Escaping The SME Trap

What’s stopping more Hong Kong firms from moving out of the

small and medium size box and becoming big businesses?

Hong Kong is an SME paradise for a host of reasons. For starters, it’s one of the quickest, easiest and cheapest places in the world to set up a business. The latest available figures put the number of SMEs operating in Hong Kong at about 340,000. And they represent more than 98 per cent of the city’s businesses, and account for an estimated 41% of the city’s GDP.

But, ease of inception doesn’t necessarily translate into ongoing success. And, statistically speaking only a tiny fraction ever grow beyond small and become medium-sized enterprises, let alone big businesses.

What’s more, according to Forbes, nine out of ten startups fail!

No.1 on the list of causes (42%) is “no market need.” Second is running out of cash (29%), followed by everything from simply being outcompeted to having a poor business model, ignoring customers, loss of focus and burn-out, which inevitably leads to the demise of the business.

I can’t argue with any of that. But, I think there is more to the story. When you add it all up, the main reason that startups fail, and why so many of Hong Kong’s SMEs stall-out and remain small or medium sized, is really because they lack a key ingredient – a sound foundation.


Eliminating The Old Mistakes

The first mistake that SMEs make is an understandable one. They don’t have the resources that big corporations do, so budgets for critical business infrastructure are always tight. That means most SMEs start by writing off the idea of implementing core IT infrastructure, like an Enterprise Resource Planning platform – and try to do things “on-the-cheap,” by buying consumer-level solutions.

That sounds like a sensible approach, but there are problems. Successful businesses outgrow such solutions fairly quickly, and the inherent limitations create a kind of organizational friction that holds the company back. At first it’s barely noticeable, but it builds up fast.

The lack of functionality also means that companies need to find workarounds and fixes to achieve certain objectives – such as getting closer to customers – or ignore that particular need.

The result is frequently a mish-mash of unsatisfactory solutions that sort of work, but aren’t scalable, and are too expensive to rip-out and replace. All too often, companies that hit that inflexion point stay there.


Taking A New Tack

I think that picture is about to change, courtesy of the cloud resolution.

Take ERP for example. It is designed to help businesses make smarter decisions, serve their customers better, and work more efficiently overall by automating processes and workflows. ERP software is important because it can facilitate the following: Increase effective communication between departments.

Lack of funds is no longer a compelling reason for SMEs to avoid the latest innovations. The predictable, pay-as-you-go nature of cloud technology makes it possible to start with as little ERP as they need, and add as much as they want as the company grows. It also means migrating from the current set of solutions to the cloud can be quick and relatively painless.


Don’t Ignore The People Factor

ERP isn’t the end of the story. According to a recent Oxford Economics report, growing companies also need to focus on people. Again, cloud technology can provide solutions that do the job for a small number of employees, and scale up to manage thousands if and when the business grows.

For example, since 2011 the Japanese designer retail brand MINISO started in China, has gone from a few stores to more than 2,400 in over 60 countries. The company has chosen cloud-based SAP SuccessFactors solutions to help it optimize performance management and enable HR self-service capabilities.

MINISO also selected SAP S/4HANA as a core platform to enable business operations and the SAP Hybris Cloud for Customer solution to help provide customer-specific personalized design, support sales revenue growth and gain market share.


Cloud Covers All Business Function

SAP’s answer to cloud ERP for SMEs is Business ByDesign. Designed as a cloud-based enterprise automation suite, it includes all major business functions, such as finance, project management, HR, sales, marketing, procurement, and support.

Along with a plethora of other features, SMEs also have access to real-time analytics and business intelligence. That makes a huge difference in terms of gaining complete visibility over any enterprise. It also means that everything an SME requires is already there, so there is no need settle for less, or waste time and money upgrading or adding other products to get the suite the business is really looking for.

Subscription-based, cloud ERP is ideal for any company looking for future growth. It is inherently completely scalable, so it easily accommodates subsidiaries or new entities anywhere they happen to be located.

Cloud also means fast. In the case of Business ByDesign, easy configurability means being ready to go in as little as 90 days, with no need to spend time developing or rethinking back-office processes for HR, finance or any other part of the business.

Last, but not least, cloud offers SMEs mobility. A cloud-based solution allows users to work from anywhere, anytime, and on any device and still have access to all the necessary information at their fingertips. The result is increased productivity, better service for customers, and access to critical metrics at all times allowing managers to take action when it really matters.


The Sky Is The Limit

Of course, not every SME wants to become a multinational success like MINISO. There are plenty of smaller businesses that outclass the biggest names in their own particular niche.

However, the good news is that, thanks to the cloud, any of Hong Kong’s 340,000 home-grown SMEs with global ambitions now have access to tools that used to available only to larger firms and MNCs.

So long as they take care to avoid No.1 on the Forbes failure list, and make sure the market does need what they have to offer, the sky is the limit for SMEs!

Click here to find out more about the Oxford Economics “Transformation Imperative for Small and Midsize Companies.”

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