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Lessons from Small States: Strategies for SME Business Success

Photo by Dicky Wauyari on Unsplash


Why being 'small' can still be powerful in both business and global politics


In global politics, just as in business, there are giants and there are minnows. 


Large states, global superpowers, and economic supragroups such as the EU can be reflected in business with the likes of LVMH, Unilever, and OPEC. Naturally, the Giants have the visibility, resources, and power to get what they want, so the smaller states need to be smarter than that if they are to compete on the world stage. The power of this is clear. Multi National Companies (MNCs) such as Apple, Google and Facebook in many ways behave like Small (Smart) States creating their own identity, values, and role, and have had a greater impact on the world order whilst being an independent entity.


75% of all the countries in the world are classified as ‘Small States’, defined as having a population 10-15m, located across all continents, and often found in places with significant natural or human challenges, which can be in the middle of an ocean or surrounded by unfriendly neighbours.


Survival is their key motivator, but they want to go further and become smarter and successful. The decline of various colonial and political Empires, from the British to the Russian, has ultimately allowed smaller ethnic and cultural groups to aspire to, and actually set up, their own states.


A new book by Armen Sarkissian ‘The Small States Club – How small smart states can help save the world’ was published in December 2023 and I’d highly recommend it as some downtime reading whilst commuting or on vacation. That’s not simply because of the interesting narrative that considers 9 Small States (Estonia, Switzerland, Ireland, Qatar, UAE, Israel, Jordan, Singapore, Botswana, and Armenia) together with their background, challenges and responses, but also for the inspiration and insights that their experience in survival and reinvention can teach us in business.


Whilst there are two broad threads of similarity in the Small States Club (SSC) - that of Identity and having international support - these can be further broken down into more specific themes that provide useful parallels for SMEs in business.


Visibility: 

It is incredibly important for SSC countries to not only DO something but to be SEEN to do something.  They cannot sit quietly on the sidelines if they hope to survive and thrive. They need to be successful despite their significantly lower levels of resources, political influence, or financial strength. They want to be noticed outside the ‘disaster narrative’ that often is the focus of world attention for SSC, showing them not as victims but makers of their own destiny.

 

Botswana has adopted a low key profile as it has not yet established its preferred identity on the world stage, and is otherwise associated with natural or human crises, whereas Qatar has begun to establish its role as a mediator in significant conflict situations that has boosted its reputation globally. It also allows some of their other domestic issues, such as human rights allegations, to be sidelined as their global power and value is considered to be of greater importance.


SMEs cannot afford to be invisible. They are the backbone of most economies, employing millions of people, and creating real GDP value for their nation. Understanding how they can stand-out, to thrive not just survive, without the resources of their bigger competitors, requires agile and innovative thinking. It is constantly a surprise to me that in talking with larger companies their internal bureaucracy and politics creates stagnation and sometimes quite complacent behaviour. The SMEs’ ‘superpower’ is to be smarter and more nimble, but too many of them fail to use this. SMEs can be the leaders in Sustainability and are able to communicate this so that they are seen to be doing something, not just talking about it with vague long term goals that everyone will have forgotten in a few months.


Survival:

For all SSCs, survival is something that is achieved against improbable odds, but this doesn’t limit their ambition to achieve ‘greatness’ beyond their territorial size. Their survival is about not doing what the bigger nations do. SSCs don’t try to outgun their competition but to outwit them and stand for something distinctive that also has real economic value (directly or indirectly). Being smart is about how they use the hand that is dealt to them. For example, if their borders are fixed by larger neighbours, they can use that to protect themselves from invasion or threat by calling on their other neighbours to support them. The difficulty is greater if they have one or more borders that are water-based or inaccessible terrain, but that can still be overcome.

 

In business, SMEs often feel squeezed into spaces that are left vacant by the larger companies. Survival means making these spaces the most productive and successful that they can be and are adept at using their innovation-bias and smart thinking to thrive. ‘Blue Ocean’ thinking is more open for SMEs to respond to than the larger companies, for whom rigidity and an inate risk aversion is crippling. That can mean that some adjacent larger companies become interested and protect SMEs through joint ventures, licensing etc..


Identity: 

The need for a Small State to develop a clear identity, whether that is focused on a specific specialism, resources, expertise, or role, is vital in order to thrive and be visible, and therefore be intrinsically valuable to the world.

 

Some SSCs, such as Ireland and Estonia have their own heritage and cultural identity, and so they can focus on that for their identity. For them there is a rich vein of opportunity for authentic storytelling and a shared Vision, with language, arts and music being strong unifying elements.  For some other SCCs, for example Switzerland and Singapore, they have had to be created from an amalgamation across several different provinces or ethnic groups. For these countries, they can almost start with a blank page and begin to develop their role according to the need for a relevant specialism that they can offer. UAE has also done this recreating itself, particularly in Dubai, as a critical transport hub.

 

In business not all companies have a lengthy heritage upon which to draw. SMEs are not all family-owned businesses, and in fact there are many that are relatively new creations with PE or VC backers. The essential point is that they need to determine their own identity – not to try to copy someone else’s, but to be clear and confident in who they are and what they can offer. If they fail to do this, they will be left without a role or purpose, with no perceived value to clients, and so much more likely to fail.

