WlNNlNG BY lNNOVATlON 3 How do Award Winners come up with Innovative Ideas? Sally Caird There is surprisingly little research on how innovators in small high-technological companies come up with their innovative ideas. This paper is based on the results of both qualitative and quantitative interviews which were conducted with twenty four winners of the U.K. Govern- ment sponsored Small Firms Merit Award for Research and Technology (SMART). This research explored the perceptions of SMART winners on: the nature of invention and inno- vation as a creative process; the sources of innovative ideas and their importance for com- mercial outcomes; the conditions responsible for the commercial success of innovative projects. An interesting finding from this research is that having good ideas is often not a problem to the award winners. As one participant said the hardest thing is to say no to ideas. The big question is which ideas have market potential, not whether you have an idea. Introduction lthough there is a considerable literature A available in psychology and sociology on creativity, many of the issues raised are only indirectly relevant to understanding inno- vation as a creative process within the com- pany. For example, arguments that creativity is associated with heredity, neurosis or well being offer few insights into technological innovation and how it may be fostered within the small-medium sized enterprise (SME).The need to understand innovation in the context of entrepreneurship and the smaller firm is evident from the importance attributed, by the economist Schumpeter, to innovation as the primary entrepreneurial function (Schum- peter, 1950). This paper provides some insight on the following concerns, of importance to the high tech SME associated with: understanding innovation as a creative activity within the SME; idenhfymg sources of innovative ideas and the process of coming up with ideas; understanding the significance of inno- vative ideas for the commercial success of product innovation. The main aim of this study was to explore innovators’ perceptions of how they came up with innovative ideas and how important innovative ideas are for commercial success within the SME context. There have been previous attempts to address these issues. Von Hippel’s work on sources of innovative ideas shows that many innovative ideas come from the user, the supplier or manufacturer, because these groups establish the needs for ideas (Von Hippel, 1988). Drucker (1991) examined internal sources and external organ- isational sources of innovation. The Open University’s Design course team classifies innovative ideas, according to their techno- logical and conceptual source and applications (Open University course T264, 1992). Furthermore, there have been studies of successful innovations (Freeman, 1986), and the innovative capacity of small, medium and large enterprises (Rothwell and Zegveld, 1982). However, there has been little research which encourages innovators to introspect about their perceptions of how they come up with innovative ideas. Background to the smart competition The Small Firms Merit Award for Research and Technology (SMART) is a British com- petition supported by the Department of Trade and Industry (DTI). The SMART award is open to firms, with fewer than fdty em- ployees, which are having difficulty in attract- ing funding for innovation. This scheme rec- ognises the failure of market forces to support fhe perceptions Of innovators 0 Basil Blackwell Ltd. 1994. 108 Cowley Rd, Oxford OX4 1JF and 238 Main St, Cambridge, MA 02142, USA. Volume 3 Number 1 March 1994