Evading Extinction : Rules of Survival in a Global Slowdown
With three out of ten of the nation's small businesses fearing they will not be here this time next year many business leaders are worried about how to steer their firms through the choppy waters of the next few months.
The figures are released in a new report that also identifies a new tribe of businesses called 'Super SMEs' who are booming through increasingly tough market conditions.
Crucially, the report, by workplace telecoms specialist Plantronics, investigates what Super SMEs and struggling businesses did differently as the slowdown first loomed on the horizon. In doing so the report delivers an action plan for business survival. The action plan is comprised of a ten-point checklist for anyone running their own business and includes tips on where to concentrate investment and what to prioritise when the chips are down, using the Super SMEs as the template for success.
So if your business is struggling or you fear that it may do so as economic conditions worsen why not join a panel of experts involved in putting together the report.
They will have practical tips and advice based on the report's findings and will be sharing their tips for survival
Join our three wise men: David Molian of Cranfield Management School, Philip Vanhoutte, EMEA Managing Director of Plantronics and Peter Thomson of WiseWork live online to discuss how to turn your SME into a Super SME.
For more information visit http://www.be-a-super-sme.com/advice
H: Steve Sedgwick, host
D: David Molian, Cranfield Management School
P: Philip Vanhoutte, EMEA Managing Director, Plantronics
PT: Peter Thomson, Wisework
C: Charley Downey, General Manager, Tele Products Limited
H: Hello and welcome to the Business Show, I’m Steve Sedgwick. With three out of ten of the nation's small businesses fearing they will not be here this time next year many business leaders are worried about how to steer their firms through the choppy waters of the next few months. A new report commissioned by telecoms specialist Plantronics identifies a new tribe of businesses called 'Super SMEs' who are booming through increasingly tough market conditions. So how did they do it? And what should you be doing to safeguard your business through the economic storm? Now we’ve got a great panel for you, I’m delighted to be joined by David Molian of Cranfield Management School, Philip Vanhoutte, of Plantronics, he’s EMEA Managing Director and Peter Thomson of WiseWork and founder of the Future Work Forum. And of course before we get into the debate, if you want to get involved and ask some questions, please submit those via the box on your screen, and we’ll do our best to tackle as many as possible. Gentlemen, thank you very much indeed for joining us today. There couldn’t be a more critical time for getting into a survey like this, and looking at what’s going wrong with some SMEs, but more importantly Philip, what’s going right with some SMEs who are navigating the storm rather well?
P: Yes well the thing that really fascinated and amazed me is the fact that those super SMEs did a very good job of frequently viewing their planning. These companies actually on a monthly basis, are reflecting what’s happening and doing some scenario planning to cope with both good and bad weather, and that is in stark contrast with more than half of the companies not even – haven’t done anything close to a bit of scenario planning for bad times
H: David, I want to bring you in here as well, because I want to take a step back and talk about the three stages of an economic cycle. The reality coming onto people, and you may think this is a very important point, for small businesses to establish where they are in that cycle and where they move forward next
D: I do, and there’s a classic pattern when you get a major economic shock like this, in the first few months people simply can’t believe it. And so they’re almost in shock, and psychologists would say they’re in denial. The second stage is when reality dawns and people begin to accept that things are bad and it’s going to affect them and their business, and then very often they get extremely pessimistic and we’ve seen in the Plantronics survey extreme levels of pessimism shown by some of the respondents
H: 79% – if I can jump in there Peter, 79% of SMEs feel the economic slowdown is hurting their business. Construction is hardest hit of all – what about that other 20%, we’re here to talk about what we can do to get through this, there are some optimistic people out there – why are they optimistic?
PT: I think because they can see the long picture, that’s what Philip was saying. They’ve got plans in place, they’re not just reacting to what’s happening this month, they’re interesting in things like their people. And what happens in a recession, people get – you know, businesses often get rid of their best talent because they feel they can’t afford them, and then in a year or two’s time they’re trying to recruit them back and by then it’s too late
H: How do you maintain the status quo of keeping your talent when your costs are under so much pressure, David?
