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BW Businessworld

SMEs' Success Formula

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The SMEs (small and medium enterprises) are no longer small in their ambitions. They are determined to succeed on the global stage. But the question is how. And this was hotly debated at the launch of Businessworld's The SME Whitebook on 13 September. The Crystal Ballroom at Delhi's Lalit Hotel was packed, and the atmosphere electric.

The charismatic chief guest, Union Minister for Law and Justice and Minority Affairs Salman Khurshid, struck an optimistic note with his promise of SME-friendly policies. He said smaller businesses provided muscle to India's growth story, before unveiling The SME Whitebook 2011-12. This year's edition is more data-intensive and covers new sectors including plastics, chemicals and healthcare.

Pavan Varshnei, president, English magazines, ABP, set the tone for the evening. He said, "SMEs play a key role in the global value chain, and also a vital role in upholding the entrepreneurial spirit and innovation which is crucial to fostering competitiveness in our economy." BW, he said, provides an interactive platform for SMEs.

K.V. Srinivasan, CEO, Reliance Commercial Finance and Reliance Home Finance, who was the next speaker, highlighted the critical role information played in the success of any SME. He said The SME Whitebook will help enhance knowledge of sectors that afford more opportunity to SMEs.

That set the stage for a panel discussion on "How can SMEs succeed in a global economy?" The panel included Ameera Shah, managing director and CEO of Metropolis Healthcare, Anil Bhardwaj, secretary general of the Federation of Indian Micro, Small & Medium Enterprises (FISME), Samarendra Sahu, additional commissioner in the Office of the Development Commissioner (MSME), Sandeep Dhupia, executive director, KPMG's Transaction Services, Shantanu Prakash, managing director and CEO, Educomp Solutions, and Srinivasan of Reliance. The discussion was moderated by BW's executive editor Rajeev Dubey.

Dubey initiated the discussion by asking the panellists what they thought were the biggest hurdles that SMEs face. Quality of manpower was the biggest challenge, according to Shah. "We need manpower that understands the functioning of our SMEs. Healthcare is a nascent industry, and lacks quality technical manpower," she said. Dr. Reddy's Pathlabs and Marico, Shah said, had decided to set up the multiple leader programme in their early growth stage. This was a costly process, especially at a time when they were small in size. But it paid off. In their expansion phase — they had access to good leaders who could lead the business well.

Bhardwaj felt current structures were not in tune with a globalised economy. Plus, the recent fall in demand, both globally and domestically, could pose a real problem to the SMEs. He suggested that SMEs should form clusters to jointly address the problems of infrastructure.

Srinivasan said the low growth trend could stymie SMEs' effort to scale up, but that was one hurdle that must be crossed. He recounted a story of an SME that tried to change its mindset: an auto dealer decided to disclose his additional sources of income over three years, so that he could have a clean slate of accounts, and his business could attract venture capital. Such changes in mindset could help SMEs meet macro challenges, Srinivasan said.

Prakash said entrepreneurs need two basic things — imagination and a core team. "But I talk to many SMEs and realise that their thinking is much less than what their ability is. Everything comes down to how big the entrepreneur can think and the quality of the core team that drives this business." The successful SMEs have managed to leverage the single competitive advantage they have. He cited the example of an Internet company in Chandigarh that managed to think big, effectively. The virtual tutoring business, with a start-up capital of less than Rs 50 lakh, outsourced its content building within India and to the USA and Russia, and was ready to take on global competitors.

Dhupia too pointed to the need for a change in mindset. "I have interacted with many SMEs on both sides of the payroll and find SMEs complain about being too small to invest in technology." But such investments prove profitable. All Out, a mosquito repellent company, had invested in Japanese technology early, and could take on companies such as Godrej and Reckitt & Colman.

MSME's Sahu pointed out that SMEs today are plagued by issues such as lack of credit, technology, marketing, skills and suffered from sustainability issues. But he felt that the greatest challenge that SMEs face in the context of globalisation was how to enhance their competitiveness.

After the panel discussion, the floor was thrown open for a question-and-answer session. It saw a lively interaction between SME aid groups,  entrepreneurs and panellists.

The event was presented by Reliance Commercial Finance. The associate sponsor was Airfrance KLM Group and television partner was Bloomberg UTV. The event was supported by FISME.

(This story was published in Businessworld Issue Dated 03-10-2011)