Family managed businesses, SMEs and start ups - opportunties tomorrow, responses today

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    Family-owned enterprises, SMEs and Start-ups:

    opportunities tomorrow, responses today.

    Madhusudan Jhunjhunwala

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    Genesis

    Every enterprise - small, medium or large needs managerial capabilities in its phase

    of growth. The need is the same for each one of these categories; but the ability to

    afford is not. In a time, when demand for such scarce resources far outstrips the

    supply, there is an opportunity to innovate management methods and practices so that

    enterprises will have affordable and executable management solutions. This is

    particularly true for the Small and Medium Enterprise (SME) segment of the

    economy.

    Apart from the economic indices that underline the critical dependence of global

    economy on SMEs, they acquire special significance in an age marked by academic

    entrepreneurialism and innovation. In a very immediate context, effectiveness of large

    enterprises also depends on an effective and efficient SME sector when outsourcing

    is the key to cost rationalization, innovation and productivity

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    1. Objective of the Talk.

    To reinforce a process thinking among those who have a stake in SMEs, start

    ups and family-owned businesses. Based on my own understanding of the issues and responses in the last

    two decades.

    Minimum theories, maximum application.

    2. Justification for the topic

    Why this topic

    Its relevance to the audience entrepreneurs, professionals, students andsociety

    Need to foster entrepreneurship in the new generation

    3. Setting the context

    1. Use of data and information on SMEs (size, market, issues, etc.) only todevelop a proper context.

    4. Opportunities tomorrow and challenges today: possible practical responses5. A few case studies and Jim Collins/Harish Mariwala/Ratan Tata

    6. A story of change

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    Objective of the presentation

    To initiate a process of thinking among those who have a stake in family-ownedenterprises, SMEs and start-ups.

    All three of them are primarily a mindset and have many features in common.

    Earlier successes were situational, today we need to plan for them.

    New breed of entrepreneurs and enterprises execution based on a detailedplanning. (Example: IT is an industry based on the hard work of old economy and

    today the old economy has suffered for good people). Earlier entrepreneurs (pre-liberalization) were innovators - built productive

    companies with out-dated technologies and second-hand plant and machineries.

    Families have built businesses and organization. There are a few gaps which iffilled can set path for another phase of business leadership.

    One industry of the past has given birth to many variants in the future.

    SME manufacturing has been the bed of technological innovation globally. Start ups and aspiring entrepreneurs: out of ten steps required to build a business,

    nine do not require money. Money is the tenth which automatically follows if thenine are done well. It may be simple but not easy.

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    Setting the context

    1. Key statistics on SMEs local and global

    2. Experience during the internet search on SMEs

    If SMEs growth, as shown in data and infrastructure, is good then

    what is the problem

    Almost all available literature talks about macro and data based

    perspectives and innovation in general,

    They all talk about possibilities and stop short of how to realize

    them

    SMEs innovation (pre-liberalization): old plant and machineriesgave impressive productivity

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    Family-owned enterprises, SMEs and Start-ups: key

    characteristics

    Owner has the highest stake and hence decision making could be faster.

    Organically grown and cohesive organizations (if not far-flung and multi-

    location).

    Effectiveness of control could be higher.

    Easier to keep a watch on implementation.

    Risk is lower.

    In case of start-ups, it is a clean slate to write and apply experiences of past

    and others.

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    Family-owned enterprises, SMEs and start-ups: opportunities

    tomorrow

    1. SMEs can solve the so called talent problem of industry

    2. Experiments and innovations in all fields of business

    3. Unlock the hidden wealth of knowledge and experience in the company

    rather than looking for solutions elsewhere

    4. Market (domestic) can hardly be a problem.

    5. Cost of quality@ 30% of sales mainly on account of rework and

    rejections resulting from inadequacies in supervision, technical skills,

    job knowledge, communication/reporting, role clarity, planning,

    information about market, vendors and customers, business processes

    6. Low productivity of people and assets

    7. It is almost recession-proof.8. Rationale for outsourcing by large enterprises is low cost, higher

    quality.

    9. Future industries and technologies require robust organizations.

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    Family-owned enterprises, SMEs and Start-ups: responses

    today

    Operational

    Market

    Financial

    Skilled people Technology

    Environmental

    Regulatory

    Business processes

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    Family-owned enterprises, SMEs and Start-ups: responses

    today

    Realize and accept what you

    control and what you dont.

    Commitment and focus to

    improve productivity of

    people and assets the two

    critical drivers of

    profitability.

    Transaction Monitoring Organization

    s

    performance

    Y Y Good

    Y X Acceptable

    X Y Problems

    X X On the verge

    of collapse

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    What Constitutes the SME Sector

    It is rather difficult to define precisely as to what constitutes the SME sector,

    as

    It covers a wide spectrum of activities ranging from manufacturing to

    trade to services.

    It involves different types of organizations with varying constitutions like

    proprietary concerns, partnership firms, private limited companies, public

    limited companies.

    Regulations/Govt. Policy guidelines varies from activity to activity.

    It overlaps with the presently defined Priority Sector.

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    In the given scenario, it can be broadly said that the SME segment would

    include the following

    Individuals

    Individuals

    as

    Businessmen

    Professionals

    Partnership &

    Family owned

    Business

    Small &

    Medium

    Sized

    Companies

    Larger

    Corporate

    Corporate

    Giants/ PSUs

    Retail

    Segment

    SME Segment

    (Constitutionwise)

    Wholesale /

    Corporate

    Segment

    What Constitutes the SME Sector ..

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    MNCs

    Large enterprises(501-5000 crores,

    10,000 people,

    Multi location, but not

    overseas

    Medium and semi-large enterprises

    (11-500 crores, 1000 people,

    Multiple location, but not more than 2-3

    Micro and small Enterprises

    (0-10 crores, 200 people, single location)

    Enterprise Segmentation

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    The beginning of big things

    SMEs contribute globally: 32% of global output

    97% of all number of enterprises

    70% of all manufacturing jobs

    95% of SMEs employ fewer than 100

    people

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    SMEs a global picture

    435098Korea

    5270Japan

    35407010 mn.India

    3340

    ( 4 trillion)

    25

    (68 mn)

    USA

    327097Globally

    % of

    Exports

    Output

    (%of GDP)

    % of mfg.

    jobs

    No. of units

    (% of total)

    Country

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    SSI units : 12.3 million

    Employment generated in SSIs : 29.5 million

    Production : US $ 100 billion

    Exports : US $ 27 billion

    SSIs account Industrial Production : 40% Exports : 35% (50% of Direct & Indirect) GDP Share : 7%

    Ownership pattern :

    Propri

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