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6 Dysfunctions of SMEs – Ineffective communication

The SME Productivity & Innovation Centre (PIC) at Edge Hill University is an internationally recognised Centre of Excellence supporting SMEs to achieve growth through scale-up.

The scale-up phase is typically the quickest and most significant stage of growth, based primarily on the most effective use, allocation and tracking of resources, and one that can bring the most challenges for an SME. However, unlocking your organisation’s scale-up potential will hold significant profitable rewards such as enabling you to measure your company’s competitiveness in the marketplace and improve your organisation’s ability to avoid waste and rework.

The six articles in this series will share the experiences of the PIC’s scale-up experts in addressing the common 6 SME dysfunctions which regularly inhibit effective scale-up: Undefined demand, Undifferentiated offer, Ineffective communication, Undefined organisational structure, Unclear processes, and Ineffective use of data.

Ineffective Communication

SMEs often face unique challenges when it comes to effective communication, both internally within the organisation and externally with clients and partners. Ineffective communication is a common dysfunction that can create vulnerabilities in the business and can inhibit an SME from scaling up. SMEs need to implement effective communication tools, skills, and approaches to reduce internal uncertainty, stress and conflict, and to maximise external engagement with existing customers and prospective new contacts.

Communication affects all areas of the business: how you interact with prospective and active customers; how you communicate internally between teams; how knowledge is utilised; how leadership cascade key messages to managers and teams; and how you present your products and services to the market. All team members need to understand the vision for the business, the concept and delivery elements, their roles and responsibilities and the targets and KPIs against which individual and business performance will be measured and managed.

The effectiveness of internal communication (i.e., between teams or functions) impacts productivity and efficiency. For example, if communication between the customer, sales teams and production or service delivery teams fails, issues such as time delays, re-work, increased costs and falling customer satisfaction can all negatively impact the profitability of a given project.

In turn, the effectiveness of external communication directly impacts sales productivity and the ability to generate demand, particularly the ‘right kind’ of demand. For example, an unclear offer (one too focused on features rather than benefits and lacking clarity of customer profiles) means it is more difficult for sales teams to productively focus their time on customer profiles with the highest conversion rates and best financial yield. This creates inconsistent and unsustainable demand generation, produces less profitable customers in the pipeline and makes sales targets tougher to reach.

Planning and building a coherent internal and external communication strategy requires an SME to have a level of dynamic capabilities to sense and seize new unmet customer needs and market opportunities. Strategically, effective communication is key to ensuring consensus in teams and being able to set the direction of the business in a way that everyone in the organisation can understand. As a key element of effective leadership, having clarity of vision and focus reduces uncertainty and gives confidence to managers and operational teams. When communication is effective, all employees, managers and stakeholders can share a cohesive vision improving performance and profitability.

The SME Productivity & Innovation Centre has worked with over 200 SMEs in Lancashire and the Liverpool City Region since 2018 to address exactly the types of issues and inconsistencies described here, helping SMEs drive on average 29% growth. Until June 2023 places on the Rapid Innovation Sprint Programme are fully funded via the European Regional Development Fund. If you recognise these challenges in your business, then we would be pleased to discuss if we can help.

Julie Strahan, SME Growth Expert, Edge Hill University SME Productivity & Innovation Centre