Leveraging small business in downturn

imageSmall business now has a sustainable edge and personal trust is a competitive advantage.

Small is the new big. Sustainable is the new growth.

Customers are now looking for people they can trust and for a CEO who picks up the phone when they ring.

Presently in our consulting firm we are busy it seems as many in business want help to get their houses in order. One of my colleagues crystallized this saying he thought of  it as just doing different work.

But in fact  we are not. We are doing the same work, but what  is different is we would have previously done it as part of a branded solution and sold as our solution partner package.

But  now as big players we are under pressure and looking for ways to get margin. Curiously, while they are reducing their workforce and partner relationships our customers are recognizing our value and coming to us directly.

Many talented people are in despair with the prospect of what some are euphemistically calling  change. We spend a lot of time talking about performance management, but do we really understand where corporations power to sustain this comes from?

Is is not only in their ability  to manage their investment or their capability to be adaptive and deliver. Consolidation and business intelligence power around today has allowed big players to systematically reengineer and reform business to propositions not possible even 10 years ago.

With this power, over those years, conglomerates have formed and grown rapidly with great success. Simply put, they are investors with skills to acquire and then manage portfolio performance. For their operations they impose consistent measurement processes that demand growth and return on investment. This model also has local people running the branch operations so customer oriented service based can be delivered on classic quarter mile theory .

This cookie cutter model focuses on reactive intimacy and in-touch attributes of a small local business with the benefits of being big too. The overarching investor processes and branding then gives sustainable market penetration and deep cost effective reach to support local efforts. This balance delivers market share and return on investment.

So in the end this model seeks to take on the benefits of quasi franchise except the incentive in not in the ownership that may trade off sales margin for service merit, but in making a buck and controlling the market. The unbranded independent small operators are constrained to run their business as a niche specialist service and usually then only on personal contacts basis only .

With the economics of growth stalling and even going into reverse in some sectors and with changing market loyalties driven by difference needs the burden of that investor overlay a malaise is now quite heavy in the big business. Those who refinance to survive will do so for sure and the nature of business is volume which only large business can do. But as local performance is down, head offices are now rationalizing and cutting service levels at the operations end which is creating a cycle to reincarnate the small player. Customers who need good service for their own survival, are also being forced elsewhere from their so called single secure source of supply, as are they finding the small business skills they need

So for small guys with substance it is a different story.  In the good times a sharp pencil on quoting was important for edge. But often that was not even enough, so they adopted service partners strategies . Now, as customers are losing faith and seek cover, small players are winning business directly, where previously the brand image prevailed. It is also much easer for the lean and local to perform  without the burden of corporate overheads and debt servicing ROI that now weighs the big guys down.

For those in despair the good news is "It is not over till the fat lady sings." Many know this carnival context expression is  often applied to something unfinished. And yes I have no doubt we are yet to face more economic  issues in the changing financial  times ahead before the music starts for the good lady to sing "This Carnival is Over".

Consider the opportunities small companies with low overhead have. Reliable owners, a small number of committed employees, personal client relationships, and sustainable business models that drive a reasonable profit are the great opportunity of our time. Smart core operators also realize as the pendulum swings that  a small  investment in a good local operator is cheap to cement loyalty and continuing business knowledge that is way beyond any concepts that can be supplied by branded services.

Something that captured my attention recently as I thought about the fact that we are just doing different work, was the statement by Harvard Press Blogger Peter Bregman who wrote: the opening lines I included in this post "Small is the new big. Sustainable is the new growth". Trust is the new  competitive advantage.

He went on to say, It is becoming more and more apparent that customers do not look at a supplier because he has lots of time in the industry, or who is highly capitalized, or has a list of big named clients and a flashy office. They are good to have if you do , but right now it’s not what they are looking for.

Small companies also have  low overhead, reliable owners, a small number of committed employees, personal client relationships, and sustainable business models that drive a reasonable profit so this is the great opportunity of this time.

Leave a Reply