyses the design innovation
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discourse and concepts. The data collected for the analysis includes primary and secondary data. The
primary data was collected through a series of interviews conducted with SMEs (n=8) and designers
(n=9) by using a semi-structured interview schedule during 2012-2013. The SMEs selected for this
study were based in Scotland and worked in variety of industrial sectors including oil & gas, food,
building, aqua, information technologies, sport and manufacturing. According the EU definition, two
SMEs are medium sized enterprises (R1 and R2) and six SMEs (R3 to R8) are small sized enterprises.
Designers participated in this study were based in the UK and mainly worked in small sized design
consultancies and agencies. The emergent primary data was analysed by adopting a thematic analysis
method. The secondary data was gathered by using the existing literature on design innovation, a
number of publicly available audio-visual materials to unfold the dominant design-led innovation
discourse.
The rest of the paper is structured as follows: the first section introduces some of the design innovation
approaches such as design thinking , design driven innovation , participatory design before moving to
presenting SMEs’ innovation processes, their characteristics and their capabilities based on the
literature and interview findings. Understanding these characteristics serves to evaluate whether design
innovation concepts help SMEs to innovate. The design rhetoric section presents how these popular
design approaches appear in the design studies and audio-visual materials. Final section concludes the
paper.
2 DESIGN INNOVATION APPROACHES
The roadmap to innovation using design is exemplified through different approaches. These include
human/user-centred design , participatory design , design thinking , and design-driven innovation , .
The basic assumption of user-centred design is users can provide valuable insights informing the
design process. These insights can be obtained by asking questions to users or preferably by direct
observation while they are using the product or the service . Participatory design or co-design, on the
other hand, blurs the boundaries between creators and users. Users become a critical stakeholder in the
design process. It advocates “power to the people”, and considers how we can get greater benefits
from new co-designing relationships within a network of participants whose roles have been evolving.
Design thinking has also been found to be a promising approach to harnessing innovation capabilities
of a company , , . Brown defines design thinking as a human-centred approach to innovation, “uses the
designer’s sensibility and methods to match people’s needs with what is technologically feasible and
what a viable business strategy can convert into customer value and market opportunity” . Design
thinking encourages experimenting and risk taking . “Fail early succeed sooner” is the dictum of many
design thinkers. This experimentation process is supported with low fidelity prototyping. Design
thinking has raised great interest and mixed reactions amongst design practitioners as well as design
scholars , .
Both participatory design and design thinking have a user focus to achieve innovation. Verganti
problematises the user focus in innovation processes and questions how some companies including
Alessi, Artemide, Apple or Bang & Olufsen succeed in the market without being user-centred . To
him, the reason behind the success of the abovementioned companies is that they apply design-driven
innovation. Design-driven innovation stresses the relationship between the vision of the company and
new product meanings. Innovation is based on creating new meanings. These new meanings, messages
and languages are diffused in society. “Design is the brokering of languages” . His view alters the
approach that is design as being solely driven by user needs or new technologies, new functions i.e.
‘technology push’ and ‘market pull’ models. Verganti defines design-driven innovation “as an
innovation where novelty of message and design language is significant and prevalent compared to
novelty of functionality and technology” .
3 SMES AND INNOVATION
SMEs play a vital role in both developing and developed countries for economic growth and
competitiveness. SMEs’ innovation is critical for economy, yet SMEs confront particular problems
constraining their innovation activities. Barriers to economic development and innovation are grouped
into internal and external barriers . Internal factors are a result of inadequate internal resources and
expertise, such as a limited budget for investment, limited access to skilled labour, catching up with
improvements in technological advancements, problems in carrying out marketing and project
management activities . External factors are market structure, bureaucratic hurdles and the problem of
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finding suitable partners to collaborate with . The development of strategies for competition and
growth within SMEs are limited especially for the ones that manage their operations on a day-to-day
fire-fighting basis . Table 1 summarises the characteristics associated with disadvantage and advantage
when they are pursuing innovation and growth. Similar to their larger competitors, SMEs need to be
concerned with their market positioning, technological trajectories, competence building and overall
organisational processes .
Table.1. Summary of SMEs characteristics associated with weaknesses and strengths
based on Nooteboom
Characteristics associated with disadvantages Characteristics associated with advantages
Lack of functional expertise and the
difficulty in hiring full-time
specialised occupations for diverse
tasks
Difficulty of diverting skilled
personnel from day-to-day activities
Limited investment capability,
resources on new technologies
Lack of organisational characteristics
that enable strategic use and
acquisition of knowledge
Ad-hoc management
Short-term perspective
Dynamic–lean structure
Personality, independence
Informal structure, short communication
line and strong leadership
Sharing information quickly
Non-hierarchical structure
Accessibility of top level management
Filling niche opportunities
Customised new products
The interviews conducted in this study also reveal the opinions of SMEs regarding their understanding
of innovation. The majority of SMEs believe in the potential value of innovation for improving their
competitive position, reducing costs and expanding their customer base. Amongst the SMEs
interviewed, incremental innovation through smaller improvements are usually preferred to radical
innovation steps (R2, R3, R7).
