1. Defining innovation beyond just new products
Focus Area 1 - What Does It Mean to Foster Innovation?
Introduction
Innovation is often misunderstood as simply inventing new products or adopting the latest technologies. For New Zealand’s small and medium-sized enterprises, the concept of innovation needs to stretch far beyond this narrow view. Innovation is the continuous pursuit of better ways to work, serve customers, solve problems and remain competitive. It is about finding new value through ideas, processes, mindsets and relationships. Every SME, regardless of size or sector, has the potential to be an innovative business.
The Problem
Many SME owners still equate innovation with big, bold inventions or flashy product launches. This perception can lead to inaction, with owners believing innovation is outside their reach due to limited time, budget or technical knowledge. As a result, businesses may stagnate, overlooking smaller but impactful opportunities to improve systems, reimagine services or rethink internal practices. This misunderstanding can block everyday innovation and limit long-term growth and relevance in an increasingly competitive and uncertain market.
Narrative Scenario
Tania owns a successful building supply company in Palmerston North. She prides herself on strong customer service and solid supplier relationships. Her business has been steady but not growing. Tania sees innovation in headlines and corporate case studies and assumes it means creating new products or investing in expensive technology. With rising costs and changing customer expectations, she begins to worry about being left behind. One day, during a local industry workshop, Tania hears another SME owner talk about innovation not as invention but as improvement. This insight sparks her curiosity.
Back at her business, she starts looking at her operations differently. She notices customers often wait too long at the counter for information about stock levels. Staff are frustrated with outdated systems. Delivery schedules are unclear. Tania realises that innovation in her business could begin with rethinking how they work, rather than what they sell.
Actions To Take
Begin by redefining innovation as the ongoing effort to improve value for your customers, your team and your business. This can mean refining services, redesigning internal workflows or adopting smarter communication tools.
Encourage small but meaningful changes. Ask staff what frustrates them or customers. Look for patterns. Addressing these may uncover your first wave of innovation.
Create an idea capture system. Whether it is a shared digital document, a suggestion board or monthly team hui, give people a place to raise ideas regularly.
Set aside short, focused time slots to work on one improvement at a time. Time-boxing innovation efforts helps it become a habit rather than an overwhelming aspiration.
Narrative Outcome
Tania’s first act of innovation is introducing a digital tool that links her inventory to a customer-facing tablet at the front counter. This allows customers to check stock availability themselves, freeing up staff and reducing frustration. Next, she holds a series of lunchtime workshops where her team can bring up small pain points.
These sessions uncover a handful of easy fixes, including better labelling systems in the warehouse and tweaks to the delivery calendar. These are not revolutionary changes but they transform the day-to-day experience for staff and customers. Tania’s team feel listened to. Customers comment on the smoother service. Revenue grows modestly but steadily, and Tania begins to see her business through a new lens.
Owner's Mindset
Fostering innovation begins with a mindset shift. It is about moving from ‘what can we invent’ to ‘what can we improve’. Owners must get comfortable with uncertainty and curious about possibilities. Openness, humility and a willingness to learn are essential traits. Innovation does not belong to a department or a job title. It begins with leadership that sees improvement as everyone’s responsibility and encourages exploration without requiring perfection.
HR Best Practice
Hiring for innovation means prioritising curiosity, collaboration and initiative over pure experience or technical ability. HR practices should include structured ways to involve staff in shaping improvements. Performance reviews can include innovation contributions. Job ads and interviews should probe for creative thinking and problem-solving, not just past roles. Training staff to experiment and learn from small failures supports a healthy innovation culture.
Psychological Perspective
Creativity and innovation thrive in environments of psychological safety. This means staff feel safe to speak up, try new things and fail without fear of blame or ridicule. It also requires clarity about values and goals, so that creativity is focused rather than chaotic. Leaders must model openness and vulnerability. When mistakes are treated as learning opportunities rather than personal failures, individuals and teams become far more willing to suggest and trial new ideas.
Red Flags to be Mitigated Against
Watch for signs of fear or cynicism among staff. If people say “we tried that once” or “that won’t work here” too often, they may be reacting to past failures that were mishandled. Be aware of the perfection trap. If innovation is judged only by whether it succeeds immediately, people will stop trying. Avoid thinking that innovation must be driven by technology. Some of the best innovations come from rethinking processes or reshaping customer experience.
Reflective Questions
What does innovation currently mean to you and your team
Where are you already improving but not calling it innovation
What small frustrations could be opportunities for creative improvement
Who on your team shows curiosity or problem-solving that you could encourage further
How do you react when someone makes a mistake while trying something new
Key Takeaways
Innovation is about consistent, creative improvement
It is accessible to every SME, not just those with large budgets
Small changes often produce large benefits over time
Leadership plays a key role in defining and modelling innovation
Staff need to feel safe and supported to contribute new ideas
Golden Nugget - “Innovation is not about invention but about making things better in ways that matter.”
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