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Transforming froma Tech SME to an MNE
Some Thoughts
Raman Roy Chairman & MD
Chandigarh23rd September 2011
www.Quatrro.com2
SME sector is a place where “Growing into a SME” and “Growing out of a SME occurs
Successful micro enterprises wind up and
Grow into an SME through survival of the fittest
Help of the SME sector helps to determine the future supply of large MNE firms
These large firms possibly will subcontract with the small firms and
Create additional SMEs
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Micro Enterprises
Small and Medium Enterprises (SMEs)
Multi National Enterprises (MNEs)
Growing into a SME
Growing out of a
SME
“Growing into” & “Growing out of”Model
(SOURCE – International Tax Dialogue, SME Conference)
Importance of SMEs cannot be underestimated
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SMEs play a significant role in leading economies of the world
Brazil
Percentage
SME Details
15 million Formal and informal SMEs in Brazil56% Of labour force employed by SMEs26% Of aggregate wages/salaries20% Of GDP2.4% Of Brazil’s exports
Percentag
e
SME Details
97.3% Of all enterprises50% Of total GDP of U.S.50% Of total jobs in U.S.74% Of new jobs created in a
year
ChinaUSA
India
Percentag
e
SME Details
42 million Formal SMEs in China99.7% Of total enterprises68% Of total exports75% Of new jobs created in a
year40% Of total GDP of China
Percentag
e
SME Details
2.6 crore MSME enterprises in India8% Contribution by SMEs towards GDP45% Of Industrial Output40% Of total exports6 crore People employed 1.3 Million Of new jobs created in a year18% Growth rate of SMEs over 5 years
(SOURCE – Industry Outlook- SMEs in China by Lauren Hilgers)
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Knowledge Economy is different from Traditional Economy
Characteristic Traditional Economy Knowledge Economy
Economic Development Steady, Linear and Quite Predictable
Volatile – change extremely fast and
chaotic
Differs on three attributes – Markets, Enterprises and Work Force
M A R K E T S
Economy Supplier Driven Customer Driven
Product and Technology Life Cycle
Long Short
Key Economic Drivers Large Industrial Firms Innovative Entrepreneurial Firms
Scope of competition Local Global : Hyper-competition
Competition : Name of the game Big eats small Fast eats the slow
Marketing : Name of the game Mass Marketing Differentiation
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E N T E R P R I S E S
Knowledge Economy is different from Traditional Economy
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Characteristic Traditional Economy Knowledge Economy
Business Pace Slow Faster with ever rising customer expectations
Emphasis Stability Change Management
Business Development Approach Vision, Mission, Goals, Action Plans
Opportunity Driven Dynamic Strategy
Success Measure Profit Market Capitalization
Production Organization Mass Production Lean Production
Key Growth Drivers Capital People, Knowledge, Capabilities
Technology Drivers Automation and Mechanization
Information and Communication
Technology
Scarce Resource Financial Capital Human Capital
Differs on three attributes – Markets, Enterprises and Work Force
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W O R K F O R C E
Knowledge Economy is different from Traditional Economy
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Characteristic Traditional Economy Knowledge Economy
Leadership Vertical Shared-Employee Empowerment
Skills Mono-skilled Multi-skilled
Employment Stable Affected by market opportunity / risk factors
Employee seen as Expense Investment
Differs on three attributes – Markets, Enterprises and Work Force
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Knowledge Economy empowers “SME” to operate like an “MNE”
Year Established 2000 2006
Customer Segments Large Companies Predominantly SMBs
Number of employees 17,500 2600
Target Markets 2 (India, US)5 (India, USA, UK, Middle East,
Canada)
Delivery Centers Location India India, USA, UK, Canada
S P E C T R A M I N D
In Knowledge Economy scale and multi national operations seemed to be delinked as evident from above example
SME can certainly operate like and/or Grow into MNE
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SMEs need to nurture specific traits that propel them into an MNE
1
2
3
5
4
N E T W O R K I N G
D I G I T A L M A R K E T I N G
T E A M B U I L D I N G
D E L I V E R Y P A R T N E R S H I P S
C H A N N E L S A L E S
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Management Team Skills
• Management team skills appear to be better in SMEs
• Concentration of shares and control management give the SME entrepreneur an advantageous position
• The support of responsible shareholders will motivate the management team to develop greater skills
Long Term Horizon
• The long term horizon based on the willingness of entrepreneur to pass down the legacy to next generations, provides business stability
• Provides a sense of security and assurance that employees will be able to pursue long term professional goals within a stable business framework
• CEOs stay is 3 to 5 times longer than CEOs in MNCs..ofcourse there is no risk of CEO being fired through SMS!!
