The Global Peter Drucker Forum held its virtual conference in Vienna recently. It’s like the World Economic Forum but for management and leadership. As usual, big businesses and large consultancies were well represented, and the talk mainly centred around their issues. But how is this relevant for smaller businesses?

Whilst there were not too many revelations, it is possible to plot a direction of travel over the last 5 years of the Forum. We still debate why top down management is failing businesses and customers. We still reflect that leaders do not embrace the new, whilst many practitioners do. Leaders are still largely firefighting and treating everything like a problem to be solved rather than a tension to be managed. But there are signs that big businesses are starting to breath down the necks of small businesses.

 Early warning for SMEs

In these particularly challenging times, many big businesses are finally getting the customer care message, and are using the pandemic to sharpen their systems and engage better with customers, as they realise exactly who pays the bills – customers, and no one else. They are beginning to Stop Annoying their Customers. Which means that they are getting much more competitive and looking for any sales they can. A year or so ago, a big business might have overlooked the market share that can be gained by addressing the needs of small business markets – no more. The usual small business advantage of being close to customers is being eroded by bigger competitors with better customer focus and better data analytics.

Big business is evolving

Increasing numbers of big businesses are adopting models like the Rendanheyi model. This is based on very small business units within a big organisation, highly entrepreneurial, competing for resources and customers, innovating fast. Sounds familiar? Just like any small business. But still they are missing a trick. They are failing to properly engage with the personal objectives of the owners and teams sufficiently, and so tend to be poor at maintaining long term goals. If you want to grab a toolkit based on Rendanheyi, it’s at Boundaryless. It’s always good to know what potential competitors are thinking and there are downloads you can use yourself.

How SMEs can compete

As we move into the next year, it is ever more likely that big businesses will endeavour to price match or beat any price in the market. They have economies of scale, and by acting transactionally, will try to drive competitors out of the market.

If a small business attempts to compete on price, it will engage in a race to the bottom which a bigger competitor will almost certainly win.

 SMEs can only successfully compete on two levels: service, and speed of response to changing conditions. But to achieve these, you need to get the right information and act on it appropriately.

 Small data tells SMEs much more

Big companies have masses of data and are accumulating and analysing more all the time. They are trying to deal with customers as multitudes, instead of traditionally as masses. To some extent they are succeeding. But big data doesn’t tell the whole story. Small data tells small businesses much more. And too much data can cloud decisions. All this plays into the hands of SMEs.

Small data discovers from individual customers what their Job to be Done really is. It’s very hard for a big corporation to ask individuals in enough detail what they want and need, and see (yes, go and look) how they use your product. But a small business can, and insights from one customer may be relevant to many. These may be weak signals, and therefore overlooked by many businesses, but they will still inform you to look more deeply. Have proper conversations, and do not rely on data driven surveys. Surveys give you data only on the questions asked. Often you don’t know what those questions should be.  Weak signals are one of the many insights offered by Professor of Innovation Management Bill Fischer in his report on one of the Drucker Forum sessions. It’s well worth a read.

Make good decisions

We live in a world of unknown unknowns. Perhaps we always have. Quoting from Bill Fischer’s Forum report “…adopting unanticipation as a replacement for conventional strategy; Unanticipation is a stunning term. It means consciously conceding that in the unknown it is futile to pretend that we know what we are doing in advance, and so we need to rethink how we go about appraising our competitive environment and responding to it”.

This is the antithesis of usual leadership practice, yet the last year has taught us that planning is futile. Only agility and flexibility can create the necessary resilience to withstand shocks and enable a business to continue to thrive. You need to make fewer plans to find a way forward. If your competitors are going to stick with last year’s practices, surely you should take advantage of that? Get enough data but don’t wait for ever. Waiting for more data doesn’t improve our decision making much. It’s a law of diminishing returns.

How much data is enough?

We have many blogs and videos on this. Are you only getting data from obvious, generally available sources like Google? You probably need some more. Have you reached the point of your first lost opportunity because you didn’t act? Time to act. Is there one piece of information that would make your decision obvious? Get it and move forward. Can you avoid the worst possible outcome? Avoid it and act. Can you do a small test?  What does it tell you? Should you live with your decision for a while before executing it? Make sure it feels right overnight, then act. We are helping SME owners make these decisions now and we’ll be putting a lot more emphasis on decision making in future blogs.

Sticky customers

Small data gets you so much closer than any customer care procedure. It brings you a relationship, because you have had a conversation with your customer (another point in Bill’s blog). So now you can tailor your offering precisely to your customer’s needs, and make the customer sticky, and unwilling to move from you. You have created your own market niche. Filling your market niche makes life very difficult for any competitor, no matter how large.

Nowadays, there’s always more power outside your organisation than inside it, a fact that SMEs are very aware of. Much of big business is still operating in the last century Fordist Age and still haven’t quite grasped that they don’t have most of the power any longer. Keeping customers sticky means utilising the power outside the business (customers and other stakeholders) to inform its direction.

Small data brings speed of response

Small data gives you insights into what customers are thinking and what they need now and in the future. This allows you to design new products and services, with a willing body of testers. It enables you to be very agile and flexible in changing times. Big businesses will not be able to respond with your speed and accuracy.

Customers as advocates

Another thought on making customers sticky – businesses are moving towards rewarding those that help with some upside results – even turning customers into shareholders. That makes them very sticky and advocates or even fans of your business – that’s why crowdfunding works so well as a marketing tool. How could you turn your customers into advocates with some sticky rewards?

Even if customers are not necessarily Advocates and, whether your business is B2C or B2B, you can still succeed by simply being the easy one to do business with.

 Helping hand

At Hixsons we make sure our clients are agile, flexible and resilient so that they are better able to respond to shocks. You can also read the helping in a crisis stories of how we helped 6 local businesses turn things around in the early days of the pandemic.

In the spirit of helping our business community we have new Brexit resources in our learning centre where you will find various tools and templates for your business. We do not ask for your data and it’s completely free.