Dubai - Only 25 per cent of SMEs said they had a clearly defined strategy for innovation, says study.
Despite many small business owners in the UAE describing their business as innovative, only 25 per cent of SMEs said they had a clearly defined strategy for innovation, Beehive's study of SME innovation has revealed.
The study, conducted in partnership with Thomson Reuters, explores how SMEs innovate in the UAE. The results indicate that many SMEs feel they have an innovative mindset and ability to generate creative ideas, but they don't fully understand how to successfully execute an innovation strategy.
The main limitations to implementing an innovation strategy are a lack of research and development, innovative skill sets as well as financial challenges.
The study also found that building a culture of innovation inside companies is difficult, but companies that are able to foster innovative thinking throughout every level of their business will be more successful.
Building a strong SME community and a collaborative culture play a greater role in fostering SME innovation and success than enforcing policy and regulations. Creating an ecosystem for innovation to flourish is critical.
The importance of innovation among SMEs is well recognised, but generating new ideas is only one element of innovation. The real challenge lies in applying those ideas to real business operations and resources.
Survey respondents cite competitive pressure and the need to grow market share as the biggest drivers of innovation in the UAE. But the desire for industry leadership and meeting consumer demand are also significant drivers to innovate.
Beehive's findings identify innovators in Dubai as generally second movers in the concepts they apply, but first movers in the local market, adapting existing concepts to the local environment quickly and efficiently.
When asked about the key factors spurring future innovations, the survey reveals three important themes: knowledge, community and transparency.
Despite their significant contribution to the economy, SMEs still continue to struggle in securing funds.
This issue is underlined by the International Finance Corporation, which estimates that the current SME funding gap is approximately $260 billion within the Mena region.
Not surprisingly, survey respondents highlight the need for greater financial stability as a central barrier to innovation, particularly in a market where the consequences of a default can be challenging to a young SME and its owners.
In 2014, SMEs accounted for 92 per centof all businesses in the UAE; they contributed around 60 per cent to the UAE's gross domestic product and provided 86 per cent of all private sector employment, according to the UAE ministry of finance.