For a small or midsized enterprise (SME) in Canada, doing business with a larger enterprise can be the fast-track to incredible success.
Expansion into new markets, access to resources, knowledge and skills, and financing opportunities are just some benefits such a partnership could bring.
However, forging a successful alliance with a big business calls for tremendous persistence and adaptability on the part of the SME, said participants in a roundtable held in Toronto recently.
Hosted by Toronto-based Direct Engagement Inc., the roundtable was titled “How SMEs can do business with big business.”
It was part of a series of peer-to-peer roundtables, organized by Direct Engagement, and featuring government, business and consumers representatives talking about relevant issues facing SMEs today.
When discussing pre-requisites for forging a successful alliance with a big business, panellists at this roundtable spoke from their own experience.
For instance, Tony Lacavera, CEO of high-profile Toronto telecom firm Globalive Wireless recalled how persistence enabled his company to play in the big leagues and secure a national wireless spectrum license from Industry Canada last year.
“I literally cold called around 40–50 wireless operators around the world,” Lacavera recalled. “I met with many of them, and was laughed out of many rooms.”
Globalive eventually struck a deal with Egypt’s Orascom Telecom Holding and secured funding that enabled the Toronto firm to purchase $442 million in wireless spectrum.
Such success notwithstanding, Lacavera cautions that getting a big business to invest in its venture is not necessarily the best option for an SME.
A small firm, he said, should seek out every other source of financing before approaching a major corporation, even if the latter is strategic to the business.
The risk in getting a large enterprise to invest is “they could start exerting influence on product development and processes – and that may not be helpful in the long term.”
When there is an opportunity for investment, the Globalive CEO said, the SME should “silo” that and structure the relationship so the large enterprise doesn’t exert and undue influence on the rest of the company.
Persistence and adaptability also helped another one-time small Canadian firm – Stealth Acoustical and Emission Control Inc. – expand its operations and employee base dramatically in just three years.
In March 2006, the firm was a one-employee outfit working out of the basement of founder Colin Davison’s home in Calgary.
“Today we employ 80 people, have two facilities in Calgary and one in Denver, Col.,” Davison said. “We’ve produced and packaged products for Canada, the U.S., Russia, Peru, and Australia.”
He said his firm owes much of its success to its alliances with larger organizations – including Siemens Canada, Suncor Energy, and Telus.
Confidence and trust are key in such arrangements, Davison said.
“A small business should not only be able to fulfill its customers’ current need, but should have potential for growth.”
He said before it does business with an SME, a large enterprise needs to be confident the small firm has the structure – facilities, or engineering capabilities, for instance – to do the job now and in the future.
For a small business, forging a relationship with relevant teams in the large organization helps, he said. For instance, many small companies don’t have in-house engineering teams. “They may have one electrical or structural engineer.”
So when doing business with a big firm such as a Parsons, Siemens or Suncorp., he said, it helps when their teams “work with you to ensure your processes and systems can sustain the work now and in future.”
When seeking business from larger enterprises, many SMEs aren’t realistic about their own capabilities, another panellist suggested.
“Lots of small firms chase after those elusive, big contracts,” noted Rick Spence, an SME columnist with the Financial Post.
He said in his 20-year career as a business journalist, he’s come across several small firms that have bagged juicy contracts from larger enterprises only to realize they don’t have the means to fulfill them.
“These are things they should have considered at the start. Their reputation is on the line now.”
When selling to bigger firms, Spence said, you may suddenly lose a lot of control over your own business.
“You have to modify your work processes and paperwork, integrate systems, upgrade your sales staff to ensure they’re sophisticated enough to deal with various people at various levels in big customer organizations.”
Firms that adapt processes, products, practices and personnel to meet these changes can experience significant growth in a short period of time, many panellists noted.
Environmental sustainability is one area where such adaptability is sorely needed, they said.
Big firms are getting increasingly careful about measuring their carbon footprint and developing green supplier standards, Spence said, because regulation is going to require it.
“I don’t think a lot of Canadian small businesses are ready for this.”
He urged SMEs to get on board, learn how to measure their outputs and ensure they use appropriate supplies and materials. “Unless they do this they may find themselves locked out of supplying to bigger companies.”
This view was echoed by Conrad Mandala, vice-president, SME and channels with SAP Canada Inc. in Toronto. He said his firm’s focus on sustainability covers its own business practices as well as those of customers.
Mandala recalled that SAP has announced – for the first time – a chief sustainability officer. (Peter Graf was named to this position on March 2, and will head the business software maker’s new cross-functional sustainability organization).
SMEs need to think globally and explore opportunities outside of Canada as well, said Mandala.
SAP Canada’s small business customers that did this have experienced phenomenal growth, he said, citing the success stories of one-time small firms that made it big — such as toy company SpinMaster, fashion retailer Aritzia, and documents and data protection firm SecureIt.
“They all made a decision to use technology as a primary lever, very early in their company’s life cycle.”