D: Well it’s really hard and let’s not kid ourselves, there are some businesses out there which are really hurting. I think the number one thing is to keep focused on making your business a great place to work, providing vision and leadership to your workforce, that you have a plan, you know where the company is going and that you’re going to come out of this, that there is light at the end of the tunnel.
H: Philip what about making innovative moves – it’s very had to make innovative moves when you’ve got these costs pressures we’re talking about, and costs and getting down debt is one of the points which the survey has raised as important. How do you innovate, how do you renew your company when there’s such pressures there?
P: Yes. Well I think we’ve never had so many tools to allow for flexible working, yes? I mean we’re still in an age where we think about binary – a person being employed for 5 days per week, or not being employed, we’re going to fire a person – let’s be more creative. I mean you can easily ask somebody to start to work a couple of days per week, not let a person completely go. Look at new forms of engagement
H: Ok well has that technology, Peter, caught up with the reality that people do want to be flexible, because we all know there’s a lot of bad technology out there as well which says oh we can get you working at home, but is there really good, affordable technology out there now?
PT: Yes – technology’s not the issue, it’s there, it’s useable, and you’ve got, you know, the You Tube, the Skype, the Facebook generation coming to work and we’re just used to using this stuff, it’s second nature to them. The problem is that we’ve got managers in businesses who came up in a different world who don’t understand some of this, and who are thinking very rigidly about the world of work. Now’s actually a time to introduce more flexible working – not because it’s socially a nice thing to do, or family-friendly, but actually because it’s good for business. It improves a productivity
H: But hang on a second, you’re talking about a generational shift, and yet David – correct me if I’m wrong but one of the important things is having a senior captain on board as well, having someone who’s a steady pair of hands amidst the storm, someone who’s actually been through a previous recession?
D: Well it’s certainly true, when you get to my age, it’s always tempting to say you’ve seen it before but I can say honestly that I’ve lived through two major recessions before, and come out the other end. So if there is a message it’s definitely don’t panic Captain Mannering, you know, we will come through and the majority of businesses are going to pull through this recession and come out the other side
H: Philip, so investing in people, letting them be mobile as well, not working 5 days a week – that’s one of our first key messages we can give people is it?
P: Yes indeed. I mean if we look at it, I mean people are predicting unemployment rate could go into 10% of something like that. I mean it shouldn’t be that we have so many people leaving the employment altogether. We need to be thinking about how much do we need of people, can they be working a couple of hours less per week in order to make sure that others can stay on being in the business and have their value – through all kinds of employment
H: And before Peter comes in, do our superstars, the crème de la crème of the workforce, do they want to work more “mobiley” at the moment, do they want that versatility?
P: Absolutely. I mean people have already figured out that in fact most – more than half of the work that you do doesn’t really go well inside 9 to 5 standard conventional offices, it’s passé –
PT: And this is where the small businesses I think, can actually benefit because large businesses are built around bureaucracies – it’s perhaps more difficult for them to be flexible. Small business can allow more an individual employee to get the right work / life balance, and benefit. Again it’s mutual, the organisation gets the benefit of more productivity, the individual gets a better work / life balance.
H: Ok so mobility, planning – two of the key issues. Talking of planning, this is one of the key parts of the study. Businesses that did plan for the downturn are now doing actually better as a result. Here’s a supreme – super SME we spoke to about preparing for the harsh times
C: “We sat down as a management team and decided to look at how the situation as we perceived it and how it was likely to turn, was going to affect us. Firstly we scored our business on a scale of 1 to 10, to decide how risky we were as a venture. We actually scored ourselves quite low, we think we’re about a 4 out of 10. The reason for this is mainly that we have lots of small customers, no one customer will cover more than 4% of our turnover, which means that the risk is spread. I think that’s what’s given us the opportunity to, in the face of this economic downturn, actually grow the business by 15% in the last financial year.”
H: So super SMEs are seeing opportunities to grow their business in the current environment. Tell us about the importance of risk assessment of your clients – Peter?
