The Outlook for Developed Markets [EIU Study, Part 2]

SAP Guest

In a new study by the Economist Intelligence Unit leaders of SMEs in developed markets reveal their top four priorities for 2013. Overall, they’re optimistic on growth, but should they be?


How are leaders at small and mid-size enterprises (SMEs) in developed and emerging countries making sure their companies flourish in a challenging business world? To find out their biggest obstacles as well as opportunities for growth, the Economist Intelligence Unit (EIU) surveyed over 1000 senior business managers in developed and emerging countries. The findings reveal a surprising amount of optimism tempered by the realities of an uncertain economy. This is the first in a two-part series that summarizes feedback from SMEs in developed countries.

“The financial crisis won’t hurt me”

Senior managers at SMEs in France, Germany, Japan, the UK and the US may be battling for survival amidst an economic slowdown but they remain more determined than ever to expand. Not surprisingly, 59% of survey respondents agree that the business environment has become much tougher in the past three years. What’s more, 58% expect things to get much worse in the next three years. However, these same managers think their businesses will outperform the economy or the competition. Sixty-eight percent expect their businesses to grow turnover in the coming 12 months. And 59% expect their workforce to increase in the next year.

Zooplus & Wahoo’s Fish Tacos grow their social media

The top four business priorities of SMEs in the next year are growing sales and earnings, becoming more efficient, using technology more efficiently, and developing new products and services. Managers are less interested in cost cutting or short-term survival tactics. Instead they’re focused on growth and expansion across both emerging and developed markets. One opportunity respondents cite often is expansion of the business into new markets, or expansion of the markets themselves. Sixty percent of SMEs agree that they need to compete in more international markets.

Many managers are turning to the internet to meet growth objectives. Cornelius Patt, CEO of Zooplus, an online pet supplies retailer based in Germany, points to digital multi-channel contact, including content accessible by tablet computers and mobile phones, as a major opportunity for customer engagement. Zooplus also uses social commerce to get closer to customers. “The recommendation [to shop at Zooplus] does not come from standalone search activity by one consumer. It’s more that one consumer refers another,” says Patt.

Wahoo’s Fish Taco, a US-based casual-dining chain, has also shifted more resources into social media to replace traditional advertising venues. “Everything here has been about investing in our marketing and branding, and supporting our increasing sales,” says Mingo Lee, one of the three brothers who founded the business in 1988.

Lee also says Wahoo’s is using the power of collaborative business networks for procurement efficiencies, something that improves survival chances for small businesses. “We’ve started going to buying groups and purchasing partners who not only can help us refine existing contracts, but also help pool us with other customers. So for the lower volume items that we carry, we can partner with them and ride their coattails as a group,” he explains.

 SMEs use technology to get ahead

In pursuit of greater efficiencies overall, many SMEs plan to use technology more effectively. For example, a manager at a US-based firm in the transportation, travel and tourism sector describes the firm’s main opportunity in the next year as “involving new technologies into the business to increase growth and efficiency.” Other executives across various geographic markets and sectors echo these comments.

The need to differentiate in the face of fierce competition may be what’s behind stepped-up product and service innovation. Claude Palard, managing director of CQFD, a metal manufacturer based in France confirms this reality. “If I’m not able to come to my clients every year with new, dynamic products, they will go to suppliers in China or Malaysia. That’s a big change from five or six years ago, and it is something that keeps me awake at night.”

Bureaucracy slows down growth

Despite their optimism about growth prospects, one of the major challenges SMEs continue to face is red tape. Eighty-six percent of surveyed SME managers find government bureaucracy and regulation are obstacles to growth—more than any other factor. Fifty-five percent of respondents say that regulatory compliance consumes more resources than it did three years ago. A growing tax burden is another factor that slows growth, according to 83% of respondents.

The feeling is that stronger government support could provide a boost. It only makes sense. In developed markets, SMEs account for 45% of total employment and some 50% of GDP according to data from the Global Partnership for Financial Inclusion and World Bank. Within the EU, the European Commission says that SMEs account for two-thirds of employment and create 85% of net-new jobs. Easier access to funding and less bureaucracy could pave a faster path to success, bringing more opportunities to everyone.


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13 Scary Statistics On Employee Engagement [INFOGRAPHIC]

Jacob Shriar

There is a serious problem with the way we work.

