Why and how do MSME entrepreneurs need to tackle changes?

by Archanna Das

Ease of Doing Business for MSMEs: About 63 million micro, small and medium enterprises (MSMEs) are located in India. 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, as an integral part of employment generation, and wealth creation and they keep the wheel of the economy running.

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With digitization intensifying the pandemic, MSMEs need to 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.

Workforce management

An increasing number of MSMEs, especially in the service sector, are using techniques that employ staff with the right skills at the right places, at the right times to minimize risks and increase productivity, especially due to the advent of the hybrid of. working. This ensures that organizations have clear guidance on how future decisions will be made. By setting short-term and long-term objectives, SMEs and entrepreneurs can gather the data, allowing them to see overlaps and gaps in the process, and create standardized and even automated processes.

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However, as systems and processes are put in place to ensure productivity and profitability, it is imperative that MSME leaders are familiar with establishing and maintaining an organizational culture. 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. Because the philosophy and opinions of the manager or owner can easily influence the behavior of workers, it is essential that the leader not only establishes a code of ethics but also embraces them.

Governance for all

According to a global survey of corporate governance, more than 50 percent of respondents comprising senior management said that integrity standards had not grown and have deteriorated over the past two years. Be it scrutiny from regulators, increased responsibilities for business leaders, or investor expectations – these factors have highlighted the need for an ethical framework within organisations. For MSMEs, governance can seem like a demanding activity, especially when they tend to focus on core operations such as building a customer base and profitability. However, organizations that undermine the creation of an internal governance framework may face challenges due to reputational damage, fines, termination of contracts and loss of investor confidence, among others. For example, if a customer or stakeholder feels that their concerns have not been adequately addressed, they may resort to voicing their concerns on an online forum with reputational and even financial consequences. It is therefore essential for SMEs to create a strong governance framework to drive long-term sustainable growth and create value for all stakeholders.

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Diversification is essential

Although MSMEs, especially in the service industry, have been severely affected by the Pandemic, they have improved significantly due to their willingness to diversify their operations. For example, a home products entrepreneur who catered to the B2B space had to cope during the pandemic and address the demands of the B2C space, which helped him address not only quality and product needs but consumer expectations as well. Diversification not only helps businesses understand changing customer expectations, but also plays a major role in changing business narratives. However, while diversification is an appropriate response to the demands of a post-pandemic business environment, SMEs need to do their due diligence and risk analysis and make careful decisions. Technological measures such as digitization and automation are now essential and SMEs need to be quick to adapt to the latest tools and know-how to stay relevant.

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In a post-Covid world, building resilient businesses is essential and this can be achieved by investing in the right technologies, establishing the right processes, accessing the right financing options, having strong corporate governance and hiring rights. However, many MSMEs are still at an early stage and need guidance, mentoring and the right solutions to build agile digital businesses. Services like 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.



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