PT: I think the difficulty now is that people don’t quite know what risks they’re facing, and it’s too easy – as they were saying – to get depressed about the whole thing and assume that the world’s a big disaster. Yes some organisations will go by the wayside, but it’s important to know what the impact is on your business. It’s a bit Darwinian in a way, there will be, inevitably, in a downturn, some businesses that go to the wall, but for the small business, the ones that are prepared, are planning better, have thought it through, are going to succeed and indeed could be one of these super SMEs
H: Well I mean there are some very important questions coming from our viewers today, and when you’re in a situation where you have to look at – marketing’s important but investing in my employees is important as well. What about prioritising, certainly that’s a question that’s come up more than one occasion. How do I prior – what do I do, do I reduce head count, do I increase my marketing? You can’t do everything. What would you prioritise?
P: Well this question about marketing versus sales comes up regularly in companies. The answer is there’s no sales without marketing and no marketing without sales. So if you’re going to select whether you have to let go of a sales guy or a marketing guy, it’s not either, it’s like I mean, is there one of the two which is good at both, or maybe you can just say I need each of you for 3 days a week, yes? But these binary things, it’s just not a wise way of handling
H: That actually reference a question we’ve had from Sebastian in London, Sebastian I hope that answers your question. Let’s move on. Are there any reasons why now is a good time to actually start a business? That’s a question a lot of people are asking because the banks, let’s face it, are being protected – by a certain amount by the government, the small to medium size businesses, and we spoke a little bit off-air about this as well – they’re finding it a lot tougher. They’re not getting that safety net are they?
PT: No but I think what’s happened is the big businesses are inevitably slimming down, and in some cases sub-contracting some of their services they used to have in-house. So if you can spot an opportunity where a big business is now not wanting to run something in-house but wants to find a small supplier to supply it in from outside, there’s a good opportunity
H: Yes. That answers Alan in Hemel Hempstead’s question. David from Norfolk writes in – “should I spend more money and time investing in my biggest client, or focus my energy on trying to attract new clients. I don’t really have the luxury of being able to do both right now. “ Very important question. This is actually addressed in the survey. I was reading about this because I was thinking well are you innovating – we’ve said, you need to innovate, you’re looking at new avenues, you need to do that, but what about protecting your current cashflow. This is a question which people are asking, and it’s a very important one. Philip?
P: It is, no question the first thing you’ve got to do is preserve and defend your existing customers. The cost of acquisition for new customers is always higher. So you do that first, and then the customers you have half a share of the wallet, you develop and extend the good work that you’ve done with certain departments and to others
H: The biggest killer of any business is delay. Delay decisions, delayed redundancies, delays on being paid. Sean writes in and asks this question – David this is an eternal problem for small and medium sized enterprises. Cashflow. One would think there might be some help you can get from technology, but there’s no solution there until bigger companies pay up is there?
D: No. In the short term the only thing you can do is watch your cash like a hawk, and monitor it certainly weekly, and possibly daily. And take tough action over customers who are paying you late. Many great businesses go out of business because they accept unprofitable work from late payers, so if you need to take tough decisions, take them and take them quickly
H: J. Gill writes in and this a harsh view, it goes along our Darwinian argument earlier – “any businesses that didn’t see this coming shouldn’t be in business. It’s not like we didn’t have warning.” Yes there have been orders of doom in the red tops and the newspapers for quite a while, but I mean if Fred Goodwin, the boss of Royal Bank of Scotland didn’t see it coming and did an acquisition of ABN-Amro at the top of the market, it’s a bit harsh to blame the poor SMEs isn’t it?
