Growth for SME

Oct 04, 2016, 15.54 PM IST | Source: Moneycontrol

Unicorns in our midst

Technology has played a crucial role in small and medium businesses, made startups fashionable, and we have unicorns trotting about the business landscape.

Until recently, unicorns were mythical creatures which made an appearance only in Greek literature, the Bible, and Marco Polo’s travels. White furry and horse-like, sometimes with wings, a prominent horn on its head, these creatures were supposed to be the harbinger of good times. Quite like the quest for the holy grail in the medieval times, there were numerous attempts (and tales) about these magical creatures.

While not a single unicorn was ever discovered in the real world, these days, we seem to be dealing with a whole bunch of them, especially when it comes to business. These neo-unicorns are celebrated for their successes and business acumen. Essentially, a unicorn is a start-up that is valued over $1 billion. When you think of them, think about, AirBnB, Uber, Xiaomi or even Flipkart. These are the new set of businesses that have disrupted the market in their respected sphere. But companies rise and fall all the time, so one may be tempted to ask what is so magical about these financial creatures?

Part of the charm lies in reinventing the business model. They find a better way to do business. It may be a new idea or an improvement over the existing one. They offer a vision; a glimpse of what the future may hold and have an intense desire to grow.

Fuelling these dreams through constant innovation and the ability to adapt quickly. Precisely where some of the giants falter. Large businesses are bogged by internal processes and complexities resulting in delayed decision-making, allowing a start-up to swoop in. The fight is not big vs. small. It’s actually about nimbleness, how fast and quick you can move.

According to a study by CB Insights, there are around 175 unicorn companies globally of which eight are based in India. Flipkart, Snapdeal, Zomato, Ola are household names and every 20 something in the country aspires to be an entrepreneur like the founders of these start-ups. Most of these founders came of age in the past 25 years and witnessed the country undergo a digital revolution. Technology like broadcast television, the Internet, and mobile phones rapidly changed the landscape of the country bearing no resemblance to that of their parents. They saw the success of companies like Wipro and Infosys who had prevailed despite the lack of venture capital funds or family money. All they needed were a few computers and a router.

For example, Paytm currently valued at $5 bn was founded by Vijay Shekhar Sharma. A bright entrepreneur from the small town of Aligarh, Sharma wanted to become an engineer. He was ridiculed in his engineering class for not knowing English. However, he didn't let that come in the way of his dreams. He improved his language and read about the Silicon Valley and decided he would create something for India. After many failed ventures, he launched Paytm- a mobile wallet for cashless transactions. In an interview to FirstPost, he said “With smartphones becoming popular, I decided to do something around it. I always wanted to impact people’s lives. So with a mobile wallet, we have done away with plastic money. At present, we have 50 million consumers doing 60 million transactions a month. We hope to touch 10 billion in 2016-17.”

Like Sharma, other entrepreneurs have realized that technology can level the playing field if they intend to dislodge industry giants. Of the 51 million SMEs in the country, 12 million are technology driven and are looking to adopt newer IT products. Large IT vendors who traditionally targeted large enterprises and now shifting their focus to SMEs though with a change in tactics. Start-ups and SMEs have different requirements compared to large companies. They are increasingly relying on cloud computing, visualisation tools, analytics, social media and rich user interfaces to have a 360° view of the business. Mobility is a significant factor as SMEs want to increase their customer reach and improve customer relations in a swift and efficient manner. Market research firm Zinnov stated that SMEs would increase their IT spend to $25.8 billion by 2020. A key component in this spend will be software as a service (SaaS). SMEs prefer open software wherein they can create customised solutions which will offer the flexibility they crave.

According to a study carried out by Forbes Insights, 65% of Indian SMBs see advanced technology as a key differentiator for the company. An SMB owner can monitor inventory, employees, and perform cost analysis in real time from anywhere. With predictive analysis, an engineer can schedule maintenance when the machine requires one instead of performing routine maintenance and thereby lowering cost.

A logistics manager can receive traffic updates on a smartphone and change delivery routes and minimise delays. Start-ups and SMEs apart from having high growth need to be cost efficient and have adequate cash flow. Because saving every rupee today will impact the financial statements of tomorrow.

Take a look around. Unicorns like Flipkart, Snapdeal, Ola, Paytm are not myths. They are real and are the future of business.

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