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

opportunities tomorrow, responses today.”

Madhusudan Jhunjhunwala

1
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

2
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 and
society
 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 to
develop a proper context.
4. Opportunities tomorrow and challenges today: possible practical responses
5. A few case studies and Jim Collins/Harish Mariwala/Ratan Tata
6. A story of change

3
Objective of the presentation
 To initiate a process of thinking among those who have a stake in family-owned
enterprises, 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 detailed
planning. (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 if
filled 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 the
nine are done well. It may be simple but not easy.

4
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 machineries
gave impressive productivity

5
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.

7
Family-owned enterprises, SMEs and Start-ups: responses
today

– Operational
– Market
– Financial
– Skilled people
– Technology
– Environmental
– Regulatory
– Business processes

8
 Family-owned enterprises, SMEs and Start-ups: responses
today

 Realize and accept what you Transaction Monitoring Organization

control and what you don’t. ’s
performance
 Commitment and focus to
improve productivity of Y Y Good
people and assets – the two
critical drivers of
profitability. 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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What Constitutes the SME Sector ……..

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

Individuals Small &

Partnership &
as Medium Larger Corporate
Individuals Family owned
Businessmen Sized Corporate Giants/ PSUs
Business
Professionals Companies

Retail Wholesale /
SME Segment
Corporate
Segment (Constitutionwise)
Segment
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Enterprise Segmentation

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)

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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
Country No. of units % of mfg. Output % of
(% of total) jobs (%of GDP) Exports

Globally 97 70 32

USA 25 40 33
(68 mn) ( 4 trillion)

India 10 mn. 70 40 35

Japan 70 52

Korea 98 50 43

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Indian SME Sector – A Profile

 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 :
– Proprietorships : 78%
– Partnerships : 16%
– Corporate & Others : 6%
 Industrial Units : 96%
 Service Enterprises : 3%
 Ancillary Units : 1%

15
Macro- challenges faced by the SME Sector
(beyond control)
1. Non-availability of adequate capital for investment .
2. Difficulties in accessing the capital market.
3. Inadequate institutional framework for assistance.
4. Lack of opportunities to attract Foreign capital.
5. Lack of technological advancement/ updation.
6. Impact of / Threat posed by WTO.
7. Terms dictated by the large Corporate on whom the SMEs depend.
8. Access to finance for SME Projects
9. Lack of adequate working capital
10. Quality industrial infrastructure (inclusive of Power)
11. Sickness and NPA management
12. Setting up common facilities.
13. Ineffective institutional support – bureaucratic and slow response.
14. Missing interface with the academic institutions

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Major operational and infrastructural issues before SMEs
(within our control)
1. Lack of proper market knowledge – both domestic and exports; heavy dependence on
existing customers; new customer development very slow and meagre.
2. Poor understanding of export market requirements and hence low exports.
3. Poor market and production planning systems leading to delivery failures.
4. High inventory levels leading to high cost of inventory and lower inventory turns.
5. Non-availability of skilled manpower and high manpower turnover.
6. Conventional / Old technologies.
7. Lack of systematic analysis of customer complaints including approvals
8. Low productivity of assets and people.
9. Problems in outsourcing
10. Delayed payments to SMEs
11. Difficulty in communication with customers, subcontractors, calibration, and testing labs.
12. Present skill of their employees in ICT handling is inadequate.
13. ICT facility to improve their communication system.
14. Performance planning, measurement and training.
15. Rework and rejects leading to very high cost of poor quality.
16. Technology up gradation and improvement in quality of products
17. Reluctance to change the way of functioning.
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Categorization of SMEs

SME
Up to Rs. 500 cr.
Up to 1000 people

(A) (B) (C)

Excellent Moderate Under-performing;
(D) (E) (F)
Performance; Performance; Below industry
Loss Making Sick/BIFR Start Ups
Beating Industry At par with Average; But
Standards industry average making profit

18
Enterprise Mapping – Analyzing SMEs challenges and opportunities
w.r.t. business and eco-system

Organization

A (strategic) B (Tactical) C (Operational)

Business eco-system issues. Issues between business and eoo-system. Internal to core business processes
Long-term health Medium-term impact Short-terms gains
Affect profitability Supportive role to business

