Creating procedures & management support

Creating procedures & management support

Out of all the companieswhich arose in Poland in 2002, only 24% remained on the market by 2009. The challenge for Small and Medium Enterprises (SMEs) is to survive in the long run, and grow to large company. Why such a large percentage of small businesses fail? Why does such a large percentage of small businesses fail? Why do so few of them convert to large companies? One of the main reasons is the short-termism, that is the focus of all the forces on current operations  and neglectingof these activities, which could provide a company success in the long term.

The situation in Poland is not significantly different from other European Union countries. Considering that 75% of GDP in the EU comes from the manufacturing industry, and, consequently99% of European producers are SMEs, it will not be exaggeration to claimthat the competitiveness of the European economy largely depends on the competitiveness of manufacturing SMEs.

"Strategy" is among many owners and managers of small companies the exotic word. They focus on winning orders for the next few months. They rarely spend time on a thorough analysis of what will change in the business environment for a year or two, let alone thinkingabout how to prepare in advancetopossiblechanges, or even use them. As a result, they react to any changesin the environment with a long delay.And changes in today's market are occurring very quickly. There are new production technologies whoserapid implementation decides about to be or not to be on the market. There are new legal regulations regarding eg. the protection of the environment; in the coming years they can result in  increasing thecostsof energy used for production. How many small producers are already thinking about improving their machinery so that it is less energy intensive? The research clearly shows that the vast majority of SMEs have not formulated a strategy, which is even worse , they have not the awareness of its necessity or underestimate its importance. According to research of Grant Thornton 54% businesses presents a low level of long-term planning, and 30% of companies do not have business plans at all.

Lack of strategy is like going on a trip without a clearly defined purpose and path. We know that we want to get from Wroclaw to the sea, but we do not know exactly where toand in addition, we have not takenthe map. So we take the road to Poznan (because it's north direction) and we will seewhat will be next. Good idea for a crazy teenager, but not for a father, the head of the family who travels with his wife and two small children.

Unfortunately, such an approach, called the English short-termism, is a kind of original sin of SMEs. Why? Because the owners and creators of new businesses are usually the innovators, not the managers. They have a great idea, often in the form of new, innovative product in the market, technology, or services. This allows them to succeed in the short term. Soon, however, there are competitors who also have learned the new technology (or developed a similar product); then, further ideas and innovation, effective management of  a company, looking  for promising new markets, and above all – building  a good business development strategy in the perspective of many years are indispensable. The first step is to develop the so-called vision.

Vision, i.e. a destination

The vision of the company respondsto the question of how a company is to lookin a few years. Response like – “it is to operate more or less as it does today, just earn more money” -is the first step towards a disaster. It is true that it is difficult to predict what will happen in 2-3 years, but one can we say with certainty - many things will change. Changes in the business environment occur more frequently and more quickly and this trend will be augmented in the coming decades. That is why each company in a few years will have to do things differently than today.

So let's consider whether or not there will be new competitors, or if the competition from China will not improve significantly the quality, or if the access to specialized technology will not become cheaper, or the new regulations will affect the conduct of business in the industry? Let’s take as an example of thecompany that entered the market with innovative products: Lantech U.S. company, which patented in the U.S. machine for wrapping goods by the elastic film, or Irish company Roche, which has patented a machine in Europe to set up transmission poles. Both companies have survived some kind of crisis at a time when patent rights did no longer protectthem and competitors immediately appeared  onthe market.Coming back "on track" took them time and associated costs, but it could be relatively easy to predict whatwouldhappen after the expiration of patent rights. And they could prepare for this. The initial vision of both companies were topatent, and thentoprovide theirs customers with innovative and unique product. However, if we know that for exampleintwo years patent rights expire, you should consider whether such a vision still makes sense.Both of these companies emerged from the crisis unscathed. Lantech had to change his vision and set to reduce production costs using the Lean approach (so-called lean production). That is why it could be competitive in quality and cost, despite the emergence of competitors. And  Roche has switched tothe development of new, unique machinery for the construction industry.

The strategic plan, i.e. a roadmap

The vision is not everything, you still have to have a good plan to achieve it (the strategic plan.) Suppose that the vision of the company include diversification of products - today we are producing chargers for phones, but after three years we want to produce reliable power supplies for computers (because all indicators shows that it will be profitable). What should be done step by step to make this possible?Now the key is to have the ability to manage change, which is another headache for the Polish and European SMEs. Implementation of the new product will consume time and resources. And in small business both are usually missing. In addition, long-term measures in their daily work are usuallypushed away for later by current issues. This is another symptom of short-termism. Thus, it is good to think and plan how the company reaches the point from"today" to the "new products for three years". What resources and means will be necessary, how will we place our actions in time, howcanwe finance such a project, who will deal with this? But even a good strategic plan does not guarantee success. Another essential factor is the consistency in its execution every day.

 

Adaptation as the key to success

Today's reality does not absolve the weak players who do not have a definite vision, or incompetent to pursue it. The three problems outlined above: the lack of vision, strategy to achieve it and problems with change management,areone of the greatest ills of small and medium-sized manufacturers in Europe. According to recent studies of FutureSME consortium, the key to the success of SMEs in the next decades, will be the ability to adapt to changes in the long term. So in order to succeed, the company will not only have to havewell-formulated vision and strategy, but what is even more difficult, its frequent review in the context of changes in business environment will be necessary.

Very helpful in this may be the methodsderived from the philosophy of Lean Management (which isThin Management), as HoshinKanri or A3 reports. The first one allows you to translatequicklythe corporate strategy to operational activities, and the other one helps to implement the change management process efficiently.

In conclusion, it is worth beginningto think strategically in order not to be surprised by changes that lay ahead, but on the contrary, one must be able to use them for its own benefit (before the others do it). We offer our knowledge and experience to those who want to implement strategic management inthe enterprise and support them at every stage of its creation. Starting with advice, going throughhelping to create procedures to audit finally created system.

Such services are priced individually according to their labor-consumption, and not to the customer's wallets, after information meeting and preliminary analysis of the organization.

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