Kerala SMEs – Is there fire in the belly?

The last few weeks saw me get involved with the Small and Medium Establishments in the Coir sector in Kerala. Cluster Pulse, a nodal agency funded by a consortium of international and national financial institutions, is spearheading the efforts to bringing in professionalism, business acumen, marketing savvy, structured financing, and efficient production practices into the coir business. They act as the via-media between the entrepreneurs and the vendors for a variety services. There are one-to-one interface sessions and knowledge upgradation through mass contact. Cluster Pulse provide consultancy services, arranges funding through financial institutions and they subsidise developmental activities such as training. They also fund technology upgradation through subsidies and R & D support.

But who is biting?

The Coir Industry in Kerala is centred at Alleppey, situated some 60 km from Cochin, which is the Commercial Hub and the port through which the produce reach the world.

The Malayali (the people from Kerala are called that because they speak Malayalam) is known the world over because he has taken on jobs or migrated to practically every corner of the planet. I guess the lack of space and opportunities in his homeland has made him spread his wings and seek work elsewhere. A popular joke doing the rounds is that when Neil Armstrong landed on the moon he met a malayali who was running a tea-shop there – such is their quickness in sensing an opportunity. But you notice that it is only a tea – shop and not a restaurant or a mall or a factory. Therein lies the problem – the malayali is a marginal player, and not one in the centre of the circle. Big seems bad for the malayali.

The malayali somehow stops short of thinking really big! He does enough to get a comfortable life for self and family – he loves to amass assets such as gold and real-estate; however tell a malayali to invest in big business or take a huge risk and you will soon find that you are barking up the wrong tree.

Malayalis have been successful in business but they are more comfortable working for someone else or taking on careers as professionals – so it is not uncommon to find a malayali engineer, doctor, architect or even as a civil servant (many Indian Prime Ministers have has malayali secretaries), you will even find many who are traders or restaurateurs; but look in the world of big business and you wouldn’t find many names from Kerala.

I am not suggesting even for a minute that there are no malayali businessmen (Oh, there are many), but like their brethren in the workforce they tend to play it safe. The world of high-risk business is not for these people. So while the Mittals and the Ambanis stake out crores on new ventures the people from Kerala think in 1000s or maybe 100,000s!

Kerala has thousands of SMEs to prove that the people here have inclination to do business – but go to the realm of big business and you will find that many of them are either run by Government (Public Sector Undertakings) or even people from outside the state (Gujarathis or its a production unit of some Indian / International MNC). There are Keralites in the big league too but few.

The malayali loves to provide the ancillary support, takes up job work, offers technical support or even take on outsourced jobs; but you would not find many malayalis in green field projects, new research, software development or large scale ventures in any field. The story is repeated in every sector – it feels strange to say that it is not in their blood?

Take the Coir Industry as an example and you will find less than a dozen really big players and the rest are essentially doing job-work to cover the business generated by the Top Guns or some intermediary (who is a consolidator for a big trading house or retail chain). There is little effort to innovate; it’s the same old pattern being sold year after year. The SMEs do not have a business development team – they do not know where their products go and who their users are – they simply fulfil the orders placed on them by a mediator. There is no effort to innovate in production practices or to improve quality of their produce or even to try alternate material. They supply the same old material and then complain that the customer does is not want their goods because they have found other source at lower cost. But there is no real effort to correct the ills. It’s the same old diminishing returns story, each year sees dip in margins and a drop in business. So people like the Cluster Pulse have to fight hard to change the mindset of people here.

The Government of Kerala which has declared the coir sector as a major industry in the state, because it provides labour to tens of thousands of workers, and yet allocates very little funds for its development. The allocation is less than Rs.50 crores for this sector for a year. How do they expect it to grow?

While there are close to 2000 co-operative societies producing coir products, the number of big units run by private owners is less than 20. Of course most of these societies produce for Government emporia across the country or work as job-work units of the larger production houses. This is because they have poor marketing infrastructure and very little R & D. It is more of the same happening month after month, year after year. If there is any change it is marginal.

Even the private SMEs are largely job –work units because they either don’t have the financial muscle to find their own market or are too complacent to try. I know a case where a marketing agency from Cochin personally took a small manufacturer to Cochin, which is an hour away by bus or train, and got him some orders from the wholesale market there. They just had not tried because they did not wish to look for change.

I believe there is huge opportunity and room for growth not just in coir but in many of the sectors that SMEs operate in. What is needed is a huge dose of belief, confidence and interest to change their current reality.

That calls for a major change in the mindset – all growth is fraught with uncertainty; all business, whether big or small has risk attached to it. But one can minimise by making a proper business plan after assessing own capabilities and the market and by implementing the plan in a systematic manner. The SMEs have a lot of room for growth and they have support from Government, even if it is small, and from nodal agencies like Cluster Pulse. So they need to make a move now. Believe and venture forth!

I wonder what it is that stops them for going from taking on large projects. Is it just risk aversion or fear of failure stemming from lack of experience (culturally) or that they are satisfied with less. Does the malayali lack fire in the belly – what stop the world conquering malayali from conquering himself. Is he a victim of his own past? They have had a protected history – no wars or upheavals and even Mother Nature has been largely kind to this state. Maybe therein lies the problem. The malayali has not faced poverty, scarcity or adversity and maybe that is making his complacent. Or is it?
I am looking forward to a huge line-up of new malayali entrepreneurs, particularly from the SME sector taking on the challenge to strike it big and prove me wrong!

We need more fire in the belly!

Jayadev Menon