South Africans expect the companies that people work for and buy from to comply with local regulations or address social issues such as the environmental challenges facing the world. These companies start by making efforts to comply, but some are quick to question the strategic value of addressing the issue at hand.
Over the years, some large SA companies adopted social responsibility programmes. Later, they began to understand these programmes as part of the triple bottom line approach to doing business.
This goes beyond the focus on making profit, and includes social responsibility (to workers and communities in the vicinity of a company’s operation) as well as environmental responsibility (to respect resources such as land and water). Many more companies now appreciate the strategic value of social and environment responsibility.
SA also has regulations that govern enterprise development. A few firms have been active in this space.
For example, when Walmart acquired Massmart a few years ago, one of the conditions imposed by competition authorities was that Massmart spend about R100m on a supplier development programme.
There are companies that have created a network of emerging suppliers. However, most have done so only for compliance purposes.
I believe companies should go beyond compliance and treat enterprise and supplier development as strategic tools. They should use this approach to grow their businesses, whether to develop new products (innovation) or tap into new markets.
By their nature, corporates have scale that gives them an advantage over small businesses. The trade-off is that most become too slow to respond to the changing market conditions, because of the bureaucracy that comes with size.
Small businesses, on the other hand, are agile and can make quick decisions. They can be more responsive to changes in the business environment.
When you bring the two concepts together — scale and agility — you create an opportunity to make enterprise and supplier development strategic to corporates and small businesses.
In their book Design to Grow: How Coca-Cola Learned to Combine Scale and Agility (And How You Can Too), David Butler and Linda Tischler argue that to thrive, companies need "scale and agility": traits that develop by design, not by chance.
They say 90% of start-ups fail. And scale is usually the stumbling block. Start-ups often prove unable to meet growing consumer demand without undermining their product or service quality or their earnings. Without scale, start-ups burn through their funding until they eventually fold.
Big companies usually have the opposite problem. They excel at using the power of their brands, customer base and distribution system to pursue global expansion. They need to cultivate agility so they don’t risk losing their competitive edge in the face of rapid technological changes and challenges from innovative start-ups.
So, a big company can become agile by investing in small businesses while giving those small businesses an opportunity to scale up.
It’s often argued that the biggest challenge facing small businesses is capital to fund growth. Access to capital is a challenge, but the bigger challenge is access to markets, and small businesses will almost always come second to the big companies. Enterprise and supplier development is one approach that big companies can take to open markets for small businesses. They can give small business access to their value and supplier chains.
This would be equivalent to outsourcing corporate entrepreneurship. In today’s marketplace, you must grow while remaining flexible enough to respond quickly to changing conditions.
• Mosala lectures on business strategy at local business schools