The average small business owner may assume that innovation (along with research and development) is only possible for major corporations. In fact, the opposite is often true: small businesses and entrepreneurs are responsible for the majority of business innovations, both small and large. Why? Small businesses have fewer resources at their disposal and are forced to do more with less. Small businesses are also more agile, able to change and adapt with lightning speed. Shifting strategy at a large corporation can be like steering an ocean liner; the ship will eventually turn, but it will take a long time.

Innovation does not require you to lock yourself in a dark room, break out the lab equipment, and dream up the next big thing to innovate. All you have to do is listen to, and react to, your customers' needs while using tools that are already available.

For example, let’s assume you run an office supply business. You deliver products to a variety of businesses in your area. To keep costs down and prices low, your customers are on a set delivery schedule. Most of your customers receive deliveries once a week, on a specific day. So far so good, but what can you do to improve service and possibly increase total sales?

One method would be to communicate directly with customers when there is an opportunity for "special" deliveries. Suppose a customer calls and needs a large quantity of paper delivered this afternoon; your driver will be in an area he normally does not visit until later in the week. You could call, email or Tweet, to let other customers in that area know you could deliver any special items they may need. Not only might you sell more products, but you may also reduce your total delivery costs, since the driver's trip will be more cost-efficient.

The key to innovation is to think "incremental progress" rather than "massive change." For ideas, start with your customers.

Put yourself in your customers' shoes 

What do they need? What can make their lives easier? What might make them more loyal to your company? Think about what the customer needs instead of what you can currently do for the customer; it's a subtle shift in focus, but an important one. Most companies think about how to service customers using the products and services they presently offer, and under their current mode of operation. For a moment, forget what you "do" and think about what a customer might really want; then adapt what you do to meet those needs.

Improve your internal business processes

Here are some ideas:

Each day, identify one thing you could do differently. Improvements can be small; if you are a mechanic, positive changes could be as simple as re-organizing your tool storage so you spend less time looking for tools and more time working. Offices can do the same thing; a quick reorganization could improve overall productivity.

Pick one expense item and say, "How could I do without this expense?" You may not be able to eliminate that item, but the process may lead you to ways to cut other expenses. Do you need to generate that report? Do you need to distribute hard copies? Do you need to have a staff meeting every week? Imagine that something you currently do has magically disappeared, and determine what you would do to overcome that challenge, or whether you even need to overcome that challenge at all. Many businesses do what they have always done, without evaluating whether "we've always done it that way" still makes sense.

Take a critical look at another business. Feel free to borrow ideas from others. But don't go to a similar business; in most cases, you will only notice what you feel they do wrong. For example, if you manage an office, visit a local manufacturing facility. Pay particular attention to ways they maximize productivity. You might be surprised by the techniques and strategies you can borrow from what would appear to be an unrelated business or industry.

Don't think that money, or a lack of money, is a limiting factor. Some of the best innovations occur when resources aren't available; instead of throwing money at a problem, you have no choice but to be creative. For example, suppose you run a service business, and your technicians travel to customer sites. As the manager you need to keep track of their locations, and often your technicians can benefit from knowing where other technicians are. Instead of purchasing expensive communication tools, your technicians could simply use their cell phones to text message you and the other technicians when they arrive at a location and when they leave that location. The result is real-time information without major expense.

Also, remember that innovation is not limited to creating new products or creating new services. Think about the problems your customers face. Think about their needs. How can you adapt and change your operations so that you solve those problems and meet those needs? Then look at your own business. What problems do you face? How can you eliminate those problems? Experiment, evaluate the results, and find new ways to solve old problems.

That's innovation!