Why SMEs don’t grow
IT was a fantastic experience to sail the Atlantic on the penultimate crossing of the old Cunard Liner RMS Queen Mary in 1966.
Under the command of Commodore John Treasure Jones, the great ship rode the mighty waves like a Friesian War Horse taking a king to battle. When in millpond-calm, a day before reaching her destination, her power and majesty seemed even greater. From the bow, you would soon see the lights of Rhode Island, then New York. At the stern, the calming wake waters of an ocean proudly sailed.
On one of the occasions when I was talking to the Commodore I asked him how running the ship was split between him, as Captain, with overall control, and his Staff Captain. He outlined their jobs. His Staff Captain looked after everything as far as I could tell – passengers, crew, victualling, health, entertainments. Was there much left for the Commodore to do?
Navigating turbulent waters
“I navigate”, he said stentoriously.
As we were crossing from Europe to the United States it sounded as though he simply pointed the ship in the right direction and relaxed. When asked if he knew at which place we would touch America he assured me that it would be somewhere along a four hundred mile stretch of the coast. That struck me as vague.
Of course, John Treasure Jones was gently pulling my leg. But in another way, he wasn’t.
If he’d said “I decide the strategy” I would have understood better. The captain of a ship of whatever size is commissioned to take his ship from A to B. So he points it in the right direction. He will be appraised of weather threats, icebergs, typhoons, other shipping hazards and problems that might affect his vessel. He will take those into account and trim his direction, speed and passenger/crew behaviour rules accordingly. He decides the strategy of the voyage.
Growing companies need the same basic decision making.
Does your business have to grow? With certain exceptions, most of which involve a substantial element of philanthropy, the answer is yes.
Most businesses have to grow if they are to maintain their position in the market, increase their shareholder value and not stagnate technologically.
Business survives through growth
The blood of a business is the people running it. However good they are, just like blood, they must renew and revitalise or they will become a process, not a living organism.
We have seen so many businesses succeed and then fail. The old classic is Xerox, but there are others. Polaroid ignored technological progress. Drones are driving photography aircraft to find new uses. AI will overtake many jobs that can be done largely by process. In doing so it will reduce the quality of much work, just as mass production did when it began.
But, as a poor person put it to me, “mediocre is better than no ocre at all”.
Growth signals diligence and innovation even when, sometimes, it is neither of those.
Journalists reporting on company successes and failures regularly cite growth as proof of brilliance. There are plenty of brilliant SME bosses around, so why don’t they grow?
Building a business is like building a house. You put your heart and soul into it, stretch your financial luck to its extreme, take risks with product or idea launches and measure your success by growth. The very wise know when to let go, to pass on the building to a new generation. But it is hard to do that. You grow attached to your business. Your colleagues are your friends.
As new technologies appear, you hire people to handle them.
Chairmen of the last century could no more handle a typewriter than win a marathon. They didn’t need to. But when the Internet arrived, could their secretaries keep up with the rush of materials or the new speed of response demanded by the technology?
What makes for business success?
If you study the businesses that succeed and those that fail, you will see that the former have both strategy and tactics.
Failures regard strategy as outdated and impractical. Strategy is knowing where you are going and why and that you remain on course.
Tactics are fleet-of-foot manoeuvres to take advantage of opportunities and threats. Is a tactical move that is at odds with your strategy permissible in this kind of business approach?
Certainly, but you must have good reasons for your tactic and understand the challenges it will create for your strategy.
Strategy changes from time to time and needs regular reviewing. How often is decided by the pace of the operations it is planning. A war being conducted 80 years ago (WWII) required very different strategic handling from the Ukraine-Russia war of today. Even during WWII the basis for strategy changed fundamentally with the creation of the atomic bomb.
In the commercial world today, the development of AI means that the strategy for advertising, already substantially changed to take advantage of the influential social media available, will again change fundamentally to take account of the sensitivities of retail customers. Issues of survival, health, climate, fairness, comfort and emotional wellbeing are already playing a new role in product development and promotion.
Another example is the strategy for defining and handling mental wellness. This is changing. In Britain, police forces are already being restrained from attending ‘emergency calls based on citizens’ definitions of mental illness’. In San Francisco, drug abuse mental illness is already sadly regarded as part of the normal scene of life.
A wise pillar of business once told me that the most useful thing he had done for his outstandingly successful company was to raise the eyes of all his employees once a week to look over the horizon.
“They then know where they are going,” he added. “If they don’t know that, how can I expect them to get there?” I followed his advice when building Cerebos Pacific.
Plan for success, don’t fail to plan
The thinking I am suggesting may seem like big company stuff. Small businesses, some will say, don’t have the bandwidth for the luxury of strategy. Others will claim that you can grow a business based exclusively on tactical moves.
To a point, you certainly can. When that point is reached, the business will be sold to a conglomerate looking to avoid the risk of product development. It may net the owners a tidy sum for them and their children to benefit from. It will not then be a growing business, but part of a process.
When admin overtakes creation a business is heading downhill. There are said to be more managers in the beleaguered British National Health Service than medical staff.
For an SME to grow, it must have a vision – and the people who need to be visionary are the owners.
They must have a willingness to partner other businesses, which involves risk; and a good ability to read people, which involves thought. Secrecy about patentable assets is vital in any operation, but sharing knowledge, which made the US so successful, is key to development – and flexibility is the sauce of tasty novelty. SME owners are brave pioneers who take the advice “carpe diem” literally and with gusto. They are the seeds of our species’ survival.
The rules for SME growth apply equally to individual career progression. Those who have a strategy (purpose) and know where they are going are very likely to succeed. Those who don’t, probably won’t. Having and maintaining a strategy is such a small price to pay for personal or commercial development that it is surprising more people don’t adopt it.
An SME that knows its strategy becomes an MNC. Ask Apple.
The writer is founder and chair at Terrific Mentors International
