Streamlining SMEs to Make Them Big | CORPORATE ETHOS

Streamlining SMEs to Make Them Big

By: | April 25, 2017
Sajeev nair main

If you are a businessman working day and night, yet struggling to grow, your firm might as well get swept away by disruptive market forces, while relative newcomers could steal the limelight. Most family-run businesses remain small, not because they don’t have the money (in fact they have lots of money!) or don’t work hard, but they fail to work smart, according to Sajeev Nair, Business Consultant to hundreds of small and medium firms in Kerala and the UAE, helping them diversify and grow bigger. He feels there are some useful lessons to be learnt from the successes of Infosys, Asian Paints, Dabur, Adanis, Godrej, Britannia and several others.

sreekumar-photoSajeev Nair is a familiar name in Kerala, having been a successful salesman turned ace network marketer, mentor, corporate trainer, motivational speaker, author of best sellers ‘Vijayamanthrangal’ (Mantras for Success), Srushtikkam Ningalude Lokam (You Can Create Your Own World) and ‘Tathaasthu’, an English non-fiction best-seller on Flipkart.

He shares his experiences in transforming Small and Medium Enterprises (SMEs) in Kerala.

# What was your motivation to start business consultancy for SMEs in Kerala?

We were initially doing corporate training, motivational classes and mentoring of managers. Nine years ago, we realized small businesses were struggling to grow, despite the fact that the promoters were working hard, day in and day out. They had no clue about what is happening in the industry, in their own company and disruptive forces can ruin their business at any time.

# How do you start addressing this crisis in SMEs?

The promoters are involved in running the day-to-day business and they have no time to think of expanding the business or learning about what the competition is doing. If they keep away from business for a week, it will collapse.  They may be the first to come to their shop or office and the last to go. Even promoters of large retail textile groups are fully involved in day-to-day activities. They have no time to think of the future threats to their business. For eg, what kind of disruptions can happen in a saree market? So we help them move from a ‘people-oriented‘ system to a ‘process-oriented’ system, freeing the promoter’s time and energy for more fruitful activities.

# How can they achieve a transition to process driven system?

We are not just advising managements as an external agency, but get involved hands-on. We are involved with them, handholding them in their transformation journey. We systemize and streamline their operations, structure their operations over a period of time working with the entrepreneur and employees. We put reporting systems in place, performance monitoring systems so that in a short period of time, the promoter is freed to learn new things by attending our sessions and also think of new business ideas. It is a painful process for family businesses to adapt to a re-engineered organization – many promoters may be told to keep off from doing some work they were doing before.

# Does this also involve investing in technologies at the backend?

Sajeev nair 2It is not about technology, but about streamlining systems. Most SMEs have expensive Enterprise Resource Planning (ERP) software systems but hardly anyone uses them gainfully or employees won’t allow that to happen. There is no real time reporting system – for eg. the promoter has no clue about sales achieved until 2 pm on a particular day or at the end of the month.

# What about employee productivity?

Many SME promoters say the employees are not working at all – they are idling or active in social media. It is not that they lack talent. The employees say they are not properly briefed on their role and functions. So, this means there has to be a proper HR Management in place – with each member told about his jobs and responsibilities, how he will be assessed at the end of the year. Similarly, when a company was started they may have put a person in the family or close to them as a General Manager. Over a period of time, he may become a liability as he lacks the skill or resources to work in a professional environment as the company starts growing.

# What mistakes do SMEs commit while launching products?

SMEs make a product, contact an ad agency, create a package, design and brand name and spend heavily on advertising and end up being a loser. They don’t have a proper strategy, no brand philosophy. The promoter may not have any kind of attachment with his product or brand. There has to be some principles and values which have to be put into that product. The success of a business is also a reflection of the core values of the promoter. Whether one wants to make a bomb or soap depends on his value system and therefore there are many factors that contribute to the success of a brand.  You may have seen lot of failures in ayurvedic over-the-counter (OTC) products. It is not because there was no demand or their quality was poor. They make a product, contact an advertising agency and spend huge money on promotions but they fail to take care of logistics, distribution and estimate the time taken for the product to reach shop shelves. When the customer goes to a shop to buy the product after seeing the ad, the product will not be there.

