I recently interviewed Konkala Suryaprakash Goud who discussed how small businesses in India are expanding their market opportunities through collaboration.
1. Please provide a brief background of yourself
Suryaprakash Goud is a post graduate engineer in plastics engineering with 16 plus years of experience in (Small and Medium Sized Enterprise) SME promotion and development. His basic degree is in mechanical engineering. He is currently working with the National Institute for Micro, Small and Medium Enterprises (ni-msme), in Hyderabad, India. Goud is associated with more than 25 cluster development projects where they invite SMEs onto a common platform to take them through various interventions. For example, they work together to grasp common opportunities.
2. What does it mean to collaborate in business?
Goud and his team works in 2 areas: 1 SMEs and 2. manufacturing enterprises. They encourage collaboration for common mutual benefit because sometimes for an individual enterprise to invest requires a large amount of capital to create R&D facilities, etc. It may not be viable for them, even if they have funds available.
In cluster enterprises, we encourage entrepreneurs to collaborate for mutual benefit and to come out of their problems. As a group of enterprises they come together at a common facility and utilize the common services to cut down their costs. In rural clusters, we encourage for collective procurement and marketing to cut down cost and improve revenue and profits. Similarly, if they want to reach global markets as individual enterprises, it is difficult. However, when they come forward through the government of India, they support them to participate in global trade fairs where they send them as a group with required materials. Once they get an order, a group of enterprises together execute the order. It can also help the cluster enterprises to handle the shipping, quality and price of products for global customers.
We create a common infrastructure with the latest tools and equipment which is difficult for individuals to invest in by themselves.
3. How can companies improve their collaboration efforts?
We are implementing number of schemes to support rural craft persons as well as traditional and hi-tech industrial clusters. We use small workshops to help them understand the benefits of clustering. We share our experiences and use the results of other interventions and the interactions of stakeholders of other successful clusters. This helps them understand.
In the workshops we invite stakeholders from other clusters and explain how others have done things, how they have taken intervention, and how the cluster approach facilitated them. This includes things such as common procurement, common marketing, creating common facilities, etc.
Once they interact with other stakeholders/cluster enterprises and see the results, they will understand. They will come forward to take advantage of this cluster approach. Initially, the government of India supports them in capacity building to create knowledge about cluster development for the entrepreneurs.
Also, in the creation of common facilities, most of the time the government of India will support 70% to 80%, the remainder is the responsibility of the entrepreneurs. There is an advantage which definitely helps the entrepreneurs who come forward.
4. Where have you seen collaboration successfully implemented? What were the results?
One of the rice milling clusters in the Strait of Haryana a number of associations were supported through cluster development. A number of enterprises took advantage of this. We took up interventions related to energy auditing. Significant savings were reached for the group of enterprises.
Similarly, in the rice milling clusters there were a lot of problems with broken rice. With the intervention many of the units reduced the amount of broken rice dramatically. A savings of roughly 20 Crore Indian Rupees was realized ($4 million USD). They also participated in an investment trade fair and visited China, which is a major competitor for this particular cluster. When they understood the need for technological innovation, the entrepreneurs invested roughly 350 Crore Rupees ($71 million USD) to modernize their technology.
This helped them improve the quality of their final products. Productivity improved and costs of production were reduced by roughly 10%. Savings in energy of roughly 3 Crore Rupees ($0.6 million USD) were realized in 3 years for 13 rice mills undergoing energy auditing. Product packaging was also improved.
Another important development in the rice cluster was that one of the bankers has looked at the impact of this cluster after intervention. They mentioned that there was roughly 1,300 Crores ($264 million) financed by the enterprises as a result of these interventions. There was a tremendous improvement in the investment path and credit flow. In addition, production improved by 450%, as found by the banker’s investigation.
Over 95% of the entrepreneurs expressed that quality and productivity increased dramatically. Most of the entrepreneurs who were working in small groups came to the common platform to work for the development of the cluster. Due to modernization, many of the clusters came out of the problem, especially in terms of broken rice. This led to opportunities to export to other countries, especially in the Gulf and Middle East.
Regarding the energy auditing cluster, there were roughly 221 units. The turnover was 1200 Crores ($244 million USD), of which 700 Crores ($142 million) were exports. Employment numbers were roughly 11,000 before the intervention.
In one of the rural clusters where they were producing tribal handicrafts they invited an expert from an NGO from Germany. The designer helped by adding value to the base material. In another cluster related to pottery incomes increased to more than $6 per day. Through clusters were obtain cost reduction, quality improvement, infrastructure development, new designs and processes, new markets and customers are some of the achievements.
About Konkala Suryaprakash Goud
TECHNCIAL ADVISER at NATIONAL INSTITUTE FOR MICRO SMALL & MEDIUM ENTERPRISES