Why is Strategic Planning Different within SMEs?

Sadashiva Consulting Services
Most texts on strategy appear to be aimed at the larger company environment. They outline relatively sophisticated and formal planning processes of the kind which are likely to prove cumbersome in an SME (small and medium-sized enterprise) environment. SMEs are even more likely to be characterized as having ‘emergent’ as opposed to ‘deliberate’ strategies (‘emergent’ being strategies which can be inferred – usually looking backwards, out of a pattern on a series of actions or divisions). They also tend to be even more incremental in the way one strategy leads to another – so that there is relatively little grand design and even less thinking about the longer-term or medium-term future.

Therefore, SMEs’ growth and profitability are often of uneven quality, with companies doing well for a while, and this often moving into a disruptive cycle which we can characterize (Figure 1) as ‘submergent’, ‘emergency’ and even ‘detergent’ phases (sorting the mess out).

SME strategic planning is often different because it is even more determined by the personal agendas and strategic biases of its top team/leader/owners. Where an SME is owner managed, the aspiration are completely different especially as the normal mechanisms for top-down/bottom-up and horizontal development of strategy that we see in some larger organizations either don’t happen or are very partial.

So, there are many gaps in how SMEs approach strategy. Once filled, these can add considerable value to the management team. Let us now examine some of the commonalities with mainstream strategic management. These include:
  • Strategy content:
    • the bigger picture environment has an impact (e.g. ‘PEST’ factors – political, economic, social and technical);
    • growth drivers, within the market, will impact on the SME’s sales;
    • competitive pressure (rivalry, entrants, buyer power etc.) will affect its margins; superior, average, or inferior customer value will affect its market share (volumes), prices, and margins;
    • the competitiveness of the SME’s cost base will also have an impact on margins.
    • Strategy process:
      • the strategy will need to be broken down e.g. into specific product/market areas;
      • it will need to be created step-by-step, rather than done in a single thought – to be effective (e.g. the diagnosis, option generation/evaluation, and detailed planning phases
      • there will be a need to do some consultation both to check implementation feasibility and, to gain more buy-in, and to improve communication;
      • develop a business case needed for investment decisions;
      • its implementation need to be project managed.
    • The role of a strategic adviser, to an SME, can take a variety of forms:
      • helping clients interpret strategic issues, and moving them into action;
      • giving them support at a multitude of levels, cognitive, educational, emotional, through different styles;
      • facilitating their thinking/strategy away
      • guiding them through growth transitions to new phases of development;
      • helping them to refocus on higher value–creating activities.

Sadashiva Consulting Services
The Author of this article Dr. N.Krishnan is a Family Business Advisor and works with Small and medium Business Enterprise. He can be contacted at krishnan.n@sadashivaconsulting.in

Website: www.sadashivaconsulting.in

 

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