Throughout the development industry, interest in India’s small and medium-sized companies (SMEs) has grown during the past several years. The COVID-19 epidemic, however, has had a significant influence on the way SME entrepreneurs and workers think, operate, and interact with clients, suppliers, partners, and one another over the last two years, which has caused this desire to increase. Although the epidemic has reduced SMEs’ contribution to India’s GDP back to the level it was at three years ago, these firms have always needed quick development. This is according to an internal study conducted by Wadhwani Advantage. The nation’s SME owners and their supporters will need to adopt a new strategy in order to change these statistics.
The worldwide resource shortage brought on by the pandemic has prompted firms in the majority of industries to exercise caution, even if these entrepreneurs remain ambitious and committed to fast expanding their operations. Therefore, SME owners globally need to reconsider how they see themselves, their purpose in life, their level of competition, and their aspirations.
They will have to decide whether to spend time and money trying to save failing enterprises, which will require them to make some difficult choices. Additionally, because of their emotional attachment to their businesses, it may be challenging for them to recognize the times when giving up and redirecting their energies toward other ventures or objectives is the best course of action.
Supporting India’s SMEs as they navigate this crisis calls for a comprehensive and integrated understanding of all the abilities that business owners require to address the unheard-of issues they are currently dealing with. These businesses will require new sources of competitive advantage, such as intellectual, emotional, and relational capital, to help them recover and expand. This capital complements their physical and financial assets and enables informed decision-making. In fact, if SMEs want to stay competitive, they must give top attention to generating these alternative types of finance.
In the sections that follow, I’ll go through how vital it is to increase SMEs’ intellectual, social, and relational capital both during and after the epidemic and how existing learning and development initiatives are failing to adequately address the particular requirements of these companies. Although the scenario faced by SMEs in India will be the main focus of this examination, many of these conclusions apply to businesses in other rising economies.
Indian SMEs require knowledge of capital
The SME community in India requires a significant improvement in the knowledge and management skills of business owners and their staff.
These business owners frequently lack the fundamental understanding necessary to operate a company, such as functional abilities in areas like sales, marketing, operations, human resources, finance, and legal matters. Additionally, they are lacking in crucial knowledge and abilities in areas like digitalization, program management, succession planning, decision-making sciences (e.g., utilizing inductive or deductive logic to make judgments), and change management. SME business owners must acquire these abilities since they are no longer optional.
Individual talent, however, is insufficient. The skills gaps among individual SME entrepreneurs are being addressed by policymakers, support organizations, and businesses themselves, with an emphasis on things like operational productivity in manufacturing, technological competence, etc. The true necessity is to broaden your perspective and consider the entire organization and environment. This is an urgent requirement that has to be investigated.
Finally, the discipline to implement is another necessity that demands quick attention. According to Wadhwani Advantage’s experience, SME owners in India frequently lack the dedication and discipline needed to run and maintain their companies over the long haul. Fortunately, it is possible to learn these traits.
Unfortunately, while technology-based education has grown in popularity, the majority of skill-building projects try to standardize learning, yet the need for customization among entrepreneurs has never been higher. How many educational materials, for instance, contextualize concepts like AI and design thinking to the SME setting and its various use cases? For SME owners, enrolling in an online university course on these topics is not appealing due to the expense or the fact that it won’t help them with their immediate difficulties or provide them with the skills they need to advance their companies. The pedagogy doesn’t provide results for them right away and doesn’t deal with the demands and difficulties of the industrial setting.
On the other side, there are several programs and “experts” in India that offer advice on entrepreneur skill development without always adhering to the required standards of academic rigour. The creation of instructional information on these subjects is receiving significant support from the academic community, companies, digital platforms, and other sources. But because so few of these businesses enroll in these courses and even fewer put their newfound knowledge to use, the results produced for SMEs fall well short of the levels of competitiveness that are needed. For instance, the number of institutions in India that cater to entrepreneurs has doubled in the previous 15 years, according to the research database of Wadhwani Advantage.
However, our study of 600 Indian SMEs shows that even among firm owners with revenues of $3 to $10 million, many do not understand the meaning of fundamental words like ROCE (Return on Capital Employed). This indicates that the learning outcomes of the nation’s skilling initiatives have been, to put it mildly, subpar. It may be because fewer people are enrolling in these courses or because their content is useless. We have seen millions of dollars poured into learning and development activities for entrepreneurs without the accompanying SME benefits, much like the health sector, where the infusion of large financial capital does not necessarily translate to better health outcomes.
