Achieving better outcomes from digital economy collaboration

By | February 19, 2014

The Connected Digital Economy Catapult and TechUK yesterday partnered a webinar which addressed the question of how SMEs and large companies in the digital economy can to achieve better outcomes.

Chaired by Jo Rabin [left], Advisory Network Member for the CDE Catapult, discussion took place between (left to right) Malcolm Graham,  (Client Managing Director, Central Government, Fujitsu), Julian McCrea, (Managing Director, Portal Entertainment), and Naureen Khan, (Head of Programme, Public Sector, TechUK).

Building and Maintaining Relationships

The panel explored how to help ensure that an SME innovator have a successful relationship with a large company. Julian suggested that it was very beneficial to find a champion within the large business, and to foster that relationship, but that the downside was the difficulty that could be caused if that contact moved on or changed roles.

Naureen agreed that this was one of the most difficult issues reported by TechUK’s member SMEs, and the associate issue of how to find the appropriate point of contact in a large organisation – the person with the authority and budget to respond productively to the SME’s approach. Julian suggested that one way to manage this was to work to maintain the relationship with the sponsor, but also the “bleed out” the inter-business relationship to, say, four or five people, so that the loss of one contact was not so critical. This could also be helpful, he said, because sometimes a single sponsor, at executive level, may not be very accessible to the SME from day-to-day.

Malcolm pointed out that in large organisations like his own, procurement departments tend to be mostly outbound, and that inbound relationships tends not to exist so much as infrastructure, but more by osmosis – where certain technology of SMEs becomes relevant to a design function, for instance, and becomes integrated into solutions. In terms of a structure that supported a consistent message of engagement with SMEs, he felt some more thought was needed on the part of larger organisations. Julian added that his experience was that relatively few people in large companies were willing to take on risk, and suggested that if such organisations created innovation teams, with a team role of taking on this risk, it could be helpful – as well as providing continuity and a point of contact for SMEs.

Benefits and Risks

Malcolm discussed the mutual benefits that could exist for both the large and smaller partner. For the larger partner, this could be around innovation (since bigger businesses tend to be more process-bound, which can be unwieldy compared to agile approaches of smaller businesses), with the SME being able to contribute a shot of insight and innovation – showing how thing could be done differently. For the SME, having a large partner could help them manage risk, and provide a channel to market, especially if a pipeline relationship were established.

Julian pointed out that, in terms of risk, the SME had a responsibility to be resilient to risk too, and to build-in risk mitigation into their plans, such as contingency for issues like late payment, and to have a realistic view as to the finite length of runway that was available to them on limited resources: it was important to realise that things can move more slowly when dealing with large organisations.

In terms of the larger partner’s responsibilities, Malcolm gave some practical suggestions that Fujitsu had adopted: signing up to the Prompt Payment Code and encouraging their whole supply chain to deal promptly with SMEs; and providing an access pledge – access to cash that SMEs can call upon for small charge, where part of lifecycle created cashflow problems. He said in practice it was not used often, but was important when needed.

Naureen commented that the issue of payments couldn’t simply be classified as an issue of large versus small companies as a whole range of actors were involved – and that for example, CBI research had shown that government agencies were a major culprit for not paying on time.

Getting the Right Fit

Jo raised the issue that large companies may find it difficult to engage with smaller ones where they might then find themselves reliant on for their product offering. Julian pointed out that more often than not, smaller companies find it difficult to know how their innovation may fit with larger companies: in his experience, very often the stage of building the innovation came first, with the step of identifying how it might fit with particular businesses’ priorities and products often coming later. In this scenario, the problem then was how to get product or innovation into the business concerned. As a possible solution he cited the example of the BBC’s Startup Accelerator, which helped SMEs identify how what they were doing could fit as a part of the larger organisation’s business priorities.

Managing Risk and Security

Malcolm pointed out that it was prudent for the large organization to evaluate the risk profile of working with the SME. In developing a relationship, he said, it can become very apparent what the longevity of SME is likely to be. Ways to help ensure safety in this aspect included: opening new channels to market for the SME; sharing pipeline; integrating their technology into key offerings that the larger company is pushing into the marketplace; assistance with managing cash-flow; and even considering purchasing the SME, if that company was open to it.

Naureen commented on the problem of matching security requirements of large companies – especially in the banking and insurance sectors – with the practices and resources of smaller companies. She pointed out that TechUK act as a facilitator – bringing together large companies by hosting a series of workshops to address those issues. Malcolm commented that, in his experience in Fujitsu, there was leeway to vary Terms and Conditions, as long as there wasn’t a security risk. He suggested that for legal issues – as an alternative to the SME signing up to the larger organisation’s terms, or the larger partner taking the risk themselves – the SME could sometimes contract via a subsidiary that could take the risk on in their own terms.

Bridging gaps in Life Cycle and Approach

One issue which came to the fore was the mismatch typically in budgetary life cycle for large and small organisations: that the disparity between the two organisations’ approaches could prevent them, in practice, from doing business together. Julian characterised this as “incredibly familiar”. He said that he wasn’t sure of the answer, but that the SME can try to get the bigger business to accelerate their process. Malcolm suggested two ways to bridge the gap between the SME’s desire to sell and the larger organisation’s purchasing: firstly, opportunistically picking up on opportunities that emerge, such as unsolicited approaches; and secondly by developing offerings that are in the larger organisation’s roadmap into the future, and that may include technology from SMEs. Similarly, in bidding, he suggested that agility was important and that the timescales involved needed to be understood by all parties.

Round-up Points
In round up, Naureen said that there were challenges for SMEs but the opportunities tended to outweigh them, and that TechUK had 500 SME members who were ready to do business with government and large businesses. She suggested that there was some work still needed for large companies to understand better who they are working with – to understand the challenges for SMES, and to work on their internal processes to make themselves more accessible.

Julian ended by pointing out that for startups, risk will always be higher for the SME than the large organisation, and that the startup must mitigate that risk in terms of their financial planning when talking to big business, and that sponsorship was important for success. In practice, he suggested, SMEs needed to be quite agressive – “if you’ve got something, go ahead and to it”.

Malcolm said his take-away point would be to push things more in his company. His organisation already had initiatives in place – such as signing up to the code of practice, and constructing its own charter for SMEs – but he would be taking away and reflecting on the issue of how SMEs access large business.

Tips for Entering International Markets

In the web chat that followed, the panel were asked for tips for SMEs to work with large companies to enter international markets. Malcolm suggests targetting companies that operate on a global basis – engaging via their UK operation – and establishing how your technology could enter their ecosytem (either by POCs or bidding to them as part of a solution). He suggesting first obtaining traction, and then seeing how the solution could be “industrialised” and potential embedded in roadmaps for overseas sales and marketing plans. Other sources of help suggested were the Foreign and Commonwealth Office, keeping a watch for TechUK international events, contacting UKTI, and, for businesses in the South East, the GLE group.