>Praveen Gupta is president of Accelper Consulting in Schaumburg, IL, and an adjunct professor of business innovation at the Illinois Institute of Technology's Center for Professional Development. He has written several books on Six Sigma, business innovation and corporate performance. In this interview, Gupta predicts the role that smaller firms will play in business innovation during the rest of this century.

How can small business owners and leaders keep their performance yield high while minimizing cost cutting? Smaller businesses can compete with larger businesses based on performance and speed. Small businesses normally do not have as much waste as large business do due to smaller infrastructure. Thus, there is a constant battle between lowering the cost of products or services and offering value to customers. This requires that small businesses build customer relationships based on value-to-price ratio rather than just the price.

We have learned that every business, including small businesses, must focus on profitable growth by developing innovative solutions to grow customer demand. If we offer our customers what they "love to" have rather than what they have just asked for, customers will be willing to pay a premium, and won't be rushing to find the cheapest solutions. So, we must learn to spoil customers with our care and creativity, instead of the low-cost solution.

In an article in Quality Digest, you say that companies in a decline should focus on growth. Why should they do this, and what are some ways they can go about it? Many businesses have been implementing Six Sigma, Lean, or similar improvement initiatives to cut costs. The end result that I have seen is layoffs, which are very disheartening to workers. I do not understand how one can grow a business by shrinking it. Cutting costs is a vicious spiral that can only hasten the demise of a business because businesses in the U.S cannot win over the competition merely on cost – the rest of the world is cheaper than us.

Thus, we must focus on creating new value, seek opportunities to be able to command premium prices for the value and grow the business. This requires involving employees and empowering them to have fun at work so their creative juices can flow freely. I have learned that having fun means freedom to think, and that is critical for growth.

On the other hand, cutting costs curtails thinking, and that is counterproductive to growth. Thus, there is a need for balancing growth with efficient use of resources to sustain profitable growth.

In writing about performance management, you say that often the strategy is short term – meeting month-to-month goals, for example. How can organizations move from this to the long-term solution of communicating the fundamental business strategy to their employees and clients? Leadership must establish a two-prong strategy – long term for growth and short term for profit – and then balance the execution of both strategies. While we are fine tuning our operations for short-term goals we must not forget our longer-term perspective.

To achieve such a balance in our approach we must keep employees informed, enlist their support and expect them to do their best. The good news is if employees know what they are supposed to do, and why, they deliver – sometimes beyond expectations. And you must be prepared for surprises once employee power is behind the leadership's vision.

In your book "Business Innovation in the 21st Century," one of your takeaways in the chapter on the Information Age is that both business and civic leaders recognize the link between innovation and economic prosperity. How can small businesses use this knowledge to their advantage? Someone said that the main purpose of a business is not to make money, but instead to provide a product or service that a customer needs and, if done well, the customer will pay well, and then the company will make money. Today, we forget about this basic understanding and believe that making money is the only purpose of a business.

If you look at anatomy of a small business, it gets started by a passionate entrepreneur to make something out of one's knowledge or expertise. Nobody starts a business because one wants to make money; instead, one starts the business because one loves to do something, and wants to put it to productive use and make money. Then, the entrepreneur envisions hiring people, growing the business and creating jobs. We must maintain that same entrepreneurial spirit to do something different for producing value, and creating jobs.

Similarly, all business owners and leaders do have a responsibility to create opportunities in the community [in which] they operate by focusing on sustained profitable growth, rather than simply making money, which sometimes leads to actions adverse to the community needs.

Where do you see business innovation headed? What role will smaller firms play? Business innovation will be the way to be in business. In the past someone would start a business thinking one could produce an item at a lower cost than the competition. That will be less important over time as customers want more custom services in fast-changing marketplaces.

Thus, small businesses must be geared more toward producing customized solutions very fast utilizing intellectual resources in the company. In other words, the leadership must believe that business innovation is as important to small businesses as to larger businesses. Thus, they must learn the innovation process, commit to benefit from it and plan to provide newer and higher-value services to customers on demand.

This is different from the current paradigm of providing higher quality, and lower-cost solutions to customers. Remember, we do not always buy lowest-price products or services for our personal use; instead, we buy value for the money we spend. The same principle applies to the business world, where customers buy innovative solutions with higher value, well delivered and when needed.