At TXM we find a lot of interesting learnings that big and small manufacturers can share with one another. Here’s our ideas of the best ones.
Top Five Things that Big Companies can Learn from Small Companies
- Focus on the Customer: Small and Medium Sized companies (SMEs) never forget who pays the bills. Most employees come in to direct contact with the customer and business owners tend to think a lot about what their customer wants and the best way to deliver it. The best companies live in their customer’s “operating reality”, so the people who build rowing boats also row them, the people who build microphones are also musicians.
- Have Fewer Meetings: Typically managers in big companies spend at least half their days in meetings. Many meetings are poorly run, with no agenda, no effective chair, no time limit, few outcomes, and if there are outcomes, no follow up. Small manufacturers can’t afford to sit around in meetings. They tend to have short focused discussions, often standing up in the office area or shop floor rather than a board room.
- Never Stop Innovating: We are constantly amazed by the innovation of small manufacturers It seems that small and medium sized manufacturers are constantly looking for new ideas, new products and new ways of doing things to drive growth. Often in big companies there is a tendency to rest on our laurels with successful products or innovate only reactively to competitor products or to reduce cost.
- Lead by Example: Private Business owners usually have little management training and little time to read text books, but they frequently inspire great loyalty in their staff because they are passionate about their businesses, their customers, their products and their people. While they are often tough and demanding bosses, they value good people, and they never expect their people to do something they haven’t done or wouldn’t do (because in many cases they have worked their way up from making the product on a kitchen table).
- Stable Leadership and Planned Succession: For many private business owners, succession is a key issue, whereas it often gets lip service in bigger companies. SMEs CEOs tend to plan a long way in advance about who will take over from them and groom that person (often the next generation in the family) to take the reins. This is difficult, but done well leads to high level of consistency and continuity. It means that initiatives such as lean manufacturing have time to be established and to be sustained from one generation of leadership to the next. In big companies often senior management turnover or ambition means that there is a new leader every two years with new ideas and little interest in continuing the initiatives of his predecessor.
While these are valuable ideas that big companies can learn from SMEs , we often find that what we need to teach SMEs some big company rigour as part of introducing lean. Top ideas that we find SMEs need to learn from their big brothers are:
- Standard Work Standard Process: Big companies standardise. A common success factor that enables an organisation to grow larger is the ability to share learnings. Whether the learning is “11 different herbs and spices” or the best way to disperse pigments in paint resins, the ability to take learnings from one location and replicate it successfully is critical to growing a small business in to a big businesses. Big businesses are therefore good at documenting what they do to lock in learnings and share them. The failure to do this is therefore a key reason why smaller businesses don’t grow – the critical knowledge resides in a few individuals, undocumented and therefore learning can not be shared.
- Understand what Makes You Great: Great corporations have an innate sense of the factors that make the business successful. These are often woven in to the culture of the business in the “way things are done around here” and shared with everyone in the business. Often SME leaders are too busy to reflect on the secrets of their success and therefore can allow these critical success factors to be lost without even realising it. In other cases the critical success factors rely on the founders’ expertise and are lost when the founder leaves the business (this can even happen in very large companies – Apple and News Corp being companies that appear to struggle without the inspiration of their founders).
- Get the Structure Right and Define Who Is Responsible for What: An efficient big company is a like a well organised football team. Everyone knows their position and plays it and players support each other as needed. Sometimes small companies can be like children playing football – everyone crowded around the ball and no-one in position – the “ball” is usually “today’s crisis”. Big companies usually have structure. Jobs and responsibilities are well defined and performance feedback and staff development highly structured. This ensures that staff know where they stand, have a career path and know their job. SME roles are often less clearly defined and less focus given to developing staff. As a result turnover is often higher and issues arise where responsibilities are not clear.
- The Balance Sheet Matters as Much as the Profit and Loss: Most SME business owners are focused on profit, while most large companies are focused on return on shareholders funds. This is driven by the demands of the share market and means that big companies are often as focused on minimising capital as they are on maximising returns. SMEs frequently lack discipline in managing inventory and other forms of working capital and this usually translates to higher debt and lower returns. A lean approach can cause breakthrough reductions in inventory and also increase the productivity of fixed assets.
- Planning is Essential: Big businesses are usually good at planning. They have formal processes to develop plans across the range of business functions. Major projects are often carefully planned and business risks assessed and mitigated. There is usually broad consultation about major initiatives and changes of direction. Small companies frequently fail to plan thoroughly enough. They often live day to day and don’t take time to assess the direction of their business in terms of finance, marketing, human resources and operations. Decisions are often reactive because everyone is so busy. However in our experience, no business can afford not to plan. Big business also recognise that when they set strategic objectives they need to support these with resources and expertise. Both internal and external resources (such as consultants) are marshalled behind the key strategic goals and projects of the business. SMEs often develop good strategies and goals, but fail to direct resources behind these goals and project, which, inevitably mean that the goals are not achieved and the projects not delivered effectively.