Why SMEs do or don’t use advisory services

Time to time, a small or medium-sized enterprise (SME) faces a task it cannot accomplish with the resources it has. In such cases, external resources are needed, either technology or human resources. When speaking about human resources, in some cases, the resources will be needed for longer period of time and the SME will hire new employee. However, sometimes human resources are not needed permanently, and in such cases the SME will hire an external expert for a limited period. All seems rational, but project experiences show that SMEs are not always willing to use external consultancy services, which then makes projects difficult to implement. Why is it often such a struggle with advisory services for SMEs? 

Observing reasons why SMEs use external services may clarify things. SMEs engage an external provider, advisory services included, mostly in three cases:

1) they must react and introduce changes required by relevant regulations,

2) they are facing a task where they have technology and know-how but not enough capacity to deliver result requested by the client, and

3) they do not have knowledge needed for completion of tasks they are facing, where the task may be              

3a) a requirement from the client, or

3b) an endeavor of the SME to introduce innovations.

Requirements coming from regulations are specific, being mandatory for SMEs, and common for the other above-mentioned cases is that the initiative, even if it comes externally, is well-understood and accepted by the SME, which being aware of the possible benefits, is ready to use the respective advisory services.

However, sometimes initiative for change in SMEs operations comes from projects and subsidy programs, which are defined on the basis of analyses, decisions, and opinions of the project funding/subsidy providing entity on what SMEs should do. This may be seen by SMEs as needed or not needed.

Accordingly, it seems there are three groups of consulting services:

1) those helping SMEs to meet requirements defined by law/rules, such as quality standards, which generally are seen by SMEs as a must and are therefore in demand and welcomed by SMEs;

2) those helping SMEs to respond to requirements coming from clients or to implement SMEs ideas generated internally, that are seen by SMEs as something that they can profit from in the short period, such as advising on new technology, recipes in food industry and similar, and thus SMEs are often ready to use them and to pay for that, and;

3) advisory services focused on changes in SME operations initiated by projects and subsidy programs, that, in current situation and according to SME’s understanding, SME cannot make profit from in short term, mostly because there are no necessary mechanisms and capacities (e.g. advisory in industrial design resulting in new product, but with no distribution and sales solved) and thus SMEs are rarely ready to use them.

Also, the new tasks may be required and defined by authorities, the demanding client or by the company itself, when trying to introduce innovations, i.e. to develop new products, improve business processes, introduce improvements in marketing and similar. According to SME’s understanding, all these include quite clearly visible and likely benefits for SMEs, achievable in rather short time and thus SMEs are interested in these changes and in services enabling the change. At the same time, projects are quite often designed with the future in mind, focusing on changes that, according to analyses and opinions of experts, are to come, and include respective advisory services, which are often not seen by SMEs as beneficial in short term and seem to have uncertain outcomes. And therefore, there’s a struggle.

How to overcome this situation? Apparently, SMEs readily use advisory services that they see as beneficial in the short term. So, the challenge is use of advisory services by SMEs that SMEs see as some kind of distant and uncertain future, thus not being willing to use them in short period of time. They may be more ready to use advisory services that they can benefit from in the long term, if they see that benefit as quite certain and achievable. Also, it may be good to provide information to SMEs, to explain why some services are proposed, why they are seen as needed, what benefits they can bring, and thus increase SME’s interest in these services. If even after the information is provided there is no interest of SMEs, then there is likely something wrong with assumptions and findings, or it is simply too far away in time. Either way, if one keeps such services in the project, there will be a struggle to get SMEs on board. On the other hand, the first steps in certain areas, such as digitalization and energy management, need to be taken and in some cases are well justified. So, this point of view should not lead to giving up promoting topics that, by all information and relevant opinions, are beneficial to SMEs in the long run, but rather to see things more clearly at the project design phase, to minimize struggles with participation once implementation starts. So, if the project is focused on advisory support that is in the third group described above, initial interest of SMEs will most likely not be high and stronger promotion will be needed. This is a pattern that seems to repeat with every topic new to SMEs.  

Leave a Reply

Your email address will not be published. Required fields are marked *