Good practices of one region are seldom interpreted as bad anywhere else globally
Job Protection
• In SMEs generally there is a powerful recognition that employees constitute competitive advantage
• Hence, efforts are made to preserve and nurture them
• Has the ability to maintain stable level of employment even during economic crisis
Leverage “inherent strengths” to attract talent locally and internationally
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Nepotism / Gifted Positions
• Nepotism especially in a family promoted SME
• It is perceived to be more in family businesses on account of blood bonds between different employees
• Ensure gifted positions atleast have a wider acceptance if not complete
Lack of Decision Making Freedom
• Unified ownership can lead to performance advantages
but
• Strong dependence on one person results in not delegating decisions to those with greater expertise
• Dependence on decision maker seem to wane away when business becomes large
• The key is to manage it properly in times when it is required the most
Bad practices of one region are often interpreted as bad anywhere else globally
Salary and Fringe Benefits
• CEO who is the main shareholder and MD of the firm often set themselves lower salaries
• They decide to spend more money in the firm where it will enhance shareholder and firm value
• This results in a rub off effect resulting in lower pay level among employees…one needs to be conscious of this.
Stay away from practices that de-motivate talent
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USA
Circa 1900
India
Innovation in Employee Engagement Practices fueled by new companies
• Flexi timings• Telecommuting• ESOPs• Free food and several conveniences for employees at office so that distinction between work and personal life is not perceptible
Innovation in Employee Engagement Practices fueled by MNCs
• 5 day work week• Flexi timings, Telecommuting• ESOPs• Earn while you learn
The companies that didn’t innovate HR practices in US, did them in India as they were competing with established players for talent
Circa 1990 Circa 1950 Circa 1990
Adapting Good HR Practices Quickly is Essential – A Case Study
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Selling to a SME
Proven & Tailored
Solutions
Package Total
Solutions
Business Value not
Technology Value
Total cost of ownership
more important than price
Big is not always better
Buying from trusted
channels & vendors
• Brands are least important factor for SME’s
• Big brands connote higher TCO• Young companies can collaborate
with large enterprises to jointly market to SME’s
• Viable and Stable solutions• Easily implemented• Require little support as they lack IT skills
& resources• Focus on SME IT buying priorities• Don’t provide customized solutions
• SME’s put lot of emphasis on TCO, not only on price. They will go for lower TCO’s
• TCO includes resources required to implement and maintain a solution, customer and technical support, unanticipated upgrade costs to maintain compatibility with new development, up and down scalability, and the cost of managing new vendor relationships.
• Easy to deploy integrated solutions• SME’s cant do integration
themselves• Easy to understand, deploy, manage
and support
• SME’s are focused on business value
• E.g. improved productivity, enhanced CRM, enhanced revenue, payback
• No technology marketing jargon
• SME’s would like to go with trusted long time vendors
• Cost of establishing a new vendor is high for a SME
• Focus on channels that sell to SME’s
Source : Milestone Group
SMEs buy Total Solutions & from Trusted Channels
It is a fact that majority of SMEs buy from SMEs and needs of SMEs are different from Large Enterprises
It takes little longer to build right channels but they are most efficient in long term
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1. You will rarely come across entrepreneurs who do not network
2. Networking helps in sharing ideas and obtain insights from others
3. Thoughts when “shared” gets “doubled” and “halved” when concealed
4. Networking in today’s time is not difficult…there are multiple avenues.
5. You just need the inclination.
Networking opportunities are directly proportional to your inclination
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Market to your own world to build the Brand – Digital Marketing
The most three most trusted forms of brand building are:
Recommendations from people I know - 90%Consumer opinions posted online - 70%Branded websites - 70%
The digital world has made the traditional two-way “Word-of- Mouth” marketing accessible and available to everyone with a computer and or a phone)
It is a fact that all of you operate in a Digital World
The key is you need people with megaphones in the digital world to build your brand
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There are plenty of avenues to find the people with the megaphone/s
Social Media – For Global Reach Mobile Media – For Local / Global Reach
1. Digital Marketing gets you started in global markets with limited budgets without a physical presence in those markets
2. Digital Marketing skill sets can be easily outsourced…they are several SMEs in India supporting International Companies in their Digital Initiatives
3. However , it requires enough patience to acquire and grow audience, see results first and increasing returns subsequently
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Thank You
Happy to Answer Questions
Raman RoyChairman & Managing Director
Email: [email protected] | Website: www.quatrro.com