Table 2. SMEs’ approach to innovation
Example quotation Summary statement
“We’ve planned to double our profit in the next 10 years. Large part of
that is through innovation, so new products, new product introduction.”
R1, SME non-owner-manager
Innovation is important
for growth
“You’ve got to be careful that you don’t become too innovative”. R2,
SME non-owner-manager Cautious-avoiding major
innovations
“[Innovation is] Obviously doing things differently. But the construction
industry is very conservative because it is producing a long-term durable
product. If something is tried, tested and proven, we are keen to keep
doing that because we know it is safe.” R3, SME owner-manager
Importance of tried and
tested methods
“Innovation is to me when you come up with a new way of doing
something that has obviously got benefits so everybody else is doing so.
I don’t think we do that in how we deliver services. It is more small
innovations rather than one big ta-da. It is all about lots of small
improvement you can make in how we work.” R7, SME owner-manager
Small changes rather
than big steps
The main barriers to innovation put forwarded by the SMEs are a lack of time and resources. The
small sized businesses were occupied with day-to-day issues, which prevent them to seize innovation
opportunities (R3, R5, R6, R7). The interviewees indicate that because of their busy schedules, they do
not have time to reflect and plan ahead and instead they focus on short-term results and easy-to-apply
solutions.
“I think there are opportunities for innovation that we missed a lot in the past because we are
so busy fire fighting and just dealing with day-to-day". R6, SME non-owner-manager
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“Everyone is so busy running around to get the day to day work done, they can’t look forward
and plan what they are doing.” R7, SME owner-manager
The majority of the SMEs (R1, R2, R3, R4, R5, R6, R7) approached for this study uses their
customers and employees as a source of information and the basis for developing innovation. Often
this knowledge is personal and owned by a small number of individuals.
“Simply, I was born and brought up in the countryside, which leads me perhaps to think a bit
differently from people who are from the cities. While working in the countryside, we meet a
lot of people, listen to them and hear their needs. You pick up what people tell you basically”.
R3, SME owner-manager
“I have been working in the market for 20 years. I understand the market fairly well. Not only
I am picking up knowledge on that but also if I have a specific question that needs answering,
I can actually ask them directly to the market because I know people and companies within the
market. It is done by actually consulting people in the market.” R4, SME owner-manager
Amongst this group of respondents, the representatives of medium sized companies (R1, R2) reported
that they develop ideas for innovation on a systematic basis. These initiatives include the use of an
idea-box, internally held meetings and workshops held with external or internal facilitators. The other
SME respondents from small sized companies (R3, R4, R5, R6, R7) did not mention a systematic
process for developing ideas for innovation. Their expertise is often the source of their ideas. It
appears that most of the knowledge within these companies is tacit.
On the other hand, from the designers’ perspective, as R16 commented, the focus is on understanding
the user, “They [SMEs] need help, I think they need to understand a lot about their end-users, what
their end users need and want. So that’s the big, I think”. Similarly, as discussed above, several
design-led approaches emphasise the importance of understanding users and customers . In fact,
communicating directly with customers to understand their needs and opinions is not a problem for
small businesses. They often have a face-to-face relationship with their customers. They comprehend
the needs and requirements of their customers. However, it appears that small businesses in particular
need to capture information from their customers more systematically for generating new ideas for
innovation. Therefore, design methods and tools should focus on capturing and articulating the
customer’ needs and feedback and then translating this information into the innovation process in a
systematic way. The assumption which SMEs do not understand their customers and users may be
invalid; thus, user-centredness may not be a ground breaking approach for SMEs.
The interviews conducted in this study indicated that SMEs have a greater tendency to pursue
incremental innovations rather than radical innovations. It was clear that SMEs avoid taking risk.
Design thinking encourages experimenting and risk taking by proposing ‘fail quickly and cheaply to
succeed’. Because uncertainty is an unavoidable part of the innovation process , by adapting such
aspects of design thinking, SMEs can better address the uncertainties of business and innovation
processes.
