The innovation hiding in plain sight within UK SMEs
Shenal Wijetunge of Dow Schofield Watts R&D Tax shares how SMEs can benefit from innovation incentives.
When people think about innovation, they often picture technology start-ups, research laboratories or businesses developing entirely new products. Yet some of the most commercially significant innovation taking place in the UK today is happening inside established SMEs that would never describe themselves as innovative businesses.
A precision engineering company redesigning a manufacturing process to improve performance, a food manufacturer overcoming production constraints, or a software business tackling scalability challenges are all examples of innovation in practice. The businesses involved are not setting out to become innovators. They are focused on winning contracts, improving margins and staying competitive in increasingly demanding markets.
That distinction matters because innovation has become a commercial necessity rather than a strategic label. Many businesses are innovating simply because growth requires it. They need to solve problems, improve efficiency and find better ways of operating. The challenge is that much of this activity remains hidden in plain sight because nobody inside the business thinks to describe it as innovation.
Innovation doesn’t always announce itself
One of the biggest misconceptions surrounding innovation is that it has to look dramatic. Scientific breakthroughs and cutting-edge technology naturally attract attention, but much of the UK’s innovation economy is built on businesses solving practical technical problems that directly affect commercial performance.
Recently, I worked with a manufacturer that spent more than a year redesigning a production process to eliminate recurring quality failures. Internally, the project was described as fixing a production problem. Neither the business nor its advisers initially recognised it as innovation, despite the level of technical uncertainty and experimentation involved.
That experience is far from unusual. Ask an engineer whether they are carrying out R&D, and many will say no. Ask whether they have spent months trying to solve a problem that nobody knew how to solve at the outset, and the answer is often very different.
That’s because most businesses do not organise their work around innovation terminology. They organise it around outcomes, while projects are discussed in terms of production issues, customer requirements or operational improvements. The technical challenge is simply part of the job.
What often goes unnoticed is that this problem-solving is where future value is created. The innovation itself is important, but the real impact is seen in improved productivity, stronger margins and competitive advantages that can be difficult for others to replicate.
Understanding where value is being created
As innovation becomes more deeply embedded across traditional sectors, there is a growing need to look beyond financial performance alone.
A set of accounts can tell you that profitability has improved, but it cannot explain the technical work that made that improvement possible. It will not show the engineering challenge that unlocked additional production capacity or the software development project that enabled the business to scale more effectively.
This is increasingly important because clients now expect more from their advisers. They want support that goes beyond compliance and reporting. They want people who understand how the business operates, where opportunities are emerging and what factors are likely to influence future growth.
That requires a different perspective. Understanding how value is being created often means understanding the technical, operational and commercial decisions that sit behind the numbers.
Get in touch
If you are rethinking how your business works, improving processes, or solving challenges that do not have an obvious answer, it may be worth looking again at where value is being created. A clearer understanding of that innovation can support better conversations around growth, investment, and long-term strategy.
If you need more guidance, contact Shenal today.
