By Archanna Das
Ease of Doing Business for MSMEs: India is home to approximately 63 million micro, small and medium-sized enterprises (MSMEs). The MSME sector has emerged as a vibrant and dynamic segment of the Indian economy, growing at an annual rate of 18% and contributing about 30% to the national gross domestic product (GDP). MSMEs play an important role in social development, especially in the semi-urban and rural areas of the country, are integral to employment generation, and wealth creation and keep the wheel of the economy running.
With the pandemic accelerating digitization, MSMEs must create a digital presence and adapt to a new way of running their businesses. From sourcing to answering customer queries, to marketing, MSMEs need to redefine their business practices.
A growing number of MSMEs, especially in the service sector, have been employing techniques that utilize staff with the right skill sets at the right places, at the right times to minimise risks and increase productivity, especially due to the advent of the hybrid mode of working. This ensures that organizations have a clear direction as to how future decisions will be made. By setting both short- and long-term objectives, MSMEs and entrepreneurs can gather the data thus allowing them to see overlaps and process gaps, and create standardized and even automated processes.
However, as systems and processes are put into place for ensuring productivity and profitability, it is key that MSME leaders are cognizant of establishing and maintaining organisational culture. The culture defines how the company relates to its human resources, how it adjusts its strategies and goals and how it creates and interacts with its customer base. As the behaviour of workers is easily influenced by the philosophy and beliefs of the manager or owner, it is crucial that the leader not only establishes a code of ethics but also embodies them.
Governance for all
As per a global survey on corporate governance, more than 50 per cent of the respondents comprising of senior management stated that the standards of integrity had not grown and have in fact deteriorated over the past two years. Be it scrutiny from regulators, a greater number of responsibilities on business leaders, or investor expectations – these factors have shown the need for an ethical framework within organisations. For MSMEs, governance may seem like a tedious activity, especially when their focus usually lies on core operations such as building a customer base and profitability. However, organisations that undermine creating an internal governance framework may face challenges due to reputational damage, fines, contract terminations and loss of investor confidence, among others. For instance, if a customer or a stakeholder feels their concerns were not appropriately addressed, they may resort to voicing their issues on an online forum which will have reputational and even financial repercussions. It has thus become imperative for MSMEs to create a strong governance framework to drive sustainable long-term growth and create value for all stakeholders.
Diversification is a necessity
Although MSMEs, especially in the service industry was severely impacted by the pandemic, they made a strong recovery because of their willingness to diversify their operations. For instance, a household product entrepreneur who catered to a B2B space was forced to pivot during the pandemic and address the demands of a B2C space, thus helping him address not only quality and product needs but also consumer expectations. Diversification not only helps businesses understand the changing expectations of the customers, but it also plays a major role in transforming a business’s narrative. However, while diversification is a suitable response to the demands of a post-pandemic business environment, MSMEs must also do their due diligence and conduct risk analysis and take carefully considered decisions. Technological measures such as digitization and automation have become a must-have and MSMEs must be quick to adapt the latest tools and know-how to stay relevant.
In a post-Covid world, building resilient businesses is key and this can be achieved by investing in the right technologies, setting up the right processes, accessing the right financing options, having strong corporate governance and hiring right. However, many MSMEs are still at a nascent stage and require guidance, mentoring and the right solutions to enable them to build agile digital businesses. Services such as peer learning from like-minded MSME entrepreneurs can help in easy modification, seamless diversification and risk-free decision-making.
Archanna Das is the CEO of ASCENT Foundation.