By Antonio Gagliardi
Pressure is mounting globally on small- and medium-sized enterprises (SMEs), which are particularly vulnerable to the effects of changing regulations, continued domestic economic uncertainty, and rising borrowing costs. In fact, around the world, senior executives at SMEs predict slower revenue and profit growth, according to the third annual Global SME Pulse: Smart Strategies to Improve the Bottom Line, a survey conducted in late 2018 by Oxford Economics on behalf of American Express.
Yet 82 percent of senior executives in the U.S. are confident in their company’s current strategy—even as they recognize the challenges that lie ahead—and 83 percent of U.S. respondents realize how important SMEs are to their country’s overall economy. In the U.S. alone, the Census Bureau’s Annual Survey of Entrepreneurs found that companies with fewer than 100 workers made up 98.2 percent of the country’s 5.6 million employer firms and that those with fewer than 20 made up 89 percent in 2016.
SMEs may be facing a tough road, but they are also well-positioned to pivot nimbly, be cost-efficient, and understand evolving customer demands. Here are three strategies for turning those innate attributes into revenue growth over the next three years.
Let nimbleness spur innovation.
While larger enterprises have the resources to cushion sudden shifts in the economy, policy, or marketplace, SMEs have a different advantage: the ability to react nimbly to dynamic circumstances. Smaller companies can more easily adopt new technologies, systems, or even internal structures to meet the ever-evolving demands on their businesses. Senior executives in the U.S. see nimbleness as key to their company’s future success; 76 percent listed quickly responding to changing business needs as their top priority over the next three years in the Global SME Pulse.
Furthermore, nimbleness fosters innovation. The act of shuffling resources as needed, the reality of having fewer hands touch different types of problems, the general lack of middle men—all of these characteristics of SMEs support an environment that acts on creative solutions. SMEs are also more likely to implement major changes; 74 percent of senior executives in the U.S. said they were willing to take big risks to gain big rewards. To support company-wide innovation, create a culture that values boldness and a team environment in which everyone feels comfortable bringing new ideas to the table.
Work smarter to drive efficiency.
SMEs recognize that they need to lower costs to maintain profitability, especially given these businesses’ reliance on loans as a source of funding. As a result, senior executives plan to adopt cost-saving programs to promote operating efficiency. One route to success? Automation.
Even semi-automation can go a long way in streamlining processes and boosting productivity. Since SMEs don’t have the bandwidth to experiment the way larger competitors do, be selective in your search for automations that offers real value. For example, AI-powered, automated customer service through chatbots or virtual assistants can answer a range of questions quickly, accurately, and around the clock, giving human employees more time to address complex issues
Another strategy for increasing efficiency: improving decision-making processes. The longer it takes to make a decision and the more complex the path to implementation is, the more resources get wasted along the way. Instead, simplify decision-making processes for greater efficiency across the board. A few pitfalls to avoid:
- Spinning your wheels in data analysis. Limit the scope of your inquiry so you can make an informed decision based on what’s immediately relevant.
- Doing it all on your own. If a problem is outside of your company’s knowledge-base, enlist an expert. It’s worth a onetime cost to implement an effective solution.
- Losing urgency when you find a solution. Develop a concrete plan for its execution, with a timeline.
Respond to your customers’ changing needs.
SMEs often know their customers directly and have an immediate understanding of the nuances of their evolving demands. What’s more, business owners are empowered to loop customer feedback into product development—there’s no need to go up the chain of demand. This process is the primary strategy for SMEs to drive topline growth; when asked to name their main plans for boosting revenue, senior executives were most likely to point to understanding changing customer demands. (Among U.S. respondents this number grew from 56 percent to 67 percent in 2019.)
How accurate and fast you are at turning customer expectation into reality is what builds trust and loyalty among your clientele. Automation can help, as can other forms of emerging technologies; nearly a quarter (23 percent) of global SMEs expect to incorporate machine learning, smart algorithms, and AI over the next three years. Be open to anything that can prove your responsiveness. Customers increasingly want a reciprocal relationship, according to Gartner, which means collaboration and co-creation with brands. So get them involved—they may be the key to your next big idea.
Antonio Gagliardi is the Vice President, Head of Strategy, M&A and Alliances, Global Commercial Services at American Express.