Modernising and diversifying SMEs

 

  • Run public campaigns to strengthen interest in and demand for SME training and counselling services.
    Business survival and growth depend not only upon leadership and management in SMEs, but also upon the skills and motivation of their staff. The prevalent belief of entrepreneurs that training costs time and money, accompanied by a lack of awareness of, and access to, training offers, as well as a lack of incentives and financial support structures, need to be addressed as barriers to enhanced skills development approach for SMEs. The use of successful training schemes for marketing and participating companies as role models could be a way to increase the interest of SMEs in making use of training and counselling services. Such initiatives may also help to enhance co-ordination between training providers, chambers, business associations and the labour office and could offer additional incentives for quality increase. Business networks could be used to support and to run campaigns to increase awareness of such programmes.
  • Enhance co-ordination, transparency and quality checks of counselling, training and coaching services.
    Existing offers and services should be subject to strong evaluation, quality control and benchmarking exercises. Information should be transparent and easily accessible.  This information should be used to support SMEs and public agencies in selection of the most appropriate training providers.
  • Include training for enterprise development in business start-up programmes.
    More emphasis should be placed on developing business management and development skills within start-up support programmes.  Existing training should be expanded to cover identification of wider markets, business sustainability issues and the identification and exploitation of future growth opportunities.
  • Support training for existing SME managers.
    Promote high-quality training programmes for SME managers to support their business development skills, especially opportunity recognition, marketing skills and knowledge of markets. These may be publicly or privately delivered and in the form of in-house training or outside courses.  Activities should offer opportunities for exchange of experiences and co-operation with the aim of helping entrepreneurs to identify changing needs of their businesses and ways to meet these needs. Such activities should target in particular growth oriented entrepreneurs.
  • Intensify business network initiatives.
    Networking can be stimulated by undertaking value chain analysis and scenario planning with the appropriate stakeholders of these industries.  A key to initiating such networks is to pose and attempt to answer a central question: By co-operating how can we move this local industry from being a price-taker to being a price-maker?
  • Continue support during post-start-up phase.
    In order to help young companies to survive and to grow, public support schemes for coaching and training activities during the post start-up phase should also be reconsidered. Very often young companies do not realise that their current business capabilities and know-how are insufficient and that external help would be an advantage. Experience with post start-up coaching programmes in other OECD countries show that the relationship between entrepreneur and coach, built up during the pre-start-up and start-up phases, has the potential, if carried on to the post-start-up phase, to provide helpful assistance that allows new entrepreneurs to recognise upcoming difficulties at an early stage. Tailored services at the local level could be used for maintaining direct interaction with previous clients in the post start-up phase by continuing the initial one-to-one interactions established during the pre-start and start-up phases.
  • Access external markets.
    It is important to increase penetration of external markets in order to create demand for local goods and services. Market research activities help to understand and forecast potential demand and allow for tailored responses. 
  • Promote business-to-business mentoring.
    Larger companies can play an important role in encouraging SME innovation and exporting by making available expert managers to SMEs for short advisory sessions. This can be very effective and valuable to many companies at the early stages of their development.
  • Seek the involvement and advice of knowledge and business angels.
    A developed venture capital system needs individual investors as well as venture capital funds. ‘Angels’, that is people who are prepared to invest in individual companies and frequently bring knowledge of the sector or other strategic advice to companies, are common in most OECD countries. They may be people who successfully started a company in the past and may have a series of companies in which they have invested. Often this type of investment is accompanied by mentoring where the individual investor or another nominated person acts as a counsellor to the entrepreneur and business. This is particularly important to business that are seeking to tackle international markets or where they have ambitious growth plans and could benefit from business advice and networking to other potential financiers, market contacts or expert advisors.
  • Expand technology support and activities.
    Given cost structures, SMEs in OECD countries increasingly need to compete on technology or other added value features that give them competitive edge on international markets. The establishment and further development of external R&D services could help local SMEs to innovate. It might be that the Districts perceive themselves as too small to create by themselves the innovation support infrastructures necessary for SMEs. In this case, collaboration with neighbouring Districts or thematically related higher education institutions should be sought.
  • Pilot a high-growth programme.
    A high-growth programme could be piloted at local level. Such a programme would identify young and existing companies with a minimum growth potential (based on employee numbers and/or turn-over), co-ordinate public support, provide bespoke mentoring and advice, and assist with the raising of private investment. Such a programme would only focus on a small cohort of start-ups over a two year period (given the size of the economies, perhaps only twenty companies a year would be recruited). This could be particularly valuable in regions where the entrepreneurial climate is close to national average but quality issues are evident.
  • Promote high level innovation.
    Existing good practice initiatives should be sustained and lessons applied to other industries.  Brokering relationships between larger regional companies with latent intellectual property and SMEs with the capacities to use it should be seen as another potential route for stimulating higher level innovation. The smaller company could buy, licence or pay a commission for the intellectual property. The approach requires a specialised agency with in-depth technology and business awareness to scan for such brokering opportunities and to initiate and facilitate dialogue.
  • Foster grass roots innovation.
    More should be done to encourage innovation in agricultural and food industries, basic industries and services and in smaller, less capital-intensive companies.
  • Exploit innovation through a wider group of firms.
    The existing innovation infrastructure should be used more intensively to foster collaboration between HEIs and local companies of all sizes as well as with large companies located elsewhere but with relevance for the local value-chain. Multinational companies located locally or elsewhere represent an opportunity for local economies to accelerate and scale-up commercialisation processes because of their strong access to markets. Such links could help to test innovative products and services in market-like conditions and positively influence time-to-market relations. However, attention must be paid to the protection of intellectual property when building value release strategies.
  • Help firms to assess their own investment readiness.
    Programmes should be designed to ad-dress a perceived lack of investment readiness in certain sectors by improving the level of knowledge in firms about their own growth and return potentials and methods of financing. Such programmes have proved to raise the level of deal flows elsewhere. Key features would include intensive working with each company; highly interactive workshops based on role play exercises and delivered by experienced industry experts like accountants, lawyers, business angels, clearing banks, venture capital firms and corporate finance firms; and a free diagnostic investment-readiness tool. Such programmes enable firms to asses their own investment readiness, obtain feedback on their strengths and weaknesses, their ability to access equity finance, and increase investor interfaces with underinvested sectors.

 

International Learning Models

 

Good Practice in East Germany