In part 6 of the Small Business Survival Toolkit series, Professor Manoj Chiba, Principal Consultant and Data Analysis Specialist at GIBS, offers insights on innovation in design thinking for small businesses.
Compiled by Tarren Bolton
Prof Manoj Chiba is a management professional and has held senior positions in different sectors. This experience has allowed him to draw on the relevant understanding to share his learnings on exploiting opportunities and help align strategies for small businesses. His training, qualifications and passion for data and the intersection with technology, drive his underlying philosophy for evidence-based decision-making.
Businesses in a post-Covid context have had to pivot – they have had to really think about their business model – and there’s never been a more important time to think about innovation than the current context. There is a huge amount of complexity and uncertainty and a number of challenges that businesses have faced, but one of the ways in which we see businesses responding is that they are ready to play an offensive game and go out and think about how to reimagine the business model and deliver value.
“One of the ways in which we see businesses responding is that they are ready to play an offensive game.
It’s important to recognise that many truly South African small businesses have pivoted very successfully given the market and environmental shift that we’ve seen. Essentially, pivoting means using the critical resources available to turn the business around.
The first thing to acknowledge is that the market and operating environment have fundamentally changed. And this is not only for businesses, but also for consumers. The post-Covid period has been long enough to have created a fundamental behavioral shift. Before we hide and crouch behind buzzwords such as the ‘new normal’, let’s understand what it really means. There is one thing that we must acknowledge and that is uncertainty. The decisions you make now will have an impact on the future of your business. So, you can only focus on what’s on the table right now.
When it comes to the businesses you serve, you must acknowledge that the demand for products and services has been muted to a large extent and we are dealing with a large amount of uncertainty.
Back to basics
Going back to basics is important when we talk about innovation and design – and we have to get our foundations right. The first foundation is really about finances. You need a diagnostic assessment before any decisions can be taken.
“We need to be realistic about what we’re dealing with right now. For critical financial metrics, the number one concern should be expenses. Look at your fixed and variable expenses. Often, people forget about seasonal expenses – your domain registration costs for your website, for example is seasonal. The second is revenue. What is the right price for your product or service? What will this look like moving forward? And looking at your revenue streams, is it now time to start changing how you charge for your product or service and make a fundamental shift in the business model? We all know that profitability is revenue minus costs. How has this changed? And what about your costs? Are they inflating or not? And finally, which I think is the most critical one is cashflow management – which is a no-brainer for small businesses,” says Prof Chiba.
“For critical financial metrics, the number one concern should be expenses.”
“All small business owners really need to start focusing on where they can cut costs. Let’s look at those fixed variable and seasonal costs. Have you spoken to your key stakeholders, and how will this affect them? And finally, are there any funding opportunities in the South African context? But it’s important to be realistic about these things,” he says.
Prof Chiba says that innovation can be defined in many different ways. In a changed environment, market innovation is about using what you have differently – to solve problems faced by your business as well as by your consumer. Innovating means you need to use your specific business ‘ingredients’ and think about how to mix these different ingredients together to come up with a new ‘recipe’. Think about your recipe for success into the future. What are the new and different ways of doing things?
We solve problems when we’re faced by them – even more so when our very existence is threatened. Right now, small businesses’ existence is threatened.
According to Prof Chiba, design thinking has always been central to the development of products and services, but now it’s even more pivotal. It really is a process focused on solving problems. It’s a solution-based approach and in a changing environment, this means your prior products or services may not serve current needs, which has implications on the sustainability of your business.
“To design products and solutions around this new constrained environment means you need to solve problems that matter to your consumer. Define the problem and explore all possible solutions, and then using design thinking, the process allows for the identification of new opportunities. There are new opportunities in the development of new business models, and innovation requires you to use the existing resources differently. Let’s look at new opportunities and these start with your strengths, and your assets as an individual business owner. It’s about you, your business and what you already have.
“So, what are your strengths? Strengths come in different shapes and forms and can be thought of as assets. What knowledge and skills do you have? What spaces (office space) and things (vehicles?) do you have? How can you use those assets differently during this time? And then at an abstract level, have you been able to build up a brand? And how do you leverage that brand?
“You have to acknowledge that your consumers, individuals and businesses are all experiencing the same thing and we are not in isolation. The entire ecosystem has changed around business. Covid has forced us to acknowledge that people have had new experiences, and individuals have reflected on what is important to them. Small businesses have shifted their focus back to their core competencies, because businesses don’t have the spending power they had before,” he says.
Define the problem
“I hate the word ‘problem’ because it has a very negative connotation. I really want us to open up our minds and say ‘problem’ is also about the opportunities that may arise. So, define the problem for each change in your business’s behaviour. Be unambiguous, and this will generally give rise to what we call new opportunities. You have to explore possible solutions – write down and solve for each need. The aim here, really, is to generate as many ideas as possible and not be constrained by anything. Be creative. Don’t be constrained by either being a product or service; the focus should really be on solving real needs and leave the ‘fluff’ on the side out for now. It’s about speed – speed to market; speed to solving problems, and based on what resources you have, and then finally choose a revenue model,” says Prof Chiba.
“When we talk about choosing a revenue model, understand that most individuals and businesses have now become spend conscious. So, can you flip your model for the product and service that you have? Can you leverage a subscription-based model as an example? Can you use a consumption-based model as an example? For the first time I strongly believe that we are being forced to really look at our business models – and how we help our customers consume our product or service is becoming central.
“In defining the success for each of the small businesses that have been thriving in a changed market and environmental conditions, we see that they solve a need which is based on data or evidence. They’ve spoken to people, and they’ve experienced stuff. They have leveraged their current skills and assets, and they are all focused. And most importantly, they have all pivoted.
“You have to pivot if your existence as a business is in trouble right now. Pivot within the competencies that you have. Therefore, I ask you to ask yourself four questions. Number one, I have a set of skills, how might I use them? Number two, what are the needs? Number three, I have assets, how might I use my existing assets differently? And number four, I have a network, and ho might I leverage this for what I may need and add value to the ecosystem?
“It’s important to pivot within the competencies that you have.”
“We have to pivot, no matter what stage we are post-pandemic. The world and the market have changed. And we’ve got to acknowledge that as small businesses.
“If we don’t change, we don’t innovate. When we see people pivot outside of an environment or an event that’s happened, they are called disruptors. If done correctly, and through the design thinking process, you gain an understanding of the needs of the market. If you deliver on your brand’s promise, leveraging your current assets and your competencies, the small pivots have a very small chance of failure,” he concludes.