The press of late, has been littered with articles on what used to be well established corporations, either failing or in serious financial trouble.
Companies that you would never imagine would go bust, yet have.
How could this possibly happen?
To be honest, there are a host of reasons, some simple, and some complex. However, solely blaming it on a struggling economy is false.
Large companies have more of an impact on the country’s economy, as they individually consolidate more employees, generate more to the GDP and contribute more in tax (at least we hope), and to some extent can affect SMEs.
Yet small and medium sized enterprises (SMEs) make up a greater percentage of a country’s total enterprise stock. In the UK, for instance, SMEs represent 99.6%, according to a EU report.
A problem big companies have, is that they tend to lose sight of the detail, often clouded by seemingly bigger, more important issues, and with the senior team too far removed from day-to-day activities of delivering to the customer.
Having worked in several large global companies over my lifetime, I have a solid insight into how they operate; what they do well and what they are rubbish at.
I have also worked in SME environments and have been surprised at the stark difference in how they approach business.
With this in mind, I am confident that a large corporation can learn from SMEs, so let’s look at the differences between a large corporation and an SME, in terms of a selection of business activities.
- Corporations tend to mass market, in a sense throwing bait into the wind, hoping to catch something. They will spend considerable sums of money on elaborate marketing of various genres, without monitoring cost of sale.
- SMEs tend to target market, being flexible in their approach and systematic in testing methodologies. They focus in on who is likely to need their services or products. They will strictly limit their budget, and closely watch for a return on investment.
Customer Relationship Management (CRM)
- Corporations tend to surface manage their customers. Those with direct company customers will utilize account managers, who act as an interface, but will spend a lot of their time up-selling. Very few take the time to really understand their customers or have a senior-to-senior executive relationship. Retailers, in the main, only offer a customer interface at the point of sale.
- SMEs strive to get very close to their customers, building solid one-to-one relationships and developing a detailed understanding of customer priorities, issues, desires, expectations, etc. They will build their products / services around their customers needs.
Approach to change
- Corporations tend to be extremely risk averse. Change is not something to be ventured into with any great haste. There is a driving command to ensure investors receive a return, so anything that could jeopardize that normally gets quashed.
- SMEs tend to be more entrepreneurial in trying out new things. They will weigh up the pros and cons quickly, without succumbing to decision by committee. They will place a strict budget and time to test its viability, thus avoiding long-term initial commitments.
- Corporations are often slow to strip out costs. Their finance system is normally at least 30 days behind and sometimes 60 days. When they do cut costs, many embark on false gains. This is due to pressure put on the coalface management, who then make quick decisions, instead of a thought through approach.
- SMEs tend to be closer to their cost base and are therefore able to react quicker. They develop a sound understanding of the issue and approach cost control in a manner that will have the minimal effect on the customer. Control of cost is much more fluid, as the employee base tends to be smaller and more close knit, so everyone understands the reasons, developing a greater buy-in.
- Corporations tend to get bogged down in silo mentalities. This stifles progress and change, as people instinctively put up barriers. Furthermore, they tend to develop countless procedures, which have to be followed, regardless if common sense indicates otherwise.
- SMEs are more intuitive. They quickly analyze the potential of the situation, weighing up risks and benefits. They also are quick to make a decision to both proceed or to terminate, if the area is unsuccessful.
Now, before I get slaughtered, I am not saying that SMEs are prefect, or that they do not go out of business, or that they do not make mistakes, as they do.
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