"Big" can be pretty ugly if you are an SME, Part 1

In a previous job at a technology-intensive SME, one of my bosses wanted to win as customer a very large company and he said this: "With a yearly turnover of many billion Euro I cannot see why they wouldn't purchase one of our bundles, for the modest cost of a few tens of thousands Euro. Surely this would be a blip on their accounting radar". Sounds familiar? At least it is to me.

I was working at a young SME that owned leading-edge engineering and technologies, and my management had great ambitions. We were onto something big! We approached the world's leading companies with our innovations... and hoped for the best. I was in charge of the mission of uncovering "new customers".

Obviously, this did not happen. No one at the company in question bought from us, and the syllogism of that manager never materialised. Even worse, during a final meeting I discovered the extent of the foolishness of our attempt - read it at the end of this series of articles. The best I could get from that bad experience is condensed here for you. Please note however that not all large companies behave like the examples in this series of articles. Luckily for your startup (or SME) there are out there high-quality large customers who do mutually beneficial business with their suppliers.

Understanding customer needs - and suffering adequately

With the salt of direct experience and frequent interaction of the Mistral team with great technology-intensive SMEs, I have learned the following lesson: there is much more depth to the "understanding customer needs" statement than might catch the eye at first. Let me take you through various levels of refinement in "understanding ..." and for the sake of the game let's put ourselves in the shoes of a small-sized innovative company we will call Underdog.

Low-level

The bottom level is the situation in which Underdog does not understand customer needs at all. This might seem like an obvious mistake nobody in her right mind would make, but alas! It's far more commonplace than we think.

I remember startups who developed software tools to facilitate or speed up or improve corporate processes, only to discover - often way too late - that the processes in question did not exist as such, or were never acknowledged by potential customers (who were not that much of a "potential" anyway), or were nevertheless deemed irrelevant to customers concerned by them.

Intermediate-level

An intermediate level of customer understanding arises if at Underdog someone has some grasp of customer needs. I see Underdogs who understand the plight in large companies and who come up with a logical remedy for those situations. While this is a first step in the right direction, our Underdog company may nevertheless discover this level of grasp is insufficient in securing orders from a large prospect.

Here also I have many examples of companies who endure this situation. While respecting the anonymity of the company, I tend to think straight on of an innovative SME who developed a set of tools to let large companies keep under tight control the costs of their ICT infrastructure, always resulting in sizeable usage savings that more than offset the costs of its services. Believe it or not, their largest customer decided to ditch them because it was instructed to axe all (yes, all) service supplier contracts. The consequence was that the large company in question started gushing red ink on ICT infrastructure expenses.

High-level

I observe the highest level of customer understanding in a few SMEs who maintain close relationships with their large customers. This does not mean anything improper - successful business does not arise from cronyism. Companies who achieve this level of "customer proximity" refinement are the ones who understand the stated, obvious, formalised needs - and who also have an expert understanding of how customers really function, their unstated, hidden needs, often being able to facilitate initiatives and decisions "from within". This is the realm of SMEs who understand internal politics at their customers and who navigate them accordingly.

A clever SME

The case of a clever SME immediately pops into my mind. It's a small company (let's also call them Underdog) that provides a state-of-the-art range of IT services to a very large customer (who we will call ACME). A few years ago, ACME told Underdog that it was embarking on a massive investment program (the "Big Plan") that would "soon enough" render the work from Underdog useless. After digesting the bad news, Underdog's CEO organised the indispensable contingency plan - let ACME fade from their business and jump into other (hopefully) profitable business.

He was, however, far from certain ACME could execute their Big Plan, because he knew them from inside and doubted they possessed the skills to achieve such a feat. A team inside Underdog continued delivering services and support, awaiting the dreaded deadline.

The deadline slipped a first time, then a second, then another time. Many months later, Underdog's CEO was confident they would not be let go so easily. He attended a meeting with ACME's management. There, he was suddenly referred to as a trustworthy supplier and as a favoured partner. Patiently he rebuilt from that point on the position of Underdog as ACME's trusted supplier, suggesting improvements here, developments there where Big Plan was failing and digging holes in ACME's structure.

What, me worry?

Working with large customers requires the deepest understanding of their needs and of its dimensions.

  • Firstly, needs should be extended to include expectations, as in: "what does our (future) customer need and expect from us? Can we respond to their needs? Can we shape their expectations?"
  • Secondly, needs and expectations should be assessed on a varying granularity scale: from corporate-wide needs and expectations, to departmental, down to the scale of individuals.
  • Thirdly, looking for explicit (stated) and implicit (not stated but hinted at) needs and expectations to reveal the real forces at play.
  • To set individual and group dynamics in motion, savvy companies also capture how staffers perceive risks and rewards, from a professional point of view (usually explicit) and from a personal point of view (usually implicit).
  • Finally, you should map all this in a network and try to anticipate how information, acts, decisions will propagate in the company. You should keep that map up-to-date with every new piece of information.

Then you will be able to answer questions such as: Which influence networks are acting when our large customer rescinds our contract in favour of some "Big Plan" project? Who has the final say in this? Who stuck his head out in favour/against that initiative? Read the second part of the series here.