Looking Ahead Five Years

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In this instalment, we asked respondents to think about the SME sector and what changes they expected over the coming five years. When the panel was asked to choose from any of the thirteen alternative scenarios on the potential future of the sector many respondents chose one statement above all the others.

"SMEs will be a key source of innovation for larger and less agile partners." Many of the comments made by the respondents support this view. Not just that this sector is innovative and agile, but that through their relationships with larger organizations and less agile organizations, they help them acquire these characteristics. Sometimes this will be through partnering arrangements and at other times through them being acquired. Either way, this can be good news for the small business entrepreneur. 71% of all respondents chose this statement out of the thirteen offered, along with 95% of Baby-boomers and 84% of the silver-surfer generation, who are now over 60 years of age, and 90% of futurist respondents.

Growth was a key issue which was frequently mentioned. There was a strong sense that the smaller SMEs, who could provide something different, added value and personalized services to their clients or customers, would win out and thrive. The group felt that the larger - and even the larger medium-sized organizations - would need to rely more on their economies of scale and presence.

"SME consulting sector will develop niche services in the delivery of forward-thinking, innovative solutions - particularly in the shaping of an integrated business paradigm that delivers customer-centered services to a global marketplace."

There is a strong sense that the SME is the powerhouse of innovation. Innovation in the products and services they are able to bring to market of course, but also in the business practices and models that they can adapt, invent, and bring to market more rapidly than larger organizations are able to. The respondents' comments on innovation were nearly always associated with increased added value to customers and improving their service propositions.

The goals of adding greater value to customers and increasing the levels of service being offered to them are driving a great deal of thinking about new propositions and business models in the SME sector according to the responses from our panel.

"SME sector will grow in the areas where the companies can offer some better innovation or idea which helps bring better value to the customer. In the customary areas where the cost and size are important the large companies will continue to do well."

The idea that larger organizations will acquire smaller players was the second most popular statement, chosen by 56% of all respondents and 55% of Baby-boomers. This supports the view that acquisition may be a key means of larger organizations becoming innovative and more agile in the coming years.

Amongst the futurists, 65% of them believed the larger firms would acquire the smaller players. However, allowing these small and agile SMEs to retain their characteristics after acquisition was mentioned as a not too certain future for them.

"SMEs will prove to be more agile, more service oriented and more personal, thus forcing competition and an increasing trend towards deliberate acquisition strategies. Innovation will in no small part be driven by SMEs."

Another frequently voiced issue was that of takeover. Of course the strategy of some SMEs may well be to encourage and even seek out takeovers as their exit plan and ‘payback', for the effort in creating their business.

"Foreign and larger firms will continue to assimilate SMEs that provide market and technological innovations."

The third most popular statement (53%) was that "SMEs will increasingly be seen as the preferred option for talented individuals seeking early opportunities and responsibility".

Later we will look at the issues around recruiting and retaining talent and leaders. 45% of Generation-x respondents, born between 1964 and 1980, agreed with this statement. The only statements that this age group felt were more important, around the changing landscape for SMEs, was that "SMEs will be a key source of innovation for larger and less agile partners" (57%) and that "customers will increasingly look to smaller organizations for a more personal service" (48%).

Among the SMEs, 58% believe that customers will increasingly see smaller-sized organizations as offering a more personal service. This view is shared equally across Europe, North America and Australasia and by 61% of the respondents over 60.

An interesting dichotomy emerges around the issue of attracting and retaining talent. The SMEs see themselves as increasingly being the natural home of talented individuals (56%), whilst acknowledging (32%) that it will be hard to attract and retain them.