Small is powerful: 6 ideas for transforming MSMEs into self-sustaining sector
The COVID-19 crisis has impacted the MSME sector with several challenges. Here are a set of ideas for MSMEs that can help accelerate the development of a robust sector that will boost India’s economic development.
The success of the MSME sector is critical to achieving India’s goal of emerging as an economic superpower. The sector is credited with large-scale employment generation and nurturing India’s entrepreneurial spirit, helping it become an economically self-reliant nation. It continues to hold a lot of promise despite a challenging business environment.
The COVID-19 crisis has impacted the MSME sector with challenges such as stress on cash flow, new safety norms, and government regulations, increase in online business models coupled with an increase in cyber threat, restriction on travel and movement, and a slowdown in the local and the global economy, etc.
The following are a set of ideas for MSMEs that can help accelerate the development of a robust sector that will boost India’s economic development.
Power of collective focus
As most MSMEs are small and fragmented, they do not enjoy the benefits that scale offers in areas such as marketing, sales operations, and new product development. A collective or a combined approach in these areas can be harnessed in many innovative ways, for example, by helping a town or village focus all its resources on manufacturing one particular product or type of product. This strategy helps leverage the collective might of these MSMEs.
As part of a cluster, MSMEs can benefit from economies of scale and enjoy easier access to capital from traditional lending channels. Most importantly, in a cluster, MSMEs mostly face the same/similar business challenges and can collectively devise a solution strategy that benefits all in the cluster. Clusters can spur healthy competition among businesses.
While Indian MSMEs as a whole are highly varied in the type of products produced or nature of service rendered, at certain geographical locations, there are concentrations of common skill sets or types of industries. These can be clubbed into clusters with common characters.
The rising internet penetration in India has tremendously contributed to the rapid growth of MSMEs, especially during the COVID-19 pandemic. By shifting their businesses online and adopting digital payment facilities, MSMEs were able to maximise customer convenience and create value for them.
An online presence also helps increase the discoverability of a small business by potential customers.
Online marketplaces and B2C platforms have enabled MSMEs to further expand to new markets and serve new customers by putting them at par with products offered by large multinational companies.
MSMEs can use digital marketing techniques like media promotions, social media marketing, content marketing, online client testimonials etc., which is a significant advancement to word-of-mouth marketing in the digital marketing era.
Building on niche
Building a niche is at the core of every successful business enterprise and MSMEs are no exception to this rule. A successful business enterprise has to first identify its niche either in terms of its product or service. A niche market involves serving a specific target audience to satisfy a specialised need.
Concentrating on niche market segments also helps MSMEs optimise their limited resources and focus on the limited management bandwidth available on the chosen market or niche product/service to help achieve better business results through specialisation.
By nature, MSMEs are well-equipped to service a niche set of customers as they are close to their customers and always have an ear to the ground. It would be great for MSMEs to think beyond the boardroom dilemma of ‘thinking big’ and having to satisfy a big mainstream audience's needs and choose to focus on building a niche instead.
Instead of competing with large companies, MSMEs can stand out by focusing on untapped opportunities rather than the mainstream areas of the market. That way, despite the stiff competition from other players, all of whom want the same piece of the pie, MSMEs can succeed with product/service differentiation.
Small can be powerful
While MSMEs may miss out on economies of scale, they can still use their size to their advantage. Successful MSMEs know that their size gives them the advantage of being nimble, agile, and increases their ability to adapt to changing landscape and respond faster to evolving customer needs.
Owing to their small size MSMEs have the biggest advantage of having the business owner being present at the core of the operations. Customers can interact directly with SME owners instead of intermediaries and share their feedback and complaints, which helps owners do a quick course correction and adapt policies as needed, more quickly.
As a result, the key stakeholders are more likely to trust the brand. In the absence of stringent procedures and policies, MSMEs are more flexible in their operations and aided by their agility and nimbleness; they can demonstrate innovativeness admirably.
Collaboration is key to growth
Encouraging the sharing of information, ideas, and research among MSMEs would go a long way in making them more dynamic and helping themselves integrate into global value chains. Collaboration among MSMEs is a real win-win for all parties involved as they can benefit from each other’s strengths and can identify and address their genuine on-ground problems and find innovative ways to grow together, a feat that might be difficult, if not impossible, when operating alone.
Indian MSMEs should also be open to establishing strategic alliances with foreign players as well. Joint Ventures with foreign firms are a good way for MSMEs to expand their presence in the current era of rapid globalisation. Joint Venture with foreign players also helps MSMEs adopt new technologies and at the same time, take advantage of skilled workforce in India.
Successful collaboration helps companies complement each other’s strengths and tap into markets and opportunities beyond their reach when working individually. It can also create an ecosystem of healthy competition.
Innovation as the key to growth (Image: Shutterstock).
Strong DNA of innovation
One of the paths to success for a business, regardless of its size, is constant innovation. Developing new ideas is essential for any company to stay relevant, enhance its efficiency and processes, improve infrastructure, introduce new, improved, and more cost-effective products and services into the market, and increase profitability and establish a strong brand identity.
MSMEs may be small in size compared to MNCs, but they have a huge potential to introduce innovative, out-of-the-box ideas, successfully market them and scale up quickly.
Innovation plays a very critical role in making MSMEs more sustainable and prosperous. By adopting an innovation strategy, MSMEs can produce world-class products and services at lower costs and be more viable. The connection between innovation and demand is fundamental.
While all the innovations in the business world are directed towards fulfilling a certain need, small businesses have often come up with game-changing ideas that can transform the outlook of an entire industry besides fulfilling certain compelling needs.
MSMEs, especially micro businesses, can consult accountants regularly for their professional advice and technical expertise in a multitude of core areas, making accountants their ‘adviser, confidant, analyst, facilitator and educator to their clients’ A successful collaboration between MSME and accountants is the need of the hour to deliver value constantly for all stakeholders in the long run.