Flat World Imperatives for SMEs

From your point of view, what is the biggest challenge mid-market companies face today?

Steve Niesman: Without question I think that the biggest challenge is what New York Times columnist Thomas Friedman calls the flattening of the world. In his book, “The World is Flat,” he speaks of the globalization of business and the economy, complete with multi-national supply chains, playing out at a rapid pace before our very eyes. The challenges – and opportunities – lie in being able to adapt to the changes taking place. Some may call it chaos. But it’s unstoppable. There’s no turning back.

Can you give an example of a company facing such a challenge?

Niesman: Certainly. Recently I was speaking with the management of a tile company that sources material in Italy, China, Russia, and Brazil. They sell tile locally in the West and Southwest United States. The current weakness of the dollar against other currencies, especially the euro, is eating into their profits. They also are impacted by the high price of oil and the cost of transportation. This is to say that their business is intertwined with problems in the world oil industry, in which the US dollar is the currency of choice for global crude oil trade. They are square in the middle of some global macro-economic problems.

How does the business survive?

Niesman: Now, they sell locally to home builders and remodelers, and as you know, there is a slowdown in the housing market, a tightening of credit, and slower growth in consumption, all of which have depressed tile sales significantly. This company differentiates itself with its customer service and value-added services, such as financing and training, so it’s positioned well competitively, and management realizes that future growth lies in expanding its marketing through global channels. By their example what I want to stress is that global functionality and overseas operations are at the heart of the opportunity for many companies that currently sell locally. The Internet makes it possible for people all over the world to find the products that they want and the companies they want to do business with. Companies in Latin America, Canada, and beyond are the tile company’s competitors now. It’s not about being local any more.

So what do you recommend that companies do?

Niesman: The flattening of the world accelerates and reinforces the need for a full-function enterprise management software solution, such as those that SAP offers, that can meet the needs of global businesses. While it’s good for companies to keep their micro-vertical focus, this focus must be supported by software that can help manage, procure, and sell globally. Now is the time for companies to look for enabler software that will open borders for them. They’re not just selling in Des Moines, Iowa any more. This requires a shift in perception of what’s possible for them.

Just like the big enterprises?

Niesman: Really, for all that, mid-sized companies’ needs aren’t so different from Procter & Gamble’s or any other Fortune 500 company’s. The trouble is that mid-sized companies typically don’t have as deep a level of internal resources as the big companies do. That’s why they need powerful software that can deliver “globalness” with reduced cost and reduced implementation time. What this points to is pre-configured solutions that can speed up the delivery of a comprehensive, functionally rich management environment.

But not everything is software

Niesman: Underlying all of what I’m saying is what IDC calls being a “change-ready” company. Make no mistake; a company that is flexible in the face of rapid change can minimize its potentially adverse impact. The company can evaluate new business models suited to changing times. Management that is attuned to the external world and internal environment can adjust and align with new requirements for forward motion. It’s not all about technology, of course. It’s a mindset, an attitude, and a willingness to reward innovative ideas. But technology is available now at a very reasonable cost. Today companies can get more for far less cost than just a few years ago. VARS and ISVs have adopted business models to deliver the same functionality as for larger businesses but scaled to small and medium-sized ones. It’s really quite astonishing.

What’s the best way to ensure success for SMEs?

Niesman: The companies that survive and thrive will be the ones that embrace technology and a point of view that gives them the ability to reach beyond their current limitations. They need to be able to continuously, and I mean every day, re-invent themselves. This is an idea that used to be just for big companies, but it’s for mid-sized ones now, too.

What should mid-sized companies anticipate in the next three to five years?

Niesman: Medium-sized companies that grow into big companies, through acquisition or through organic growth will be consciously aware of the acceleration of change and they will embrace it. They will say, “Yes this is disruptive and scary, but it’s also invigorating. It’s exciting and fascinating.” Those that do not are the laggards that will stagnate or vanish.

What kind of staff do SMEs need?

Niesman: I say to companies I meet with: hire and promote people who can see opportunities where others see obstacles. Recognize that data is going to proliferate and that timely access to information and real business intelligence is becoming increasingly important for making strategic decisions faster. Invest in the best, most flexible enterprise management software to improve your productivity and flexibility. Adjust it as you evolve. Do not delay. Think faster, cheaper, better in all things.