This continues a series of guest columns from practitioners and bloggers I respect. The category - The Real Deal describes them well.
I have met Jyoti Banerjee just once years ago - and was fascinated how influential he has been in the UK application software market with his publishing, advisory and even his charitable activities. Here he writes about one of his passions - the mid-market. As SaaS heats up particularly in the SME market, my readers should find Jyoti's views incisive. While he writes about the UK, the concepts apply equally in most global markets (just replace the "s" with "z"!)
"In Europe, we call them SMEs, short for small and medium enterprises. Really, we mean anything that is not big business. We attribute almost mythical powers to SMEs – they drive innovation, employment, and, most of all, growth. We shower them with every possible financial and regulatory break we can think of. And they consistently fail to meet our (massively hyped) expectations.
In the SME segment, where business births and deaths happen at about the same rate, the net economic contribution is pretty close to zero. A year ago, a small group of us decided to study the segment in the UK, and found that the real economic heroes are mid-market enterprises. They power the UK economy.
That’s where we need to apply our focus: on the M in SME.
Although only three-quarters of one percent of UK companies are in the £10-£250 million revenue bracket, these businesses employ 15% of the British work force, and generate 20% of all corporate profits. Their annualised growth rate is at 8%, which is well above the national growth rate.
By the way, their IT stinks – a Harvard study found that British mid-market companies fail to get the revenue boost that US, German and Brazilian companies get from smart investments in IT.
Despite their sterling business performance, mid-size enterprises (I call them M companies) are nearly invisible. They have no profile in the market, government does not pay them any attention, and they are usually lumped together with small and micro enterprises via the SME label, although they are significantly different from those companies in almost all respects. And, it must be said, that few IT vendors seem to know how to sell to them. For an example of poor mid-market selling, check out this Siebel story from earlier in the year.
Leaders of Ms often struggle when it comes to knowing where to turn for help and advice. They are rarely plugged into peer networks where they discuss their challenges and learn new ideas relevant to their scale of organisation. B-school methodologies, they feel, are aimed at those who work for Exxon or BP. The massive literature on starting up a new business is completely irrelevant. They want, expect, to grow at 20-25% per annum but don’t always have access to the finance to do it, people with the right skills, or the internal systems. If they struggle with direction, it is not surprising that those who target them, such as sellers of technology, find it difficult to keep them in focus.
The motivations of an M organisation and its behaviour patterns are critical for understanding how these businesses would respond to particular products and services that are offered to them. Yet, few suppliers to the marketplace for mid-sized businesses understand their unique characteristics, and end up confusing mid and small enterprises in their product development, positioning and messaging.
Next time you meet a leader of an M, consider their deepest current challenges:
1) Growth – if an M is not growing, it is probably sliding downhill. Fast.
2) People – finding people, particularly top people with great skills, is difficult; developing existing people is tough because there is little spare time to grow them
3) Growth – did I mention that already?
4) Finance – money to build things is often easy to find but money to grow an M usually has a high sticker price
5) Processes – finding smart processes and technologies that aid growth and are not expensive in terms of money or people
6) Globalisation – is somebody from across the world blitzing them out of their best markets?
7) Growth – sorry: been there, done that…
Get my drift? Products or services that fail to ring these particular bells are irrelevant. But get the resonances going, and the fruits are sweet. Value is a key requirement, and growth the result that works for customer and supplier alike.
Want to find out more about mid-market organisations? Check out a new UK initiative aimed squarely at the leaders of mid-market businesses at www.m-institute.org. "
Jyoti can be emailed at [email protected]
