Intuit Study: Small Businesses Will Innovate

Small Businesses Will Innovate Today to Succeed Tomorrow

Future of Small Business Research Reveals Six Characteristics That Help Entrepreneurs Survive and Thrive

MOUNTAIN VIEW, Calif.–For today’s small business to succeed tomorrow, the ability to innovate will be more than something nice to have, it will be a necessity.

New research shows that innovation will be essential for small businesses over the next decade as they try to thrive and survive by seizing new opportunities, improving their competitive position and providing more value to their customers.

The findings appear in the latest Intuit Future of Small Business Report, sponsored by Intuit Inc. (Nasdaq:INTU) and written by Emergent Research. It focuses on the key factors that drive, enable, amplify and shape the outcome of innovation, and the six characteristics of innovative companies. The report is part of the ongoing Intuit Future of Small Business series, conducted by Emergent Research and the Institute for the Future.

Innovation is common among the 77 million people employed by the nation’s small businesses, the report found, but entrepreneurs don’t see themselves in that light. Yet that doesn’t diminish the critical role innovation plays in their business or the effect they have on the U.S. economy.

“Innovation isn’t restricted to science labs and corporations. It’s the driving force behind small business entrepreneurship,” said Roy Rosin, vice president of innovation at Intuit. “Small businesses instinctively use innovation to create new products and services, efficiently manage their business or find and acquire customers. These innovations are the keys to their future.”

Small business owners are natural innovators, the study found, with their inspiration driven by three needs: necessity, opportunity and ingenuity. Whether prompted by changes in the marketplace, competitive pressures or simply the desire to create something bigger and better, small businesses are constantly refining and redefining how they work and what they produce.

Innovation Enablers

Compared to large corporations, small businesses have a number of innovation advantages that enable them to more readily identify opportunities, quickly react to changing conditions and remain competitive. Their smaller size makes it easier and cheaper to try new approaches faster than larger businesses. These six enablers include:

* Personal passion: Personally invested, most small business owners are willing to try new approaches to make their business more successful.
* Customer connection: A deep and direct relationship with the market and customers helps small businesses understand customer needs, identify new opportunities, and fix problems quickly and efficiently.
* Agility and adaptation: Unlike large corporations, small businesses can quickly adapt to changing market conditions and implement new business practices.
* Experimentation and improvisation: When pursuing new opportunities, many small business owners and managers aren’t afraid to experiment and improvise, accepting failure as part of the path to success.
* Resource limitations: Small businesses are adept at doing more with less. And these resource constraints lend to their innovative mindset.
* Information sharing and collaboration: Small businesses traditionally rely on strong social networks to share information and inspire innovative thinking.

In addition, other factors amplify the ability to innovate. They include use of technology, access to capital, fostering a culture that values experimentation and building market knowledge. Also, government regulation can spur or rein in innovation.

Innovation Outcomes

Innovation occurs at all levels of small business, from the front office and dealing with customers, to the back room and producing products. Its outcome can also extend beyond the business, with effects that either sustain or change entire markets.

Market-sustaining innovation describes the ongoing refinements, or incremental innovation, in products and processes that most businesses regularly churn out to improve productivity and financial performance, increase customer satisfaction and save time. It includes about 80 percent of a firm’s innovation efforts, driven by an opportunity to make something better, not create something new. This type of fine-tuning may be as simple as offering a customer the chance to lease a product or service, rather than purchasing it outright. While not widely visible, it creates a new playing field that keeps small businesses competitive.

In contrast, market-changing innovation occurs on both large and small scales, and represents fundamental product, technology or business model changes that shift the competitive landscape of an industry. eBay is a classic example of a breakthrough company that changed a market by disrupting traditional retail systems. While rare, these innovations are highly visible and industry changing, essentially rewriting industry rules.

“Innovation is in small business DNA. Yet, many entrepreneurs don’t realize that some of the great offerings and processes they create are innovations,” said Steve King, partner at Emergent Research. “Small businesses are the foundation of the economy, and they need to continually embrace new ideas and have the courage to pursue them to survive and thrive in any economic climate.”

Note to Editors: A PDF of the complete report is available at, along with visuals, a list of resources and background materials.

About Emergent Research

Steve King and Carolyn Ockels are partners at Emergent Research, senior fellows at the Society for New Communications Research and research affiliates at the Institute for the Future. They are co-authors of the Intuit Future of Small Business Report™ Series. Emergent Research is a research and consulting firm that identifies, analyzes and forecasts the trends and forces impacting small businesses and their role in the global economy.

About the Institute for the Future

Founded in 1968 by a group of former RAND Corporation researchers, the Institute for the Future is an independent nonprofit research group working with organizations of all kinds to help them make better, more informed decisions about the future. The Institute for the Future takes an explicitly global approach to strategic planning, linking macro trends to local issues in areas such as technology and society, health and health care, and global business trends.

About Intuit Inc.

Intuit Inc. is a leading provider of business and financial management solutions for small and mid-sized businesses; financial institutions, including banks and credit unions; consumers and accounting professionals. Its flagship products and services, including QuickBooks®, Quicken® and TurboTax® software, simplify small business management and payroll processing, personal finance, and tax preparation and filing. ProSeries® and Lacerte® are Intuit’s leading tax preparation software suites for professional accountants. The company’s financial institutions division, anchored by Digital Insight, provides on-demand banking services to help banks and credit unions serve businesses and consumers with innovative solutions.

Founded in 1983, Intuit had annual revenue of $3.1 billion in its fiscal year 2008. The company has approximately 8,000 employees with major offices in the United States, Canada, the United Kingdom and other locations. More information can be found at