Date posted: 27/10/2017 7 min read

Navigating SMEs through disruption

Many SMEs are now fully exposed to global competition in the current new era of digital disruption, so how can they respond?

In Brief

  • Don’t jump into solutions too fast - pause to plan and assess the market and priorities.
  • External options such as payroll, software development and call centres can now be used by SMEs.
  • SME owners have a real advantage when it comes to innovation as they are typically far closer to customers.

Competition is not a new phenomenon for small-and-medium-sized enterprises (SMEs). That said, the current era of disruption does pose additional challenges. Since the introduction of smartphones and ubiquitous fast broadband, customer preferences have changed and new businesses have emerged. Many SMEs are now fully exposed to global competition. 

Take retail, a tough sector. The competition extends from online/low-cost Asian manufacturers to Amazon Retail; the latter causing palpitations among Australia’s largest retailers, and in turn putting pressure on local SMEs.

It’s not all bad news for SMEs, though. With the availability of cloud-based and outsourced services, the investment required to modernise operations has fallen. And with typical SME-agility, they can update their businesses before many corporate competitors even complete their business cases. It’s the analogy of turning around speedboats (SMEs) versus aircraft carriers (big corporations).

So how should SMEs respond to disruption? There are four aspects to consider and master.

1. Strategy and approach

As much as quick decision-making is an asset for SMEs, rash decisions can be costly – with SMEs typically constrained for capital and resources. Pausing to strategise and plan execution is critical. Here are some questions to consider, and research if needed:

  • How has the industry changed, what’s driven that and what’s likely to come?
  • How have customers’ buying patterns and expectations changed and what’s foreseeable?
  • What adjacent industry trends may impact our industry?
  • What are our strengths and weaknesses versus other SMEs, big corporations, others (eg online players)?
  • What are the most prospective opportunities and most acute risks?
  • What should we prioritise, based on potential impact, cost, time, implementation ease, required sequencing and other factors?
  • How can we implement in a rapid “test and learn” format, to maximise potential for success and minimise risks?

The best advice is to avoid jumping into solutions too quickly – for example “everyone’s got an app – we need one too”. An app may indeed be the solution, but a well-considered approach will avoid just another “me-too” interface. Or worse, a second-rate one.

2. Digital and technology-based options

Digital will inevitably be part of the solution for many SMEs – to improve efficiency, customer experience and/or create new business models. SMEs should consider a range of technology types:

  • Websites and smartphone applications for customer interactions and new business models (eg Uber).
  • Robotic process automation (RPA) to automate processes; offers a quick return on investment for larger SMEs.
  • Software as a service – subscription and cloud-based services that are accessible via desktops, tablets and smartphones; and can save large software investments and upgrades.
  • Data analytics – a powerful tool for business insight, aided by increased availability of data.
  • Artificial Intelligence (AI) – which incorporates an array of advanced tools and is especially powerful when combined with other technologies; to produce eg.Siri (on iPhones), Google Translate.
  • Additive Manufacturing (eg 3D Printing) – which offers new potential for small batch manufacturing and increased customer responsiveness.
  • Hardware (eg sensors, scanners, RFID technology) that will allow the full potential for other forms of technology to be realised.
  • High-speed connectivity – for example, the NBN or a reliable 4G network, which provides the backbone for the many things SMEs need to do – including providing good point of sale experience.

Other forms of technology making significant ground include blockchain, virtual and augmented reality, the Internet of Things (ie physical devices with connected sensors) and drones. Only some of these technologies will be of benefit to each SME, although all are worth monitoring as they are developing quickly. 

Finally, outsourced services (a derivative of technology advancements) should be considered where automation is not feasible. One example is to connect in-house services to lower cost external services through better labour utilisation (and sometimes, capability) in lower cost locations. For example payroll services, software development and call centre operations. Long a tactic of large corporations, these options are now SME-accessible. 

3. Innovation

Delivering novel and valuable outcomes to create advantage is vital in competitive environments and should cover all aspects of the business – from products, brands, channels, processes to customer engagement, revenue and business models.

Here, SMEs have a distinct advantage. Owners are typically far closer to customers and their evolving needs than managers of large corporations. Likewise, they are intimately aware of every aspect of their business. SMEs are hence in a better position to identify and leverage insights to uncover new opportunities.

SMEs should also consider contemporary techniques to ideate and prototype – such as design thinking and lean start-up methods, which offer faster speed to market at lower risk via “empathetic insight” and extensive prototyping.  

4. Owner mindset + bias for action + continuous learning

The ability to “turn on a dime, for a dime” is perhaps the greatest asset of SMEs. Driving this capacity to be nimble are several attributes:

  • The owner’s mindset entails being very customer-centric, cost-aware and outcome-focused. Owners must retain the same level of engagement in outcomes, even when the opportunities (eg digital) may be outside their comfort zones. The owner’s mindset can rarely be delegated.
  • A bias for action - prompt decision-making and action.
  • Continuous learning. The world is moving quickly. Industries are disappearing and appearing. SMEs and their owners should stay up-to-date to understand the opportunities and risks. Courses are one option, although much information is online and freely available to those focused on staying abreast. 

Times are certainly challenging for SMEs. The upside is that the dark clouds have a silver lining.

Related: Harnessing digital disruption

How to keep your balance on board the digital wave.

Case study: Benjamin Barker

In the competitive world of men’s apparel retailing, this successful business has opened new stores in Singapore and Melbourne; now totalling 12.

Its secret? Two owners (ex-filmmakers) who are deeply engaged in the business and constantly trialling new ideas, a focus on customer experience and on design. The design team is co-located with the retail stores to keep them close to customers (notwithstanding high retail rents), a great culture that enthuses and retains staff, and a focus on continual learning – including doing courses at leading business schools. 

For Benjamin Barker, great website aside, technology is an enabler, rather than a differentiator. 

The picture above is from a collaboration with The Everleigh bar and staff in Melbourne. 

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