SMEs, hear the bells in the Fog

The COVID 19, spreading worldwide, harms the human health and brings the economic life to standstill. Personal health is not personal anymore. It restricts the workforce resources of companies, causes losses of important employee. And also the global economic crisis caused by the epidemic becomes dull the business life and a nightmare for many sectors.

This chaotic atmosphere that we’ve experienced now has negative impact on both companies’ liquidation processes and high unemployment. This also causes multiplier effect in the negative psychological structure. The proper steps should be taken and implemented resolutely. Otherwise, the atmosphere with its personal, corporate, country and worldwide rebellious spirit, will unfortunately lead to bigger tragedy in the medium and long term.

Who knows, maybe these pains belong to the labour pain of a new age.

Let’s take a look at the bells, which tolls in the dense fog, which created by this chaotic atmosphere with the epidemic and economic crisis.

What is happening?

• Business continuity posed a big problem. Although some companies were blindsided and had difficulties, this problem was solved in a short time with the teleworking, owing to information technologies and advanced communication infrastructures. The importance of information security and data storage has raised even more. In addition, with the restricted human resource, coordination, control- and security problems in the organization continue to have been having. There is moreover a limited number of competent, entrepreneurial and innovative human resources, therefore, especially the loss of top leaders and key staff of some SMEs in some way has led to lower performance in implementation by taking new policy decisions.
• Companies have become incapable of producing and serving. Because of the pandemic, many enterprises had to stay closed. And because of economic reasons, some of them entered into the process of the liquidation. This situation will continue to be recurred as long as the pandemic continues. And this forces the companies in trouble to share sales, bankruptcy and commission. The catastrophe would be bigger if high amount of cash were not put on to the market and financial institutions did not attempt restructuring.
• Many companies’ strategic plans, business and financial models have lost their validity. Moreover, countries’ economic constriction, job losses, supply and inventory problems, collections, commitments, cash flow, new strategies and business models have become important agenda topics.
• National economies are in a tight corner. This causes the great majority of companies to have problem in both the home market and international trade. As it is seen that monetary expansion has positive effects, further expansion is needed. When both the pandemic and the economic crisis are experienced at the same time, economic managers have difficulty in finding a solution to this unusual situation.
• Companies had the supply chain issues and they were able to come through them. Still, as a significant risk factor, it will stand by us like the sword of Damocles.

Now let’s touch on what SMEs exposed to dense fog can do:

First of all, they should be honest objectively about the current situation in their companies. Including analysis of the management profile and actual staff. It is also the right time to determine which responsibility the rising generation will shoulder in Family Corporations… By the way, they should compare themselves with the situation in their industry. Companies should be above-board with acquisition and merging issues.

The pandemic and the concomitant global economic crisis have disruptive multiplier effects on some sectors and augmentative effects on others; Therefore, companies are obligated to go over their business models and strategic plans, prepare new financial models in different scenarios, which are suitable for their targets and resources, and can predicate on potential risks, for long-term and steady growth and profitability. In cash flow, the neoconservative management should be taken as a basis.

Staying financially strong is vital for a company. At worst, a company should downsize and re-enlarge. Again, the most important thing is to stabilize the financial balance. When they manage to this, it will be all alright according to the accuracy level in the market analysis. This is directly associate with the performance of the top management…

What else can be done:

• Operational Infrastructure should be made reliable, efficient and strong. For this, a flexible and fast organizational structure, secure and flowable business processes, critical control, risk management, information and communication, processes of supervision and agile decision should be existed. In this regard, advanced information technologies, which are assort with the company’s structure and culture, can be invested in. With the short, medium- and long-term digital transformation planning, without the need for going out of the budget companies will benefit from the appropriateness of prices. Companies should definitely interview ta few IT companies on these issues. In this way, the costs are minimized, and reasonable investments are made for the institution by preventing the system to get worse. As there are very good potentials in the market, it can be made investments of budget to the competent middle and senior staff.

Another important issue is the ”institutionalization”, which has turned into an urban legend for SMEs for years. I wholeheartedly believe that this can become reality in a short way through of opportunities of information technology without the organization-specific structure, low costs and other things. In this uncertain and complicated atmosphere, we have been experiencing, there is no need an old-style institutionalization. We all saw the despair of the strict institutionalized international organizations, states and large companies in this atmosphere. I think institutionalization will be completed in the short way, if whole operational structure, including the business processes of SMEs that can react agile, can be made systematic with technological infrastructure, and can be disciplined.

• The level of Corporate Culture should be become collaborative, excited, calm, flexible, entrepreneurial and innovative. For this, a fair, transparent, secure, accountable governance habitat should be created.

Beside senior management, other leaders, who are building blocks of the critical mass, should support development with their attitudes and behaviours that encourage the created environment. It is necessary to observe whether there is empathy, emotional intelligence, cognitive flexibility, openness to learning, cooperation and innovation among employees.

It should be established a mutual relation among employees. Even they don’t disagree, they should be appreciated and for encouraging them, latch string should be always out for them. Considering the opinions of the employees, the corporate training concept should be planned from scratch.

• You must do Customer and Market Analysis. To understanding the spirit of the times and improving and the sustainability of company operations, sectoral and geographic analysis is vital. Customers, especially new generation consumers, express their opinions clearly thanks to the technological possibilities; you should take advantage of it. Although the loyalty of companies and their focus on preserving their stabilized, individual and corporate customers are always stated in the marketing literature, in fact, companies continue to keep the mentality of “I respect whoever is in charge”.

It is necessary to analyze the products again. Is the current product portfolio sufficient, what is to be added or removed? Considering the needs of the new era, what kind of new product range can there be? In this period, innovations are very important: about both product development and profit maximization. As an example of this, meeting profit maximization with changes such as content and packaging of products according to new needs.

I would finally like to point out that we are at the best time to realize institutionalization in both small and medium sized enterprises. The practical solution is in the digitization, so it’s time to start digitalization in all our parts! In the corporate culture triangle that will activate the base institutionalization, advanced operational structure and corporate intelligence of companies, SMEs will become nowadays more secure, efficient and effective with new infrastructure, and will strengthen. They can gain a great competitive advantage in order to have a healthy existence, sustainable growth and profit in the next difficult period. Business models, which have lost their validity, and the strategic plans will be built on the new structural reality. And they will be presented to the top management by preparing a resource and opportunity based financial model.

Life goes on even if there is dense fog!.

Bulent Hasanefendioglu

Head of Consultancy, TDG Global

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