Enhancing the emotional capital of SME’s
Knowledge capital alone is no longer sufficient to address the myriad new issues that SMEs must now face; instead, the leaders and staff of the millions of SMEs operating globally must also acquire robust emotional health. However, based on Wadhwani Advantage’s experience dealing with hundreds of Indian SMEs, the insufficient focus is being paid to initiatives to restore their mental health to pre-pandemic levels—a condition that probably also occurs in other emerging economies.
The amount spent bolstering the emotional health of SME owners is woefully inadequate when compared to the amount of financial capital entering into firms. Any gains on financial capital put in these entrepreneurs’ enterprises won’t be sustained until they receive enough consideration and substantial investment in boosting their emotional capital. And generally only when it is too late do the emotional fault lines that will finally derail these businesses become apparent.
Entrepreneurs’ decisions are frequently influenced by their emotions, which has an effect on how well their businesses function. Psychologists have proposed a number of hypotheses for how emotions may spread and disturb social interactions between people at work, impacting the competitiveness and performance of the organization. Since SMEs rely on a smaller community of employees and supporters whose emotional states can be greatly influenced by the emotions of those around them, I’ve been researching the impact of emotions in SMEs for the past year and have discovered that emotions play a far greater role in SMEs than in large corporates. Despite this, organizations devoted to assisting these companies pay little attention to these effects, which must alter in order to design successful interventions to grow SMEs into large, lucrative, and long-lasting enterprises.
Developing SMEs’ relationship assets
Despite the significance of these elements to the success of SMEs, having emotional stamina and intellectual capital is insufficient for entrepreneurs. The operation of these enterprises ultimately depends on individuals working together to carry out tasks and strategies—and that depends on how individuals interact with one another. There are many instances in the business world of what can go wrong when a corporation disregards the value of relationships, including poor cooperation, toxic work environments, unhealthy competition, and HR problems that fester within organizations and cause poor competitiveness and even business collapse.
Relationships have a significant impact in determining how individuals see one another and the responsibilities they play in accomplishing a shared objective. The conflicting commitments model, created by Harvard educational psychologists Bob Kegan and Lisa Lahey, offers a convincing justification for why people frequently obstruct their progress toward achieving their personal objectives or the goals of their organization. According to the approach, company executives’ or employees’ behavior may not coincide with the organization’s goals because each person may have conflicting commitments stemming from their own implicit (unconscious) values that run counter to the organizational goal they are knowingly pursuing. This dispute frequently leads to negative interpersonal behaviors, which, consequently, have a negative impact on the business.
The expanding impact of technology on all human interactions has made connections between people—including those between individuals and their coworkers, consumers, stakeholders, etc.—more complicated than ever. Small and medium-sized enterprises (SMEs) are struggling with how to comprehend this new technology, how to determine how it will affect their businesses, and how to avoid either being too slow to adopt it and falling behind rivals or being too fast and mindlessly chasing new tech solutions without the necessary understanding of how they will impact their relationships.
To use a frequent example from the epidemic, when comparing the effectiveness of a meeting conducted through a video conference at home vs in person, it is evident that doing so is more practical and efficient, but it has minimal influence on developing strong bonds. Although technology may tremendously assist SMEs in their work, the methods in which these companies use it are still “dehumanized,” and sadly, not much is being done to enhance their attempts to cultivate connections more deliberately.
For instance, according to Wadhwani Advantage study, Indian SMEs have accelerated their adoption of digital technologies by 74% during the epidemic, yet the caliber of their interactions and customers’ experiences have not improved proportionately. This implies that using these technologies alone to conduct business is useful but ineffective—and maybe unsustainable—absent commensurate efforts to greatly improve the customer experience.
SME business owners need to realize that while high-performing companies require all the standard success factors, such as money, efficiency, time, etc., the companies that endure also recognize the importance of knowledge, emotions, and connections. Successful businesses depend on these components to function; otherwise, their performance is erratic and unsustainable.
It’s time for SME owners, entrepreneurs, capital providers, policymakers, and other supporters to concentrate on developing and putting into action an operational plan to increase SMEs’ reserves of intellectual, emotional, and relational capital, whether they operate in India or other emerging markets. These businesses’ capacity to recover from the pandemic and maintain their long-term sustainability will be in jeopardy if these demands are not met.