5 Reasons why MSME’s in India are lagging behind?

MSME’s form a major market share in the Indian business scenario and its contribution to our country’s GDP. Yet most of these companies are lagging behind in many aspects. The industrial revolution saw the rise of many brick and mortar companies, some of which have scaled to great heights but the IT revolution has seen many die as well. Most of these manufacturing companies did not survive as they were resistant to change to the changing demands of the world.

There are many companies in India which are doing good in terms of sustaining the changing technological landscape but the major challenge they faced is to grow beyond a certain level. Take a walk in the Industrial areas of any state in India and you will find many companies still being operated successfully, but looming under the threat of automation. There are two worlds operating in India: one comprises of people working in MNC’s, eCommerce and start-ups companies trying to solve most complex and diverse problems. They are not only talking about AI, VR, AR & Data Analytics but also leveraging these technologies. The other world I am talking about is the ones working in Industries under the manufacturing units of Industrial areas who find it difficult to understand the digital world. I am not talking about only the blue collared workers; but also talking about some middle and senior management of many such companies.

We did a study and came up with some root causes as why some of these companies are still lagging behind in terms of growth to scale up exponentially. Some of the reasons why MSME’s in India are still lagging behind are mentioned below:

1. No Investment in Skilling their Employee:  One of the most important factors which differentiate a small company from an MNC is the amount of money spent in skilling their people. Large organization spends good proportion of their money on employee training and growth. 

In US: Overall, on average, companies spent $1,075 per learner in 2017 compared with $814 per learner in 2016. Manufacturers spent the most per learner in 2017 ($1,217), followed by services organizations ($1,157). Larger companies continue to operate on an economy of scale as they spent less ($399) than midsize ($941) and small ($1,886) companies. (Source: trainingmag.com). 

2.  Absence of Data Driven Culture: Most of the MSME tracks financial metrics and other very important aspects of business are mostly neglected. The more successful counterparts have a very strong MIS system and their culture is built around data management which fosters growth and allows predictive analytics to play a vital role in business. Absence of a strong data culture is another key reason for lagging behind for many companies.

3. Micro Management: We did surveys and met many employees from different organization and most of them said that there is a culture of micromanagement which doesn’t allow managers and employees to experiment and have freedom to express. Most founders had a very strong control over the organization which is very good but in the process he fails to leverage on the strengths of the team and hinders growth.

4. Not Leveraging Technology: German Engineering is a classic example of using technology in the manufacturing sector. Most people see the use of technology in either IT or Service industries but Manufacturing sector around the globe has been digitized. We all know that the cost of implementing technology in any industry would be huge but we have so many government initiatives bringing banks and entrepreneurs together for growth but that will only happen when there is a vision to integrate technology at workplace.

Europe’s Robotics and Automation Technology Hub With a robot density level of 301 industrial robots per 10 thousand employees, Germany has the highest density level in Europe and ranks fourth in global comparison (global average of 69 robots per 10 thousand employees). Demand for industrial robots for the period 2006 to 2021 is forecast to increase by more than 250 percent. A study conducted by PWC reveals the factors for Germany’s success in the robotics and automation technology sector as being close ties between R&D and application in the industry clusters; logistic proximity to important sales markets; demographic development in the companies; and the digitization of the value chain (often referred to as “INDUSTRIE 4.0”). - (Source: GTAI report: The Robotics and Automation Industry in Germany)

5. Monotony in Strategy & Execution: Most of the SME’s are operating with same strategy as they had traditionally. Many companies and leaders failed to create new strategy and execution methods to innovate and create more inclusive workplace. Organization Capability Building as a management toolkit took a seat in the backyard and only thing that was at focus was delivering to the customer. There was no strategy to have modern HR, Operations & Marketing in place to enable faster growth. Most of these companies which survived many years in the industry were very good when it came to delivering value, cutting cost and creating customer delight with the help of TQM and good craftsmanship. There have been many case studies which are created and some of these companies have graduated to the next level. But many companies got stuck to solve the last mile challenge and did not change with the changing industry needs.

Note: The views are personal and my experiences and research findings have been articulated in this article.