There are benefits to looking beyond the traditional one-size-fits-all approach, in business and elsewhere. Recent technological innovations have made it more possible than ever before to offer clients the personalized attention to detail that they demand, while still thinking about the big picture.
It’s no accident that small- to medium-sized enterprises (SMEs) have grown by 120% over the last five years across developed markets. They’re now seen as the backbone of modern economies, accounting for about 90% of businesses and more than 50% of employment worldwide, according to the G20 Action Plan on SME Financing.
The power of technology in boosting SMEs is reflected in their increased importance in developed economies, where they make up an impressive 55% of GDP, as opposed to just 35% in developing economies, according to the World Trade Organization (WTO). In addition to a tech-savvy talent market, developed economies also tend to benefit from clear regulatory policies that are designed to create a level playing field and boost competition.
At Texas Capital Bank, we have sought to create and nurture business partnerships primed for SMEs to find success. We know that a comprehensive system that reduces the burden at every step, from early stages to scaling up, helps produce the dynamics of growth and job creation. In fact, SMEs play an outsized role in development, accounting for approximately 95% of new jobs in developing and emerging countries. However, despite the upsides and recent growth, SMEs continue to face an uphill battle.
Four ways SMEs can find long-term success
1. Attract the right talent and put employees in a position to succeed
Fortunately, SMEs offer greater flexibility and adaptability than large firms, meaning it is easier for them to provide promising employees with opportunities for visibility, measurable impact and a path to ownership. It is often difficult for employees at big companies to feel like they make a meaningful difference, and SMEs offer an alternative that resonates with a new generation of ambitious creatives.
SMEs offer the unique appeal of helping these employees thrive in a changing business environment that demands synergy between the talent a business attracts and the clients it draws. SMEs are already well-versed in the value that each member of staff brings to the table, as they know every hire has a tangible impact. Nobody can hide or defer responsibility in an SME.
By focusing on each individual employee, SMEs create more cohesive workplace cultures that foster tighter personal connections. This shift is occurring alongside technological breakthroughs that increase connectivity across distance and make it easier for teams to collaborate efficiently. This allows dedicated groups to have an outsized impact, compared to in more traditional workplaces. Moving forward, SMEs will have to define this ‘new human connection’ successfully, as it will be an important, competitive differentiator.
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2. Create agility through horizontal management
As daunting as this sounds, it is easier for SMEs to hit these targets than big companies organized vertically. The best SMEs already work in a collaborative fashion to deliver value to their clients and ensure that employees feel connected to their mission. This syncs with the overall philosophy that talent development and cross-training are important, and not just as factors that give SMEs an edge.
At Texas Capital Bank, we have invested in creating a fertile learning environment in collaboration with our SME clients. This ecosystem attracts and supports young talent, allowing them to interact seamlessly with their colleagues without feeling the brunt of the generation gap. Long-term success depends on creating agile structures or hybrid agile structures for the entire organization.
3. Harness the potential of the latest digital technology
By developing strategic partnerships with big data firms, SMEs can lay the groundwork for progress. The future will require them to generate deep client insight that goes beyond their current base. Key partners for consideration include some of the most progressive data companies such as Alibaba, Google, Amazon, Tencent and Baidu. Alibaba even offers a Small Business Platform that can help SMEs meet today’s most pressing challenges while preparing for future success.
4. Be part of a value chain of relevant and adjacent stakeholders
SMEs don’t have to be subservient to one company as part of their supply chain, but they can be part of an industry or a company’s value chain. They can learn from being part of that bigger community, while not allowing that same community to stifle innovation.
Every SME needs to ask itself important questions such as: “Who are we as a company?” and “Why are we worth considering?”. Since SMEs often lack independent brand validation, being part of an established value chain gives them a clear identity. This is an unfolding process that can change over time, and successful SMEs will apply their knack for adaptability to ensuring that they always stay relevant in these discussions.
On the cusp of a renaissance
These four principles are not a complete blueprint for SME growth and expansion. As I mentioned earlier, SMEs often face obstacles from larger, more established firms. Governments have a critical role to play in ensuring fair competition and ethical business practices. They can provide friction-free regulations that are transparent and easy to understand.
Partnerships that generate investment in the development of cutting-edge digital infrastructure present clear benefits to both the public and private sector. SMEs remain the engine of economic growth across the globe, and enhancing connections will put them on a path to success.
To this end, the SME Finance Forum has taken early steps to create a focal point for this type of exchange and networking. Specialist forums of this kind could significantly bridge the knowledge deficit in SME finance and keep them competitive. With a critical mass of members and visible support from some of the largest financial institutions across the world, such a forum could foster a virtuous cycle of knowledge, leading to a greater flow of funds to SMEs.
As technology continues to make it easier for dedicated teams to deliver personalized solutions, we stand on the cusp of an SME renaissance. By following these principles, there is little doubt that SMEs can and should increase their importance on the global stage.