1. Taxation 1. Marketing and business dev.

2. Corporate governance 2. Sales
1. Economic environment 3. Legal and statutory 3. Branding
2. Govt. policies 4. CLB 4. Code of conduct
3. Industry bodies 5. Sustainable development 5. Operations
4. Socio-economic factors 6. CSR 1. VCM & SCM
5. Economic infrastructure 7. IPR 2. Quality & Maintenance
8. Knowledge management 3. Systems and process
6. Globalization
9. R&D 6. Finance and accounts
7. WTO and GATT 10. Certifications and approvals 7. Productivity
8. Regional trade blocs 11. Audits and compliances 1. Asset/capital
9. CSR 12. IT infrastructure 2. Human
10. Technological changes 13. Technology upgradation 8. CRM
11. Bargaining power 14. Innovation 9. New initiative
15. Policy framework 1. TQM
2. Lean 19
3. Six-sigma
 Enterprise
Profitability
1. Long-term health
2. Strategic
3. Environmental factors
4. Culture of the organization
5. Code of conduct and value
6. Skill and motivation
7. Sustainable development
8. Sustainable productivity
9. Poor compliance bigger liability
10. Policies, systems, processes
11. HR to be the key integrator
12. Innovative management
13. Action plan for growth:
1. Productivity of assets
2. Productivity of people
3. Improve compliance
4. Product innovation
5. Technology
6. Market expansion
7. Market penetration
8. Value addition
9. Higher realization
Profit
1. Short-term gains,
2. Cutting corners
3. Tactical
4. Deferral of investments
1. People
2. Technology
3. Productivity
4. New initiatives
5. Skill development
6. Quality programs
7. CRM
8. Strategic initiatives
9. Vendor improvement
5. Psyche of shortage and crisis
6. Insensible cost cutting
7. Manipulation
8. Non-compliance
9. Deviations from specifications
10. Poor pays
11. Poor vendor management
12. Unplanned outsourcing
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A holistic approach to organization

Policies, systems,
Asset
Mission People Procedures and Business Model
Management
documentation

Empowerment, Values and character

Integration and
Vision Learning, Business Plan Credibility
communication Respect
Trust and care

Customers,
Resource Organization
Goal alignment and Knowledge creation Network,
Objective And
leadership management Relations,
optimum utilization Human capital

Role clarity, Knowledge & learning

Value Systems, ethics Execution and
and, character
Accountability Simplicity Result-orientation
Innovation
And mutual respect Inspiration and passion

21
The stories of three organizations

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Organization A: A mid-sized company in power sector,
Period of change: 1999-2002
 In 1999
– A well respected 35 year old mid-sized Indian company (a JV between a US MNC and an
Indian major) based in Pune in power sector.
– Sales 200 crores, no. of employees 700, plants in Pune, Hyderabad, and Daman.
– 1998 onwards US MNC exits leaving the Indian operations to fend for itself.
– During 35 years company neither grew as other domestic companies did, nor it got any
major technology support/transfer from the US MNC (although the MNC had many
proprietary technologies).
– The exit agreement was unfavorable to the Indian company which had little choice but to
accept the terms given to them.
– The company was made to sign a non-compete agreement with the US major.
– Business model heavily dependent on SEBs, development funding from Word Bank. Zero
exports.
– Post-Pokharan sanction, business likely to be hit to the tune of 50% loss of sales.
– In operating losses for last 7 years and made profit only before 1991 in controlled and
closed Indian economy.
– High manpower cost (25% of sales), low worker and managerial productivity, heavy
overheads, aggressive and militant CITU union, used to work only in cartels, no major USP
or product to rely on.
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 Company A: 1999-2002 (continued)
 2002
– Profitable operations.
– Manpower cost @ 10%.
– Market leader (domestic) in its product segment.
– Sales nearly doubled.
– Export of goods to many a countries including Europe.
– Employees’ attitude undergoes a major positive shift.
– 50% of workers’ accept VRS and go away through peaceful negotiations.
– Company once again becomes a part of a reputed MNC (Europe).

24
 Company B: 2003-2006
 In 2003
– A consumer durable company employing 800 people.
– An entirely new set up in a village setting ( only an industrial shed and machines )
– Poor access from the city, dysfunctional telecommunication and internet.
– Available manpower either class X or below against ITI (as required).
– Barely doing 10000 units of production per month.
– High absenteeism and attrition.
– Almost nil financial support due to fund crunch.
– Harassment by tax authorities and local politicians.
– The first and the only unit in that area for quite some time.
– No vendor base and poor supply chain.
– Quality and availability of water and power – major issues.

