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Thu 30 Jul 2020 02:39 PM

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In a time of change, big business should beware of agile start-ups

Size isn't always insulation against the chills of a recession, especially when new technologies and nimble competitors are coming to the fore

In a time of change, big business should beware of agile start-ups

No one is safe from the current economic storm, with companies large and small braced for a bumpy recovery for the rest of 2020 – and no doubt for much of 2021, too. While SMEs have been particularly hard hit, earlier recessions have proved fertile ground for new entities determined to defeat the odds.

Even in the less challenging times, we had been noticing an increase in highly qualified professionals leaving the safety net of big firms to set up on their own. This was particularly prevalent in industries such as construction, finance, marketing and technology. Now that redundancies are escalating, there’s even more talent weighing up whether to seek another position or start something of their own in the same sector.

What that often means is new entities entering the market offering greater price flexibility and more attentive service as they seek to survive and build a customer base.

The big players, by contrast, will try to bank on long-standing client loyalty and maybe broader service offerings to retain customers – but that might not be enough in the face of the cost-savings their new competitors are promising, especially in a touch economic climate.

For any large corporates reviewing their risk register, then, the threat of emerging businesses looking to challenge their position should be near the top at times like these. Larger corporations can be slower off the mark when it comes to effecting change but it’s time to acknowledge the prospect of disruption from leaner competition and learn to adapt.

Preventing the problem

Employee retention is such a critical issue here. Good staff are a huge asset – and also potentially dangerous competitors. Even when times are tough, it’s always worth looking for other ways to streamline expenditure instead of losing human capital.

A comprehensive employee retention strategy should cover benefits and incentives, professional development and open approach to feedback alongside a clear track to career progression. That said, there will always be people who leave and the best way to protect a company’s interests is with a watertight non-compete agreement so staff can’t set up in a similar industry or work for a competitor. Plus, all processes and materials should also be trademarked to avoid replication.

The same applies to collaboration contracts. We know first-hand of an IT firm that partnered with a large software brand to provide support without anything formal in place to stop them striking out and offering clients up to 70 per cent savings coupled with superior service levels. As a result, they’ve secured several high-profile contracts with MNCs in the region and definitely damaged their old partner’s bottom line.

Prioritise responsiveness and customer service

Action and efficiency mean a lot when evaluating suppliers. Even as a large company, there are ways to streamline the decision-making processes to avoid unnecessary delays caused by red tape and bureaucracy. Operations can be simplified to remain compliant but speed up the execution, for example, giving fewer employees more authority to improve response times.

All clients like to feel the love and a possible pitfall for larger entities is their tendency to focus on the biggest fee earners. As a result, smaller clients can feel undervalued and question the level of attention they receive.

This is an issue that has been identified among the Big Four in the US and UK. Former executives who have established their own companies challenge their ex-employers, not by targeting the massive audits but by going after their mid-segment of SMEs who appreciate the personal interaction, agility and support.

With this in mind, all business segments should be analysed to ensure there is an absolute commitment to customer service and efficiency across all ends of the spectrum. Hiring an external consultant in this area can help to provide perspective and advice on updating accepted protocols.

Credibility, continuity and control

Larger corporations have spent decades building credibility, and while start-ups might have sufficient expertise to compete, they don’t have the same level of trust associated with their name. In a volatile market, security is a big benefit and it pays to reinforce these messages in communication efforts.

Clients need to understand that if a smaller start-up relies on very few staff, then issues like sickness or redundancy will have a huge impact on their service offering. In contrast, big players are more likely to have multiple contingency plans in place.

There has been a marked increase in mergers and acquisitions taking place in the region in recent months, and one of the reasons for this activity is that companies recognise the power of agile competitors to make waves. Joining forces is an opportunity to bring them under a more established umbrella, adding more value to clients and effectively controlling the competition.

Scott Cairns, Manging Director, Creation Business Consultants

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