Do interconnected eco-systems of SMEs hold the key to future business success?

My 2014 article “Corporate Culture & the Bottom-line” ended with the following prediction:

“The digital revolution is changing many aspects of our lives irrevocably, including how and for whom we work…if organisations don’t change their culture they risk losing their key staff, as employees increasingly choose to build the business that they would wish to work for, and crowd-source themselves a better future.”

Fast forward six years and SMEs accounted for 60% of all private sector jobs in the UK, a total of 16.6 million. Across Europe SME’s in the European Union employed approximately 66 percent of the workforce.

Over the last twenty years the number of SME businesses has increased by almost 45%. Over the same time period large business growth has been just 7%.

So, is the future of business likely to be dominated by SMEs? Well yes and no…I believe the future of business is likely to belong to an eco-system of interconnected SMEs.

What is an eco-system of interconnected SMEs and why do they have the potential to outperform large corporates?

Well first the “what”…an eco-system of interconnected SMEs is a group of businesses who actively develop and nurture collaborative relationships to co-create, co-elevate and co-market their services. Typically, this will involve organisations who offer complementary services and works best when there is a good match of cultures and values between the companies.

To be clear this is not about supply chains or buyer chains…suppliers supply, buyers buy, eco-systems of interconnected SMEs co-deliver. It’s also worth noting when it comes to these eco-systems, organisations that might otherwise be deemed outside the generally accepted definition of an SME (<250 employees) can be “in the club” if they have the right value match, relatively flat/delegated management structures and a flexible approach to business.

Why do these eco-systems have the potential to punch above their weight in the marketplace? Well the large corporates have some inherent disadvantages that they struggle to overcome such as multiple levels of management impeding rapid decision making, a corporate culture that tends to focus on short term financial targets over long term strategy and organisation structures which act against a coherent vision being shared at all levels of the business. Traditionally these disadvantages have been offset by factors such as diversity of product and service portfolio, market penetration and buying power, however that may be changing…

Eco-systems of interconnected SMEs are increasingly able to match and better the traditional advantages of large corporates whilst retaining the culture, agility, and challenger attitude of an SME. These days, through a combination of digital transformation and collaboration, interconnected SMEs can develop hybrid propositions (co-creation) and aggregate their capabilities in ways that deliver more than incremental value (co-elevation) whilst getting their message to an increasingly wider audience through joint marketing initiatives (co-marketing).

Could the future belong to an interconnected eco-system of SMEs?

66% of the workforce of the EU seem to think so.

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