“If we were a big company, we would own the building, we would own our own data centre, and we would have enough professionals to handle our own email centre. But we are small, so we can’t own and therefore we have to deal with suppliers. Big suppliers.”
Let’s start with a scenario: Buying an accounting/ERP package. When you are a big company with hundreds of employees, you have existed for a while and are therefore set in your ways of doing business. Part of you doing your business a particular way is governance, making sure that everything is done in time, within a specific budget and free of corruption and malpractice. You have streamlined certain aspects of your business to deliver faster, or you have implanted certain technologies to deliver cost-effectively.
For that reason, when you buy a accounting or ERP package, you want to make sure that your package can be fitted to your business, and not that you have to fit your business to the way the package works. If you buy from a large company, they deliver the package in the thousands, which means they are probably not willing to change the package to your needs. If you buy from a smaller company, however; then the money talks louder, and you can modify the package to fit your unique business needs. As a large organisation, you have the resources to manage this modification, including project– and change management and testing the package properly. You are in control.
If you are big, buy small.
If you’re a small company on the other hand, you are actually looking for ways of improving governance. So as a small company you actually want to start implementing governance by doing it the way that it is done most successfully. If you are going to get an accounting/
ERP package, you want the one that is sold the most, giving evidence to be the most successful package. That of course also means that such a highly successful package comes form a highly successful company, that it is by now a large company. That company will continue to innovate and find best practice around its processes to continue improve both their product and their market share.
If you buy from a small company, you cannot safely assume that the product has the same success behind it, and you most likely don’t have the resources to manage it, yet. The smaller company will offer to implement whatever change you would like, but as a small company you don’t know what you want, you just want the best way of processing business.
If you are small, buy big.
This example was based on supply of a software package, but I found this principle true with almost every dealings we have here at MEDO. We used to use a smaller internet company to host our email server, but the email server kept being blacklisted, since other clients of the company used the same email server for spamming. We considered to run our own email server, and while we have our own servers co-located with a large data centre where we run many of our own services, we are not yet ready to tackle the pressure of running an email server effectively. Today we are using the world largest email service provider and it runs like a dream.
We have one of our incubators located at a place where the internet access was advertised as cheap and fast. It turned out to be a nightmare, not very cheap and not at all fast. We built the incubator around the supposition of cheap and fast internet, so now we can’t just move it. We can’t even get any of the big internet access providers involved, including Telkom to save the day as the building has its own provider with a monopoly over the location. We went against our principle and chose to go to a small landlord using a small internet provider. It’s a lesson you don’t need to learn twice, so in Cape Town our landlord is one of the largest in the country and our internet access providers are without a monopoly. We first negotiated with a smaller landlord, but during the process our legal council warned us about the contract being very one sided contract. There were stipulated clauses in the contract that the landlord had unilaterally stricken after the contract was signed, wherafter we were advised to report them to the police for fraud.
If we were a big company, we would own the building, we would own our own data centre, and we would have enough professionals to handle our own email server. But we are small, so we can’t own our own, and therefore we have to deal with suppliers. Big suppliers.
I have many other examples: We used to rent cars from a small/medium sized company, that rented out cars for less, but they eventually turned out to be more expensive. Today we are AVIS preferred customers. We used to buy the cheapest laptops on promotion, today we have given most of our staff Apple MacBooks. In our 4K studio, we decide to go for Sony Professional equipment, instead of the cheaper Blackmagic Design equipment. We buy our IT equipment straight from the large ICT distributors. We import all our photo-, video-, and audio gear from B&H in New York, the world largest in the field. We import the technology we use in scale directly from suppliers in China. Our Magazine is printed by one of the largest printing houses in Johannesburg. While we do not source products or services from small suppliers, we incubate, train, and otherwise deliver services to small business and train them how to deliver to large businesses. This we do as part of the MEDO Supplier Development Programme.
The MEDO Supplier Development Programme
This programme focuses on the particulars of delivering to large companies; companies as explained above, already have their governance in order, and therefore require some governance from businesses who delivers to them. This governance includes special documentation, such as BBBEE certification, compliancy proofs, tax clearance certificates and most of the time a completed set of forms allowing the supplier to be registered with their client. Understanding how a large company operates when you have never worked in one or supplied to one, can be difficult. When you supply to a consumer or to a small company, the payment comes from the owner, and it is easy for the owner to just accept or decline to pay. But when your payment comes from a large company, the person doing the payment is an employee, and the money paid is not his or hers. For that reason, there are specific governance in place to make sure that payment is done correctly, without waste, incorrection or fraud. Understanding this fact will also make the small supplier understand, that payment can take time and be delayed if the invoice is not 100% correct. The programme covers many other aspects, such as scalability, just-in-time operation and project management to name a few. Small businesses should buy and sell to large businesses, making them growing faster… Professionally.