Many industries are oligopolies – a few ‘big players’ dominate the market and SMEs are shunted into the shadows. Everyone wants to be seen collaborating with these well-known giants and few want to boast of partnerships with small, unheard-of firms.
Fortunately, this is not the case in our industry. Of course, there are still large businesses, but there are also many small and medium sized enterprises (SMEs) doing some of the most innovative, cutting-edge work that is noticed and admired by peers, big and small.
SMEs and multinational corporations (MNCs) are different in so many ways, yet they can forge some of the most effective partnerships. International projects I have led at Tecman have convinced me that their differences are the very reason they can work so well together.
Fusing innovation with scale
Readers may be disappointed to learn that there is no secret reason for why they make great partners, but the features and characteristics of each give us clues as to why this relationship can flourish.
Ownership structure is an important but overlooked feature, for example. SMEs are usually privately owned or owner-managed, and so benefit from a bias towards risk taking and a culture that celebrates originality and innovation. They are often highly specialised and proactive in their approach to designing new solutions for existing markets.
At its best, this ‘culture of innovation’ manifests itself through an approach to design that asks ‘why?’ at every stage. Engineers who dismantle, undo and break (sometimes literally!) the way things are done are the ones who push boundaries, rethink established practices and lead the innovations of tomorrow. This is the result, in part, of being unhindered by legacy systems and freed from a reactive, status quo mindset that is prevalent in large businesses[1].
The key weakness SMEs have is that they sometimes struggle to get these innovations to market at scale. They also struggle to internationalise because they don’t have the resources to conduct extensive market research[2].
Enter the MNCs.
I use the term MNCs loosely here to refer to large businesses with international operations. These firms usually have a strong testing infrastructure, economies of scale, and rollout capabilities that can transform SME innovations into real world applications with global reach. Matching an ability to innovate with the ability to commercialise is what makes these partnerships so potent.
The strength of MNCs also offers an insight into an Achilles heel – their mammoth workforce, resource base and distribution channels make them poor innovators relative to size. Complex, multi-stakeholder decision making processes, a low appetite for risk and a short term, shareholder focused outlook encourages a repetition of best practice.
This is the case across sectors and often results in collaboration or a straightforward acquisition – it seems if you can’t do innovation well, then you can ‘buy’ it. This is particularly the case in software engineering, where Google frequently acquires smaller, innovative firms as it did with Nest[3].
But let’s pull ourselves back - we don’t live in a binary world. It isn’t the case that SMEs are always innovative and MNCs are not; it's more nuanced than that. The reality lies somewhere in-between, with SMEs being, on balance, better at innovating. Market leaders recognise this, which is why we see R&D collaboration and strategic partnerships formed regularly in the biotech market but also in others including automotive, where our own relationship with Sekisui has demonstrated the importance of looking beyond your immediate ecosystem. SME - MNC relationships can unlock more than the sum of their parts and result in the creation and commercialisation of products neither could achieve alone.
Why doesn’t everyone do it?
There are three key requirements that are necessary for SME – MNC partnerships to flourish.
The first is having a genuine ability to innovate. Engineering teams in MNCs are experienced market scouts and can distinguish between the merely interesting and the truly promising. Initial conversations usually enable them to filter those claiming to be innovative with those that really are, as we have seen first-hand with our OEM approved protective films.
Second is deep sector expertise. There are so many industry-specific factors that affect design and manufacture – particularly in the medical and automotive sectors. Having demonstrable design theory knowledge and deep sector expertise is essential to developing innovative products that MNCs can help commercialise.
Finally, strong personal relationships are essential in getting a collaboration deal or partnership over the line. I don’t just mean CEO to CEO relationships, but a synergy between engineering teams that indicates a similarity in approach, a mutual respect for skillsets and an ability to jointly overcome the inevitable design hurdles that accompany any innovation-led project - something we experienced on a joint Jaguar Land Rover (JLR) - Mankiewicz project.
Where next?
The UK is fortunate in that it has a strong SME base, with plenty of highly innovative engineering firms across every sector, from aerospace to life sciences. Much of this innovation comes from university knowledge-transfer-partnerships (KTPs), but more significant are the unique regional ecosystems that result in areas like the West Midlands being able to claim excellence in automotive engineering.
Global firms often encourage and sustain a huge number of local SMEs within their supply chains, who can use these relationships as a springboard to success. The UK’s future competitive advantage could be found in leveraging the innovative capabilities of its SMEs globally – we just need to have greater self confidence in what we can do.
Wayne Matthews, sales manager at Tecman Speciality Materials
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