The need for SME innovation in the 'new normal'

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Date: 14 January 2022

A small business team work on an innovative new project

For many UK SMEs and start-ups, the past two years have been a constant struggle as business leaders faced numerous roadblocks throughout the COVID-19 pandemic and Brexit, alongside the daily decisions that come with running an SME.

Yet as we move in 2022, business leaders can reflect on the lessons learned through these difficult times and look to ensure they are well prepared for any future complications to their day-to-day business operations.

As part of our recent UK SME Risk Report, we have been able to gauge how businesses' risk management strategies coped with the recent upheaval, as well as highlighting the focus areas that all SMEs should be integrating into their strategies on as we move into 2022.

Nothing could have truly prepared business leaders for the impact of the COVID-19 pandemic, with businesses expected to think fast and find a way to survive. As well as fundamental changes to where they work, businesses were forced to make changes to how they work, with 42% modifying or planning to modify their day-to-day processes in light of the pandemic.

This level of innovation was crucial for businesses as they looked to navigate the landscape of the 'new normal', and it seems this will be crucial for businesses in the year ahead too.

Failure to innovate in response to changing client demands was highlighted as the second most critical internal business risk for UK SMEs, with 24% of business leaders highly concerned about this.

Many SMEs have also had to pivot in order to survive the trials of the pandemic. Sectors like hospitality have had to make wholesale changes to their business models, while others have had to embrace technology either through ecommerce or remote working.

Businesses that were quick to innovate and evolve their business models, products and services were shown to weather the storm of the last few years better than those that failed to change with the times. However, as much as this survival activity has been reactive, it is very easy to not recognise or acknowledge it as innovation.

It could also be said that those that have not ranked innovation highly are viewing their innovation as a completed activity. This is particularly prevalent amongst those businesses with a company turnover of £100,000 or less, according to our research.

For many leaders, COVID-19 will be one of the biggest business challenges they ever experience and surviving it could give a false sense of security, or even instil a level of complacency. Innovation cannot be seen as a 'one and done' activity – this is vital.

Businesses should certainly ensure they've learned from the trials of the past few years, and now a proactive rather than reactive approach to innovation and change should become a part of their cultures. Businesses should look to continually evolve and improve in order to help build resilience, so they are robust enough to manage any unforeseen circumstances or crises. For many SMEs, it has been about adopting a new mindset, and their continued, proactive innovation will help them to move from surviving to thriving.

We must not lose sight of that fact that while they may be a little different in form and severity, there will inevitably be other trials that lie ahead.

It is also worth assessing whether your risk management and business continuity plans are as robust as is required by your industry and by insurers. Plans must be fit for purpose and be able to respond to future risks, not a plan for plans sake.

Copyright 2022. Article made possible by Amanda Walton, Enterprise Managing Director at Marsh Commercial.

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