Note: The following post will also appear on Pronited
I have to admit that the idea for this blog post came as the result of a discussion about the networking potential of Small to Medium Enterprises (SME) around the world to participate in global development and business projects with my friend, Mohammed Hajjar of Pronited. Capping off the discussion was Mohammed’s advice that I approach the subject in a blog post, which except for the most canny and prolific of writers, probably more often than not turns into a project much broader in scope than the original idea. Such is the case with discussions with friends, especially when one friend says to the other, “Why don’t you write a blog about this?” And the other friend says, “ . . . Okay!” as if he/she has content just swimming dormant among those millions of brain cells.
Defining an SME
So, of course my first task would be to come up with some reasonably sound definition of SMEs, and no better place to find on my search engine of choice that Wikipedia! What I learned was that among other things, the definition of Small to Medium Enterprise is NOT an U.S. derived definition, but actually derived from the European Union and the other international organizations, such as the World Bank, United Nations and the World Trade.
Something else interesting about the “definition” and understanding of what defines an SME is that this understanding differs among different nations – both developed and developing – around the world. And in order to further clarify the concept of “small” as it pertains to business activity, at least in Europe, an additional definition – that of “micro-entity” was added to distinguish those companies that were indeed small.
As for the United States, well the U.S. Small Business Administration had developed a Table of Small Business Size Standards first by industry, then by revenue in millions of dollars, then by size of employees where the employee size ranges from a low of 50 to 1,500 employees.
Challenges Facing SMEs in the Global Marketplace
In June, 2004, the 2nd OECD Conference of Minsters Responsible for Small and Medium-Sized Enterprises (SMEs) was held in Istanbul, Turkey. One paper published from the Conference was titled: Promoting Entrepreneurship and Innovative SMEs in a Global Economy: Towards a More Responsible and Inclusive Globalisation. The paper presented those barriers and challenges that face SMEs in their efforts to enter and participate actively in the global marketplace. The paper also outlined some recommendations that would assist SMEs to become more active – and successful – participants.
One disadvantage with SMEs is their limited access to resources, while generally focusing on their local market. This can pose a challenge to those SMEs who are eager to enter the international market where competition will be stiff and project success will tend to favor the enterprise that can demonstrate depth in their business as well as up-to-date technical expertise.
Another aspect of the challenges that SMEs face is the limited capacity for actual sharing of resources or capabilities. This is intensified by the limitations that SMEs generally face due to their localized business footprint. They might also be limited due to lack of information and awareness, or just fear of venturing into foreign markets, even without a language barrier.
This challenge can be turned into an opportunity for those SMEs that are willing and interested to engage in a network that puts them in touch with similar enterprises. International networks, such as Pronited are developing structures that cater to capable SMEs that are willing and interested to network with each other across borders to collaborate globally on mutually beneficial projects. This type of strategy will provide for those SMEs the leverage needed to enter, bid and successfully participate in projects gaining for them added visibility, enhanced business relationships, and increased experience on providing solutions for a wider variety of clients.
SMEs and Legacy Enterprises
While the OECD paper outlined many institutional, government and logistical challenges that hamper the potential success of SMEs on the international business landscape, there is also one primary factor that makes a tremendous impact on the competitive potential of SMEs to participate on a global scale, and that is the strength and visibility of legacy enterprises.
Legacy enterprises are well-known as they are usually located regionally, have massive staffing and technical resources, not to mention their financial strengths. A legacy enterprise can pull staff from practically any location and relocate them as needed to meet a client or project requirement. Legacy enterprises might also have additional resource capability by leverage any number of lower level interns to support project development, particularly when lead times are affected.
And legacy enterprises have a tremendous arsenal and bank of . . . Templates!
They are able to produce a template that meets the BASIC need of client’s objectives, while offering to customize the solution to fit – at additional cost of course. Legacy enterprises may also provide a degree of post implementation support, also to a limit specified by contract. The problem with this is that, as we all know, no two clients are alike in their business models, growth needs, operational requirements, etc. While there may be similarities, there is still just enough uniqueness to warrant a specific treatment . . . well unless you are a franchise.
The general advantage with a capable SME is that due to their small footprint, they are able to address a client’s specific requirements in a way that suits that client. Also, since SMEs are pretty much localized in their primary service models, they are able to 1-develop a more intimate relationship with their clients; and 2-provide sometimes quicker, and targeted post-implementation service and support.
The Wider View
The fact that SMEs, that have a strong business foundation cannot participate in the global marketplace is not a statement of impossibility, though it may suggest difficulty and challenge. However that difficulty and challenge might be managed through a network of common skill sets and interests brought together to meet the requirements of this rapidly changing world.
With the many tools of web-based collaboration, communications and shared work spaces, SMEs from virtually any place in the world may collaborate with each other to form the types of partnerships that can provide customized, localized service and possibly at less cost than legacy enterprises, while still providing an excellent level of pre- and post-implementation service.
The challenges are still there . . . but the opportunities are even more numerous!