Muna Onuzo
FRI, 12 AUGUST 2016-We’ve all heard the buzzwords; SME’s, Start-Ups, Entrepreneurship. It seems like the same idea continues to re-invent itself under different names every couple of years. What is constant though is that since the dawn of time, humanity has had needs. We have continued to meet those needs through the production and exchange of value with other individuals. This value can come in form of goods, services, information and ideas etcetera. We now exist in a complex system of organizations exchanging value for profit. While it may seem as if these organizations appear and thrive by sheer providence, this is not the case. There are trends guiding the flow of value and profit. These trends are in turn influenced by developments in technology, human tastes and societal evolution.
Goods, services and ideas that were deemed valuable only a few years ago may be obsolete today. So, businesses need to constantly look outwards at the external trends and organize themselves to avoid being carried away by the flood of change. Change also brings opportunities. So, adapting to change can position a business for further success. In modern times, there is no other space where these opportunities are more prevalent than in small and medium scale businesses, also known as SMEs. The European Union has defined an SME as a legally independent company with no more than 500 employees. SMEs account for around 95% of global businesses and contribute approximately 40% of the GDP. The amazing thing about small businesses is the ease with which they can be born and the speed at which they can grow. In many cases, small businesses have developed from hobbies and have grown beyond the imagination of their owners to the point where they have had to sell them at astronomical amounts of money to bigger companies who are more competent to manage them. This illustrates the huge potential that SMEs can have.
The role of SMEs in the modern global economy cannot be overemphasized. SMEs are considered key engines of economic growth and primary creators of jobs and are essential for efficient and competitive markets. In fact, having a large core of thriving SMEs is seen as a sign of economic development in a country. SMEs help to absorb large numbers of skilled and unskilled workers, leading to overall productivity and a reduction in the rates of crime and anti-social behavior. Any country where the youth are gainfully employed and productive automatically becomes a production economy as opposed to a consumer economy which relies on imports. Generally, producer economies not only export goods and services to consumer nations, but over an extended period, their culture and values are assimilated by the consumer economies. This is believed to be an explanation for the cultural diffusion from the West in general and the U.S in particular, to other parts of the world. So, a vibrant SME presence can enable a nation to gain respect and leadership in the global committee of nations. [I don’t know whether what you have just written is true. African consumer economies import more from Asia – China, Japan, India etc than from Western nations. Yet, we have not imbibed the Eastern cultures but have stuck with the West. Other factors such as history e.g. colonialism, population migration etc may better explain the reason for cultural diffusion than trade and commerce. This is what I think. If you agree with me, then amend your thoughts or delete that portion.]
So, what sectors are the most viable in today’s global economy? In today’s world, we are seeing a new genre of entrepreneurs. People with formal education, who could otherwise be successful in other professional fields are choosing to run businesses in the informal sector. We have a generation of doctors turned fashion designers; accountants turned food franchise owners and even engineers turned DJs. Today’s generation values personal fulfillment above the views and opinions of parents and the general public. This new generation is also bringing a degree of professionalism into informal business. For instance, it is now not enough to be a skilled musician. Modern music icons are now aware of their brands. They are constantly seeking means of increasing their revenue streams by getting endorsements and building platforms for engagement with fans. Many have even put on the entrepreneurial hat and opened record labels of their own. The blueprints laid by global icons like Dr Dre and Jay Z are being followed in Nigeria by the likes of D’Banj and Olamide. The informal sector will always be a hotbed of SME activity. No matter how advanced the world becomes, people will always have physiological needs. Food, shelter, clothing and entertainment will always form part of human desires. As long as these needs persist, there will always be room even on a global scale, for SMEs to profit from the opportunities they generate.
