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SME going global - surprised?

Den Howlett Profile picture for user gonzodaddy July 2, 2013
A new survey suggests SMEs are going global. Should you be surprised? Largely the answer is 'no' but the devil is in the detail.

HSBC advert

Oxford Economics have prepared a survey report (link to report - PDF download) that that talks about SMEs going global. It says:

..small and midsize enterprises (SMEs) around the world and across industries are making major changes to their business models, products and go-to-market strategies. SMEs are also competing with larger companies by investing in technology to improve operations and become more efficient.

The survey was conducted among 2,100 businesses across 21 countries with annual revenue in the range $20-750 million. As you read the commentary, remember this was sponsored by SAP and the language used in the commentary reflects that sponsorship.

What professionals can tell us

My initial take on a skim reading was: duh? Is this supposed to be a surprise? I have followed the accounting market since 2005 and observed how professional accountants have adopted cloud technologies. Three observations are worth making:

  1. All the organic growth that should have gone to incumbent vendors has gone to the new cloud players.
  2. In the last year, the emerging cloud players have started to eat into the core markets of the incumbents.
  3. Many professional firms are re-casting their business models in light of market opportunities.

Why should this market be important in this context?

  1. Professional accounting is a market that is usually slow to adopt new technology. The last real shift occurred in 1991-5 when internal networks were developed to improve internal efficiency. It took another 15 years before we saw a a real shift.
  2. Globally, we saw outlying markets adopt more quickly than larger markets.
  3. The largest shift was in the Very Small Enterprise (VSE) market but...
  4. Adoption was what colleagues would term 'bottoms up.' In other words while adoption started in VSEs, larger businesses followed suit.
  5. Most recently, I have seen examples where VSEs are working internationally.

From what the survey says, the upward flow of adoption we have observed in past years is continuing.

Devil in the detail

In the detail, the results say (among other things):

Technology is important for SMEs and a major element of transformation. Investing in new technologies appears to be a top strategic priority as SMEs remake their businesses for the global marketplace, including business management software, data analytics, mobile, social media, and cloud computing. Almost two-thirds strongly believe technology helps them achieve longevity and sustainable growth. Overall, 35 percent of respondents identify themselves as early adopters; the figure rises to 42 percent for discrete manufacturers and to 47 percent for firms in North America.

This seems to confirm what I have seen in a single market that reaches into many other markets.

Innovative technology is a key to help enter new markets and create strong customer relationships. More than one-third of respondents cite creating a culture of innovation as a leading priority in their transformation efforts...Mobile is the leading technology driver of competitive advantage for SMEs as well as an important driver of innovation; respondents cite improved innovation as the biggest benefit of mobile adoption, more than other technologies considered.

Again, this reflects what I have already seen.

SMEs are job engines but face cultural obstacles to technology adoption. Nearly half (46 percent) of respondents are actively hiring employees to support their growth activities. SMEs face the same issues as their larger competitors; 39 percent find it increasingly difficult to recruit people with the right skills. According to 31 percent of responses, encouraging employees to use mobile technology is one hurdle, while 35 percent say lack of understanding of the benefits of cloud computing is an issue. And 43 percent of SMEs indicated they have trouble encouraging employees to embrace social media.

This one doesn't puzzle but for reasons that may not be obvious. There is a myth that SMEs have simpler problems and organizations. On its face, that sounds reasonable but in reality is far from true. The basic principles of organizational management do not change with size. Add in factors like multi-location (as we at diginomica know about) and which Cindy Juras confirms and it is easy to see why there is no surprise:

And if you believe the HSBC adverts  (see image above from the campaign) then you know where business is heading.

Where I am a little surprised is on the topic of social media. My observed experience suggests that SMEs see social networks like Twitter, Facebook and Twitter as a better use of marketing resource than traditional advertising. However, I would like to see more detail on the demographics behind this observation before saying more.


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