1. Why is it difficult to grow?

“We’re convinced, in fact, that the greatest challenge ahead may be simply keeping up with the demand” was the claim made by a famous CEO, Scott McNealy of Sun Microsystems, before his company struggled and plummet revenues by $6 Billion[1]. Sun Microsystems was a technology company, established in 1982, and it always tried to keep up with and meet client requests, but revenue growth remained a challenge. It contributed to several prominent products such as virtualized computing, thin client, and UNIX, among others, nevertheless, the company was later acquired in 2009 by Oracle corporation.[2] This situation is not unusual in the business world and many of the world’s largest and most important corporations face similar challenges they found difficult to grow.[3]

The inability of the corporates to paddle continuously for the revenue’s growth, increased customer bases, and profits, poses serious threats to their survival, as the corporates with growth survive whereas other companies vanish. The question remains at large why the growth remains a corporate secret, why do some companies such as Walmart, and Amazon, among others have astonishing double-digit growth whereas other star companies heavily struggle in this domain?³ Similarly, why some small and medium enterprises can achieve higher or double-digit growth compared to others? Particularly with the unsystematic increase of the population across different regions, this challenge is more prevalent in the agri-business or bio-economy.[4] A bio-economy is defined as “an economy based on the sustainable production and conversion of renewable biomass into a range of bio-based products, chemicals, and energy”.[5]

For instance, an SME named SweTree, was established with a vision to improve the productivity of the trees based on their innovative technologies and open innovation approach. It decided to produce commercial seed products, which requires companies to face more challenges in terms of designing an innovative plantation method, which requires significant effort.[6] Enterprise built on an open innovation approach and collaborated with forestry companies and other lead customers to convert their research into a viable commercial product to achieve their growth targets.⁶

What is double-digit growth?

Double-digit growth is defined as a growth rate of 10 percent or more during a specific time period.³ For instance, Cargill, one of the major agri-business companies experienced a growth rate of 23% in its revenue to record $165 billion during the fiscal year 2022. [7]

An agribusiness-based SME needs to answer the following questions related to double-digit growth:

1. How much growth of an SME during the last year is due to its entrance into the new market?

Source: Image by Le Moal[8]

2. How much of an SME market share gain is obtained from selling to its current customers contrary to capturing new customers from the competitors?
3. Shall the SMEs grow the market organically or shall acquire competitors?
4. What are the adjacent markets where the SMEs can take advantage of the existing capabilities and how much growth an SME is expected to achieve from entering into those markets?[9]

Challenges for Agri-Business SMEs in achieving double-digit growth:

Most SMEs can’t answer the above questions successfully, however, if your enterprise can answer these questions, your management knows the art and has a disciplined approach toward growth.⁹ Nevertheless, most enterprises’ management considers double-digit growth an upheaval task, a leap of faith, or an accidental achievement in the lab. For these SMEs, single-digit growth turns out to be routine and their management keeps relying on the low growth as they don’t want to change or are in a trap of false status quo. For example, a number of agricultural food SMEs faced issues to attain growth and cannot achieve their target such as Atameken-Agro in Kazakhstan.[10] Even several agri-food-based SMEs in the European Union struggles to continue their operations because of declining profits which pushed them to downsize employees or shut down their businesses.[11] According to the EU’s Primary Food Processors Association, four out of the ten agri-food SMEs in Belgium face the risk to go bankrupt in the current challenging era.¹²

Importance of adopting a discipline growth strategy for SMEs:

The growth has been taken as a wild goose chase or the hands of the GOD by the managers. This growth dilemma is inevitable and avoiding it could hurt SMEs’ vigor and their survival. Once an emerging SME suffers in growth, it may become difficult for it to gain the same status or be on top again in the industry. An SME can build on open innovation to achieve double-digit growth by adopting a disciplined approach, and this strategy is accessible to all firms, not limited to a few as explained below.

1) Base retention strategy: An SME must maintain client satisfaction in this growth plan by attending to their evolving demands.

2) Market share gain: An SME can attain growth by attracting competitors’ customers; however, this type of growth is quite challenging to achieve.

3) Market positioning: This strategy requires identifying markets where your current capabilities give you the advantage to penetrate new markets and then building additional required capabilities.

4) Invade the adjacent markets: SMEs shall target to enter the near market where they can leverage existing capabilities and attain additional qualifications to enhance revenues.

5) New lines of business: SMEs enter and invest in new business lines; however, it requires extensive training and experience to make this strategy work.

Source: Freepik