RR eRevolution 2011 transforming from SME to MNE- Presentation by Mr. Raman Roy

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Transforming froma Tech SME to an MNE

Some Thoughts

Raman Roy Chairman & MD

Chandigarh23rd September 2011

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SME sector is a place where “Growing into a SME” and “Growing out of a SME occurs

Successful micro enterprises wind up and

Grow into an SME through survival of the fittest

Help of the SME sector helps to determine the future supply of large MNE firms

These large firms possibly will subcontract with the small firms and

Create additional SMEs

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Micro Enterprises

Small and Medium Enterprises (SMEs)

Multi National Enterprises (MNEs)

Growing into a SME

Growing out of a

SME

“Growing into” & “Growing out of”Model

(SOURCE – International Tax Dialogue, SME Conference)

Importance of SMEs cannot be underestimated

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SMEs play a significant role in leading economies of the world

Brazil

Percentage

SME Details

15 million Formal and informal SMEs in Brazil56% Of labour force employed by SMEs26% Of aggregate wages/salaries20% Of GDP2.4% Of Brazil’s exports

Percentag

e

SME Details

97.3% Of all enterprises50% Of total GDP of U.S.50% Of total jobs in U.S.74% Of new jobs created in a

year

ChinaUSA

India

Percentag

e

SME Details

42 million Formal SMEs in China99.7% Of total enterprises68% Of total exports75% Of new jobs created in a

year40% Of total GDP of China

Percentag

e

SME Details

2.6 crore MSME enterprises in India8% Contribution by SMEs towards GDP45% Of Industrial Output40% Of total exports6 crore People employed 1.3 Million Of new jobs created in a year18% Growth rate of SMEs over 5 years

(SOURCE – Industry Outlook- SMEs in China by Lauren Hilgers)

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Knowledge Economy is different from Traditional Economy

Characteristic Traditional Economy Knowledge Economy

Economic Development Steady, Linear and Quite Predictable

Volatile – change extremely fast and

chaotic

Differs on three attributes – Markets, Enterprises and Work Force

M A R K E T S

Economy Supplier Driven Customer Driven

Product and Technology Life Cycle

Long Short

Key Economic Drivers Large Industrial Firms Innovative Entrepreneurial Firms

Scope of competition Local Global : Hyper-competition

Competition : Name of the game Big eats small Fast eats the slow

Marketing : Name of the game Mass Marketing Differentiation

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E N T E R P R I S E S




Business Pace Slow Faster with ever rising customer expectations

Emphasis Stability Change Management

Business Development Approach Vision, Mission, Goals, Action Plans

Opportunity Driven Dynamic Strategy

Success Measure Profit Market Capitalization

Production Organization Mass Production Lean Production

Key Growth Drivers Capital People, Knowledge, Capabilities

Technology Drivers Automation and Mechanization

Information and Communication

Technology

Scarce Resource Financial Capital Human Capital


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W O R K F O R C E




Leadership Vertical Shared-Employee Empowerment

Skills Mono-skilled Multi-skilled

Employment Stable Affected by market opportunity / risk factors

Employee seen as Expense Investment


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Knowledge Economy empowers “SME” to operate like an “MNE”

Year Established 2000 2006

Customer Segments Large Companies Predominantly SMBs

Number of employees 17,500 2600

Target Markets 2 (India, US)5 (India, USA, UK, Middle East,

Canada)

Delivery Centers Location India India, USA, UK, Canada

S P E C T R A M I N D

In Knowledge Economy scale and multi national operations seemed to be delinked as evident from above example

SME can certainly operate like and/or Grow into MNE

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SMEs need to nurture specific traits that propel them into an MNE

1

2

3

5

4

N E T W O R K I N G

D I G I T A L M A R K E T I N G

T E A M B U I L D I N G

D E L I V E R Y P A R T N E R S H I P S

C H A N N E L S A L E S

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Management Team Skills

• Management team skills appear to be better in SMEs

• Concentration of shares and control management give the SME entrepreneur an advantageous position

• The support of responsible shareholders will motivate the management team to develop greater skills

Long Term Horizon

• The long term horizon based on the willingness of entrepreneur to pass down the legacy to next generations, provides business stability

• Provides a sense of security and assurance that employees will be able to pursue long term professional goals within a stable business framework

• CEOs stay is 3 to 5 times longer than CEOs in MNCs..ofcourse there is no risk of CEO being fired through SMS!!

