SMEs Covid-19 Resilience Strategy: Unlocking Value through Market Innovation

Since the first reported case of Covid-19 in Kenya, SMEs have continued to struggle to keep their heads afloat with the sector experiencing unprecedented mortality despite government efforts to turn the tide through a series of stimuli packages.

Although government recognition of SMEs as important and are worth supporting; the proposed interventions through the stimuli package suffers problem-market fit as well as lack of coherent evaluation framework which is critical for course correction.

The country further finds itself between a rock and a hard place, on one hand offering tax breaks and cash bailouts to salvage businesses while at the same time starved of both local revenue and an increasingly expensive external debt market not mentioning revenue leakage through corruption.

SMEs despite incremental challenges have find a way as failure is not an option. Market innovation is one strategy SMEs can utilise to create and capture more value in the market which translates to more revenue.

Market innovation strategy combined with a shift from low value sectors as is the current scenario of retail-wholesale, motor vehicle-cycle, accommodation (Kenya National Bureau of Statistics MSME 2016) which also are highly susceptible to external shocks; to high value sectors such as agribusiness and manufacturing will enable SMEs create and capture significantly more value.

To put into context, we must distinguish market innovation from other forms of innovation. First form of innovation is centred around increasing efficiency to make product or service cheaper but has little growth potential for business growth because competitive advantage is pegged on low price which is not sustainable.

The second innovation is incremental that focuses on improving an existing product-service to be better through repackaging and the likes, again this offers little growth opportunities for SMEs.

Market innovation strives to unlock value by taking products that were previously accessible to a small market segment and making it affordable and accessible to a much larger market.

The best example of market innovation is encapsulated by Equity Bank who made opening and operating a bank account something that traditionally was reserved for the rich available and affordable to the common man, a move that catapulted the previously nondescript bank to among the largest banks in Kenya.

Based on the jobs to be done theory, SMEs can take a mental tour of a typical day of your average rich or middle class taking special note of all products and services that they use on a given day and simulate how mama otieno or bottom of pyramid can be able to access the same. For example your average middle class uses a washing machine. An SME can experiment based on the lean start-up model by offering a similar service to persons at the bottom of the pyramid and tweak the business model until they hit the jackpot.

Market innovation can be applied by SMEs to improve their current product offering or as a diversification tool as a way of managing the negative effects of Covid-19.

https://viffaconsult.co.ke/smes-covid-19-resilience-strategy-unlocking-value-through-market-innovation/