Strategy: A key success factor to Small and Medium Enterprises (SMEs) in East Africa

Strategy Explained

Strategy is extensively implemented in both our personal and professional lives. Its importance may be profound, but acknowledgement of the same vague. Strategy is not only important to individuals in daily walks of life, but organizations as well regardless of size, industry, geographical location or portfolio.

In business leadership, Strategy is the on-going process of formulating, implementing and controlling plans to guide the business in achieving the desired goals or objectives. In brief, Strategy is a tool for planning and execution.

In today’s competitive business milieu, businesses need not only to plan extensively, but also implement prudently. Often, businesses suffer from incompetence in either of these, which lead to harsh results. This is where the importance of Strategy cannot be magnified.

SMEs and Strategy

On that note, Strategy is equally important to one of the most important sectors of the economy – Small and Medium Enterprises (SMEs). Their importance is overwhelming, given that they constitute 90% of any economy today in the developing world.

For SMEs, Strategy is a visionary process that best relates to its Business and Operational Strategy through a strategic framework that inscribes Market Assessment, Plan Formulation (idea formulation process), Plan Implementation (practical application of the business idea), and Plan Evaluation (constant assessment of progress made whilst correcting any deviations).

This should be in line with a progression that inquires on the current capacity of the business in terms of know-how and business operations:

• Where are we now? (The current state of the business operation)

• Where do we want to go? (The business premise to migrate from the present stage to the next)

• How do we get there? (The methodology / strategy implemented to reach the next phase)

Strategy Implementation

Most small businesses’ lack a formal mode of planning (around 74% surveyed independently). This clearly suggests that the key reason for failure for SMEs is not only lack of access to finance, but also lack of a planning. This is not necessarily due to lack of know-how, but rather lack of acknowledgement or importance of the same in ordinary course of business. This is a chronic trend that leads to difficulty in harnessing opportunities in form of market identification and penetration, and widening distribution channels that could positively impact the business.

Today, despite SMEs suffering from lack of finance to expand their business operation, it is disconcerting to learn of lack of a clear Business Mission and Vision. This restricts the business owners from tapping market potential. It is imperative for the Business Mission and Vision to align with overall objectives in ensuring business survival and longevity. This will help the business realize both its operational and financial objectives.

The Mission should clearly define the business endeavor; market served and core competence, whilst the Vision should elaborate on future intentions and portfolio. These are critical elements, which aid the overall planning process. Furthermore, business and financial objectives need to be realistic, pre-emptive, and market-oriented. This is one of the most common business alignment tools aiding small business development.

Another prominent business tool aiding small businesses to explore market avenues and learn of existing potential is SWOT (Strengths, Weakness, Opportunities, Threats) Analysis that explores Internal (within the business) and External (outside the business) environment.

Strengths would explore business capabilities, Weakness would define business shortfalls in terms of market reach or resources, Opportunities define the current market potential, and Threats would elaborate on risks facing the business from the environment or competitors. It is imperative for the business owner to define all variables purposefully in order to allocate resource that could positively impact the business. More often than not, the process of SWOT is characterized by lack of market know-how and unclear competitor identification that results in an indistinct exercise.

There are various other tools that small businesses could benefit form, but the reflective impression of the alignment and SWOT process are distinct from the rest in terms of business and market clarity resulting in well-defined perspective of the business scene.

Strategic Leadership

In summation, small businesses need to adopt strategy that is Simple, Measurable, Actionable, Realizable, and Total (SMART). This is only possible if businesses strive to transform their ideas and empower them through a detailed and well-thought planning process subsequently resulting in careful implementation.

Moreover, the planning process needs to be characterized with effective assessment of market trends; competitor actions and current potential to best maximize and allocate resources. Furthermore, implementation needs to be proactive which would not compromise potential and principle.

When strategy has been analyzed and selected, the task is then to translate it into organizational action. Implementation is often the hardest part. As Sun Tzu, one of the founding fathers of Strategy remarked in his book The Art of War, “Strategy without tactics is the slowest route to victory, but tactics without strategy is the noise before defeat.”