By: Chuck Frey
While large organizations innovate, smaller ones often reinvent because they have different drivers for change.
While large organizations usually innovate through complex innovation management processes, smaller operations more often reinvent. That’s usually because they don’t have as many products or services and aren’t as locked into legacy systems.
Smaller operations are also more nimble, and so are often more responsive to current market, financial, and social conditions. When it comes time for a change, as often as not they take change to its farthest degree and may completely overhaul themselves.
Further, smaller organizations such as small businesses and associations are susceptible to different drivers for reinvention than large organizations seeking to innovate. In that way, they are closer to individuals who decide they want to change their behaviors or lifestyles. These drivers include:
Pressure from financial, economic and personal changes: Small organizations tend to operate closer to the bone and so are much more influenced by financial results. For example, the loss of a gorilla client can spell near doom for some small businesses, so they reorganize and reinvent to seek new ones in different markets.
Also, changes in an economy, such as the current recession that is besetting the world, can have an outsize impact on small organizations. When a large organization experiences a drop in revenues, it will impact their stock price, but usually they have the resources to ride out the storm. Not so much the small business.
Lastly, leaders of small organizations rarely have the support services of large organizations, and so are much more personally involved in their operations. A wish to slow down, spend more time with family, or create better work-life balance can lead to a reinvention of the entire business.
Diversification strategies often play a role in a smaller organization’s desire to reinvent. Often these operations rely on one or two core services for the majority of their revenue, but would like to hive off some services to create other streams of income or explore other markets. This diversification is often described in the investment portfolio management term “core and explore,” in which one puts the majority of one’s assets into relatively safe and predictable investments and earmarks a small portion to explore other, more risky investment areas.
Disruptions in an industry can also cause smaller organizations to embark on reinvention. Probably the most egregious example of this is in the technology industry, where disruption is a regular occurrence. A traditional software maker, for example, might have to completely revamp its operation because of the advent of the software as a service (SaaS) or cloud computing models. However, technology is just a first-in leader for most trends. Today, no industry is safe from disruption.
Simple boredom plays a larger part in reinvention than is often acknowledged. Many small operations are entrepreneurial and entrepreneurs are often more excited by the building of companies than they are by the management of them. To get their entrepreneurial juices running again and use their often superior company-building skills, they overhaul their operations to access new markets or take advantage of new opportunities.