PT: I think so, although SMEs again have got an opportunity to understand their particular niche much better than a big organisation that maybe has spread itself, its products, over a wide variety of markets. SMEs can often own their particular area – but where does most of the kind of innovation come? It’s often in SMEs because they are – they understand that particular area they’re in much better than the big conglomerate
H: Another question coming in, this time from Kelvin in Maidstone. He says “we’ve taken a lot of previously outsourced business in-house, but it’s left our employees very stretched. Is there a golden rule for this? David, let me come to you because we were talking about increased productivity. This is a company that’s clearly doing that, but it’s leaving them overstretched
D: Well I think – first of all there is no golden rule, but if that’s what you’re asking your staff to do, then it’s a two-way street. You have to invest in them, to make it as easy as possible for them to increase the rate of productivity so you have to see this as a cost, sorry not as a cost, but as an investment, by making it easy for them to live within the new service targets that you’re setting
H: But I suppose in many ways it’s a good position – they’ve got the business, they’ve bought it in-house and they’ve managed to cut out the middle man on a lot of this work
D: This is often what people find, when you enter a downturn, that actually there’s some fat that can be trimmed from the business, and going into a downturn forces you to do exactly that
H: Flexible working, increased productivity, in addition to that I want to talk about education, we haven’t mentioned education. Shouldn’t we be retraining – I mean you’re the Cranfield School of Management, we should be training people shouldn’t we? Giving them new skills. Or if they’re skills that are actually slight peripheral but they keep them happy all the same, but we should completely concentrate at the moment. Just keep to the core business
D: Well of course I’m going to say you should be investing in training and education. But actually survey after survey that we do shows that businesses that invest in training and education their workforces consistently out-perform their peers. So the last thing you should be doing if you’re going into a downturn is taking a knife and making savage cuts to training and investment in your biggest asset, who are your people
H: Quality of service. How do you maintain quality of service when you’re trying to cut back left, right and centre? It’s very tricky, you want to service those customers, those existing customers before expanding the business Philip, but how do you maintain quality of service, and that is something that super SMEs have been doing it, isn’t it? They have managed to do that. Can all kinds of SMEs do that or is it only ones in certain industries in certain parts of the country?
P: I think they can absolutely, as the study very well points out, the number one thing is focusing on customer service, and maintaining quality. If you keep an eye open on what your customer wants, and you know what you’re competitor is not so good at, you can continue to win.
H: And that Peter backs up some research you’ve been doing elsewhere as well?
PT: That’s right, at Henley Business School we’ve done some research on SMEs in the West Country, in Cornwall, and interestingly I think it was one of the top 3 things that they found was customer service, actually improved as a result of introducing more flexible working. Now you’d think that if employees are working in ways that suit them it might not meet customers’ needs, but actually as customers require a more flexible service, perhaps out of normal hours, so employees can flex their hours to match the customers’ needs
P: What we tend to forget when we talk about flexible working is we always think binary, either in the old office or at home. In reality the place of the action is with your customers, right? I mean I remember the old days when I was in consulting, and on a Friday in the pub people would ask me “have you been in the office” and if you were in the office, you were going to have a very poor career. You had to be with your customers, and that’s what mobile and other technology allows you to do. You can be with your customer. Work there
H: Let’s talk about how critical technology is. Most technology I have in my home is far more expensive when I bought it than it is now. Luckily one thing about a slowdown and a recession, it helps – things do get cheaper in terms of the goods you are buying. Is the technology getting better for your money at the moment? David?
D: Oh absolutely. No question about that. The technology is plentiful, it’s out there in lots of different formats. The problem is we’re running to catch up with it and we have to learn how to use it, so it’s a behavioural issue more than a technology issue. I know Peter’s got views on this
PT: Yes definitely because what happens of course is people look at a piece of technology and think ah, maybe that’s good for my business. Instead of stepping back and saying hang on, if technology enables, it’s a catalyst, it enables me to work very differently. How can I change my working style, I can now choose when and where I get the job done. So many of us, and managers in particular are fixed with the idea that work has to be done sitting at a desk. If you can have a mobile phone and a laptop, they – and they can go to a service station on a motorway, they can be working anywhere. Some people can stay at home, and as Philip says it’s a question of people choosing. There’s no right or wrong place to work. Chained to a desk is not best for some people, sitting at home is not best for some people
H: But the only good thing – well one good thing I can see about sitting in my office is I’ve got a phone number, I can dial, I can ring up my support and I can have a guy round my desk in 20 minutes saying this is what you did wrong, you pressed the wrong button, you buffoon, you kicked out the power cord- the level of support on technology, what about that? It’s not just about buying the gadgets, or about buying the software is it?
