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Business Development & Marketing General Uncategorized

What are the benefits to SMEs of collaboration with corporates?

skydiving collaborationThe 2018 Global CEO Outlook by KPMG found that 70% of the 150 UK CEOs involved were in favour of collaboration with start-ups and SMEs.
Many cited the benefits to them of collaboration helping them to drive innovation to remain competitive and support their growth objectives, particularly where new businesses in the tech sector can help their larger partners to become more agile.

Collaboration is not a one-way street

One of the difficulties cited with collaboration, however, is achieving the right fit in terms of shared aspirations and culture. So, it is important that potential misunderstandings are ironed out before working together.
Both sides should want to establish a relationship based on trust which includes understanding others’ as well as their own needs and agreeing how any shared knowledge will be used. Equally, both sides need to be prepared to learn and this may be more difficult for those involved in a large corporation, where there are often clear and bureaucratic lines of communication and decision-making.
There is an argument that to be sustainable the corporate can learn much from the SME/start-up and how to think like a smaller business.
However, the benefits should not be one way.  While it is clear how large corporations can benefit, it is less clear what is in it for SMEs or start-ups unless they are agreed in advance such as access to contacts, finance, resources, technology and distribution channels.
A mistake that corporates make is thinking SMEs want advice when they generally want help to grow. Indeed, all too often the executives of large firms have little understanding of the problems facing small firms. They do however have access to resources that can benefit the SME.
A small business is unlikely to have the spare capital to be able to invest significantly in marketing or R&D. When resourced are limited and there is a prospect of running out of money, the issue for SMEs is the uncertainty of spending time and money while they search for sales that can be replicated. This can take longer and use more resources than the SME can fund hence the benefit to them is a leg up from a larger partner.
Once the SME finds its formula for growth, a larger partner can be particularly useful by helping with the planning and implementation. SMEs can learn how the “big guys” operate, how they establish supply chains and install systems and processes.
Working with others can be frustrating and is often a choppy ride, according to Stefan Tan writing in a blog for dashmote.com.
He describes it as being a bit like white water rafting, with all its thrills and spills but “the experience can be truly rewarding if you are able to endure the ride”.
He says it can take time to build a solid relationship and depends on both partners working to understand the benefits and limitations of each one’s corporate culture. Often this can be achieved by running a pilot project to iron out the differences and once that phase has been completed to then scale up activity, being mindful of KPIs and costs.
Above all, he says, they should be mindful that there will always be some cultural differences and that it is important to recognise that neither’s business model is better than the other’s.

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Business Development & Marketing General

Collaboration – even with competitors – can be good for business

people fitting jigsaw pieces togetherCollaboration is about maximising power.  It can bring real benefits to SMEs to work with other businesses, even when those businesses could be regarded as competitors.
Look on many high streets and you will likely find that most of its estate agencies can be found next door to each other. Why would they do this?
The simple answer is to bring more customers through the doors. But it also means that each individual business saves on the cost of promoting its location to customers who more likely will visit the street where all the other estate agents are located. This analogy goes further where often independent estate agents in an area produce a joint publication that each distributes so that they can compete with the large estate agents that have many offices.
Collaboration can be found in both the natural world and the business world. Wales often hunt together and fishermen tend to work the same fishing grounds, in both cases because the locations are known to provide the most prolific source of their quarry but also through collaboration the fish are herded into one place making it easier to catch them and jointly profit from the collaboration.

Collaboration can even the odds

There are several other scenarios where it makes sense for otherwise competing SMEs to collaborate.
It is often the case when tendering for larger contracts, particularly in the public sector, that the small players are regarded with suspicion, particularly in IT supply. “Will they be able to handle this job?” is the question.
In this context, by forming a consortium or joint venture for the purpose of the bid, several small IT companies, each with its own strengths may dispel such doubts and improve the chances of success. Equally, they can benefit from pooling their marketing resources for the benefit of each business when looking for projects.
Another case where collaboration brings benefits to the smaller business is where each is supplying a much larger client and if negotiating alone may be vulnerable to being bullied over prices. Obvious examples of this are cooperatives such as farmers or independent small producers supplying, or hoping to supply, the larger retailers, who are notorious for the pressure they apply.
In the same way, buying cooperatives can bring down the cost of supplies and bought-in products by consolidating their purchasing power. An additional benefit here is the cost saving in terms of time by having one party represent the cooperative instead of everyone spending time on negotiation and buying.
The power of belonging to a professional association or even a franchise organisation should not be discounted. There are many such organisations whose branding is well-known and recognised.  Again, these offer scope for promoting their members in a way that cuts down on the individual members’ marketing costs but can also help with purchasing and standardisation such as documentation which all contributes to increased profits.
Equally, when lobbying government or where there are issues of unfair treatment between larger organisations and small independents, the power of a self-interest group collaborating cannot be discounted when it comes to getting a fairer deal.
The SME world can be a lonely place, but will be made more so if each owner regards all their competitors with suspicion.  Never discount the power of a group pooling resources to collaborate for mutual gain.