Consensio

As I discussed in my earlier post about the Intangible Asset Value Chain, small firms and start-ups are particularly exposed to the ‘chicken and egg’ situation. Should they just invest in ‘tangible asset’ creation and development? And when and how is the time ripe for ‘intangibles’?

To clarify this, we firstly need to look closer at small business research. Although over 96% of Australian businesses are employing less than 20 people, the majority of management recommendations and findings is deducted from academic research into large industry organisations.

This is pretty much the case for the US, Japan and other industrialised countries as well.
Secondly, as Verreyenne (2006, 220) points out, the lack of suitable measurement tools and best practice study courses hinder small business owners to integrate strategic management into their daily practice.

Small Business Strategy Types

Strategic Decisions in small businesses are usually following the ‘rational decision-making model’, which is for example used to obtain financials through a business plan.

A less stringent approach is called adaptive or logical incremantalism, which means that management is providing a broad directive and employees follow through with detailed actions.

The other form of strategy is dubbed vision or umbrella strategy, as it employs involvement of external stakeholders that may have influence on the small business.

The command strategy approach, you guessed it, means that the owner or senior executives exercise complete control over the firm. However, the intrapeneurial form of strategy-making is the opposite and inclusive of employee input.

Small Business Strategy Applied

Martie-Louise Verreyenne researched previous small business findings. She observed that researchers only reported whether small businesses made rational strategy decisions, and not whether they engaged any other strategies. She tested all above described strategy modes and the results are summarised as follows:

1. Pure rationality may not at all occur in small firm decision making, therefore, academics are better off using different models to describe and measure small businesses
2. Adaptive, intrapeneurial, participative and simplistic modes of strategy making are primarily used
3. Simplistic mode means the owner/manager bases her/his approach on previous strategy making without previous analysis of the environment. She found and a strong link to actual firm performance
4. Internal and external stakeholders play a more important part in small firm strategy than previously thought
5. In small firms, value and culture are successfully driving a participative strategy mode, unlike in large organisation, were participative styles are more likely to lead to politics and negativity.

The learnings small business owners/managers can take from this are manifold-

• Leadership styles of owners/managers matter. The more you as a leader are aware of your behaviour and actions, the more likely decision-making is fruitful. Continue to learn something about yourself and others
• Input from internal (your staff) and external (your suppliers, friends, family and investors) does matter. Different angles help to make better outcomes. Play Devil’s Advocate more often
• Gut-feel matters. Verreyenne specifically states, that simplistic decision-making is made without the sophisticated scenario-rendering tools of big business and yields results for small business
• Value and culture of your small firm matters. Sit down with your staff and ask them what (apart form the money) gets them out of bed and makes them join your company environment every day.
  Friday afternoon get-togethers (with or without alcohol) and networking opportunities don’t have to cost the world, but can cement a better work climate. Do you know how your staff see your future as a company?