In this part of the Spotlight on Strategy series we’ll be exploring how strategy and strategic thinking can help smaller organisations.
Before we get down to the nitty-gritty, here are three key facts regarding smaller businesses:
- Smaller businesses or SMEs (small to medium enterprises) are usually defined as businesses with less than 250 employees.
- According to the FSB, SMEs accounted for 99.9% of all private sector businesses at the start of 2017. Total employment in SMEs was 16.1 million; 60% of all private sector employment in the UK. The combined annual turnover of SMEs was £1.9 trillion, 51% of all private sector turnover in the UK
- Most large businesses start as small ones with big ideas!
Smaller businesses are key contributors to our economy, they are here to stay and we need them.
Many of the challenges faced by owners and leaders of smaller businesses are similar to their mega-corp counterparts; for example striving to stay sustainably profitable and gaining access to the best resources. The main difference for a smaller company is that these challenges are much greater as every penny and every action count much more than in a larger organisation.
Sustainable profitability and resourcing can be effectively addressed by taking a more strategic approach and by using strategy as a dynamic empowering process rather than seeing it as a value-less add-on only suitable for large corporations.
Having worked with many smaller businesses over the years, I see there are four general traps that they can fall into when it comes to being more strategic. These traps can then form barriers to longer-term thinking which directly impacts profitability and resourcing in the present and in the future.
Very important note: These observations are in no way criticisms. I understand the challenges of running a smaller business and know the personal responsibility most owner-managers take for keeping the business afloat and for supporting their teams.
Let’s take a look at the traps and how strategy and being more strategic can help smaller businesses.
Time Trap: A full in-box, customers calling, quality to maintain, not to mention making sure the orders keep coming in. And that’s just before 10am!! And now you want me to spend time being strategic?! Using lack of time as a reason for not thinking longer term may be due to fear of change, lack of understanding or scepticism that thinking further ahead leads to success in the present.
We all recognise that time is a precious resource and, as Duncan Bannatyne says in his book ‘How To Be Smart With Your Time’, “it’s a resource that is allocated equally to us all … we each get twenty-four hours in a day”.
Ultimately, it’s how we use our time to add-value and achieve more that matters. Allocating a proportion of our time to understanding the aspirations for the business and making strategic choices about the routes to this success help us to use the rest of our time much more effectively.
Today Trap: The perpetual hamster wheel of running a smaller business means that having chance to take breath and think beyond day-to-day activities can be difficult. When we are fixed in this mindset, breaking free to think strategically is a challenge. And, anyway, why should we? There’s so many other things to do?!
Looking at the subject of profitability for example; thirteen letter word that paints a different picture for every company. You may want more of it but how much more and by when. And how are you going to achieve it? Cost reduction? Higher value products and services? Or…
Thinking strategically about what you have and what you want means that the actions taken, decisions made and money spent today are more likely to lead to the ultimate prize and beyond.
Technician Trap: Have you read ‘The E Myth Revisited’ by Michael Gerber? In it he talks about how companies evolve from those entrepreneurial moments into smaller businesses. He also explores the challenges owners face if they don’t step away from ‘technician’ mode into business mode. He makes some interesting points which support my own findings.
When I started my enterprise I had gained rounded business experience in my corporate roles. If I hadn’t had this experience and gone straight from being an industrial chemist, as I was in my early career, to setting up a business I might have fallen into the technician trap too.
Why? Well, we don’t know what we don’t know! Obvious? Yes, it is but my point is, switching into strategy and business-mode is not always easy if it’s not something you’re used to doing.
This is not an excuse to avoid learning, change or trying to evolve. What we can do is acknowledge where we need assistance and get some help.
Talent Trap: What if a company does not have the right talent? In the words of Jim Collins in his book ‘Good To Great’, those “who ignited transformations…first got the right people on the bus (and the wrong people off the bus) and then figured out where to drive it.” As any smaller company knows, people are key to success.
Many think they cannot compete in the race for talent. It’s not just about super salaries. People are looking for much more these days; job satisfaction; being part of something special or interesting; autonomy; new challenges. Being creative and strategic allows us to craft remuneration and employment packages which are attractive on many levels. Plus, teams don’t always have to be made up of employees; associates and suppliers all add huge value if selected and managed in the right way.