Most employees are disengaged and not passionate about the work they do. This is costing companies a ton of money in lost productivity, absenteeism, and turnover. It’s also harmful to employees, because they’re more stressed out than ever.

The thing that bothers me the most about it, is that it’s all so easy to fix. I can’t figure out why managers aren’t more proactive about this. Besides the human element of caring for our employees, it’s costing them money, so they should care more about fixing it. Something as simple as saying thank you to your employees can have a huge effect on their engagement, not to mention it’s good for your level of happiness.

The infographic that we put together has some pretty shocking statistics in it, but there are a few common themes. Employees feel overworked, overwhelmed, and they don’t like what they do. Companies are noticing it, with 75% of them saying they can’t attract the right talent, and 83% of them feeling that their employer brand isn’t compelling. Companies that want to fix this need to be smart, and patient. This doesn’t happen overnight, but like I mentioned, it’s easy to do. Being patient might be the hardest thing for companies, and I understand how frustrating it can be not to see results right away, but it’s important that you invest in this, because the ROI of employee engagement is huge.

Here are 4 simple (and free) things you can do to get that passion back into employees. These are all based on research from Deloitte.

1.  Encourage side projects

Employees feel overworked and underappreciated, so as leaders, we need to stop overloading them to the point where they can’t handle the workload. Let them explore their own passions and interests, and work on side projects. Ideally, they wouldn’t have to be related to the company, but if you’re worried about them wasting time, you can set that boundary that it has to be related to the company. What this does, is give them autonomy, and let them improve on their skills (mastery), two of the biggest motivators for work.

Employees feel overworked and underappreciated, so as leaders, we need to stop overloading them to the point where they can’t handle the workload.

2.  Encourage workers to engage with customers

At Wistia, a video hosting company, they make everyone in the company do customer support during their onboarding, and they often rotate people into customer support. When I asked Chris, their CEO, why they do this, he mentioned to me that it’s so every single person in the company understands how their customers are using their product. What pains they’re having, what they like about it, it gets everyone on the same page. It keeps all employees in the loop, and can really motivate you to work when you’re talking directly with customers.

3.  Encourage workers to work cross-functionally

Both Apple and Google have created common areas in their offices, specifically and strategically located, so that different workers that don’t normally interact with each other can have a chance to chat.

This isn’t a coincidence. It’s meant for that collaborative learning, and building those relationships with your colleagues.

4.  Encourage networking in their industry

This is similar to number 2 on the list, but it’s important for employees to grow and learn more about what they do. It helps them build that passion for their industry. It’s important to go to networking events, and encourage your employees to participate in these things. Websites like Eventbrite or Meetup have lots of great resources, and most of the events on there are free.

13 Disturbing Facts About Employee Engagement [Infographic]

What do you do to increase employee engagement? Let me know your thoughts in the comments!

Did you like today’s post? If so you’ll love our frequent newsletter! Sign up here and receive The Switch and Shift Change Playbook, by Shawn Murphy, as our thanks to you!

This infographic was crafted with love by Officevibe, the employee survey tool that helps companies improve their corporate wellness, and have a better organizational culture.


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Supply Chain Fraud: The Threat from Within

Lindsey LaManna

Supply chain fraud – whether perpetrated by suppliers, subcontractors, employees, or some combination of those – can take many forms. Among the most common are:

  • Falsified labor
  • Inflated bills or expense accounts
  • Bribery and corruption
  • Phantom vendor accounts or invoices
  • Bid rigging
  • Grey markets (counterfeit or knockoff products)
  • Failure to meet specifications (resulting in substandard or dangerous goods)
  • Unauthorized disbursements

LSAP_Smart Supply Chains_graphics_briefook inside

Perhaps the most damaging sources of supply chain fraud are internal, especially collusion between an employee and a supplier. Such partnerships help fraudsters evade independent checks and other controls, enabling them to steal larger amounts. The median loss from fraud committed
by a single thief was US$80,000, according to the Association of Certified Fraud Examiners (ACFE).

Costs increase along with the number of perpetrators involved. Fraud involving two thieves had a median loss of US$200,000; fraud involving three people had a median loss of US$355,000; and fraud with four or more had a median loss of more than US$500,000, according to ACFE.

