It lacks the strength of large enterprises, but suffers from their ailments

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This post was last edited by lovelife1997 on 2019-4-29 at 10:39. Lacking the capabilities of large enterprises, yet suffering from their problems – Author: Hao Jumin, an expert in corporate innovation and transformation. The advantages of being small, fast, and agile in the early stages of entrepreneurship for small and medium-sized enterprises are not their true core competitive strengths; rather, they are temporary characteristics that arise due to the enterprise’s small scale. Almost every successful small and medium-sized enterprise has gone through its golden period of entrepreneurship. After initial exploration, these companies earned the trust of their customers, and by leveraging their advantages of being small, fast, and agile, they were able to expand their market presence rapidly, leading to their steady growth. With the business situation being so favorable, it’s only natural to accelerate recruitment. However, this good fortune did not last long. As the company’s scale expanded rapidly, employees’ sense of ownership began to fade, and their commitment to serving customers diminished. Internal efficiency dropped sharply, and the company lost its advantages in terms of cost, speed, and flexibility. Suddenly, it transformed from a competitive company into an average one. The golden period of growth came to an end, and the company suddenly lost momentum and direction. Such loss is almost inevitable. Essentially, the advantages of being small, fast, and agile in the early stages of entrepreneurship for small and medium-sized enterprises are not their true core competitive strengths; rather, they are temporary characteristics that arise due to the enterprise’s small scale. In the early stages of a business, the scale is small, labor costs are low, and management costs are also low. Employees typically have an entrepreneurial mindset and a strong sense of ownership, which helps to keep waste and expenses under control. As a result, businesses at this stage enjoy a natural cost advantage. In terms of response speed, there are fewer customers at this stage; the company pays close attention to its customers. Its business processes are simple and involve few levels, and its products and services are usually straightforward, enabling it to respond quickly to customer needs ； In terms of customer satisfaction, during the early stages of a company’s development, the founders often handle business matters personally, which allows them to understand and grasp customer needs more deeply and accurately. Moreover, fearing the loss of customers, they tend to exhibit a high level of dedication and willingness to cooperate, always meeting the customers’ requests. However, the advantages of being small, fast, and agile, which stem from a small scale, disappear rapidly as the company grows in size. As the scale grows, corresponding management levels become necessary, and employment practices start to become more formalized. Employees’ sense of ownership diminishes over time, and the cost advantage disappears ； As the scale expanded, the organization developed new divisions of labor, established standardized processes, and set up a rigorous command structure, resulting in the loss of the company’s ability to respond quickly ； As the company grows and the number of customers increases, the response to clients becomes less timely, and the quality of service provided to them starts to decline. The company experienced a sudden slowdown after rapid growth; its performance stopped growing or even declined, internal efficiency dropped significantly, and a bureaucratic atmosphere prevailed. Some entrepreneurs of small and medium-sized enterprises joke that they lack the fate of large companies but suffer from their problems. Many companies have been lost for a long time; as if suffering from dwarfism, they have become \"small, old companies\" that will never grow up. “\"Growth paralysis\" is not an incurable condition; as long as companies realize that their original advantages of being small, fast, and agile are not sustainable advantages but rather temporary advantages that arise from a small scale, and if they can develop sustainable competitive advantages based on a larger scale before those initial advantages disappear, they can avoid \"growth paralysis\" and embark on a path of sustainable development. Unlike the natural advantages of small scale, speed, and agility that enterprises possess, sustainable advantages require design; through deliberate planning, resources, technologies, and business models are optimally combined to create core sustainable advantages. For small and medium-sized enterprises striving to overcome the challenges associated with uncontrolled growth, it is crucial to focus steadfastly on customer needs, build sustainable competitive advantages, and develop core competencies in order to achieve success. The various new technologies that have emerged today, such as the Internet, the Internet of Things, big data, cloud computing, artificial intelligence, and intelligent manufacturing, provide businesses with vast opportunities to create sustainable advantages. If small and medium-sized enterprises can seize this opportunity, they will not only be able to avoid getting lost and being integrated or disrupted, but also undergo transformation and upgrading, thereby gaining access to the new economy. In terms of creating cost advantages, technological advancements provide us with the opportunity to use alternative resources; for example, Tesla replaces traditional fossil fuels with electricity to reduce the operating costs of its vehicles, while some thermal power plants incorporate waste into their fuel mix to cut coal consumption and thus lower costs. By redesigning the products, there is also room for significant cost reduction; for example, VisionSource Electronics has continuously integrated the traditional circuit boards used in multiple televisions, thereby reducing costs substantially ； The sharing economy represents a new opportunity to reduce costs on a large scale; through the Internet, unused or underutilized resources can be shared, thereby **cutting the costs of products and services. Examples include carpooling and short-term housing rentals, which enable the sharing of cars and empty rooms ； Virtualizing traditional physical products can also significantly reduce costs; for example, Tesla has reengineered its vehicles so that many functions are implemented through software, and instead of replacing hardware, cost reductions are achieved through software upgrades ； Through automation and intelligence, it is possible to replace human labor, and there is also significant room for cost reduction. There are many ways to create a supply chain that can respond quickly, such as reducing organizational hierarchies, using project teams for decision-making, reengineering the value chain, or employing technologies like smart manufacturing – all of which can improve the speed of response to market changes. For example, ZARA has restructured its value chain and, by making extensive use of information technology, created the most influential fast-response clothing supply chain in the world, thereby gaining a strong competitive advantage. To improve service quality, approaches such as customer involvement in customization, precise product development based on customer needs, product positioning driven by big data analysis, and establishing customer communication communities to obtain feedback in real time can be employed. Whether it’s to achieve cost advantages, improve response times, or enhance the accuracy of products and services, there are numerous technical approaches that can be employed, and such approaches continue to increase over time. However, the existence of technology does not automatically translate into a competitive advantage; small and medium-sized enterprise owners must realize that creating a sustainable competitive advantage relies not only on effort but also on design. This design thinking is still an unfamiliar concept for many business owners of small and medium-sized enterprises.