But the real impact of SMEs on the global economy can be seen in the way technological innovation has changed the world. The story of Steve Jobs is well documented as one of the most inspiring SME stories. Jobs and his partner Steve Wozniak developed the first of the Apple computer series in their garage in 1976. Only a few years later, Apple became one of the pioneers of the computers we use today. As at 2013, Apple overtook Coca Cola to emerge as the most valuable company in the world. Mark Zuckerberg’s remarkable rise to global recognition through the social media site, Facebook is also one of the most remarkable game changers in the way tech Start-Ups are perceived. This is the dream of the average tech start up in every city of every nation in today’s world – to start small, innovate, disrupt the market with great ideas and develop into an irrefutable force in the global space.
There are other amazing examples of small businesses that have grown into global brands. In fact, tech start-ups have helped to galvanize nations with little or no natural resources to become players in the global economy. In a book titled Start-Up Nation, written by Dan Senor and Saul Singer, there was an attempt to capture the entrepreneurial spirit of the Israelis. Start-Up Nation is a compendium of compelling Start-Up stories from ordinary Israelis with extraordinary ideas and an uncommon will to see those ideas come to reality. In the first story, former Israeli President, Shimon Peres, accompanied tech innovator, Shai Agassi to a series of meetings with top automobile executives to see if a plan Shai was touting could be actualized. The plan was for an electric car which requires no fossil fuels to operate. Shai raised $200 million for his electric car company, making it the fifth largest start-up in history. In another story, Scot Thompson, president of PayPal, negotiated a deal to buy a fraud detection software company called Fraud Sciences from a young tech entrepreneur called ShvatShaked. The book also describe how Israel’s never-say-die attitude has influenced the SME philosophy and in turn yielded economic benefits and international recognition for the country. This is a pointer to how beneficial SMEs can be to an entire nation. Thankfully, Nigeria has not been left out of the new era. SMEs such as Paga have incorporated the global standard locally to achieve results in the area of payment solutions. All around many big cities of Nigeria, there are innovation hubs springing up, with young tech-savvy Nigerians joining the race to develop the next big app or software that will disrupt the industry and see them achieve international acclaim.
The best tech services are those that serve a mass number of people simultaneously. They recognize no physical borders or territories. Software is key in today’s SME revolution. People no longer require an office and a team of staff to start a business. A laptop and an internet connection are all that many of today’s entrepreneurs need. The mobile phone has provided a platform for tech innovations to be accessed cheaply and on-the-go. It is said that by the end of 2015, 1 billion smartphones will be sold. Mobile apps, payment solutions and games have spurned billion dollar industries in a very short amount of time. The global App industry is worth $25 billion today, and will be worth $77 billion by 2017. And this is an industry that didn’t exist ten years ago. The worldwide mobile payment volume in 2012 was $163.1 billion and is expected to grow to $721.4 billion. Mobile games are also another goldmine. Video game Company, Activation Blizzard, is reportedly planning to buy King Digital Entertainment, the maker of Candy Crush for $5.9 billion. Mobile games like Temple Run have also received global attention and made millions of dollars for their developers. These games, apps and payment solutions are typically designed and programmed by small companies with staff strengths sometimes less than 20. This is a great example of small companies making a global impact.
The new perspective on the impact of SMEs on global economic development is that of an emerging culture of innovation and creative solutions. Globally, there is a new thinking on [how a company should be organized. SMEs now favor a flat organizational structure, with less emphasis on bureaucracy. The new crop of small business owners are not hindered by notions of how businesses should run. Emphasis is no longer on acquiring massive start-up capital, but rather on skill and innovation. Modern SME owners forge on fearlessly, making mistakes and learning from them as they go along. They re-evaluate, re-calibrate and move forward. After all, business plans are living, evolving documents rather than rigid instruction manuals. With the ever increasing use of mobile technology, these trends will continue perhaps for the next few decades until something totally new disrupts the entire industry and brings new perspectives and ways of doing business that we cannot imagine to be possible at this time.
Muna is an Entrepreneur, speaker, start-up coach, communication & business etiquette expert as well as women advocate
