Steinbeis experts help SMEs shield themselves from market volatilities and inaccurate risk assessments
When crises become part of everyday life, it is important to be prepared and resilient against such threats – especially for small and medium-sized enterprises. Help in this area is available from the experts at the Sales and Marketing Institute (VMI). As a Steinbeis Consulting Center, the VMI has developed a model called Sales Risk Anticipation Management, or SRAM, to support SMEs in identifying the individual risks faced by their business and, based on this, make the right decisions when it comes to marketing and sales strategies.
Image 2: Risk maps highlight the areas of strategic risk facing a company
If you follow business developments in Germany, you’ll be familiar with the collapse of the drugstore Schlecker, the insolvencies of Galeria Kaufhof, and of course on a wider scale the undoing of the Nokia and Kodak business models. Was the war in Ukraine actually foreseeable – or conflict in Taiwan, the current energy crisis, climate change, or the coronavirus pandemic? Why is digital transformation still being implemented so badly in Germany and failing to pick up momentum? Why are people still surprised at current demographic developments, the resulting skills shortage, or challenges posed to social security systems?
Many business responsibles and policy makers knew and suspected that the business models they ascribed to were outdated, that numerous products were in danger of becoming obsolete with the emergence of superior solutions, that geopolitical upheaval was imminent, the dependency on certain supply chains were obvious, that there was an urgent need to take action and safeguard social systems, and that sooner or later humanity would be struck down by a pandemic – unless, of course, preventative action was taken. At least 90% of all the cases that have just been mentioned are ultimately self-inflicted and homemade, because no action was taken – despite what was already known. The consequences were unmistakable, and still are: wide-scale commercial and macroeconomic damage, brands and companies vanishing, and many, everywhere, openly lamenting their misfortune.
The challenges faced by SMEs
The coronavirus pandemic and the war in Ukraine have shown that many sales organizations have not prepared themselves for crisis situations. Also, overnight all access to markets can be denied. The above examples also show that there are many uncertainties and factors that have an enormous impact on the business of small and medium-sized companies that affect sales and marketing. They include: being dependent on individual customers, markets, or products; new competitors entering from entirely different industries with disruptive innovations; cost and demand volatility; and changes in the roles of stakeholders in the value chain, such as wholesalers becoming producers themselves or selling directly to end customers.
Small and medium-sized enterprises are particularly unlikely to hold sufficient resources to conduct comprehensive and discriminating assessments of their market environment – of their own company. As a result, it is important to put the right mechanisms in place to anticipate risks. Tailored to the needs of SMEs, such tools offer significant benefit and can be implemented with only moderate levels of resources.
From transparency to strategy – the Steinbeis SRAM model
The experts at Steinbeis have recognized this need and developed a model called Sales Risk Anticipation Management (SRAM), the aim of which is to allow companies to identify individual risks facing their business in order to develop suitable strategies and measures.
As a first step, the Steinbeis experts work with the client company to analyze current risks or threats to the business. It’s important at this stage to ascertain how resilient or exposed the sales organization is to external influences, such as any developments with an impact on markets, customers, or business models.
To do this, a standard checklist is used based on known facts. This forms the basis of a risk map, which highlights areas of risk (risk clusters – see image 2). These include, albeit not exclusively:
- Business risk: To what extent does my business depend on individual customers, regions, brands, or acquisitions? Do I face risks in the supply chain?
- Earnings risk: How price-elastic are my products?
- Process risk: How am I faring in terms of digitech? Can my employees analyze business data in different ways, looking at all factors?
This is followed by a workshop to revisit external and disruptive factors relating to the business environment. The next step is to evaluate risks and define strategies aimed at mitigating risk. By the end of this consultation process, the company has defined its own strategy, complete with an individual action plan to address high risk areas.
From strategy to management
What would a strategy be if it wasn’t implemented?. The Sales and Marketing Institute has set itself the goal of ensuring risk management for SMEs is standardized, repeatable, measurable, and controllable. This ensures that changes over time will be transparent and success is evident for all to see.
The benefit of using the SRAM model is that two-thirds of all questions posed in the workshop can be quantified using internal company data. This is also why the Steinbeis experts brought CAS Software on board. CAS is a leading company in the German Mittelstand sector specialized in customer relationship management. Its jointly developed solution for actively managing marketing and sales risk includes a risk analysis based on a standardized and continuously adapted questionnaire, a risk assessment workshop focusing on marketing and sales, and the development of a strategy and action plan using the CAS cockpit (Image 1), which is based on company data. This enables SMEs to gain transparency when it comes to the business risk they face, to continuously measure quantitative targets and assess the implementation of action plans, to initiate countermeasures, and to return to this process once a year in order to reassess risks in marketing and sales on a regular basis.
Contact
Franz Speer (author)
Freelance Project Manager and Senior Partner
Steinbeis Consulting Center Sales and Marketing Institute (VMI) (Göppingen)
Dusseldorf Office
www.steinbeis-vmi.de
Markus Deutsch (author)
Senior Partner
Steinbeis Consulting Center Sales and Marketing Institute (VMI) (Göppingen)
Office Stuttgart/Karlsruhe
www.steinbeis-vmi.de