4 THE DESIGN RHETORIC
Since design innovation has become the focus of many business and design scholars, practitioners and
regional governments, there are several online multimedia that promote design innovation and the role
of design in business. The Industrial Designers Society of America has recently commissioned
Mormedi - a Spanish design consultancy- to produce a video about the main challenges the design
industry in Europe. The video presents the viewpoints of leading companies such as BMW, Bosch,
Orange, Philips, The Foundry and BBVA. Amongst these different industry sectors such as
automotive, consumer electronics, banking or telecommunications, there are no standpoints of SMEs
to represent design challenges . Similarly, the UK Design Council’s 2010 video on design’s role in
innovation only features big corporate leaders .
If the academic design literature focusing on design-driven innovation concepts is explored, it can also
be noticed that the concepts draw upon the observations of large enterprises including Apple, 3M and
Dyson and build on interviews conducted with designers from leading design-led companies such as
Alessi and IDEO. For example, Verganti states,
“Consider for example the diffusion of colored translucent materials from home furniture to
computers (a linguistic exercise that let the Apple I-Mac speak the language of home rather
than office. In this case Jonathan Ive, the VP of design of Apple, with previous experience in
domestic products, acted as a broker of languages from households to computers)” .
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Likewise, in his book, he suggests, “Design-Driven Innovation unveils how leaders such as Apple,
Nintendo, Alessi, Whole Foods Market build an unbeatable and sustainable competitive advantage
through innovations that do not come from the market but that create new markets” . Equally, to
Beverland and Farrellyi, design-led innovation means that design plays a strategic and central role in
innovation. They gave examples from companies such as Apple, Vitra and Dyson . The design process
generates innovations that have been unforeseen by the market. Brown provides no mentions to SMEs
while introducing design thinking concept . The great emphasis on large enterprises and corporate
leaders on these publications poses the question if design innovation concepts are derived from the
findings about SMEs. These abovementioned examples still do not full y illustrate how many times we
heard of Apple and Dyson when design-led innovations are mentioned. To some extent, using well-
known companies to create some sort of recognition is understandable. Nevertheless, these
representations also frame the language in such a way that leaves SMEs invisible in the design
innovation discourse and leads to questionable assumptions amongst designers.
5 DISCUSSION AND CONCLUSION
This paper has argued that whether design-led innovation approaches are relevant to SMEs’
innovation processes. It looked at SMEs’ core competencies and main barriers to innovation, which
were then compared with the features of mainstream design approaches. The findings demonstrate that
many SMEs avoid taking risk; therefore, approaches such as design thinking encouraging
experimentation, addressing uncertainty and highlighting cheap prototyping are relevant to SMEs and
help them build such capabilities. On the other hand, SMEs have close relationships with their
customers and users, and they device their customer relationships and observations to generate new
innovative ideas. Concepts focusing on understanding users seem to be better suited to large
enterprises than SMEs. However, the findings illustrate that most of the knowledge base within SMEs
used for innovation and growth is tacit in nature and shared by a small number of people in the
company. Design innovation methods therefore should support SMEs to externalise their tacit
knowledge.
It has been found that most of the innovation approaches are exemplified through large enterprises.
The types of videos, papers and blogs that mainly represent the perspectives of large corporate leaders
and multinationals add up over time and affect our understanding of the way in which design should
work and help companies. Eventually, this strengthens the invalid assumption that is design-led
innovation for large and small firms are alike. These perspectives also have implications for the design
education. Design graduates often have to work with SMEs within the current economic climate. This
research concluded that viewing SMEs as microcosms of larger companies is not helpful; distinctive
characteristics of SMEs should be recognised to understand how SMEs learn, design and innovate.
SMEs intrinsic characteristics should be incorporated in the design education, the design theory and
the design practice, and the expectations of large enterprises should not dominate the development of
the design field.
This research has identified that not all aspects of design innovation approaches are applicable to
SMEs. This conclusion matches some of the existing research. For example, Deakins and Freel and
Zhang et al. draw attention to the fact that often learning models are developed according to the needs
and features of large organisations. Hence, these models are often not applicable to SMEs. For
instance, Deakins and Freel claim that considering the size of small firms, theories improving
communication can be ineffective in SMEs, as communication with a small number of employees
should not be an issue for an SME . To Deakins and Freel, the concepts and theories that recognise the
impact of uncertainty in learning and development, such as Schumpeterian dynamic approaches, are
better suited for SMEs .
While aiming to understand if SMEs’ requirements are addressed by design methods and approaches,
it should be noted that SMEs are not only different in size, sector, technology and R&D level,
age/lifecycle and geographical location, but also in their individual dynamic and informal knowledge .
Over-generalising their inherited weaknesses and strengths might also be problematic while evaluating
design approaches for innovation. This research is based on the findings that are derived from the
literature and qualitative data derived from a limited number of participants mainly representing
Scotland. Future research might consider validating some of the conclusions with quantitative data,
such as surveys.
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