Build a culture to fight fraud

The most effective method to fight internal supply chain theft is to create a culture dedicated to fighting it. Here are a few ways to do it:

  • Make sure the board and C-level executives understand the critical nature of the supply chain and the risk of fraud throughout the procurement lifecycle.
  • Market the organization’s supply chain policies internally and among contractors.
  • Institute policies that prohibit conflicts of interest, and cross-check employee and supplier data to uncover potential conflicts.
  • Define the rules for accepting gifts from suppliers and insist that all gifts be documented.
  • Require two employees to sign off on any proposed changes to suppliers.
  • Watch for staff defections to suppliers, and pay close attention to any supplier that has recently poached an employee.

About Lindsey LaManna

Lindsey LaManna is Social and Reporting Manager for the Digitalist Magazine by SAP Global Marketing. Follow @LindseyLaManna on Twitter, on LinkedIn or Google+.


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The Future Of Supplier Collaboration: 9 Things CPOs Want Their Managers To Know Now

Sundar Kamak

As a sourcing or procurement manager, you may think there’s nothing new about supplier collaboration. Your chief procurement officer (CPO) most likely disagrees.
Forward-thinking CPOs acknowledge the benefit of supplier partnerships. They not only value collaboration, but require a revolution in how their buying organization conducts its business and operations. “Procurement must start looking to suppliers for inspiration and new capability, stop prescribing specifications and start tapping into the expertise of suppliers,” writes David Rae in Procurement Leaders. The CEO expects it of your CPO, and your CPO expects it of you. For sourcing managers, this can be a lot of pressure.

Here are nine things your CPO wants you to know about how supplier collaboration is changing – and why it matters to your company’s future and your own future.

1. The need for supplier collaboration in procurement is greater than ever

Over half (65%) of procurement practitioners say procurement at their company is becoming more collaborative with suppliers, according to The Future of Procurement, Making Collaboration Pay Off, by Oxford Economics. Why? Because the pace of business has increased exponentially, and businesses must be able to respond to new market demands with agility and innovation. In this climate, buyers are relying on suppliers more than ever before. And buyers aren’t collaborating with suppliers merely as providers of materials and goods, but as strategic partners that can help create products that are competitive differentiators.

Supplier collaboration itself isn’t new. What’s new is that it’s taken on a much greater urgency and importance.

2. You’re probably not realizing the full collective power of your supplier relationships

Supplier collaboration has always been a function of maintaining a delicate balance between demand and supply. For the most part, the primary focus of the supplier relationship is ensuring the right materials are available at the right time and location. However, sourcing managers with a narrow focus on delivery are missing out on one of the greatest advantages of forging collaborative supplier partnerships: an opportunity to drive synergies that are otherwise perceived as impossible within the confines of the business. The game-changer is when you drive those synergies with thousands, not hundreds of suppliers. Look at the Apple Store as a prime example of collaboration en masse. Without the apps, the iPhone is just another ordinary phone!

3. Collaboration comes in more than one flavor

Suppliers don’t just collaborate with you to provide a critical component or service. They also work with your engineers to help ensure costs are optimized from the buyer’s perspective as well as the supplier’s side. They may even take over the provisioning of an entire end-to-end solution. Or co-design with your R&D team through joint research and development. These forms of collaboration aren’t new, but they are becoming more common and more critical. And they are becoming more impactful, because once you start extending any of these collaboration models to more and more suppliers, your capabilities as a business increase by orders of magnitude. If one good supplier can enable your company to build its brand, expand its reach, and establish its position as a market leader – imagine what’s possible when you work collaboratively with hundreds or thousands of suppliers.

4. Keeping product sustainability top of mind pays off

Facing increasing demand for sustainable products and production, companies are relying on suppliers to answer this new market requirement.

As a sourcing manager, you may need to go outside your comfort zone to think about new, innovative ways to collaborate for achieving sustainability. Recently, I heard from an acquaintance who is a CPO of a leading services company. His organization is currently collaborating with one of the largest suppliers in the world to adhere to regulatory mandates and consumer demand for “lean and green” lightbulbs. Although this approach was interesting to me, what really struck me was his observation on how this co-innovation with the supplier is spawning cost and resource optimization and the delivery of competitive products. As reported by Andrew Winston in The Harvard Business Review, Target and Walmart partnered to launch the Personal Care Sustainability Summit last year. So even competitors are collaborating with each other and with their suppliers in the name of sustainability.