25
 Company B: 2003-2006 (continued)
 2006
– Computer literacy at 80-90% (all employees including workers).
– Unit had its own home-grown IT software (internally integrated ERP) though it didn’t have
internet access and comfortable telecommunication facility
– The young boys from village produced very high quality products at nearly ½ of the industry
cost and double the productivity.
– The unit became a benchmark in terms of productivity and cost within the 25 year old group, a
leader in its own business.
– Employees (workers and officers) worked together to build the infrastructure such as canteen,
office, gardens, sheds for storage and internal roads and introduced many innovations against all
financial odds.
– A team of 20 fresh engineers (0-1 years) played a very critical role in My SAP implementation
in the group and have become thorough bred IT professionals. They have all served the group for
nearly 5-6 years before they went out for better opportunities.
– They generated resources by using and selling scrap and designed and launched a few radically
improved products.

26
 Company C: 1954-2010
 2008
– A market leader in its line of business for the last 55 years.
– 4500 people, 175 branches/offices across country.
– Several JVs in and outside India.
– Strong R&D back.
– Worried that competitor will overtake.
– Had no clue as to what need to be done.
– Had a vague idea that it is an HR issue but didn’t know the specifics.
– Managers felt that they are doing an extremely good job and there is little room for
improvement with them and, therefore, problem lie elsewhere.
– Very motivated people dedicated to the company and been with it for not less than 15 years on
an average.
– The company knew its business and it was growing at 30%; yet they felt that the competition
will take over. And it was about to happen.

27
 Company C: 1954-2010 (continued)
 2010
– In 2008 the company starts an organzitionwide intervention at three levels – top (VP and
above), middle (Regional manager to AVPs) and lower levels ( workers to managers).
– Simplifies the vision statement (existed for 10 years but not understood due to
complexity),
– Launches organization-wide communication, helps everybody understand it and decide
what each one of them have to do to make it a reality.
– Precise roles are defined for everyone.
– Performance measurement systems are introduced for business and individuals.
– Simplicity is stressed in communication, processes and training.
– All the available knowledge with people is institutionalized.
– People admit that yes they need to change their mindsets and they do.
– Organization has a path and a plan to salvage its levels of confidence and grow further.
– It is working on it though it will take time to reinvent itself.

28
 Companies A, B and C - Conclusion
 Three companies
– Different business, different cultures, different age groups, different advantages
and different disadvantages.
– All of them improved, though each in a different context and in a different
manner.
– None of them was one man’s job. Everybody participated, achieved what they
could only with available people and resources.
– All of them focused on what they controlled and what they could change, not
on what they did not control and therefore could not change.
– The available knowledge and skills was institutionalized and became an
internal source of intellectual growth and learning.

29
Successful Companies Companies in Trouble

Success

Renewal
Arrogance &
Innovation complacency

Initiative Competition

Lack of
imagination
Imagination
Failure to
adapt

Success Collapse

30
Signs of a troubled business

• Ineffective management style

• Over-diversification
• Weak financial function
• Poor lender relationships
• Lack of operating controls
• Market lag
• Explosive growth
• Precarious customer base
• Family vs. business matters
• Operating without a business plan

31
Organization growth – Equilibrium between external and internal constraints

32
 Agenda for the organization

1. Leadership in cost, quality and service of our products. This alone can
leverage the hidden 15% ( out of the 30%).

2. Updating and preserving our human assets through “continuous shared

learning.” Without this the above is not possible.

3. Rational upgradation of technology. The first criterion for selection of a

technology should be, “do we have people who can operate it?” Otherwise
train people first.

4. People development is a not the so-called “HR function.” It is the primary

responsibility of every manager/supervisor.

5. Innovate ways people can know their precise responsibility and learn how
to perform them.

6. Building a rationale for a genuine pride in what we do.

33
 Goals to guide - Mechanism
Vision & Mission
Vision & Mission
Changing external and
Changing external and
internal environment -
internal environment -
e.g . Customer needs,
e.g . Customer needs,
Key Result Areas competition, special
Key Result Areas competition, special
market priorities,
market priorities,
regulations etc.
regulations etc.
Review & realign Key Indicators
Review & realign Key Indicators
as and when needed
as and when needed

Performance targets
Performance targets

Continuous improvement
Continuous improvement
Implement plans
Implement plans
monitor performance
monitor performance
& provide feedback 34
& provide feedback
Effective operations

Time-bound
Vision
objectives

Growth for Path to the vision

all and objectives

Organization Awareness about vision

improvement and objectives

Learning
organization

35
Measurement

Financial
Financial Customer
Customer

Internal
Internal Business
Business Processes
Processes Learning
Learning and
and Growth
Growth

36
Commoditize Skills

Recruitment
Recruitment Induction

Training Deployment
Deployment

37
 Real task

The challenge before an organization is not so much as to design a

better systems or policies or to buy a new technology or to recruit more

people, as much as it is to innovate ways and means to take all the

innovations of the past to everyone in the organization and try to make

the best possible use of existing people and existing resources.

