The nexus between the design thinking, strategy formulation and innovation in SMEs: an integrative review

Small to Medium Enterprises (SMEs) are essential to global economic development. However, they frequently encounter strategic and innovative challenges stemming from limited resources, unpredictable environments, and informal planning processes. This integrative review examines the interconnected roles of design thinking, strategy formulation, and innovation within the context of SMEs. The study investigates how design thinking—a human-centered, iterative problem-solving methodology—can enhance the strategic agility and innovation capacity of SMEs by drawing on multidisciplinary literature. Grounded in the Dynamic Capabilities Theory, the review emphasizes how design thinking enables SMEs to identify opportunities, implement innovations, and adapt their operations through the development of flexible strategies. Key themes explored include the democratization of strategic planning, the facilitation of cost-effective innovation, and the establishment of feedback loops that align business objectives with changing market demands. The review also identifies significant gaps in empirical research and underscores the necessity for context-sensitive approaches tailored to SMEs in developing economies. The findings present practical implications for SME managers and policymakers, advocating for the incorporation of design-led thinking within strategic and innovation processes to foster resilient, customer-centric enterprises. Key Words:Design thinking, Strategy formulation, Innovation, SMEs, Dynamic capabilities, Strategic agility, Integrative review