Successful SMEs Share Secrets

Rob Klassen September 19, 2017
After interviewing, surveying and studying hundreds of companies over the last two decades, I have observed a number of disconcerting truths about managers who work hard to protect the competitiveness of their firms. One of them is this: small companies hate divulging how they make their products.

Of course, there are exceptions to the rule. But for the most part, in my experience, owners and managers of small- and medium-sized businesses are extremely reluctant to tell others how they have increased worker productivity, decreased energy costs, improved product quality or anything else that could be perceived as a threat to their competitive advantage.

Their secrecy is not surprising, considering the personal investment many business owners have in their companies’ success. Many of them have invested years – if not decades – into building their organization. They may have personal money tied up in the company. And family members may constitute a significant portion of the employee base. With those factors at play, protecting your secrets from competitors seems like the wisest thing to do.

But what if your neighbours aren’t really your competitors? And what if everyone in your local or regional industry is staying silent while international forces erode your market share?

This was the case in Ontario a few years ago when a group of manufacturers realized their greatest competition was not each other but lower-cost producers in China. They formed the Bluewater Wood Alliance to visit each other's factories and to share secrets. They planned long-term hiring strategies, shared research and development, and copied each other’s successes. And they helped solve each other's problems on a shared website. In essence, these “competitors” worked together!

To paraphrase one manager: “Smaller Canadian firms can’t beat Chinese firms on price. But we can get delivery faster and offer better quality.”  Another manager, interviewed for the same article, observed: “I have been shocked and surprised how we have broken down barriers to secrecy.”

While this “cluster approach” to outside competition can’t solve every problem an SME faces, it certainly can’t hurt. At the very least, collaborating with “competitors” can spur creative thinking.

Robert Klassen is a Professor of Operations Management at the Richard Ivey School of Business at Western University. Robert's research interests focus on exploring the linkages between operations and the natural environment, including international operations. This research has emphasized, first, characterizing the pattern of investment in environmental technologies, and second, understanding both the antecedents and performance outcomes of these investments. His research has been published in Management Science, Journal of Operations Management, Academy of Management Journal, and Decision Sciences, among others. He is currently serving on the Editorial Review Board for the Journal of Operations Management. Robert was the Chair of the Operations Management division of the Academy of Management in 2001, and previously served as the Program Chair in 1999.