Good practices of one region are seldom interpreted as bad anywhere else globally

Job Protection

• In SMEs generally there is a powerful recognition that employees constitute competitive advantage

• Hence, efforts are made to preserve and nurture them

• Has the ability to maintain stable level of employment even during economic crisis

Leverage “inherent strengths” to attract talent locally and internationally

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Nepotism / Gifted Positions

• Nepotism especially in a family promoted SME

• It is perceived to be more in family businesses on account of blood bonds between different employees

• Ensure gifted positions atleast have a wider acceptance if not complete

Lack of Decision Making Freedom

• Unified ownership can lead to performance advantages

but

• Strong dependence on one person results in not delegating decisions to those with greater expertise

• Dependence on decision maker seem to wane away when business becomes large

• The key is to manage it properly in times when it is required the most

Bad practices of one region are often interpreted as bad anywhere else globally

Salary and Fringe Benefits

• CEO who is the main shareholder and MD of the firm often set themselves lower salaries

• They decide to spend more money in the firm where it will enhance shareholder and firm value

• This results in a rub off effect resulting in lower pay level among employees…one needs to be conscious of this.

Stay away from practices that de-motivate talent

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USA

Circa 1900

India

Innovation in Employee Engagement Practices fueled by new companies

• Flexi timings• Telecommuting• ESOPs• Free food and several conveniences for employees at office so that distinction between work and personal life is not perceptible

Innovation in Employee Engagement Practices fueled by MNCs

• 5 day work week• Flexi timings, Telecommuting• ESOPs• Earn while you learn

The companies that didn’t innovate HR practices in US, did them in India as they were competing with established players for talent

Circa 1990 Circa 1950 Circa 1990

Adapting Good HR Practices Quickly is Essential – A Case Study

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Selling to a SME

Proven & Tailored

Solutions

Package Total

Solutions

Business Value not

Technology Value

Total cost of ownership

more important than price

Big is not always better

Buying from trusted

channels & vendors

• Brands are least important factor for SME’s

• Big brands connote higher TCO• Young companies can collaborate

with large enterprises to jointly market to SME’s

• Viable and Stable solutions• Easily implemented• Require little support as they lack IT skills

& resources• Focus on SME IT buying priorities• Don’t provide customized solutions

• SME’s put lot of emphasis on TCO, not only on price. They will go for lower TCO’s

• TCO includes resources required to implement and maintain a solution, customer and technical support, unanticipated upgrade costs to maintain compatibility with new development, up and down scalability, and the cost of managing new vendor relationships.

• Easy to deploy integrated solutions• SME’s cant do integration

themselves• Easy to understand, deploy, manage

and support

• SME’s are focused on business value

• E.g. improved productivity, enhanced CRM, enhanced revenue, payback

• No technology marketing jargon

• SME’s would like to go with trusted long time vendors

• Cost of establishing a new vendor is high for a SME

• Focus on channels that sell to SME’s

Source : Milestone Group

SMEs buy Total Solutions & from Trusted Channels

It is a fact that majority of SMEs buy from SMEs and needs of SMEs are different from Large Enterprises

It takes little longer to build right channels but they are most efficient in long term

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1. You will rarely come across entrepreneurs who do not network

2. Networking helps in sharing ideas and obtain insights from others

3. Thoughts when “shared” gets “doubled” and “halved” when concealed

4. Networking in today’s time is not difficult…there are multiple avenues.

5. You just need the inclination.

Networking opportunities are directly proportional to your inclination


Market to your own world to build the Brand – Digital Marketing

The most three most trusted forms of brand building are:

Recommendations from people I know - 90%Consumer opinions posted online - 70%Branded websites - 70%

The digital world has made the traditional two-way “Word-of- Mouth” marketing accessible and available to everyone with a computer and or a phone)

It is a fact that all of you operate in a Digital World

The key is you need people with megaphones in the digital world to build your brand


There are plenty of avenues to find the people with the megaphone/s

Social Media – For Global Reach Mobile Media – For Local / Global Reach

1. Digital Marketing gets you started in global markets with limited budgets without a physical presence in those markets

2. Digital Marketing skill sets can be easily outsourced…they are several SMEs in India supporting International Companies in their Digital Initiatives

3. However , it requires enough patience to acquire and grow audience, see results first and increasing returns subsequently

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Thank You

Happy to Answer Questions

Raman RoyChairman & Managing Director

Email: [email protected] | Website: www.quatrro.com

mailto:[email protected]

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RR eRevolution 2011 transforming from SME to MNE- Presentation by Mr. Raman Roy

Technology

management

jobs created

knowledge

traditional

attributes

digital world

work force

sme details