In the world of small and medium-sized enterprises (SMEs—businesses with fewer than 250 employees and moderate revenue), growth often hinges on two key factors: adaptability and differentiation. Innovation fuels both. Yet, many SMEs struggle to build a culture of innovation, even though it's crucial for long-term success. (Best's Review, 2025).
Recent industry insights highlight how leading companies are prioritizing innovation culture. Best's Review emphasizes that businesses with strong innovation cultures experience higher engagement, more consistent growth, and greater adaptability in changing markets. For SMEs aiming to emulate this success, the journey begins with the 'Discover' phase of the innovation process.
The 'Discover' Phase: Foundation of Innovation
The Discover phase in the innovation process is not about finding quick solutions—it's about uncovering the right problems to solve. As part of my approach to innovation, this phase involves:
User Interviews: To grasp unspoken needs, frustrations, and insights from any stakeholder involved in the innovation scope.
Ethnographic Observations: Watching people—whether customers, internal employees, or other stakeholders—in their natural environments to identify behavior patterns.
Secondary Research: Leveraging existing market data to contextualize findings.
When SMEs engage deeply in discovery, they can sidestep the trap of assumptions and surface-level insights. While Starbucks isn't an SME, their recent customer experience overhaul (Customer Experience Dive) provides a compelling example of the discovery process in action. By observing the disconnect caused by mobile ordering, Starbucks identified that customers missed the sense of community that once defined the coffeehouse experience. The company initiated an innovation process that involved customer interviews, employee feedback, and in-store observations to reimagine their service model. Their 'Back to Starbucks' plan focuses on simplifying menu options, prioritizing personalized interactions, and enhancing the physical space to encourage more face-to-face engagement—potentially dramatically revitalizing customer loyalty. SMEs can adopt similar discovery techniques to enhance internal processes, optimize costs, or refine business models. For instance, small coffee shops have applied similar customer feedback loops using free survey tools and regular team brainstorming sessions to improve their service experience without large-scale investments.
Why Innovation Culture Matters
An organization's culture shapes how decisions are made, challenges are addressed, and new ideas are pursued. Research from industry sources (JSBS) indicates that companies with an innovation-first mindset:
15% Boost: Economic performance increases by 15% with a strong innovation culture.
20% Growth: Sales growth rises by 20%, driven by product innovation.
Market Share: Higher market share is achieved through innovation initiatives.
Long-Term Results: R&D investments deliver more consistent long-term performance.
Innovation culture isn't just a trendy phrase—it's a core business driver. SMEs must foster a culture that encourages curiosity and continuous learning among employees and leaders alike. Culture shapes how a company operates—from everyday decisions to long-term strategies. Unlike products or services, which can be copied, culture is the only truly one-of-a-kind element of a business. It influences how people collaborate, solve problems, and innovate. SMEs that build a strong innovation culture will stand out from competitors who neglect this crucial aspect. Without it, businesses risk stagnating as market conditions evolve. The next step is to ensure that this culture is supported by clear systems, processes, and structures that turn innovative ideas into measurable results.
Practical Steps for SMEs to Cultivate Innovation
Leadership Commitment: Culture, and specifically an innovation culture, starts at the top. Leaders must model curiosity, reward experimentation, and provide resources for discovery.
Cross-Functional Teams: Diverse perspectives lead to richer insights. Encourage collaboration across departments to break down silos.
Structured Discovery Practices: Implement regular 'discovery sprints' where teams interview customers, analyze findings, and generate fresh hypotheses.
Celebrate Learning: Shift focus from 'successful outcomes' to 'insightful experiments.' When learning is celebrated, employees feel empowered to innovate.
Case in Point: The Good Kitchen
The Danish food delivery program, The Good Kitchen, initially faced the challenge of seniors not eating the provided meals. The obvious assumption was that the food quality was poor, leading to suggestions like changing the menu. However, through a thorough discovery process involving interviews, observations, and stakeholder engagement, they uncovered the core issue: a lack of dignity and social connection. Seniors felt isolated, and staff felt disconnected from the purpose of their work. The emotional impact was profound—many seniors described feeling invisible, and staff reported feeling like mere delivery workers rather than contributors to community well-being. By reframing their service as a hospitality experience rather than a logistics operation—complete with personalized deliveries and more engaging interactions—they achieved a 500% increase in meal orders. This case study demonstrates how discovery can reveal unexpected insights that drive impactful innovation and highlights how addressing emotional and social needs can drive meaningful business outcomes. For more on this transformation, check out this video: The Good Kitchen Case Study.
Final Thought: Innovation as a Continuous Process
Innovation isn't a one-time event; it's an ongoing journey. By embedding discovery into their organizational DNA, SMEs can navigate uncertainty with confidence, uncover hidden opportunities, and foster a resilient, growth-oriented culture.
The discovery process is essential for uncovering unarticulated needs—those insights that go beyond the obvious solutions and challenge the assumptions often driven by Occam's razor, which suggests the simplest explanation is usually the correct one. While the simplest explanation might work for many problems, SMEs that apply this principle too rigidly risk missing deeper, more transformative opportunities.
As you reflect on your own organization, ask yourself: Are we truly understanding our stakeholders' needs, or just guessing? Share your thoughts in the comments below—I'd love to hear your experiences and start a dialogue on how the discovery process has impacted your innovation journey.
Best,
Shaune Reynolds
Professor of Innovation and Chief Curiosity Officer