Employing a SMaC Recipe to Improve SME Performance
“A SMaC recipe is as relevant to a SME (Small & Medium Enterprises) business as it is to a large Corporate. SMaC is a key strategic ‘tool’ for SME’s in order to achieve their owners’ Vision and to improve business performance – and it’s easy to do.”
Jim Collins, in his book ‘Great by Choice’, articulated that a ‘SMaC recipe’ is an ‘operating code for turning strategic concepts into reality, a set of practices more enduring than mere metrics. Tactics change from situation to situation whereas SMaC (Specific, Methodical and Consistent) practices can last for decades and apply across a wide range of circumstances.’
Collins illustrates his points though illustrative case studies of large corporates such as US based Southwest Airlines and attributes their long term success to relating every key strategic business decision back to their SMaC recipe.
But is a SMaC recipe relevant to a SME and if so, how can it improve business performance?
Over the past two years the SMaC concept has been applied as a ‘tool’ when nem works with a client to develop Business Development Action Plan – with significant success.
Using the case study below, we can illustrate how a SMaC recipe can be developed and used by an SME.
The business: A Melbourne based building services contractor with 16 employees that focuses on commercial and residential developments across Melbourne. Financial results have been poor in recent years as a series of calamities befell the business. For example, builders going bankrupt and not paying bills, the business being ‘price shopped’ on quotes, working on projects that were too big for the firm and couldn’t be resourced properly and in a timely manner. The upshot of these events was a series of significant financial losses and the Directors had to provide additional capital and personal guarantees to both suppliers and financiers in order to keep the business going.
A Comprehensive Strategic Business Review was conducted and several key features for commercial success, and failure, were identified from both assessing specific commercial projects and specific stakeholder relationships e.g. architects and builders. The business also identified its Unique Selling Proposition (USP) as doing quality work (little rework) on time and on budget (by strictly following its own established procedures) – particularly on (architectural) design projects.
A five point SMaC list (called a ‘list’ rather than a ‘recipe’ and ‘M’ for ‘Measured’ rather than ‘Methodical’ as these words resonated better with the business owners & staff) was drawn up that focused on the features that were common to all successful projects and also those activities common to all failures.
The SMaC list was (in no particular order of importance):
- Projects where Architectural drawings are used extensively: known as ‘detailed’ jobs. (why selected: ‘detailed’ projects tend to be the more complex projects & this suits the business’ culture of thoroughly planning its jobs – so much so that it frequently identifies potential issues to Architects that competitors don’t);
Project revenue to be between $300K & $1M: (why selected) with smaller projects the business is competing with small contractors who have a cost advantage (low overhead) & large projects are just too big (tying up cash flow);
Only work with builders you know & have established relationships: (why selected: work with builders who value the business’ USP – price is then not the most important variable in securing a project);
Only work with builders who respect & honour your procedures: (why: work with builders who value our USP – price is then not the most important variable in securing a project);
Constantly invest in the skills of our people: (why selected: keep a good team together by encouraging & promoting their professional skill development. This is also appreciated by builders & architects).
The SMaC list is visibly displayed in all work rooms, all staff understand what it means and it has become the ‘litmus’ test against which all projects are compared before proposals/tenders are developed. A projects failure to comply leads to not pursuing the project.
Fifteen months of ‘religiously’ following the SMaC list has seen:
- Revenues increase 27% (prime reason: becoming preferred supplier to some builders & architects);
- Gross Margins increase 5% (prime reason: price is now not the key selection criteria in many projects and clients are prepared to trade off some price for quality and timeliness – it makes them money over the life of the project);
- Fixed Costs have reduced 12% (prime reason: less time spent attempting to ‘win’ non SMaC compliant projects) &;
- Resulting in a 78.5% increase in pre - tax operating profit!
Adopting Jim Collins’ SMaC approach can have significant beneficial effects on an SME business both achieving its strategic objectives and increasing its financial performance. A SMaC list should be one of the central foundations to any SME Business Development Plan.
A SMaC list acts as the strategic ‘rails’ upon which a business is guided to achieve its objectives. The SMaC list becomes the ‘standard’ against which all key commercial decisions are compared. It’s as much a list of what does not work as it is a list of what does work for the business.
Author: Glenn Mansfield, Partner of nem Australasia.
This article is based on research and opinion available in the public domain.