38
The story of the eagle…

39
The eagle has the longest life-span of
its’ species
40
 It can live up to 70 years
But to reach this age, the eagle must
make a hard decision

41
In its’ 40’s

Its’ long and flexible talons can no

longer grab prey which serves as food
42
Its’ long and sharp beak becomes bent

43
Its’ old-aged and heavy wings, due to
their thick feathers, become stuck to
its’ chest and make it difficult to fly

44
Then, the eagle is left with only two options:
die or go through a painful process of change
45
which lasts 150 days.
The process requires that the eagle fly
to a mountain top and sit on its’ nest
46
 There the eagle knocks its’ beak
against a rock until it plucks it out

47
After plucking it out, the eagle will wait
for a new beak to grow back and then it
will pluck out its’ talons

48
When its’ new talons grow back, the
eagle starts plucking its’ old-aged
49
feathers
And after five months, the eagle takes
its’ famous flight of rebirth and lives
for ...

30 more years 50
Message of the story
 Past, whether good or bad, creates baggage.
 Change is improvement - getting rid of the baggage of past.
 Improvement is the only condition for survival.
 It is a integral part of the natural process of life – whether an individual or an
organization.
 Improvement is an individual responsibility (without exception).
 Improvement is real and painful.
 Improvement is action based on a clear understanding of what one needs to
do.
 Machine (technology) is a tool which is gives results when we know what it is
supposed to do and how we should operate it.
 We do small things; big things happen.
 Thoughts are unrealistically larger than action.
 Opportunities in chaos, business in order.
 Opportunities in noise, business in signals.
 Opportunities in problems, business in solutions.

51
Improvement

People
(Need Vision and Objective)

Execute the Vision

(Resource - Coaching)

Process Systems
(Improve) (Improve)

52
Internal Coaching

 Opportunities for “shared learning”

 One-to-one informal communication
 Personal bonding
 Content customization around on relevant issues and learning
 Builds coaching skills, so vital for leadership
 Intellectual development of the “internal trainers”
 Focus and effectiveness

53
Change Management
Internal Environment
Culture – values& behavior
Learning and KM
Adaptability to external environment
Systems and processes
Technology
Hardware

External Environment

54
Change
1. Neither be forced nor it can be coerced; it can even be through persuasion; it can only be
inspired.
2. A process of making an individual primarily, and organization collectively, what they should
be.
3. Adapting internal environments and conditions of an organization with the rapidly changing
external environment.
4. Equilibrium between internal and external environments with respect to an organization and
also between organization and individual and among individuals in an organization.
5. This equilibrium is a dynamic one and the most serious threat to it is emotional – individual
and organization behavior and culture.
6. In other words, change is about transparency and encouraging human respect and values in a
organization first and foremost.
7. Transparency is essentially de-complexing the organization and therefore change is about
“SIMPLICITY.”, because simplicity and transparency are synonymous as both of them have
the same goal – make things what they ought to be.

55
Finally…

 Don’t get scared.

 They are not difficult at all if you try to understand them because you have
been doing this anyway all these years, may be in a different way.
 You know you business better than others can ever do, because you have been
with it through its highs and lows.
 Most of these things are no longer a choice, as global changes, governance
imperatives, etc. are forcing them anyway, one-by-one.
 So bite the bullet.

56
Actions:
1. We must recognize that business operate at tow levels primarily –
transactions and monitoring.
2. You have to make a decision and commit yourself to it (improvement at
any cost in process adherence and compliance).
3. The basic issue will be “people capability.”
4. They have enough knowledge accumulated over time and loyalty to the
organization which is needed to achieve this. It needs to be captured,
validated, integrated, documented, institutionalized and shared with those
who need.
5. Our existing resources and technology may not be the best but we can make
a better use of it.
6. Doing this will build a platform for training and developing people on the
job.
7. This itself will create confidence and passion necessary to trigger change.
8. You would need to take the process forward and sustain it.
9. This is the “the least and the most” that we can do to begin the process of
improvement.
10. It is simple but certainly not easy.

