New study recommends strategies for SME growth
October 22, 2003
New study from Queen's School of Business, RBC and Canadian Manufacturers & Exporters
2003-10-22 - TORONTO, October 22, 2003 — How a company finances, plans and manages its business and human resources plays a significant role in determining the likelihood of whether a small-or medium-sized enterprise will succeed or fail, according to the latest study by RBC Financial Group (RBC), Canadian Manufacturers & Exporters (CME), and Queen’s School of Business.
The study, entitled Managing for Growth, was commissioned to review internal barriers to business expansion and look at ways to help Canadian entrepreneurs build more successful businesses. It builds on the 2002 Path to Prosperity report, released by RBC, CME and the Canadian Federation of Independent Business, which looked at external barriers to growth for small- and medium-sized enterprises (SMEs) in both Canada and the United States.
While the earlier study confirmed that external challenges can be considerable, and articulated the need for government policy changes to support SME growth, this new report delves into the internal barriers that prevent Canadian SMEs from reaching their full commercial potential.
“One factor in Canada’s widening productivity gap with the United States has been its failure to grow more SMEs into midsize or even large businesses with the scale and scope to participate successfully in the global economy,” said Craig Wright, vice-president and chief economist of RBC Financial Group. “If we want to remain a diversified, value-added economy with high-paying jobs, we need to get better at growing our most promising small firms. And that means we need to look at both internal and external barriers to growth.”
The report identifies nine challenges to growing our most promising firms, while defining the key management strategies necessary for SMEs to grow and thrive in a complex and rapidly changing business environment. In particular, it notes:
• Planning for growth is paramount and business plans require regular reviewing and revision.
• SMEs need to more effectively target their financing proposals so that they don’t miss financing opportunities.
• SME leaders need to develop connections with colleagues, competitors and markets. Many become too isolated or too focused on their own company goals.
• SME leaders need to upgrade their own management skills as their companies grow.
• A SME leader’s assumptions need to be challenged regularly and competently.
• SMEs must adequately plan for succession or exits or else they leave themselves and their companies vulnerable.
• SMEs must be adaptable and willing to change the company infrastructure to match the business’s current growth stage.
• SMEs must professionalize the business infrastructure as the company moves out of the chaotic startup and fast growth stages or risk having the engine run off the rails.
• Failing to pay adequate attention to organizational culture during the growth stages may result in the loss of the values and spirit of a new company.
”Growth challenges are mystifying to managers because they are largely invisible and intangible,” said the study’s lead researcher Dr. John Gordon, professor emeritus and former dean of Queen’s School of Business. “This is the first study to define general patterns and trends in management as barriers to SME growth. Our intent is to offer SME leaders a starting point for change.”
”Management is what differentiates winners and losers in today’s fast-paced world of global competition,” said Perrin Beatty, president and CEO of Canadian Manufacturers & Exporters. “Canada’s entrepreneurs and managers have to be world-class if they want to grow their businesses and sustain their market share. Our study is a valuable tool in identifying management challenges as well as opportunities for CME to help our members succeed in international markets.”
The initial Path to Prosperity study interviewed 1,200 owner/managers of small- and medium-sized enterprises on both sides of the border. While it showed that both countries have comparable rates of new business creation, Canada lagged significantly in the growth of these new businesses into medium and large enterprises. The study concluded that the removal of barriers to growth is important because small business represents a larger percentage of the Canadian economy than the American market, so any gains the sector makes will have a much greater impact north of the border.
Click here for the report's Executive Summary.
Click here for a copy of the full report.
Click here for the Agendas for Future Research.
Click here for the related bibliography.
The study was led by Dr. Gordon and fellow professors at Queen’s School of Business with support from Craig Wright, vice-president and chief economist, RBC Financial Group, and Jayson Myers, chief economist, Canadian Manufacturers & Exporters.
RBC Financial Group (TSX, NYSE: RY) uses the initials RBC as a prefix for its businesses and operating subsidiaries, which operate under the master brand name of RBC Financial Group. Royal Bank of Canada is Canada’s largest financial institution as measured by market capitalization and assets, and is one of North America’s leading diversified financial services companies. It provides personal and commercial banking, wealth management services, insurance, corporate and investment banking, and transaction processing services on a global basis. The company employs 60,000 people who serve more than 12 million personal, business and public sector clients through offices in North America and some 30 countries around the world. For more information, please visit www.rbc.com.
Queen’s School of Business (www.business.queensu.ca) is one of North America’s premier business schools with an international reputation for innovation and excellence. Programs include Queen’s MBA for Science & Technology – ranked #2 in the world by BusinessWeek magazine in its survey of non-US business schools – and Queen’s Executive MBA, Canada’s only truly national EMBA program. Queen’s is also the country’s largest provide of open enrolment executive education programs. The School has a strong research mandate, which includes exploring the challenges facing high-growth enterprises and developing successful strategies for managing growth.
Canadian Manufacturers & Exporters is Canada’s Leading Business Network. Its mission is to continuously improve the competitiveness of Canadian industry and to expand export business. Its members account for 75 percent of the country’s manufacturing output and 90 percent of exports. For more information, please visit www.cme-mec.ca.
- 30 -
Queen’s School of Business: Sandra Olszowka, (613) 533-3090
RBC: Beja Rodeck, (416) 974-5506
CME: Perrin Beatty, (613) 238-8888 ext. 236