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SME sector need to be digitally equipped

Firms can learn from German peers to leverage tech to expand in India and abroad.

Small and medium enterprises (SMEs) in South India could become impactful players not just in their home turf, but in global markets by emulating some of the successful characteristics of Germany’s Mittelstand (SME) companies, according to Suresh Raman, Vice-President and Head of Chennai Operations, Tata Consultancy Services.

“Like our SMEs, Mittelstand companies are very strong family-run enterprises. Yet, they are professionally-run. But those German SMEs have always focussed on growth and innovation by investing a lot in technology, while Indian SMEs are still reluctant in adopting technologies for growth,” he said while speaking on ‘Technology adoption in the SME sector for global growth’ at the SME Growth Summit, organised by ICICI Bank and BusinessLine here.

Going digital

Digital is impacting the world and SMEs, in particular. It’s time SMEs leveraged digital to expand not only in India but also in other markets.

“With a number of SMEs in this part of the country having come up from nowhere, I strongly believe SMEs in this region can be very impactful players. It is not that everybody should become Tendulkar, one could become players like GR Viswanath, Hardik Pandya... They need not be big players essentially to make an impact,” he explained.

Trade wars, a blessing

n the context of emerging global trade wars, tremendous opportunities will open up for Indian SMEs. Mindset change, getting organised like German SMEs, and embracing technologies will help Indian SMEs enter the global supply chain.

Unlike in the past, SMEs need not set up a separate IT department or other infrastructure as everything is on cloud and agile technologies and experts are available to do things, he stated.

Discussing Industry 4.0, Raman said that most Indian SMEs didn’t even leverage Industry 3.0 like their counterparts in other countries. “However, it is not too late, I strongly believe SMEs can directly join the Industry 4.0 bandwagon.”

Highlighting emerging challenges on the manpower front, Raman stated that the demand for blue-collar workers would come down with robotics and automation. SMEs should be prepared to adopt all these new things and may have to manage more and more white collar workers.


He urged SMEs to graduate to preparing designs for OEMs (original equipment manufacturers) instead of being mere order takers. “Mittelstand companies also come up with designs for OEMs. Japanese SMEs also do that,” he said adding, “SMEs in the South are perspiring, but not aspiring to be big like SMEs in the North.”

Success of SAF

The summit also discussed the success story of Chennai-based Super Auto Forge (SAF), founded in 1975 by first generation entrepreneur S Seetharaman. SAF, engaged in the business of making cold forged components, reinvented itself in the mid-1990s by taking bold steps to foray into making complicated auto parts.

By repositioning itself as a niche player, the company cracked the export formula and scaled greater heights in the past two decades. The company’s revenues grew from just ?2 crore (after 20 years of its existence) to ?680 crore.

About two-thirds of its revenues come from exports. Its big buyers include Ford, Chrysler and General Motors. More importantly, SAF ships close to two lakh parts a day with zero defect (in terms of ppm).

S Muralishankar, Managing Director of Super Auto Forge, who has been part of the company’s export journey from 1998, said that the company’s decision to move away from being a “me too” manufacturer to a niche player paid dividends.

“We reduced the number of customers from 60 to 10 by late 2000 when we were serving numerous OEMs, Tier-1 and -2 companies across the country,” he said.

“We identified three distinct product families — ball joint parts, transmission CV joints and braking parts. These are highly safety critical parts and we made our presence felt in these areas. Today, in all these families, we are either No 3 or 4 globally,” Muralishankar said.

“Also, for about 95 per cent of the parts we make, we are the single source for OEMs,” he added.

He advised SMEs to play to their strength, go with a lot of confidence to tap export opportunities, establish direct contacts with customers and not to commit to too much, as meeting commitments is highly crucial.