57
AIMA –Impact assessment: impediments to growth

Market related 70%

Finance related 25%

Government policy related 12.78%

Power / infrastructure related 14.0%

Technology related 14.60%

58
 SMEs predominance in
 Food products  Paper products and Printing

 Chemicals and chemical products  Transport equipment and parts

 Basic metal industry

 Leather and leather products

 Miscellaneous manufacturing industries

 Electrical machinery and parts
 Other services and products
 Rubber and plastic products
 Beverages, tobacco / tobacco products
 Machinery and parts excluding
electrical goods  Repair services

 Cotton textiles
 Hosiery and garments
 Wool, silk and synthetic fibre textiles
 Wood products
 Jute, hemp and mesta textiles
 Nonmetallic mineral products
 Other services 59

6
For example: basic issues in marketing
 Customer data
– accurate and updated details on new customers such as contact, specification of
requirements, price expectation, etc. not available in most cases.
– Available data bases and information on websites are not enough.
– Request for above information is not responded properly.
 Quotation
– There are more than reasonable mistakes in quotations and poor follow up.
 Comfort zone
– Dependence on existing customer base and natural market growth.
 Marketing
– The basic concept of marketing is not understood.
– Marketing and selling are thought to be the same.
 Customer feedback and involvement
 Delivery and quality are compromised.
 Order execution and documentation.

60
Indian experience in SME Banking

SMEs are vulnerable

Information about SMEs is scarce

SMEs are geographically dispersed

SMEs are transaction intensive

61
For example: factors inhibiting banks in SME
financing
 Sketchy data on the financial position and lack of comparative data.
– Lack of transparent credit information, access to credit history
– Limited sectoral data
– Low capitalization and collateral- high impairment propensity
 High cost of acquisition of new client, high cost of credit processing, services
& delivery coverage
 Difficulties in effective monitoring of accounts/ capturing cash flows.
 Poor legal framework for collateral enforcement
 No secondary market for SME loans
– No clear exit route for private equity
 Fortunes depend more on the individuals behind the business rather than
business/ trade cycle/ behavior.
 Vulnerability of the small sized players to globalized economy.

62
Harsh Mariwala’s innovation

– What their precise roles and responsibilities are?

– How they can perform their roles?

– How their performance is measured?

– How their performance is improved and rewarded?

63
Future technologies/industries will require more prepared
organizations: an example from future variants of the old
energy industry
1. Capturing wind
2. Solar energy
3. Electricity from the oceans
4. Combined heat and power
5. Super-efficient homes
6. Electric cars
7. Motor fuels from cellulose
8. Capturing carbon
9. Biochar
10. Soils and forest

64
A few inevitable realities

 It is no longer product obsolescence alone; the technology itself gets

obsolete very quickly.
 The IR of yester years is going to get replaced with a far more
complex structure of employer-employee relationship. No longer the
illiterate “blue collar,” but more informed, suave and sophisticated
pool of people with very high levels of expectations. Can the present
infrastructure sustain that?
 Basics are the bases of all technological advancement.
– Aircraft evolved from craft when basic theories/principle were
understood clearly and applied methodically

65
Surplus
 Basic issues is productivity of people and assets.
 We don’t understand money market or currency market, but we need to
understand where and how money should be utilized and that is the most basic
principle of business.
 Availability of money happens either we produce surplus or we print money.
It is anybody’s guess which is more sustainable.
 SMEs’ real development (not lip-service) can alone give a sustainable
response to global crises we face or are likely to face from time to time,
because statistics show that majority of people (70%) get employed in this
segment. An increase in the productivity (managerial and technical) of people
in this segment will have an overall positive impact on the economic well-
being.
 NSDC – 70-80% of people are B.Sc and below.

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Management innovations in SMEs

 Most productive utilization of available people and technology resources

within the enterprise.

 Knowing what to do with resources and institutional framework we wish to

have.

 Inputs, process, transactions and monitoring.

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Three options for anyone

1. Lead
2. Follow
3. Get out of the way

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The attributes of a desired state of working in a business
organization
• A process is well understood when:
‾ All critical sources of variability are identified and explained to people who are
responsible for correct execution of the processes.
‾ Variability is managed by the process.
‾ Product quality attributes can be accurately and reliably predicted over the design space
(boundaries) established for materials used, process parameters, manufacturing,
environmental and other conditions.
• Organization’s product (& service) quality and performance are achieved and assured by design
and implementation of effective and efficient business processes.
• Product and service specifications are based on a thorough understanding of how inputs (raw
material and human efforts) and business process factors impact product and service
performance
• An ability to effect continuous improvement and continuous “real time” assurance of quality
• The Learning and development systems work towards attaining the above conditions.

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Challenges Key issue Reasons Solutions
Operational

Marketing

Financial

Technology

Skilled people

Global environment

Domestic –
regulatory and
governance

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Macro - challenges faced by SME sector in india

Pre-Globalisation Post-Globalisation

Local/National Investment Collaborations

Single-firm activity Strategic alliances

Manufacturing for self- Outsourcing-
identified market local/international
Local market World market
Rigid production system Flexible production system

Limited economic interest Focus on growth

Protective policies Survival of the fittest

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