MAKING SMALL TALK - JSE MAGAZINE

MAKING SMALL TALK

CEOs are turning to the world of start-ups and SMEs to learn valuable lessons about big business from the little guys

MAKING SMALL TALK

It’s probably not a great time to be a small-business owner. The economy is tough (Adcorp’s Employment Index states that about 440 000 SMEs were forced to close down between 2007 and 2012). You’ll also spend your days fighting a pile of paperwork (a recent SBP survey said SA SMEs spend eight working days a month dealing with red tape). So it’s not easy.

But still, there’s a real romance around being an SME owner, an excitement and ‘start-up’ spirit that you just don’t find in big firms. And let’s face it: there’s no business school more demanding – or rewarding – than successfully launching your own small enterprise.

During a road trip through small-town America, business school professors Paul Oyer, Michael Mazzeo and Scott Schaefer noticed that – despite their small payrolls and modest turnovers – the small businesses they encountered on Main Street had a lot to teach the know-it-alls on Wall Street.

They collected their insights in a book, titled Roadside MBA: Backroad Lessons for Entrepreneurs, Executives and Small Business Owners, and during their travels encountered a memorable example of effective small-business negotiation.

‘It was not the best smelling place we visited, but the lessons in negotiation were rich at Eko Compost in Missoula, Montana,’ Oyer later told Amex Open Forum. ‘It’s a great example of the importance of knowing your own next best option, as well as that of the party you are negotiating with.

‘Eko Compost obtains its primary input from a sewage treatment plant next door. Knowing that the plant would incur great expenses if it got rid of the waste any other way helped Eko Compost be aggressive in negotiations.’

Mazzeo said that the biggest lesson the authors learned was: ‘The answer to any question of business strategy is: “It depends.” All industries and companies are different, and their strategies have to reflect that. There’s no “right” answer that applies to strategic issues across companies.

‘The successful companies are those that figure out what is appropriate given the markets they face and their own capabilities,’ he says.

In SA, Riaan Swart is an unsung hero of the local small-business scene. In 2001, with a start-up investment of just R1 000, he launched Chaos Computers, operating from a granny flat in the northern suburbs of Cape Town. Soon he expanded his operation to seven retail stores across the Western Cape, with a turnover of R67 million. Swart then realised that e-commerce made more sense, so he adapted. He packed up his computer stores and started a tech resource service provider called Solv.

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‘In the fast-paced, technology-must-work world that we live in, time has become one of the most precious commodities’

RIANN SWART, FOUNDER, SOLV

At Solv, Swart is aiming to make a point about how people – and companies – use IT. ‘It’s not about the latest, greatest and most expensive new devices,’ he says. ‘It’s about what you need your technology for and what is going to be best and easiest for you. In the fast-paced, high energy, technology-must-work world that we live in, time has become one of the most precious commodities.

‘How can we create more of it? The answer was simple: create an IT concierge service that comes to your home or business. Why waste time taking your faulty device to a repair centre, when Solv can come to you?’ he says.

If the marketplace were a boxing ring, big firms would have the competitive advantage when it comes to size and strength (or resources and capital). But SMEs would win in speed and agility.

Size (a blessing when it comes to economic security, but a curse for adaptability) can make all the difference. In the time it takes a bigger, more-established company to identify a business imperative, formulate a strategy, obtain sign off, buy-in and boardroom approval, and then roll out an implementation plan, an SME could think, plan and execute.

Tony McManus, MD of McManus Consulting, believes that although many people speak freely about agility and the need for businesses to adapt quickly to capitalise on the digital economy, few actually have a clear-cut strategy to do so.

To combat this, McManus is using his expertise in project management methodology and process management software to entrench the value of the McMethod.net system into the corporate space. His company developed the project and port-fo-lio ma-n-age-ment work-flow so-lu-tion with Dac Systems.  ‘The IT industry is faced with ever-increasing challenges in the need to support businesses as they adapt to the burgeoning digital economy.

‘The rate of application development has increased immensely and so have the risks associated with the need to get this new business functionality to market first. The adoption of agile techniques is prevalent and the need for project managers to understand the new dynamics is paramount,’ he says.

However he provides a word of caution: ‘In the rush to market, caution is often thrown to the wind and governance corners are frequently cut. The challenge is adapting to the new pace whilst ensuring that the business is not exposed to unnecessary risk.’

Another lesson big business is rapidly learning from smaller startups is where and how people work. As a senior Microsoft executive reportedly said in a widely circulated (and perhaps apocryphal) quote: ‘We need to reclaim the word “work”. It’s something you do, not somewhere you go to.’

This reflects an emerging trend that small businesses, which aren’t tied down by big corporate headquarters, are quickly catching onto.

Telecommuting technology has allowed work to move from workplaces to workspaces.

Mark McCallum, chief technology officer, director and head of global services Africa at Orange Business Services says: ‘Essentially, everyone is trying to achieve the same thing – to get employees together to collaborate. Not everyone can work in an innovative $1 billion headquarters like Google’s. But wherever you choose to work, the requirement for collaboration doesn’t go away. The good thing about technology is you can take your workspace with you into an innovative environment.

‘There has also been an increase in co-working spaces globally where members can come and work in a shared environment. These spaces attract start-ups and freelancers in an environment that encourages innovation,’ he says.

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‘Our cards let our customers know that real human beings work on the other side of the internet and are here to help’

ANDREW SMITH, CO-FOUNDER, YUPPIECHEF

McCallum points to recent research by global workplace provider Regus, which suggests that flexible working is an attractive employment ‘perk’ that helps in recruitment, reduces expensive staff turnover, breaks the chain to the office desk, helps reduce stress and offers work/life balance.

A huge part of the charm of mom-and-pop shops lies in the personal touch they offer. Big businesses know this, and despite their size, the best ones continue to keep that customer-centric SME spirit alive. Amazon founder Jeff Bezos used to keep an empty chair at board meetings as a reminder of the customer’s role in the business.

Bezos also once said: ‘Your brand is what other people say about you when you’re not in the room.’ And he was right. According to a recent study by American Express, companies that respond to and resolve complaints via social media see 21% more sales than companies that take care of complaints via telephone or writing.

Big data is giving companies (big and small) valuable insights into what their customers want. The key to success lies in responding to that. Quinton Pienaar, CEO of Agilitude, Africa’s first Salesforce.com reseller, says: ‘Today’s technology allows customer-facing teams to create and deploy customer journeys based on rich customer insights. This results in a one-to-one customer connection and creates closer, long-lasting relationships with customers.’

Pienaar points to a Customer 2020 report that sees the client experience overtaking price and product as the key brand differentiator. ‘This means that businesses have to start now to embed a customer-centric methodology into their overall approach if they want to succeed,’ he says.

In the world of e-commerce, the only direct contact your customers have with your company is the package you send them in the post.

For e-commerce upstart Yuppiechef, that’s a key opportunity – and one that many big firms let slip by. Yuppiechef include a personalised thank you card with every order they send. The card is handwritten, and includes a short message to the client (who is addressed by name). It’s a small touch, but makes all the difference.

Yuppiechef co-founder Andrew Smith says: ‘Our package is the only physical touch point we have with our customers, so the card is like the smile that a teller might give you in a store. E-commerce can be perceived as cold and lifeless, with robotic arms packing boxes in massive warehouses.

‘Our cards let our customers know that real human beings work on the other side of the internet and are here to help or guide or just share in the joy of a new purchase,’ he says.

Remember that the next time your established, big company posts soulless letters to your customers, with half those customers’ names spelt incorrectly.

By Will Sinclair
Image: Andreas Eiselen/HSMimages