Understanding Innovation for Small Businesses | Tory Burch Foundation

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Understanding Innovation for Small Businesses

How changing your mindset can prepare you for just about anything.

The only constant is change, and that’s especially true in the life of an entrepreneur. How a small business responds to change is the difference between surviving and shuttering.

Author and Columbia Business School professor Rita McGrath is an expert in innovation and strategy, helping business owners face change head on. She joined us for a webinar, moderated by our Chief Operating Officer Gabrielle Raymond McGee, to speak to our community of business owners about preparing for the future while continuing to serve their customers in the present. McGrath emphasized that while none of us can truly predict what will happen, we can build resilience into organizations so that they can adapt. “The only way you’re going to get out of a highly uncertain situation is learning your way out of it, not planning your way out of it,” she said. Learning is just part of protecting your business in a changing landscape.


Your competitive advantage is the thing that you have over other businesses in your space. What is it that makes customers come to you before (or instead of) the others? This is the point of the innovation process where your good idea is driving sales and attracting attention. While that competitive advantage is great for your bottom line, you’ll need to look at what’s happening in the world outside of your business to think about next steps.

McGrath shared a pandemic success story of a Philadelphia-based custom shutters manufacturer. At the beginning of the crisis, no one was interested in his product, so in an effort to support his company and employees, the business owner began making personal protective equipment, or PPE. “It turned out to be another very successful line of business for him. So in this context, it’s a transient competitive advantage,” McGrath explained. He was one of the few people in his area to fulfill a specific need, but soon, there was no shortage of places to buy masks and other forms of PPE. “You can’t count on an advantage lasting, even if you built up a very strong one,” she cautioned.


One way that entrepreneurs can try to anticipate the changes their business may need to make is by changing the question they ask to drive product or service changes. Instead of asking, “what does my customer want?” try asking, “who needs to get a job done?” That shifts entrepreneurs for thinking about what innovation experts call an arena, rather than a specific industry–which means you can reach more customers

To illustrate her point, McGrath uses the men’s shaving category as an example. Gillette was the number-one razor brand for decades until, in 2011, Dollar Shave Club arrived on the scene. Started by two guys in a garage, Dollar Shave Club thought about the men who just wanted shaving to be easy so they could start their day quickly, rather than thinking about targeting Gillette customers or Schick customers. Their model helped people bypass high-priced replacement blades and the frustrations of waiting for a store associate to open the locked case of razors. 

You can’t count on an advantage lasting, even if you built up a very strong one.


How was it that Dollar Shave Club was able to become such a huge success? They exploited a strategic inflection point (and sold to Unilever for a billion dollars in 2016).

Coined by engineer and entrepreneur Andy Grove, a strategic inflection point is the particular pressure put on a business that forces them to reconsider their position. “What a strategic inflection point does is it exerts a 10-x force on your business,” McGrath explained. “If you get it right, it can take your business to new heights. If you get it wrong, it can cause your business to go into decline.” The tricky thing about strategic inflection points is that they seem to happen overnight but in fact, happen bit by bit. 

The good news, according to McGrath, is that innovation for small businesses can often be easier; smaller organizations are generally less married to a particular recipe for success and so are able to pivot more quickly than their big competitors. They’re more able to do rapid experimentation and learning, which will help them get ahead of changes. 

To spot those changes early, you have to talk to your customers and really listen to your community. What’s important to them? Have their routines or budgets changed? You’ll also want to keep an eye on the behavior of your customers, especially if they were loyal but have since strayed, because their self-reported motivations may not tell the full story. “We’re all, as human beings, remarkably unaware of what actually drives our behavior,” McGrath said. 

The only way you’re going to get out of a highly uncertain situation is learning your way out of it.

Even the most observant entrepreneur can’t go it alone. Having the right people on your team can help your business take advantage of strategic inflection points. “As a person leading a business, you need to have enough variety inside your organization or within your community that you can respond,” McGrath advises. “The trendy word for this is ‘pivot’. As the circumstances around your business change, how do you then change yourself?”

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