SME growth stifled by poor company culture: Report

Workplace culture is holding back nearly seven out of 10 Australian SMEs from achieving their full growth potential, according to a report published by Microsoft today.

The Culturing Success report, which forms part of Microsoft’s Joined-Up Innovation initiative, surveyed around 500 small and medium Australian businesses. It found cultural factors, including working in silos, fear of failure, employee distrust and poor collaboration, are hindering growth in the SME sector.

Just 33% of the SMEs surveyed by Microsoft were classed as innovation “leaders”. These companies are adept at responding to change, threats and opportunities in their markets.

Innovation “cruisers” – companies with an interest in innovation but which under-deliver in practice – accounted for 43% of the SMEs surveyed, while 24% were considered “laggards” with little or no appetite for innovation.

The report, which was developed with corporate anthropologist Michael Henderson and research agency AMR, found innovation “leaders” have six cultural traits in common: a high level of customer focus; an awareness of and appetite for innovation; a supportive working environment; visible and involved leaders; engaged employees; and authentic internal dialogues.

Microsoft found companies that embrace innovation outperform those that don’t.

Of the innovation “leaders” identified in the report, 39% reported revenue growing at a faster rate than their industry average. This compared to 24% of “cruisers” and 23% of “laggards”.

Small Business Minister Bruce Billson welcomed the report, which he said shows “improving workplace culture drives innovation so it is a good investment to make”.

“We know small business people are time poor, but innovation within business processes can drive efficiencies,” Billson said in a statement.

“Innovative businesses are generally successful businesses, constantly looking at ways to improve and to grow their businesses.”

The release of the report coincides with the launch of an online tool from Microsoft that allows SMEs to measure their level of innovation and then be sent a report about how they can become more innovative.

Sarah Vaughan, director of developer experience for Microsoft Australia, told SmartCompany the report highlights the importance of nurturing innovation within a business.

While Vaughan says innovation is a broad term and can often be used in relation to new technologies, there is more than one way to be innovative.

“It can be taking a different but more efficient approach to tackling a problem or market or something new that creates value, whether that’s a product or model for doing business,” she says.

But innovation can also describe improvements in the way you hire new staff, collaboration with others, or the way you engage your customers, Vaughan says.

“It’s broad but accessible.”

Vaughan says the first step for SMEs to become more innovative is to evaluate the company’s current performance and then “ask some questions”.

And these questions should be about how the company could collaborate better with other SMEs.

“From the work we’ve been doing for the past 18 months around how Australian SMEs can be more innovative, collaboration is a key finding,” Vaughan says.

“When ventures are working together, that’s where you can really be more innovative.”