 

Influence: 

The Small States are desperate to be at the Top Table on the global stage in some way so that they can exert some influence over decisions that will impact them, positively or negatively. This inevitably leads them towards roles such as financial or business centres (Switzerland, Singapore), transport/trade hubs (UAE, Qatar), technology, or as climate change pioneers.

 

The Small Island States have a shared identity linked to the existential threat of climate change, and so they have created an Alliance in order to have more of a voice. They clearly have a long way to go however, given that they were not even present at the recent COP28 final stages of drafting the declaration. The fact that their statement about this omission gained a longer and more heartfelt standing ovation than that of the COP28 Chair is hopefully an indication that they will be listened more closely to in future.

 

In the same way SMEs have to band together in meaningful networks and business forums. The CBI is just one of those, but the voices of the smaller businesses need to have a role in the formation of government policies and ambitions, as they will be key to delivering the outcomes in future across the nation. A broader adoption of AI and Sustainability initiatives can only be achieved if the SMEs get on board with the need to engage with Change across their businesses.

 

Alliances: 

The need for international support from bigger countries is key for the Small States, and something that they work tirelessly to achieve. Without this protection and encouragement many SCCs would fail. The support of the USA for Israel has never been clearer than in the recent conflict – or more vital for their survival. However, for many SSCs the way that this is being achieved is different to previous decades.

 

No longer is the choice simply a binary structural one requiring integration or a subsuming of the smaller entity within a large nation with either a ‘West’ or ‘East’ orientation, but an acceptance of their distinct role in adding value to the global political stage in new sectors. The fact is that as SSCs become more future focused and nimble it is allowing them to remain independent as nations. In other areas traditionally seen as ways for SCCs to fall under the protection of larger nations, military power is no longer about large ground force troops. Cyber-based warfare and RPAS (drones) require significantly less manpower and are extremely effective, and have the advantage of not requiring a large standing army to ensure protection. The SSCs are now more capable to defend themselves, and so they don’t need to be part of an alliance with larger nations to engage in warfare or defend their territory.

 

In business we have seen many smaller companies acquired by larger groups in order to gain the benefits of scale, infrastructure or investment – the acquisition of Hotel Chocolat by Mars Inc is a great example of this. But this can be a risky route too for SMEs who often feel that they lose their identity later on, which can even cause the brand to fail. SMEs who remain independent but add value through innovation, expertise or as a balancing force in a market or sector have real power. Takeovers are not the only way, as many are now discovering, with joint ventures and collaborations being the most common ways to grow SMEs.

 

Succession planning:

In SSCs, especially the ‘created’ states, Succession Planning can be a major concern, and the challenge is always to maintain a sense of continuity in vision and purpose, without defaulting to a more authoritarian regime with a dynastic rule. Some achieve that better than others – Ireland is a good example of this.

In any period of Change, a transition in Leadership can bring both risks and opportunities. The new generation often have more energy, new ideas, and a greater resilience, together with a willingness to fight for visibility, to reinforce values and identity, and to develop a more futuristic vision.


In SMEs we often see this challenge, especially in family-owned businesses, where the Founder is passing on the reins to the next generation. However, in every business the need for well-planned Succession is a critical part in the continuity of their Vision whilst encouraging a forward-thing approach. The key factor in longevity of most businesses is the ability to respect their heritage whilst looking to create the future in ways that avoid stagnation and decline resulting from an inability to change and evolve.

 

Future-focused:

The world is evolving at a rapid rate, and this appears to be to the advantage of the Small Smart States. The changing dynamics and frontiers of business are enabling roles to be developed by them that do not require a large industrial base, significant finance, or massive human resources.

 

Economically, the world is moving from a bi-focal to a tri-focal situation, with nations such as India (certainly NOT an SSC member) and UAE growing in power and influence, whilst sitting outside of the traditional West/East axis. Even currencies are devolving from traditional US$ and GB£ denominations, with crypto destroying territorial boundaries.


Technology, and AI in particular, is the basis of an ‘advanced tomorrow’, and many SSCs are putting themselves at the heart of this. To be a global Superpower no longer requires armies, huge finances, large territories, or industrial bases – a genius can be born and work anywhere!

 

In summary….

The Small Smart States have begun to succeed in raising their profile, power and influence as a result of how the world is evolving. That is both due to an element of good luck in the timing, but also testament to their ambition and innovation. They have seized the initiative and are truly set for significant economic and political success.

 

SSC members are also at the front of climate change responses, as they are often the most impacted by this in loss of territory (as a % of land attributed to that nation) and the local traditional livelihoods that are being lost. They have a need to avoid being the victims of any future crisis, natural or manmade, and with their drive to be at the forefront of decision making in future, they will increasingly become major players on the global stage over the next few years.

 

In business, SMEs are also a force for change and innovation. If their ‘territory’ is challenged they need to respond quickly and decisively. If new opportunities arise they need to be ready to grab them with both hands. They can become leaders in responding to climate change, where larger companies are failing to deliver on expectations and promises.

 

SMEs can define themselves as whatever they wish to be – providing that they have the vision and determination to see it through for the long term. Taking a few lessons from the Small States could have huge benefits for them in future.


If you are searching for a clearly defined and unique role for your business contact me for a brief chat.

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