By Dr.Girish Kelkar
Founder Chairman V3C3E3 Consultants Pvt Ltd, Ex Managing Director Satt-Control AB Sweden.
Today the business world has become very complex and globalization has further added to the challenges of modern organizations in India, especially for SME segments. Globalization has changed the Business World rapidly and this change has transformed the ways of conducting business in a drastic fashion for most of the industries. Response Time and Speed of Operations, Productivity, Quality of Products and Services, Cost of Operations and Perpetuation of healthy Growth of an Enterprise have always been the watchwords for each and every CEO all over the world. One can easily appreciate that all these objectives have a direct relationship with ‘SME’ segment organizations as well. Additionally, in the new global economic order, the norms of performance “The Benchmarks” are not restricted to any single country. They have become global in the true sense of the term. In this situation the need for smart and reliable work force with self-generated accountability is the need for every professional organization. This has become a must for sheer survival and growth of any organization.
The greatest advantage of promoting small-scale industries and small businesses is that they provide employment without much government interference. SMEs encourage both urban and rural growth. This is the most vibrant sector of the economy and will contribute towards faster growth of the economy and GDP as such. SMEs by & large help the Indian economy, by generating the effervescence in Economic environment in the following ways:
- Generate employment that is vital for the growth of the economy, especially for the youth of the country leading to higher production and better GDP.
- Help reduce poverty rate, especially for the young aspiring force in the in the country
- Help reduce urban-rural income gap disparities and hence very useful in social context
- SME due to their inherent nature and size of operations, help reduce migrations to cities and help encourage regional development
- MSME sector in general, is based on specific skills and expertise and have significant contribution towards Experts from India
- SME sector results in helping reduce pollution levels
- Increase production volumes and reduction in costs for the end users
- Increase people’s purchasing power due to better income distribution
- Improve quality of life in general for the working class and the society at large
One can easily appreciate that ‘SME’ sector contributes a significant portion of the Indian Economy, (around 40 of the industrial output) and around 45 % of the exports from India. The growth potential for this sector is very promising and this needs due attention to this vital sector. However, the path for the growth of the SME sector is not full of roses, they have their own share of the problems and impediments in the real world. Hence one has to pay adequate attention to many critical issues that have been hurdles for this vital sector poised for the growth.
- It is evident that SME segment is at point of inflection in India at present and flooded with many opportunities in many sectors both conventional & newly developed markets. This is mainly due to many schemes and initiatives set up by the Government of India.
- The new initiatives set up the Government are certainly welcome but are we prepared to handle such challenges to ‘Make the Dream a reality?’
Challenges faced by the SME organizations in India: (Indicative List)
Strategic Issues:
- Many SME units (Competent / Excellent in their space) have limited ‘Visibility & Reach’. This is due to lack of ambition & lack of awareness at times. A challenge indeed.It is noticed that many of the SME units have not paid adequate attention to development of the markets (medium & long term) and hence land up in limited growth prospects. Many of these units are switching to ‘Digital Marketing’ tools that can help to improve Visibility & Reach.
- The ‘Choice’ of the Products & Services is mainly on gut level feel rather than systematic market analysis of the ‘Opportunities’. Initial successes tend to make the leaders ‘Complacent’. This needs change now. There is obvious need to improve such approach and the new generation professionals are becoming aware about such needs.
- The best Technologists set up new units but are not able to sustain / maintain the Competitive Edge in the later years. This is dangerous. Attention to keep the ‘Axe Sharp’ should become for the core of ‘Growth Strategy’ for SME units.Many entrepreneurs, although aware about such a need, tend to give low or no priority for this aspect and hence perish.
- Very often, limited Finances lead to ‘Constrained D&D Budgets’. This is a challenge for many SME units. Note there is not too much of R&D as yet. Managing Funds Flow and Cash Flows continue to hound SME units by and large.
- For many SME units there is lack of ‘Business Plan / Perspective Plan’ leading to ad-hoc growth and short term / adhoc Decision Making. This is a major challenge for most of the SME units. This is certainly not desirable and a major constraint in allowing ‘Chalata Hai’ culture instead of professional approach to the operations of the unit. This leads to lack of accountability across the organization.
- Additionally, there is lack of attention to ‘Balanced- Portfolios / Markets / Volumes & Margins’ in spite of prowess in terms of ‘Technical Skills’. This can be easily improved if ‘Strategic Planning’ approach is used by these units.
- Lack of ‘Financial Planning and Financial Engineering’ is also one of the bottlenecks that can lead to startup failures. Unrealistic plans and schedules also need to be examined to avoid such traps. In few cases, even if the funding is adequate, many times the wrong priorities for expenses lead to cash traps and then failures.
- Added to this problem is the inadequate attention paid by the bankers to understand the pulse of the market & technologies that are chosen by the Startup units. The lack of the adequate attention to assess fundamentals of the market dynamics, on the part of the Bankers may lead to sub-optimal decisions from the Banks.
- Serious Lack of ‘Project Management’ skills and practices leading to delay & loss. Many of the SME units have limited or no awareness about the need for ‘Project Management’ in their operations. This leads to too many bottlenecks in day to day working and hence chaotic situations. This can be easily avoided if there is proper use of ‘Project Management’ concepts & methods.
- Lack of awareness & lack of Attention to ‘Contract Management Aspects’ for large projects leading to chaos / confusion / tensions and disputes which lead to delays / loss and fatal impact on the unit.
- There are many of the SME units in India face peculiar problem in terms of ‘Succession’ Plans. It is observed that the Sons / Daughters, are not necessarily interested in running parents’ Business. Additionally, ‘Professional Succession’ plans are missing in the most cases.
- It is noticed that generally the ‘Middle Management & Supervisory’ Training is a neglected area for such units. One will appreciate that the ‘Middle Management’ is the backbone of SME organizations and hence neglecting such basic need tends to lead to su-optimal performance for the SME units. This aspects needs lot of attention for the Indian SME sector.
Operational Issues:
- In many SME units, attention to PPC is inadequate or incomplete, leading to lower productivity and operational effectiveness.
- In many cases (especially in one of types of activities & projects) ‘Scope of work’ not defined completely leading to sub-optimal performance.
- By & large ‘DOT’ & ‘POT’ performance is far from desired leading to adhoc decisions and short cuts leading to lower quality and rejection / rework.
- Lack of well managed Performance Management Systems (Lack of KRAs / KPIs).
- Inadequate attention to Work Processes and lack of appropriate ‘Tools / Jigs and Fixtures’ leading to higher cycle times and higher costs.
- There is ‘Inadequacy / inaccuracy in terms of ‘Technical Standards / Documents’ leading to confusion / delays and higher costs.
- Lack of internal ‘Test Facilities / Infra-structure’ leading to quality issues.
- Noticeable ‘Lack of training & development of Middle Managers / Supervisors’ leading to sub-optimal performance. Development of the ‘Middle Management’ is a neglected subject.
- There are ‘Compromises in terms of ‘Technical Skills & Knowledge’.
- Lack of ‘Succession Planning’ for key operational personnel. The owners in the initial phase manage everything themselves and at a later stage say that they do not have competent assistants. One has to invest time and efforts to develop second line. Will SME leadership pay attention to this?
Conclusion:
SMEs will continue to play important role in the rapid progress of the Indian Economy. However, it is evident that such units will have to pay lot of attention & efforts to resolve many bottlenecks & problems specified above.