Dominating Indian headlines in the last 22 years were large businesses on acquisition sprees of big ticket/big banner international businesses, joint ventures, tie-ups, break-ups with global companies, mergers and foreign listings. Stories abound of start-up businesses with a gang of friends, angel investors, IT barons making exceptional growth and profit while issuing horse blinkers to ensure their engineer-employees follow the repetitive software programming path. But without any hullabaloo, as per SME Chamber of India statistics, India?s small and medium enterprises (SME) have contributed 45% of industrial output, 40% of exports and employed 60 million people. SMEs annually create 1.3 million jobs and produce over 8,000 marketable products. If SMEs are consciously strengthened, a permanent smiley would represent a robust Indian economy.

SME excellence has made Germany into Europe?s industrial powerhouse today. According to Prof Bernd Venohr of Institute of Management, Berlin School of Economics, about 3,200 high-end SMEs within 50-100 million euros annual sales ?are responsible for some 30% of Germany?s total exports.? Of these, 1,300 are ranked top three in their market sector worldwide. ?Companies such as door technology supplier Dorma, cooking system manufacturer Rational, packaging machinery producer Krones may not be household names, but each boasts a global market share of 50%-plus in its market sector,? he said.

My German business associate Harald Helm of reputed consultancy, Helm & Company, corroborates that German SMEs define their markets narrowly, create and operate in market niches. ?Their specialisation is combined with global marketing, the focal point is customers, the key factor is highest quality. Innovation is their foundation for market leadership. Many SMEs have pioneered unique products, defined their own market, and retained their front-runner positions.? Harald emphasises that SMEs, which are primarily family-owned, don?t tolerate idlers. They hire highly qualified, performance-oriented team-players to sustain business in case the next generation is not interested or has no requisite skills. ?SMEs believe high vertical integration of core competencies is better than outsourcing; so core know-how is protected. They prize healthy growth over share value. The average director?s tenure is over 20 years,? he said.

German SMEs have created intangibles with unique craftsmanship and embellishment to uplift their delivery to a heightened quality platform that?s elusive but implicit. Unlike Germany, most Western European countries lost their SMEs in early 1990s with the opening of the European community and globalisation. Germany benefited from the Euro?s introduction as Deutschmark was the stronger currency. Culturally, Germans are against borrowing they call schulden, the same word means guilt. Other Europeans started taking cheap credit when inflation moved real rates down; this triggered the recessionary crisis. With stimuli packages, Germany has bailed out many European countries who continue to criticise German trade relations for being mutually beneficial with China, India and Russia. ?The range offered by German SMEs ideally matches the demand profile in these countries ? quality products for developing the infrastructure,? said Prof Venohr. He attributes SME success to high R&D spends, meticulous persistence for setting up worldwide sales/service networks, and favouring direct customer contact. Another SME success factor is Germany?s almost-free education system with thrust on vocational training where students go to industries as on-the-job apprentices.

I?ve always worked with large global and domestic companies, but working for a few French SMEs I?ve discovered a hallucinating dimension of their innovative and sustaining power even under global threat. Among them is Mieuxa I?ve worked with since late 1980s on business strategy including corporate image, branding, product development. Based in Nimes, South of France, visionary President Michel Vindry would regularly travel 700 kms to Paris to consult with me on his business of anytime need products for doing odd jobs at home. These included small home repair kits like plaster, paint and implements for minor wall touch-ups, or liquid that easily cleans sticky wall-paint brushes. Another is de-mineralised water for ironing clothes. When poured into the electric vapour iron, the water does not damage the iron, nor do water sprays leave stains on pressed clothes. Today his innovative power has upgraded the de-mineralised water with soft fragrance for home linen. As no international company or retail private label is likely to enter this area, Mieuxa took the advantage of finding newer solutions to relieve the customer?s small home woes. We created very unconventional branding at that time which totally transformed the boring odd jobs look. Vindry had the guts to accept the bold branding, saying, ?It will look strong and different on retail shelves.? Till today, using the same branding, his odd jobs products stand out in thousands of stores. Mieuxa, the category benchmark, has sustainably grown by also acquiring complementing companies.

Looking at India from this perspective, I can see basic to high-end SMEs mesmerise markets if they imbibe the German essence of creating intangibles. India?s micro, small, medium enterprises (MSME) would definitely be higher than officially recorded figures. They could be agile, creative hotshops with astonishing innovation; at the other extreme, small shops penetrating underprivileged areas. SMEs need not depend on family continuity. Professionals with delivery capability, not street-smart MBAs, can run father?s business if the next generation prefers not to. SME mentality is often backend supplier driven. SMEs have to better understand customer needs and work with an objective (what you are going to do) and purpose (why you are going to do it and what problem it can solve). For instance, an SME making kitchen stove chimneys has to solve the customer?s end-to-end smoke problem three to five years on. That means impeccable after sales installation, flawlessly fixing wiring and switches aesthetically in all sizes of kitchens. These brand intangibles touch customer hearts to increase business through word-of-mouth.

Maintaining self-defined discipline within a boundary according to every SME?s capability is vital. I?ve defined a five-fold disciplined boundary comprising of a purpose, uniqueness, sale-ability, expandability and being aspirational. This discipline is different from authoritative military discipline because it drives creativity and sustains business. For a bright future at the tunnel?s end, Indian SMEs can take a leaf from Germany?s SME model.

Shombit Sengupta is an international Creative Business Strategy consultant to top management. Reach him http://www.shiningconsulting.com