Small but strong

The normal notion also says that bigger is stronger and certainly we will have many examples whre size determines strength. Nature has its ways to create exceptions and examples, The strongest material on the earth is diamond , no doubt about it. In fact phsycis will agree that the smaller is the size of particle , more energy it will require to break it. This year global recession has hit business school placements like never before , MBA graduates who considered themselves employable in any circumstances are having tough time to find a job so colleges started looking for small firms and start ups .

In last few days I have got a chance to interact with several such organizations from head count to 4 people to 100 , from revenue of 60 lacs to 100 crores. I am really amazed that even in such bad times many of these smaller firms who have been in existence for around 3-4 years are doing extremely well . There are many reasons to it and one of them is to target a focussed area and provide end to end executable solution in that area at very competitive price.
In discussions it also came out that where many of the larger firms could not predict about their future projects and cash flows , these smaller firms have project lined up for next couple of years so much so that they are turning down clients because they don't have enough resources to execute many such projects at the same time.

What is keeping small strong ?

Low Operational expense : Most of them are still running from small rented spaces and have not opted for purchasing and maintaining their own facilities. This is keeping the operational expense low. These organizations are running from premises with less than satsificing facilities where they may not even have a cafeteria for their staff. Where other larger ones have now a big task at hand to cut down highly on operational expense , for smaller ones its life as usual on this front.

Every one does everything : For start ups it is not acceptable at any time to handle an attrition rate of 25-20% , even if it happens than the key to remain strong is a flatter hierarchy where every one knows and does pretty much every thing, one is responsible from opening the office doors in the morning to making an international sales pitch, collecting receivables , recruiting projects and managing existing projects in hand.

Closeness to customer : Large organizations today have client list running in hundreds , one of the KPI of quarterly results is number of clients added and specially from fortune five hundred, post which it is about deal size but in case of start ups and new organizations in block , they have almost all of their projects are coming from very few clients which means complete attention and close association with these clients. There may not be deal sizes of millions of dollars but there are definitely continuos flow of projects and great trust on these small but flexible partners.

Its not money but passion and vision : I thought these it is very bookish and theoretical concept that small firms are driven by sheer passion which does not care much about cash flow , specially in short term. Recent interaction with some of the CEOs opened my eyes to a world which is full of energy , vision and un quantifiable passion. They are so intoxicated in it that every second sentence they speak gives a confirmation of their passion and commitment. Small size helps making such feelings contagious to the entire team. Offcourse money follows , many entrepreneur commented that earned much more in their small entrepreneurial stint of 3 year than their corporate career of 30 years.

Developing a perfect ecology : Larger organizations have too much pride and arrogance which hinders development of a cooperating ecology with their peers but this is just opposite in case of smaller ones, they are constantly looking out for friends who can help them in various phases , be it complementing them to provide end to end solution to customers or helping them in expansion to new locations. This kind of ecology gives them more strength.

I am certain that many such small organizations will not only sail through the current crisis but also will establish themselves as strong players in respective fields . Lets hope when they become bigger , they don't forget how they have drawn strength to do so.

Realizing the power of Small ( and medium enterprises)

In most economies, smaller enterprises greater in number then the large corporations . some of the facts related to SMEs in the world are:
1) In the EU, SMEs comprise approximately 99% of all firms and employ between them about 65 million people.
2)China’s more than 8 million SMEs, account for 99 percent of China's total enterprise and 60 percent of the nation's industrial output and exports.
3) In India 4.5 million SMEs contribute 40% of industrial production but create 70% of industrial pollution.
4) As per the latest Microsoft-AMI Partners report, "the India SMEs are on a firm growth trajectory, with 60 per cent of PC-using businesses expecting 20 per cent growth and 16 per cent planning to add branch offices to expand operations" .

Not only are SME's seen to be the engine of employment growth but they are also responsible for driving innovation and competition. These are the businesses which later on become some of the largest empires in the world , recall the days when Infosys started with 5 man and a two BHK aprtament in Pune and went on to be the second largest software services provider in Asia. SMEs also play a major role in developing entrepreneurship and ways of diversifications.
Given the rosy picture , SMEs are the one hit hard even by minutest change in the macroeconomic conditions. They have great difficulty in obtaining captal for scaling thier operations , crossing boundaries of nation , going with technical upgradation and attracting the best talent. This all keeps these indegeneous industries shackled with thier potential locked.