How to Engage SMEs in Innovation Networks- Lessons from the Dutch campaign FuturizedBusinesses

By: Ingrid van Berlo / Murk Peutz / Sjef van Herpt

Current public innovation support often fails to activate a significant group of SMEs. As a result, the innovation infrastructure is not utilized to its true value and capacity by a key constituency – small and growing companies. Not-for-profit intermediary Syntens initiated a campaign “FuturizedBusinesses” with Regional Development Agencies and the Chambers of Commerce to tackle this. Here’s what we learned.

FuturizedBusinesses (in Dutch ‘De ToekomstBedrijven’) is a four-year campaign to involve SMEs unfamiliar with public innovation support – innovation consulting, clusters and R&D projects that is made available by organizations such as Syntens, the Chambers of Commerce and Regional Development Agencies.

The campaign’s goal is to enhance the innovation capabilities of SME’s in the southern part of the Netherlands, in the provinces of Limburg, Noord-Brabant, and Zeeland and we think the lessons are applicable elsewhere.

Regional situation

Currently, the regional competitive position of the Dutch southern provinces is reasonable. However, other regions might outrun the southern provinces in the near future. Within the region, the innovation landscape is dominated by mainly large companies like Philips and several high-tech SMEs.

Innovation activities from the central government reach mainly this group. Most (other) SMEs perceive these activities to be too exclusive and inaccessible. Furthermore, SMEs often view innovation as complex R&D and linked to high-tech development and underestimate their own innovation needs and potential. They perceive regional innovation networks to be of low value to their company. Yet these companies form an important part of the industrial environment as suppliers to innovative companies. Often they are the reason why innovative companies stay in the region. Unlocking the potential of this group is a driver of future growth and innovation, therefore this “Middle group” of SMEs is the target of FuturizedBusinesses (fig. 1).

Target group – analytical context [1]

Companies in the middle group do not innovate systematically. Projects are often conducted ad hoc, and suffer from a lack of financial resources, time, and skills (Bradford and Childe, 2002; Kaufmann and Tödtling, 2002; Millward and Lewis, 2005). Although many SMEs do recognize the need for improvement, they initiate few innovation projects and prioritize  more  immediate activities, such as short-term customer or retailer demands (Lindman et al., 2008; Woodcock et al., 2000).

Innovators and early followers do often find their way to current available innovation stimulation activities. Their innovativeness is the result of connecting in to innovation (knowledge) networks and subsidized innovation programs as an important part of the company policy (Keijzer et al., 2002).

The middle-group, although possibly able and willing to improve, does not yet recognize the value of networks and innovation stimulation activities. Clearly, there is sufficient potential to improve innovation behavior within this group.

How it is done

The campaign FuturizedBusinesses consists of three distinct phases. These are the identification phase, the selection phase, and the most important and challenging one, the activation phase.

Phase 1. identification phase

In the Netherlands all companies are obliged to register with the Chamber of Commerce. Based on this database the first target group is established by filtering them into six categories where innovation activity might be expected: industry, construction, wholesale, transportation and communication, business services. Retail and catering have been excluded. Companies with more than five full-time employees are selected to ensure a potential minimum capability of systematic innovation, and to exclude all holding and inactive companies.

Phase 2. selection phase

After identification, those companies which had contact with Syntens or the regional development agencies in the recent past, or are otherwise known to be participating in networks, are excluded and therefore not approached. By excluding these companies from the target list, FuturizedBusinesses focuses on SMEs in the middle group of figure 1, unfamiliar with the activities of the innovation network. Finally, a team containing representatives of Syntens, the Chamber of Commerce, and other regional representatives, prioritize the list looking at the potential of the companies, important sectors per region, etc. These representatives later on also operate as an ambassador for the campaign by giving a recommendation.

Phase 3. activation phase

SMEs on the final list are contacted by Syntens. However, it is clear that these companies are not addressed convincingly by current methods. Therefore we developed a tailor made, local approach.

• Local campaigns: Small local regions are selected. In this region general awareness for the campaign is raised by talking to local representatives, and by generating publicity in local papers and on radio stations.
• Making contact: Subsequently SMEs are contacted individually. Well-prepared and experienced Syntens consultants personally call each selected SME and listen to the challenges they face. They consequently explain the value they might have for the company and convince them to agree to a meeting, no strings attached. In comparison with a call center, the Syntens consultants score over 50% on appointments where the call center scores 10%.
• Company visits: Consequently the same consultant visits the company. On this visit the consultant acts pro-actively and hands-on to identify innovation possibilities for the company. The consultant immediately tries to respond to urgent questions of the entrepreneur. This way, the value of innovation intermediaries such as Syntens becomes visible by showing immediate action.
• Profiling: Furthermore, the consultant establishes a company profile stating ambition, willingness to change, opportunities, innovation capabilities, and current problems and needs. This company profile forms important input for the consultant to decide on what activities to initiate, or which referrals to intermediaries to make.
• The support offer: Depending on the results of the first meeting and the company profile, the Syntens consultant offers specific activities or refers to other parties (other companies, knowledge institutes, Chamber of Commerce, Regional Development Agencies etc.) to improve the SMEs overall performance and innovation capabilities.
• Evaluation and follow up: Both the visiting and another Syntens consultant evaluate the company profile and identify potential follow-up activities. This enhances an impartial and complete advice. Additional activities might be initiated and the company becomes part of the innovation network. Syntens has developed a tool called Customer Made Information & Intelligence (CMI²) to maintain the personal relationship with the entrepreneur.

Staying in touch

One of the challenges in this project is to stay in touch with the companies and provide them just in time relevant information on innovation. Specifically this target group hardly searches for new knowledge themselves or participates in innovation networks. It is the consultants’ challenge to search for relevant information using specific tags, within the context of his/her client. The Customer Made Information & Intelligence (CMI²) tool provides consultants with automated signals and triggers on relevant topics for specific companies.

The reaction of the company to the provided information will be used as input for new keywords so that the demand profile of the company stays up to date. But most importantly it’s energizing the relationship between the consultant and the company.

Preliminary results

Are sufficient companies reached?

Systematic analysis identified nearly 13,000 SMEs in the target group (fig. 2). Out of this number 6,800 companies did not have previous contact with Syntens or Regional Development Agencies but might be willing and able to innovate. Over the last two years 994 companies from this group have been visited according to plan (fig. 3 also shows the number for each province).

Figures 2 & 3

Are companies interested in innovation?

SMEs participating in FuturizedBusinesses have started a high number of follow-up activities (fig 4). These follow up activities, often more than one per company, have been delivered by Syntens but also by a wide variety of other actors within the innovation network. Syntens will also introduce clients to other intermediaries, industries or knowledge partners. An astonishing 55% of the companies have started follow-up activities and engage in innovative behavior. This proves that the individually tailored approach of FuturizedBusinesses succeeds in engaging and activating larger numbers of SMEs.

Figures 4 & 5

Conclusion

The campaign FuturizedBusinesses is unique because policy interventions have not previously targeted this anonymous group of SMEs pro-actively on such a scale. It is also unique because of its tailored approach for SMEs. The results indicate that almost 80% of these companies do want to innovate (fig. 5). Involving this group within the innovation network promises a sustainable competitive advantage for the region and enhances the region’s innovation infrastructure. Furthermore the campaign can easily be copied in other regions. In summary, it is sound policy to invest time and effort in less innovative companies but only if you work in a demand driven (“listen”) way and ensure that the visits are performed by experienced consultants.

By Murk Peutz, Sjef van Herpt & Ingrid van Berlo