How small businesses are learning to innovate faster

By Amanda Sleight, Commercial Director of Small & Medium Businesses, UK, Amazon Web Services

Research from Public First and Amazon Web Services (AWS) estimates that digital technology could create over £413 billion in additional value for the UK economy by 2030. This value won’t only be unlocked by large enterprises; digital technologies will also create value for small and medium-sized businesses (SMBs) too, with the UK Government reporting that small businesses that use two or more business management technologies (such as Customer Relationship Management and Supply Chain Management) see productivity gains of up to 25%. SMBs, however, are faced with multiple barriers to tapping into their full digital potential. For example, the UK Government’s Digital Strategy highlights that small businesses lack understanding of digital technologies, don’t have access to the right digital skills or robust digital infrastructure, and find it hard to obtain financing when investing in digital technology.

To drive innovation and unlock the potential of digital technology for their business, SMBs must take a customer-centric approach that solves real customer problems. This will help them to have a clear view on where to start, understand what digital solutions to focus on, and how to finance, build, buy, and implement solutions in a cost-efficient way.

Focus on what the customer needs, before deciding on the right digital technology to use

When it comes to deciding on what technology solution to focus on, at AWS, we see that SMBs often assume that they need to dive straight in and start looking at all the technologies on offer to them, rather than take a step back and consider the needs of their customers first.

This involves mapping out the customer: Who is the customer? What are their needs? What problems do they face? And what opportunities are they looking for?

A relentless focus on customer needs and opportunities allows SMBs to build longevity and market relevance into production. This way, SMBs can narrow their digitisation efforts and ensure they are solving real customer problems with technology, rather than an assumed challenge. With this, the focus is not on competitor solutions and profits; it encourages businesses to innovate for the customer and not simply replicate their competitor’s offer.

To facilitate this process, AWS runs ‘working backwards’ workshops to help SMBs to think about what their customer needs are, and then work backwards from this to conceive and build the solution. Amazon’s working backwards approach is the innovation mechanism behind Amazon Prime, Amazon Kindle, the AWS business, Amazon Echo and Alexa, and Amazon Fresh, and has also been adopted by many startups and SMBs. AWS encourages small business leaders to adopt this customer-centric innovation mechanism to focus on the customer’s needs, clarify customer benefits, and invent and innovate on their behalf.

An example of a small business that pivoted to a customer-centric approach to digital innovation is RPAIR, a small, Essex-based business that sought to digitise the watch and jewellery repair industry. RPAIR participated in AWS’s Digital Innovation Programme for SMBs that helps businesses to innovate customer-first solutions and bring ideas to market faster. RPAIR attended business skills workshops run by AWS to help them understand their customers’ needs, and through this, they identified that customers often struggle to find local repair shops and many repair businesses run a manual system where customers can only discover them and get updates on their repairs by calling or visiting the shop. RPAIR worked closely with Green Custard, an AWS Partner Network company, to develop an app-based platform to address these challenges by simplifying the traditional repair process. The app allows customers to compare different shops and services all in one place and get real-time updates on repairs, and in turn, helps owners of watch and jewellery businesses to move away from their reliance on walk-ins, get more customers and better manage their workflows.

Other businesses have taken this customer-first approach and incorporated it into their standard practice. For the people development company Insights, the value lay in taking learnings from several AWS working backwards workshops to steer the future direction of new products. The working backwards methodology is now embedded within their product lifecycle internally, and teams are trained to focus on customer centric innovation at all stages.

To build or to buy? That is the question

The decision whether to develop your own software as a small business, acquire another company or look into pre-packaged and white labelled products is critical at an early stage. For many SMBs, it can feel like a decision that they aren’t equipped to make without a complete understanding of the digital offerings, the business know-how, and expertise to choose the best option for the business and its customers.

Amazon uses ‘one-way and two-way doors’ to make big or small company decisions like how to develop its technology, and this can be used by SMBs when considering whether to invest time and resource in building their own digital solutions at the start. One-way decisions can have irreversible consequences, impacting areas such as customer trust and major capital investments. Two-way decisions are more forgiving and can be undone; they allow a controlled space for experimenting, learning, and innovating. Identifying two-way door decisions can give SMBs a springboard in their decision-making process and allow for controlled and efficient innovation.

An example is CitNOW Group, which developed an app-based solution to overcome the barrier of needing to physically visit car showrooms during the purchase journey. As part of the working backwards workshop, CitNOW debated between the choice to build or buy their technology solution. CitNOW started out thinking about new Customer Relationship Management capabilities they wanted to roll out, and halfway through the process they became aware of a company that had already built a product closely matching the requirements they were looking for. CitNOW had mapped out the end product they wanted through the working backwards workshop, and this helped them evaluate whether they should consider an acquisition. In this instance, an acquisition was found to be the more viable and preferred choice because the acquired company had established infrastructure for the product and a large freelance team of ‘chat-ops’ agents to manage customer services. The working backwards workshop gave them a controlled environment for learning, experimenting, and making decisions.

The cost of innovating: How SMBs can streamline their budgets

In most cases, having smaller budgets than larger enterprises is an unavoidable fact for SMBs and it can lead to a more risk-averse way of working, wariness of making large investments, and making decisions that maintain a position where the team is comfortable with a known outcome.

Today, there is almost a requirement for businesses to match the pace of digital innovation in their markets and have a digital-first mindset. SMBs recognise this, and in a recent study by Sharp 91% of SMBs across the UK reported they are planning to invest in IT improvements in 2023. With increased investment in digital solutions, there also comes a need to explore options in a way that reduces the potential for wasted spend on ineffectual solutions.

Taking a focused direction for digital innovation and development can help SMBs to streamline, optimise, and allocate costs. This means tackling a risk averse culture and instead taking the approach of thinking big, starting small, and moving fast. AWS encourages SMBs it works with to define their wider vision, break it down into manageable phases, and then develop a plan to streamline progress. Using agile, scalable, and automated tools to build solutions can also give businesses the flexibility to develop the technology without incurring additional costs, like the cost of abandoning a solution when met with a hurdle.

ENVEA is a multinational manufacturer of ambient emission systems, including gas analysers, dust monitors, air quality monitoring networks and environmental data processing solutions. Early in their digital transformation journey, ENVEA decided to work with AWS and AWS Partner Green Custard to build their first cloud-based product. ENVEA attended working backwards workshops where they sought to scale and improve their product offering of “netTools”. They developed a real-time, cloud-based data capture tool that supports environmental control engineers to monitor industrial process emissions like gases and particulates, and improve operational outcomes. Being able to rapidly scale the technology in the cloud has improved the platform’s efficiency, controlled emissions, and reduced costs. Working alongside a small, dedicated AWS partner helped ENVEA build faster and scale their product, despite not having a large software development team.

Innovating for success

For SMBs it’s not just about access to digital tools such as enterprise resource planning, ecommerce, and cloud computing that makes a difference. Instead, it’s often understanding where to start, identifying the right technologies to use, and how to implement that technology to solve an actual customer problem in the most cost-effective way. With a customer-centric mindset and culture, SMBs can streamline their innovation efforts to stand a better chance of growing their business, increasing profitability, and reducing operational costs.