Over the years I have been at the front-end of providing vision and setting strategy for a range of different organisations. I guess it is this bent/ passion which has led me to look at the way in which in New Zealand at least commerce education providers and business leaders/ advisors alike remain transfixed on the traditional SME scale business model as being the best option for most budding business owners to pursue. I have quite a different (and opposing) view on this advocacy – in fact I consider that this perspective is now flawed for a few key reasons. The most compelling being, most Kiwi businesses are small in scale and concentrate on meeting local/ domestic customer needs (they are not of a scale which enables them to reach offshore into other countries – at least not in a bricks and mortar sense). Therefore, most Kiwi businesses are competing with one another for the same customer dollar – and the “pie” is only so big and very finite.
This means that as subsequently more new entrants into the business realm emerge, this causes competition to intensify and market share to be spread even more thinly among participants in the given industry/ business category. It may also mean that pre-existing businesses in the given industry may experience market share erosion – as new entrants attract customers away from these entities; perhaps even to the extent that a number of the pre-existing business become unviable as a result…and fold.
As I have commented in my book, I don’t see how domestically-orientated businesses of a SME scale can be sustainable in their current format/ structure as individual business units/ entities unless they can generate a scale of business volume which pushes them (and sustains them) beyond their sales break-even point. And if businesses in this category are being impacted by strengthening competitors and/ or new entrants into their market sector, achieving and maintaining a viable business becomes highly questionable in my view.
I believe in fact that the greatest reason why the business failure rate in New Zealand is as high as it is is due to there being so many participants (competitors) in each sector of the economy and therefore “the pie” per sector being spread so thinly between many participants. Given this situation, it doesn’t take too many threats (e.g. increased competition and/ or number of competitors) for a business to lose competitive advantages and become unviable due to eroded market share and revenue.
I have worked with some of the very best (most high achieving) business people in N.Z., and they’re all saying the same thing…the N.Z. market is oversaturated with SME scale businesses, and something’s got to change if the survival rate of SME businesses is going to improve. In my view (a view which is shared by one of New Zealand’s top entrepreneurs who I worked alongside recently) the kind of change of orientation required to stem the failure rate of Kiwi businesses is for SME scale business owners to stop working with a “silo” mindset, and start working with a “collaboration” mindset instead – where businesses combine forces (e.g. multiple businesses operate under a single parent company structure, or mergers take place between like-minded businesses in the same business category/ industry, or simply two or more businesses work in tandem as strategic partners) in order to reach and maintain a level of trading operation which is viable and sustainable.
I’m somewhat frustrated that more Kiwi business owners aren’t making the above realisations for themselves; and actively pursue mutually beneficial commercial relationships with like-minded business owners. In my view, if this kind of transformational shift in thinking doesn’t take place in New Zealand soon, I predict the failure rate of SME scale businesses is only going to increase …which will come with a considerable social and economic cost.
Don’t be afraid to initiate conversations with other parties who operate in the same market as your business does to explore appetites for change…see these people as potential strategic partners (i.e. comrades) and not so much as competitors. You may very well be pleasantly surprised by their reaction to your approach to them, if you approach them gently, and with an open mind and positive attitude.