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5 Ways to Make Your Small Business Innovate Better Than the Big Guys

There's no escaping it — small companies must be flexible enough to continuously react to changes in the business environment. Reaction definitely keeps your business alive, but it takes a proactive, innovative approach to encourage growth. Innovation can (and should) come from anyone on your team, and your close-knit relationships actually put you in a better position to innovate than many of your largest competitors.

Big businesses would probably implode without extensive structure and discipline among thousands of employees. Your small company, on the other hand, can actually do its best work when everyone thinks outside of their defined functions, even when a smattering of chaos occasionally ensues. But, your workforce will not put forth unusual ideas if they feel that innovation is risky. The following five tips can help you foster an atmosphere of innovation throughout your company.

 #1. Use your personal knowledge of your team members.

Where big company employees are typically highly-structured cogs in a wheel, you see everyone on your team as an individual. You know about each one's talents and skills beyond what they use to do their daily jobs.

Innovation is more likely to come from those talents and skills than from everyday tasks, so try to take advantage of each whole person whenever possible. Consider a showroom employee who sells the furniture that you make. That person may be great with the customers, while also having a number of artistic gifts. Bring those gifts to the forefront by encouraging suggestions for new furniture designs based on customer interests. That person might become your next top designer, as new customers flock to your showroom to buy unique innovative products that meet their needs.

#2. Share top company goals.

All too often, employees know only the goals that directly pertain to their jobs without being aware of the big picture. So, employees at widget painting stations, for example, will focus on doing their jobs exactly as defined. What if those workers know of ways to do higher-quality painting at lower costs? If they know that the company goals emphasize delivering top-quality, reasonably-priced products, they'll share their ideas.

Make sure that your employees know that they have a role in meeting top company goals and reward their contributions. Innovation will become a way of life.

 #3. Create a spirit of teamwork.

Many companies specialize in creating team-building events for large corporations. They take their clients to fancy resorts to learn how to work together to build boats out of Styrofoam boards and Duct Tape, and they hold swimming pool boat races to find the winning team. These events may be the only option for major conglomerates that have too many people to attract natural team spirit. They may be fun, but they tend to be largely ineffective. You're a small business owner — you can do better.

Your employees perform specific tasks, but they also work outside the boundaries of their defined positions. They naturally have a sense of team. But, having a sense of team is not the same as being a team.

Real team members consistently see their roles as they apply to the entire business, so you need to eradicate departmental or functional boundaries that limit innovative thinking. Encourage employees in all parts of the organization to think together and you will probably see impressive new levels of innovation.

#4. Stress the merit in employee ideas.

There's no such thing as a bad idea. It may be easy to immediately dismiss ideas that won't work, but it's more rewarding to help employees make ideas great.

Don't forget that you may be the boss, but you're also part of the team. So, if an employee proposes the purchase of tools that you can't afford, take the time to work together to find a less expensive way to accomplish the same thing. Or, if an employee suggests dropping a quality check, ask for ways to enhance other quality checks to ensure that you continue to develop a perfect product or service.

Any less-than-perfect idea can culminate in an innovative solution — and, if you use it as a teachable moment, it helps create future ideas that are more on track.

#5. Recognize innovation without cutthroat competition.

Some experts agree that competition can encourage innovation in a business, but you also need to distinguish between employees who thrive on competition and those who shrink from it. Find ways to strike a balance between contests that encourage innovation and those that create irreparable rivalries that prevent future innovation.

Maybe the ideas flow best when you announce competitions with major prizes (monetary rewards, trips or even days off). Maybe you should take a more low-key approach by verbally recognizing creativity at company meetings or when making salary or promotion decisions. You know your workforce, so decide what works best within your company culture.

Innovation brings power and fun to the workplace.

When you unlock the creative skills hiding within your workforce, you will learn that there is often a way to meet or exceed the power of your large competitors. Best of all, your employees will share the excitement that comes from winning. It's all a game and every victory is fun for all.

About the author

Carol Roth is a radio host on WGN, a CNBC TV contributor, a ‘recovering’ investment banker & a bestselling author of The Entrepreneur Equation. You can find her on Twitter @CarolJSRoth or at She also has an action figure made in her likeness.