WHEN you are a small player, people tend to take advantage of you and demand more from you than you are able to give.
In this case, we are talking about small and medium enterprises (SMEs) being exploited by their clients.
SMEs collectively represent one of the main engines that power a country’s economic growth. However, they are also vulnerable to being pushed into business practices that they were never destined to do.
This is often manifested in a client’s demand that an SME divulge its ideas and strategies; often this is much more than what the SME had originally anticipated or was even stated as a condition precedent.
Case in point: After many rounds (and years) of negotiations for a large deal, the potential client said to the SME’s representatives: “I have done all this work for you, and you will end up getting this project, but all I get is mee siam?” One of the representatives, who was presumably trying to be hospitable, replied that the potential client could order other dishes that were available on the menu, if the mee siam was not satisfying enough. The SME’s representative’s colleague had to kick him under the table to shut him up as food was not what the potential client was driving at!
What the potential client meant was that he had done a lot of work to evaluate the SME’s bid for business, and so should have been rewarded for it with more than just a dish of mee siam. This is despite the fact that the work was well within the potential client’s job scope and it was what he was paid to do by his own organisation. Additional perks were clearly an invisible payment that he had expected.
Such pressure by clients for SMEs to provide things or services that they may not be able to give is becoming the norm in business. Among the popular requests today are for an SME to provide “training” to the client’s staff. This normally entails transferring the client’s staff to the SME for instruction.
In this way, a client is able to quickly learn how to operate and function like the SME. Sometimes, potential clients even demand that an SME provide its staff with on-the-job training overseas. Often, this is nothing more than a glorified holiday from the office, and very little technology or skills transfer takes place.
For SMEs, human resources are a precious asset, one they can ill-afford to waste. Yet some clients will demand that the SMEs dedicate one staff member to solely work on their account, even to the point of spending a few hours every day on their project. This puts a serious strain on an SME’s resources, especially if it has a small workforce to begin with.
Another unexpected demand will be for information – another precious asset of companies. When SMEs bid for business, potential clients usually ask them to submit a proposal before they can be considered for a contract. Such a proposal is really just a way for a company to get one foot into the business door, in the hope that it will lead to a deal or a fruitful, longer-term relationship.
SMEs that are new to submitting such proposals must brace themselves to bare all, as it were, in such submissions. The information required includes details about the company, such as its financials, its shareholding structure, and even what it actually does and how it goes about doing it. The last of these is particularly sensitive for a company because it invariably involves a company’s intellectual property (IP), or marketable ideas.
One specific example comes from the perspective of SMEs that specialise in creative work, such as small advertising, PR or design agencies. These agencies will be invited by potential clients to pitch for a project or campaign. The proposal will be expected to contain specific details of campaign ideas, even down to copy and visuals, at times.
The upshot of such a practice is that a potential client will likely learn all it can from such IP – and then, after absorbing all these lessons, award the job or contract to another third party, sometimes to a friendly company that has no experience in this field at all. SMEs have complained that potential clients would steal their IP by copying bits of it or by plagiarising it outright, word for word.
In the case of the creative agencies, it is not unknown for prospective clients to exploit agencies for free brand positioning, strategy and creative ideas through the pitching exercise. Some agencies receive an unpleasant surprise when they see their campaign ideas – sometimes reproduced in whole – appearing in the media even though the client had not accepted their pitch. Understandably, this is greatly frustrating for the SME community.
Underhanded clients also use another tactic to pilfer from SMEs: this tactic is known as the “Very Important Meeting”, a demand which requires a company bidding for a job to drop everything it is doing and attend to the potential client at once.
In a recent case, the SME brought its entire C-suite team to the supposedly ‘Very Important Meeting’, as they had been given the impression that the meeting was meant to discuss issues that had to involve the SME’s senior team. And yet, after seeing that the SME had brought their C-level team, the potential client retorted very early into the meeting: “Shall we have this discussion at another time then?”
Now, given the haste in which the client had called for this meeting, why would it suddenly want to take the discussion to a less public forum? What was the nature of its demands that it could not discuss at the table, face-to-face with the SME? One can only wonder what was the real reason for calling this “Very Important Meeting”; and why they did not want to have so many of the C-suite personnel. Something to hide perhaps?
Something they wanted to ask for that is best not known to too many individuals? So to SMEs, when you receive a “Very Important Meeting” request like this, beware that something fishy may be afoot!
We are sure that many SMEs have faced the “mee siam situation” such as the one we described earlier in this column; many will probably be willing to share their own frustrating experiences in dealing with current or potential clients.
Given how frequently this occurs, perhaps there should be a special course in business school that teaches SME operators how to deal with potential clients who demand for these unrecorded benefits or requests, because it is certainly akin to industrial espionage, if not worse.
© CORSTON-SMITH ASSET MANAGEMENT SDN BHD 2014