PT: Except a lot of that can now be done remotely, and again the younger generation coming through don’t need the sort of support the older ones do because they understand it, they’ve come up with this stuff. You know they – my generation, we need somebody to tell us how to work the DVD recorder, you know. My children and grandchildren don’t need to do that, they – they just come up with it
H: It’s the same here. Very embarrassing. Philip you’re nodding furiously
P: Yes absolutely. Well look I’m only one day a month in my office in Swindon here, and the rest of the time I’m on the road all the time. It’s absolutely possible, you need very little investment. You might get into some noisy places, so better to have a headset, then at that time people can understand you on the other side of the line. So don’t forget the headset
H: There’s some bigger picture questions as well I want to get to, and Paul McKenzie writes in and one that I’m interested in, I’ve asked this question a lot over the last few years to guess – “how does a regular SME become a super SME and more importantly are super SMEs better placed than bigger companies to survive the economic downturn, because they add some extra force. If I look at mid cap and smaller cap companies, a lot of them are more cyclically exposed. But is there an advantage they have got over the big companies? Versatility’s got to be one of those hasn’t it?
P: Call it agility. I mean what strikes me in the study is that the better ones, they are in touch with their marketplace, they almost have like an organic way to adapt, reassign resources. Be that on the technology side, on people and tuning them up and down, it’s agility and much companies are just – well jealous from what they see with these small companies
D: It’s the ability to take decisions very quickly and then to drive those decisions through with a plan of implementation. It’s absolutely the hallmark of these super SMEs
H: Peter, to start summing up what we’ve learnt today, it is very tough out there, we don’t need me or any of us to tell people that. Small and medium sized enterprises are suffering very heavily. The super SMEs, that 20% or what the 1 in 20 I should say – what are they doing right, in a nutshell?
PT: What they’re not doing is reverting to hard, financial decision making and simply cutting and saying business is bad, we cut. What they are doing is looking at the broader picture, investing in the future, investing in their people, looking for the longer term, and being careful obviously of the current business, but not just taking a knife and cutting willy-nilly
H: You teach economics to a certain – or business management, there are certain procedures, certain patterns, everyone said this is the right way to run a business. Do you need to rip that rule book up now if you’re a small or medium sized company, and we talked about innovation, but just be innovative with some of those ideas as well?
D: we need to understand two things when we go into a downturn – one is that cash is king, quite obviously. And the second is you need to understand the difference between what your customer wanted when times were good, and what your customer needs when times are bad. So you really need to get close to your customers and solve their problems. Find out where the pain is and provide a solution that addresses that area
H: And also cut the customers that are just going to bring you down was a point that – streamline, look at your risk as we heard on the VT there as well. Philip, final points as well? We’ve heard from Peter, we’ve heard from David as well – what exactly should an SME prioritise? We’ve got a whole list of points in which – a good 10 bullets of how to get yourself through, or certainly how to help get yourself through it. If you had to prioritise, what are the key findings?
P: I think it’s be flexible. Keep your eyes open on a monthly basis. Take a look again, yes, and then have speed in actions. Make sure that you stick with the basics, focus on the customer quality and then leverage the fine people that you have and some of the very inexpensive technology that you can use with it
H: Gentlemen thank you very much indeed. I’ve learned a lot today, I think many of our viewers will have done as well. Peter Thomson, David Molian and Philip Vanhoutte thank you very much indeed for that. Thank you very much indeed for watching our panel. Lot of you SMEs out there can get more solid advice on how to negotiate your way through this economic storm we’re seeing. The address is at the bottom of the screen now. (www.be-a-super-sme.com/advice) And that takes a look of course at how some super SMEs are negotiating this storm. Thank you very much indeed for watching