Operations streamlining is near zero in most companies. There should be a proper inventory management system, manufacturing processes should be right and raw material procurement should be proper. There is no proper vendor management system – they will depend on just one or two suppliers and they will decide the price without any negotiation. When all these systems are streamlined, we complete the first step in the move from people-driven to process-driven system in companies.

# How did businesses adjust to your streamlining process?

When the business is promoter-driven, they worry about how to run their single business all the time. When a company is process-driven, there are proper management information systems (MIS) in place. When their processes get streamlined, it makes promoters confident to think of new businesses. I had a client who was a successful tiles & sanitary goods supplier in North Kerala. He was making losses and he didn’t have proper accounting systems. Once his business was streamlined after a 6-month exercise, he had the confidence and time to start a new plywood venture in Tamil Nadu; we are advising them on that too.

# Could you recall any interesting incident in your transformation program?

Yes, there are many. In a large retail shop, we had to shift the cabin of a promoter from the ground floor to first floor as he was constantly interacting with his customer friends to offer discounts, bypassing his sales managers. We thought it was not professional and moved his cabin upstairs. Then he felt uneasy because all his life, he had been interacting throughout the day with customers. Then we installed a closed circuit TV and a number of screens in his cabin so that he could feel he was with customers. So our streamlining process involves training, coaching entrepreneurs on their style of functioning as it matters too. You can’t grow with an unprofessional style.

There is another case of a family jewellery business in Kerala. Seven brothers were managing seven branches; they had no time for anything else and couldn’t even dream of expanding. We restructured their business, created a director board of seven and asked them to focus on strategies alone. The daily operations of the branches were entrusted to managers. After sometime, the brothers told me they now have less work to do. Then they started thinking of expanding to other areas. One of them even started an agri-business venture.

# What are the tangible benefits of streamlining of SMEs?

The sales turnover goes up, production, profitability, productivity go up and employees feel they are working in a professional environment.

# How far is inducting MBAs into SMEs helpful in bringing professionalism?

There is no point in employing MBAs if there are no proper systems or structure in place. I know of a company which hired IIM MBAs at high salaries as COO and CEO, but they couldn’t work because the systems were not in place. The promoters felt they hired them at a high cost, but were not delivering. MBAs will not be interested in creating a system but more comfortable to work when it is in place.

# Are our small businesses aware of the dynamic changes happening in the market place?

They are not aware of new trends because of lack of exposure. They don’t know the importance of networking, use of co-operation or collaboration instead of competition. Our traditional media is more focused on politics than on reporting on business trends. That is where online media such as Corporate Ethics can help in creating that awareness as we move into a ‘data-free’ world.

# What are the reasons for the large number of failures among start-ups? Are you addressing this market too?

smeMany young MBAs or engineering graduates are fascinated by an idea and believe that it will succeed. However, they fail to conduct proper feasibility studies, find out whether the business is scalable or whether it can attract funds. Most often angel investors or funding agencies are also unable to conduct due diligence on startups. The engineers or MBAs who venture out without any formal work experience will be ignorant of corporate structures and systems. This can be a drawback when they start a venture.

# What lessons we can learn from SME failures?

I know of a case where a businessman made hair oil, the product and packaging was good as he had sourced from a traditional vaidyan and used it himself with good results. He spent a few crore rupees on advertising and promotion but now it is nowhere in the market. It failed because of lack of proper positioning (just a me-too ayurveda oil) and failing to focus on logistics and distribution. India’s consumer market has enormous absorption power as Patanjali has proved. But we need to have proper planning, identify target markets, have a strategy, brand positioning and communication strategies. They need to have operational funds for at least a year. Many SMEs don’t know the difference between income and profit nor do they have a proper balance sheet. Herein lies the trouble and we are addressing these issues in our consultancy. We have so far helped 300 enterprises in UAE and India to streamline and grow and our target is 1000.