SBSI Wave-5
By looking at how small businesses score on each sub-index of the SBSI, a more detailed picture emerges of their strengths and trouble spots. Small businesses are struggling the most with Marketing and Innovation, earning the equivalent of a ‘D’ on this sub-index (see Figure 5). This area has dropped significantly over the past year, from a 68 in December 2009 to 65 in June 2010, where it remains unchanged in January 2011. A major area of deterioration in Marketing and Innovation is a drop in the perceived ability of small businesses to compete with bigger companies (discussed later). The Workforce sub-index also experienced a decline in the past year, dropping from 79, the equivalent of a “C+”, to 76, the equivalent of a solid “C”. The Customer Service sub-index dropped as well, but is still a key strength of small business.
Other areas are unchanged from a year ago, including Capital Access, a critical area where small businesses are at a continued competitive disadvantage. At the other end of the spectrum, small businesses continue to excel at Compliance, and get by with Technology.
Figure 5
What are the top priorities for making small businesses more competitive? By comparing the importance of each sub-index with its overall score, it becomes apparent which strengths and weaknesses have the most impact on the ability of small businesses to succeed in the future. The quadrant below (Figure 6) provides this perspective by comparing performance on each index dimension with its importance.
Figure 6
The quadrant map reveals just how important Capital Access is in affecting the ability of small businesses to compete. The recession hampers small businesses’ ability to secure funding for their short and long term needs, which in turn restrains their ability to grow and compete effectively. The map also reveals that Marketing and Innovation is not just a weak area, but a highly important one. The prolonged weak economy has finally started to undermine the confidence of small business owners to stand up to the big companies that compete in their industries. One solution may be technology-based marketing. The later discussion reveals how small business is rapidly embracing social media and reinvesting in internet business solutions as a way to attract new customers and engage existing customers.
The Workforce dimension is classified in the quadrant labeled “less important, performing well.” As noted previously, it has slipped in performance, which may pose a problem as the economy recovers and hiring increases. Small businesses plan to add over three million jobs in 2011, but face challenges in competing for new people and ensuring existing staff are well trained and productive.
Computer Technology has borderline performance, though it is not the most important success driver. Small businesses continue to perform well in the less important areas of Customer Service and Compliance.
The next section takes a more in-depth look at the factors driving change in each of these six areas, which sheds light on the pain small businesses are feeling due to the economy and where they need to work to bounce back as the recovery commences.
Factors Contributing to Competitive Success
The six areas of the index include individual attributes that contribute to small business success on the dimension and shed light on where businesses are failing or doing well (see Figure 7). Within the important area of Capital Access, small businesses struggle to get enough capital to make investments (only 36 percent are highly successful) and fund day-to-day operations (48 percent), and this has not changed much over the last year as the recession took hold. Small businesses do better in getting financial advice for their businesses.
Google+
