Intangibles make SMEs prosper

Dominating Indian headlines in the last 22 years were large businesses on acquisition sprees of big ticket international businesses, joint ventures, tie-ups, break-ups with global companies, mergers and foreign listings. Stories abound of start-up businesses with a gang of friends, angel investors, IT barons making exceptional profit while issuing horse blinkers to ensure their engineer-employees follow the repetitive software programming path. But without any hullaballoo, as per SME Chamber of India statistics, India's small and medium enterprises (SME) have contributed 45 per cent of industrial output, 40 per cent of exports and employed 60 million people. SMEs annually create 1.3 million jobs and produce over 8,000 marketable products. If SMEs are consciously strengthened, a permanent smiley would represent a robust Indian economy.

SME excellence has made Germany Europe's industrial powerhouse. According to Prof Bernd Venohr of Institute of Management, Berlin School of Economics, about 3,200 high-end SMEs within Euros 50-100 million annual sales "are responsible for some 30 per cent of Germany's total exports." Of these, 1,300 are ranked top three in their market sector worldwide. "Companies such as door technology supplier Dorma, cooking system manufacturer Rational, packaging machinery producer Krones may not be household names, but each boasts a global market share of 50 per cent + in its market sector," he said. My German business associate Harald Helm of Helm & Company, corroborates that German SMEs define their markets narrowly, create and operate in market niches. "Their specialisation is combined with global marketing, the focal point is customers, the key factor is highest quality. Innovation is their foundation for market leadership." Unlike Germany, most Western European countries lost their SMEs in early 1990s with the opening of the European community and globalisation. Germany benefited from the Euro's introduction as Deutschmark was the stronger currency. Culturally, Germans are against borrowing, they call it schulden—the same word means guilt. Other Europeans started taking cheap credit when inflation moved real rates down; this triggered the recessionary crisis. With stimuli packages, Germany has bailed out many European countries who continue to criticise German trade relations for being mutually beneficial with China, India and Russia. Prof Venohr attributes SME success to high R&D spends, meticulous persistence for setting up worldwide sales/service networks, and favouring direct customer contact. Another SME success factor is Germany's almost-free education system with thrust on vocational training.

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