Activating Radical Innovation in Small and Medium Enterprises

Abstract

The COVID-19 pandemic made organizations around the globe aware of the urgent need for Digitalization and Digital Transformation. Small and medium enterprises (SMEs) are no exception. Business Model Innovation (BMI) might be a solution to successfully adapt to the new circumstances and cope with the effects of the pandemic, and radical innovation can give organizations a long-term competitive advantage with the potential of making them resilient to future market disruptions. This study describes the design and execution of an intervention program - part of a government funded innovation support program in Austria - to activate SMEs so they can pursue radical innovations by experimenting with reinventing their business models. The purpose of the paper is to evaluate the acceptance and effectiveness of the program. As a research strategy we followed action research to plan interventions and reflect on the observations gained from each of 3 cases in order to optimize the actions for practice. The findings show that the SMEs have difficulties thinking far away from their core business areas. With the help of external stakeholders for idea generation, prototyping and experiment design and execution, SMEs can be activated to pursue radical business model innovations and adopt an open mindset embracing risk, uncertainty and ambidexterity. This study offers important practical insights and contributes to SME strategy development.