The detailed study findings of a recent research study, “Branding Innovation: A StrategiCom Study of Singapore SMEs” will be unveiled at the Singapore Brand Conference on 25th March 2010.

The study revealed that only 21% of Singapore SMEs successfully apply innovation management tools, despite 91% of them having an understanding of the contemporary definition of innovation as an introduction of a new thing or method that has to ultimately be translated into value for both the firm and its stakeholders, is something that is applicable to all businesses and does not necessarily require formal R&D which can be expensive.

The findings showed that 59% of the respondents perceive innovation as “something new and different” which can exist in the form of both products and services, which need not arise from a breakthrough invention. 31% associate innovation with “constant change and improvement”, another 31% state that innovation “must bring value add to the customer” while 17% perceive it as “being productive” and necessary for survival in the marketplace.

The objective of the study was to explore how leaders of Singapore SMEs perceive innovation, investigate the extent of innovation management and innovation successes in Singapore SMEs and examine the presence and extent of branding efforts that are applied to these innovation successes.

SMEs comprise of 99% of the total number of enterprises in Singapore in 20073, employing nearly six out of every ten workers and generating almost half of the total enterprises’ value-added, thus occupying a crucial position in the growth of the Singapore economy. According to the Budget Speech 2010, the Singapore government has a prime focus on growing productivity by 2 – 3% per year over the next decade through raising skills and productivity to achieve higher wages. It has been highlighted that one of the key ways to do this is through supporting innovative efforts among enterprises and making innovation second nature to business owners and employees.

The study sought to answer four research questions (RQ):
- RQ1: Do Singapore SMEs have a contemporary understanding of innovation?
- RQ2: Do Singapore SMEs have the appropriate tools to innovate?
- RQ3: What kind of innovation successes do these SMEs have?
- RQ4: Are there branding efforts towards these innovation successes? And if so, to what extent?

A total of 100 SME leaders from a diverse range of industries in Singapore were interviewed for the study in 20 minute face-to-face sessions.

Despite 91% of Singapore SMEs having a contemporary understanding of innovation, only 21% of the respondents had appropriate tools in place to manage innovations. A combination of three or four of each of these innovation management tools will result in a higher probability for innovations to succeed.The appropriate tools and the proportion of respondents out of the 21% that utilised them are:

(i) HRM to engage people to innovate and develop the skills needed - 51%
(ii) searching for external sources to provide valuable impulses for innovation direction – 35%
(iii) co-operation to share the risk and costs of innovation – 29%
(iv) team work for knowledge sharing – 27%

The top three human resource management related activities implemented by SMEs were the engagement of employees in innovation, training of employees to handle innovation challenges and the creation of incentives to develop innovation.

Dr Wilson Chew, Group Principal Consultant & CEO states, “As innovation is a broad concept that involves people, process, technology and research rather than one that is limited to technical issues, it is vital that SMEs manage innovation through a holistic approach, one that permeates all aspects of the organisation. As such, SMEs should simultaneously enhance their capabilities in the four key innovation management areas of human resource management, searching information from external sources for innovation direction, encouraging team working and forming partnerships and co-operating with external parties for innovation. A holistic approach towards managing innovation will augment a firm’s capability to realise its innovations, resulting in greater profitability.“

For SMEs with the appropriate tools to innovate, 61.9% of them achieved efficiency innovation, while 23.8% of them achieved product line novelty, market novelty and business model innovation and 14.3% experienced quality innovation.

Out of the 21% of respondents that achieved innovation success, 90.5% of them have applied branding efforts towards their innovation showing that a majority of SMEs that enjoyed innovation success also implemented branding efforts in commercialising the innovations. Corroboration with applied business research and literature reveals that the merits of branding an innovation can be summarised into one main outcome that every firm seeks – profitability.

SMEs with branded innovations enjoy more commercial success than non-branded innovations. Firstly, a brand helps to enhance marketability of the innovation, increasing the receptiveness of a new product or service. The perceived trust in the corporate brand also enhances the purchase intentions of customers, giving the firm an ability to attract buyers when it introduces new products and services in existing markets, or introduces existing product lines and service offerings in new markets.

Secondly, a branded innovation is able to command a premium over a non-branded innovation. A brand establishes differentiation for an innovation and justifies the price premium it demands. To sustain that premium, a brand also serves as a vehicle to summarise the benefits of the innovation, facilitating customers’ appreciation of the innovation’s differences.

Thirdly, a strong brand helps generate long-term profitability for a company. In the context of listed companies in Singapore, it was found that perceived brand strength is closely tied to their share price expectations, especially in the property/ REITs, Retail/ F&B, and Environment industry.

Dr Wilson Chew states, “Effective commercialisation of a firm’s innovation through PR, marketing, corporate branding, engaging external consultants and design activities ensures that profits generated from the innovations can be re-invested into other innovation areas that will serve to generate new revenue streams. However, this cycle requires that the firm has the appropriate innovation management tools and more importantly, applies branding efforts towards their innovation successes to fully leverage on their commercial potential.”

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