5. Co-marketing is a win-win

Look at your list of suppliers. Does anyone have a brand that is bigger than your company’s? Believe it or not, almost all of us do. So why not seize the opportunity to raise your and your supplier’s brand profile in the marketplace?

Take Intel, for example. The laptop you’re working on right now may very well have an “Intel inside” sticker on it. That’s co-marketing at work. Consistently ranked as one of the world’s top 100 most valuable brands by Millward Brown Optimor, this largest supplier of microprocessors is world-renowned for its technology and innovation. For many companies that buy supplies from Intel, the decision to co-market is a strategic approach to convey that the product is reliable and provides real value for their computing needs.

6. Suppliers get to choose their customers, too

Increased competition for high-performing suppliers is changing the way procurement operates, say 58% of procurement executives in the Oxford Economics study. Buyers have a responsibility to the supplier – and to their CEO – to be a customer of choice. When the economy is going well, you might be able to dictate the supplier’s goods and services – and sometimes even the service delivery model. When times get tough (and they can very quickly), suppliers will typically reevaluate your organization’s needs to see whether they can continue service in a fiscally responsible manner. To secure suppliers’ attention in favorable and challenging economic conditions, your organization should establish collaborative and mutually productive partnerships with them.

7. Suppliers can help simplify operations

Cost optimization will always be one of your performance metrics; however, that is only one small part of the entire puzzle. What will help your organization get noticed is leveraging the supplier relationship to innovate new and better ways of managing the product line and operating the business while balancing risk and cost optimization. Ask yourself: Which functions are no longer needed? Can they be outsourced to a supplier that can perform them better? What can be automated?

8. Suppliers have a better grasp of your sourcing categories than you do

Understand your category like never before so that your organization can realize the full potential of its supplier investments while delivering products that are consistent and of high quality. How? By leveraging the wisdom of your suppliers. To be blunt: they know more than you do. Tap into that knowledge to gain a solid understanding of the product, market category, suppliers’ capabilities, and shifting dynamics in the industry, If a buyer does not understand these areas deeply, no amount of collaboration will empower a supplier to help your company innovate as well as optimize costs and resources.

9. Remember that there’s something in it for you as well

All of us want to do strategic, impactful work. Sourcing managers with aspirations of becoming CPOs should move beyond writing contracts and pushing PO requests by building strategic procurement skill sets. For example, a working knowledge in analytics allows you to choose suppliers that can shape the market and help a product succeed – and can catch the eye of the senior leadership team.

Sundar Kamak is global vice president of solutions marketing at Ariba, an SAP company.

For more on supplier collaboration, read Making Collaboration Pay Off, part of a series on the Future of Procurement, by Oxford Economics.


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Is Digital Business the Answer to the Climate Crisis?

Kai Goerlich

By Kai Goerlich, Michael Goldberg, Will Ritzrau

Among the studies of climate change that indict human inventions and activities for the ecological damage done to the earth, there is a hopeful glimmer that digital business can bend the curve to reduce carbon emissions. According to #SMARTer2030, a study by the Global e-Sustainability Initiative (GeSI) and Accenture Strategy, it is possible, during the next 15 years, to hold worldwide carbon emissions to 2015 levels by digitizing business processes and applying data to decisions about resource use. That would represent a valuable contribution, according to the research, in decoupling economic growth and greenhouse gas emissions, thus helping to solve the tradeoff between the two.

SAP looked at a subset of companies in six major industries that are currently using business software such as enterprise resource planning, data analytics, supply chain, logistics, production planning, resource optimization, and remote access. Then SAP did their own analysis to estimate how applying these technologies to emerging digital business models in these industries globally would contribute to reducing carbon emissions.

The “Business as Usual” Scenario

The heat is on. The Intergovernmental Panel on Climate Change, the world body established in 1988 to assess the impact of humans on the climate, notes in its most recent report that “business as usual” practices would lead to temperature increases between 2.6°C and 4.8°C by the end of the century—beyond our expected ability to reverse the damage.

More IT = Less CO2

By rolling out information and communications technologies (ICT) across the global economy, total emissions of carbon dioxide equivalent could be cut 12.1 gigatons by 2030 and help forestall temperature increases, GeSI research has concluded. GeSI is an ICT industry association working with, among others, the United Nations Framework Convention on Climate Change to improve its members’ sustainability performance and promote technologies that foster sustainable development.


About Kai Goerlich

Futurist and resource optimization thought leader

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