10 Observations on the Future State of European Small & Medium Businesses
“Three concurrent forces are re-sculpting the nature of work and what constitutes a company in the most dramatic ways in over a century.” – Rishad Tobaccowala, The Future Does Not Fit in the Containers of the Past
“What’s next?” A simple question that, given these times, becomes complex quickly. When the question relates to work and businesses, people’s confidence in predicting “what’s next?” is wavering, especially when layering on the three con-current work forces Rishad alludes to (in his brilliant blog): technology, demographics, and the pandemic.
The question can be paralyzing, but when it comes to European SMBs, and the big brands that market to them, there are indicators that can help predict, with some confidence, their “what’s next?”.
These 10 observations are our preliminary perspectives to help lay the groundwork for 2022 and beyond for marketers, brands, and their ecosystems. We’ll continue to dive deeper and evolve our points of view as what’s next evolves for us all.
#1: SMBs confidence is growing, which is good news for the European economy
Given 99.8% of all businesses are SMBs and they account for over 50% of Europe’s GDP, the health of SMBs has a direct impact on Europe’s economic health. The good news is SMB owners and decision makers are positive about their future which means they’ll have a growth mindset, i.e., in buying and investing mode — a positive indicator for brands and marketers.
#2: Different times breed new challenges
While finding customers continues to be a top challenge for SMBs (18% rank it #1), finding skilled staff and experienced managers has become pain point #1 for 27% of SMBs. And it’s even higher for medium businesses at 32%. There are a lot of differing opinions about what’s driving staffing challenges (we plan on sharing our take soon), but one thing everyone tends to agree on is it’s not just a pandemic phenomenon. Which means this #1 challenge will continue to impact Europe’s SMBs in the months and years ahead and they’ll be on the lookout for help and support.
#3: Remote work is here to stay
In a 2021 North American study, we found over 40% of SMBs planned on making remote work a permanent option even after Covid. The future of work for European SMBs will exceed that number. And not because SMBs may want it, but because their employees demand it. Tied to observation #2, keeping or retaining talent is requiring SMBs to rethink where, when, and how work gets done.
#4: Consumer behavior shifts will continue to accelerate digital transformations
Dramatic shifts in consumer behaviors over the last few years have accelerated SMBs’ needs to digitally transform their business. SMBs have known they needed to digitize their products, services, operations, and experiences. But some, who continued to succeed in an analog world, realize it’s a matter of survival now. From touchless payments and experiences to automated processes and frictionless omnichannel shopping and buying, SMBs over the next 12 to 24 months will continue to reshape their existence. This means they wil continue to need help from brands during their transformation journey.
#5: SMBs act on emotion, now more than ever
Our mantra for 15+ years has been “if you want an SMB to act, you need to get them to feel first.” Businesses don’t buy from you — people do. And humans are innately emotional creatures. What we’ve all been through the last 2 years has only strengthened that belief. An emphasis on human connections, values, and purpose will drive SMB decision making and who they do business with even more going forward.
#6: Employees demand to be heard
Part of the emotion and drive toward more purpose-driven decision making and business relationships is coming from the European SMB workforce, not the owners and decision makers themselves. Gen Y and Z are increasingly becoming much of the SMB workforce and these generations want a say in who their employers do business with, and they aren’t shy about voicing their opinions. They expect SMB suppliers’ values to align with their own personal values. And while owners still lean Gen X and Boomers, the new workforce will only see their influence grow in the future as more and more become owners and decision makers themselves.
#7: SMBs are looking to regain control
SMBs have always been proud of how they were macro-influencer-proof. While things like taxes, economic and political shifts, and regulations impacted their business, they did not solely dictate their success. Because macro-influences be damned, they could rely on their skills, tenacity, and efforts to succeed. However, that all changed over the last 2 years in Europe. They lost a lot of that control of their own success and destiny. And going forward, they want to regain that control while also making sure they are even more macro-influencer-proof.
#8: Business formation is evolving
What constitutes a business or a start-up will continue to evolve over the next few years. Between the rise of the gig economy driven by younger people starting side ventures and start-ups — not starting in a traditional brick-and-mortar office — it will take different strategies and approaches for brands to know when SMBs begin. This is critical because building a relationship with an SMB at inception means your relationship can grow alongside them, versus the more expensive and inefficient approach of conquesting them from your competition.
#9: Speed to market meets speed to marketing
The pathway from idea to business inception continues to accelerate thanks to technology, economic developments, and the ease of starting a business. So, when you couple this with point #8 above, the demand for agility from big enterprise marketers will continue to increase. SMBs have learned to rapidly pivot over the last few years to meet consumer and market demands, and now enterprises need to follow suit and behave a little more like the SMBs they want as customers.
#10: Think ecosystem vs routes to market
The future shopping and buying behaviors of SMBs are driven by the same consumer shifts they have adapted their businesses to match (remember point #4). This means SMBs are going to buy from routes that give them the most value and best frictionless experience. The days of big brands controlling the buyer journey or pushing SMB buyers towards more profitable routes is over. Going forward, European SMBs will gain, and demand, more control on how, where, and when they shop and buy from companies. For big brands, think less about right place, right time, right message and think more about every place, every time and one message if you want to win the hearts, minds, and pocketbooks of SMBs in 2022 and beyond. Because one thing is for sure, it’s not going backwards.
This list is in no way exhaustive. Our team will continue to observe, listen, and talk to the SMBs that exist in Europe today. Maybe not all 22.6 million of them, but enough to help us continue to track and predict not only their “what’s now” but most importantly, their “what’s next.”