While large businesses have deeper pockets, stronger networks and adequate market share compared to upstarts; they always face a lurking threat by these smaller firms which are nimble, agile and innovative.
Smaller companies, on the other hand, can be weighed down by lack of capital, sporadic flow of customers and ever-changing business environment.
To outweigh competition, market leaders go to a great extent to retain their share. They may leverage on their brand with loyalty and reward programmes, hold on to resources and become the “safe” choice, play on price or the can leverage on their huge capital access and become more cost efficient.
So how can a small and medium enterprise (SME) make it big and stay competitive? Let’s look at some of the more effective means to this end.
Innovate to disrupt
Probably the easiest to state but most challenging to achieve, this age-old remedy remains the most successful ways to stay ahead of the competition.
How? Being disruptive involves innovating to force others to alter their strategic course. Technology has some obvious advantages. Let’s look at Spotify, a music company that revolutionised the way people listened to music.
Rather than looking at a pay-per-download model, it learnt from past failures to create a valuable streaming proposition where, on a subscription basis, consumers had access to the entire music library.
Also, cannot miss Dropbox whose superior cloud computing services are the basis for a consumer-focused offering that works across multiple platforms on mobile and PCs, as compared to pen-drives and HDDs.
A company must leverage technology to remain innovative. This will not only improve its ability to scale its operations to a high level of efficiency, but also help it achieve long term sustainable growth.
For instance, in a highly competitive market, Appleand Samsunghave kept their rivals at bay by excelling at innovative practices not only in the product-technology mix but also in production, packaging, promotion and supply chain.
Choose how you want to compete
Every business can choose how it wants to compete. One can either be unaffected by what the competition does, or be extremely reactive and counter each of their moves.
A business can be in the game either to gain larger market share or to create an altogether new market. Hence, it is important to choose one’s strategy and be actively aware of how to implement it.
For instance, VC-backed entrepreneurs who transform their start-ups to SMEs predominantly look to create new markets, while mid-to-large-caps often focus on retaining or expanding their market share.
Build strong systems and processes, independent of the founders
A culture of open exchange, where employees are unafraid to voice ideas in their area of expertise needs to be built. This should be done in conjunction with a conscious effort to increase the quality of people.
It is also advisable to engage with industry experts and consultants who can actually bring about these processes that will help utilise resources, reduce costs and help the company focus on its core functions.
Collaborate; don’t clash
Partnering with someone unexpected outside of one’s industry, with synergies to the business can definitely reap rich rewards.
This step, to achieve mutual business benefits with non-competing partnerships, will ultimately bring additional value to the system. Alternatively, a business can create a new path when its competitors are fixated on one.
The Star Alliance, a group of almost 30 airlines from around the world, is a great example of collaboration - with clear benefits to everyone involved, and clear detriments to those not involved.
Keep your customers involved
It might seem pretty obvious to focus on the customer, but very few companies manage to do that. The customer, with their money, is central to business success. A business must develop new ways to engage with customers in a way that they want.
One might recall that’s how Virgin Atlantic managed to snatch a considerable customer base from British Airways, all by creating a healthy customer relationship, a company can turn them into brand endorsers, who will build its reputation - at the expense of the competitors.
Businesses can adopt some interesting means to keep their customers actively involved:
Go Digital: Right from online product demos, 24x7 online chat, utility mobile apps and digital feedback platforms to augmented reality, businesses have to push the envelope on customer engagement.
Be Social: By creating superior content about their offering and taking it on social platforms, customer focused brands have created a niche for themselves in the minds of the consumer.
For instance, the world’s leading automobile brand, Ford, has brought the social experience to the forefront of their marketing efforts.
Ford uses this as a way to get new ideas for their next generation of cars. Ford has used many of these innovations to advance the technology of their cars. They do a great job of involving their fans and customers into their company growth.
The ‘softer side’ of being competitive
There is more a company can do beyond the above measures to remain competitive. At the most basic level, these include looking at how the company is handling issues of employee attrition, its labour policies and the overall morale of the company employees.
If a company finds itself unable to successfully address issues of labour unrest, the same will significantly affect the company’s competitive advantage, even though it might be doing well financially.
A real life example of the situation stated above was observed recently at a major automobile manufacturer’s plant in North India, where the senior management failed to resolve a major labour unrest.
The events that subsequently transpired severely affected the company’s position in the markets.
Beyond addressing the basic employee needs, the company can look at increasing the level of fulfilment an employee and align the business objectives with the employee’s aspirations.
This can be through rewards and recognitions, employee engagement initiatives and in purpose built compensation structures rather than a one size fits all approach.
Seek horizontal expertise
The answer to building competitiveness also lies in bringing in Horizontal Expertise, that is, an operating consultant who brings in a skill-set different from that of the business and domain.
It also brings in cross industry learning and can help adapt best practices from industries, which at first glance would appear unrelated.
The expertise could be in horizontals like marketing, digital, channel management, financial control, personnel management, and so on.
Companies must always seek a different point of view especially one that is different from one’s sector, industry and domain.
These alone cannot make companies more competitive, but they lay a strong foundation on which the SMEs can build a strong large business.
Mohit Ralhan is managing partner at IndusBalaji Private Equity