Introduction:
Many large customers within the productive sectors of the economy have often struggled to identify and develop new local suppliers, due to limited resources, incomplete information, and the specialised expertise required to develop small businesses efficiently and effectively. On the other hand, challenges for small businesses consistently fall into two categories:
- Accessing large, sustainable, and growing markets; and
- Rapidly upgrading and scaling operations aligned to customer needs.
Thus, recognising these challenges for both large customers and small businesses, BMA developed and launched the Business Accelerator. Now in its fifth round, the Business Accelerator facilitates an innovative approach to identify, connect, and unlock mutually beneficial commercial opportunities between SMEs and large customers. In other words, the Accelerator bridges the often difficult, uncertain, and frustrating gap between high-potential suppliers being identified and purchase orders being placed.
Local Sourcing Opportunities:
As leading enterprises in a value chain establish their growth strategy, a natural next step is to consider who to partner with to support that growth. This typically involves growing the capacity of the high-performing existing local supply base and identifying and developing new local suppliers. Ideally, these existing and potential new vendors need to unlock opportunities in one or more of the areas outlined in Figure 1 below.
Figure 1: Primary opportunities for corporates pursuing local sourcing
Challenges in finding and working with SMEs include the following:
- How to cast a wide enough net to identify potential vendors outside of known networks.
- How to screen large numbers of potential vendors efficiently and effectively to identify a shortlist of promising candidates.
- How to rapidly identify likely winners to avoid wasting resources on potential vendors that do not offer long-term growth potential.
After considering the relative importance and specific needs for transformation, localisation, and strategic capability, the next challenge is to identify enough high-quality and appropriate vendors to potentially partner with. Once appropriate potential vendors have been identified, further challenges emerge in the categories outlined in Figure 2, especially when seeking to partner with Small and Medium Enterprises (SMEs).
Figure 2: The 6C’s to unlock commercial opportunities with new vendors
Commercial opportunities cannot be unlocked until deficiencies are resolved in what the Accelerator terms the ‘6C’s to unlock commercial opportunities with SMEs,’ which include the following:
- Commitment: Is the vendor determined to add value and demonstrate their potential to their customer, including a bias for action towards solving customer problems?
- Capability: Can the vendor provide the product or service as per customer requirements?
- Competitiveness: Can the vendor meet the required price, quality, reliability, flexibility, logistics, and new product development requirements?
- Compliance: Does the vendor fulfil the necessary financial, legal, labour, health and safety, sustainability, product specification, and other compliance requirements?
- Capacity: Can the vendor supply sufficient volumes required?
- Cash: Is the vendor able to manage appropriate cash reserves for raw materials, working capital, and/or investments for expansion?
Our Business Accelerator is uniquely designed to understand the specific needs of lead enterprises (large customers in an industry), identify a large number of SMEs interested in becoming suppliers, efficiently filter this down to a promising shortlist aligned with the lead enterprise needs, select the most promising in collaboration with the lead enterprise, and then support the chosen SMEs to overcome the 6C’s and develop into meaningful suppliers. This is done over eight phases, summarised in Figure 3 below.
Figure 3: Accelerator Overview
What makes this Accelerator model different?
The Business Accelerator offers six key points of difference, which are summarised below. These points are briefly summarised in turn below.
SME selection driven by customer need
Before proceeding to locate and engage with any SMEs, the Accelerator seeks to first understand what the lead enterprise’s (i.e. the customer’s) needs are. All subsequent phases of the Accelerator are then geared towards delivering on those confirmed needs. This is distinct from many other SME development programs that seek to identify what is deemed to be ‘a good business’ without clarity on what the ultimate customer needs are.
Competitive placement of SMEs
The Accelerator is structured to identify high-quality SMEs who are prepared to demonstrate their potential to prospective customers, as opposed to simply identifying SMEs requiring support. The Accelerator solicits a high volume of applicants through several networks and media channels, efficiently screens the SMEs to identify high potential candidates, supports those SMEs to put their best foot forward as they demonstrate their potential to customers, and then uses an innovative dragon’s den model where the customers themselves are the ultimate selectors of high potential candidates. Each of these phases is designed to ensure SMEs must compete at multiple levels to succeed in the Accelerator, leading to superior results.
Upgrading is customised to unlock specific opportunities
Many SME programs improve or upgrade SMEs according to a generic methodology and then try to match them with customers (if at all), with mixed results at best. Instead, the SME Accelerator customises upgrading projects based on the nature of the identified commercial opportunity, resulting in superior conversions of high potential SMEs to realised commercial opportunities with tangible outcomes.
Efficient expenditure for high impact
Due to the early focus on high potential SMEs, the Accelerator significantly reduces wasteful and fruitless expenditure, as efforts are directed only towards SMEs with a high probability of meeting the desired outcomes. This efficient spending is further amplified by upgrading activities being tailored to unlocking the identified specific commercial opportunities, as opposed to generic business and entrepreneurial coaching. Thus, resources are focused on the right SMEs and the right upgrading initiatives.
Maximise impact of BBBEE spend within the value chain
BBBEE points can be secured through various mechanisms that have been made available by several entities and enterprises, often tangential to the core business of a lead enterprise. The Accelerator, however, provides an opportunity to direct BBBEE spend towards capacitating and aligning a lead enterprise’s value chain to directly support its growth strategy. This ultimately results in a far more strategic use of BBBEE expenditure as an enabler of its growth, as opposed to a distraction from it.
Maximise BBBEE scorecard through one initiative
Often, enterprises seeking to optimise their BBBEE scorecard are required to set up and manage several initiatives to secure the necessary points in different areas. The Accelerator reduces this burden by providing one initiative to secure BBBEE points in the Socio-Economic Development, Enterprise Development, Supplier Development, and associated Bonus point categories depicted in figure 4 below.
Figure 4: BBBEE categories where the Accelerator provides optimisation opportunities.
The Accelerator has demonstrated its ability to unlock commercial opportunities between small businesses and large customers, with significant benefits to the local economy and society. Since 2019, more than 100 new commercial commitments have been unlocked, adding up to more than R150 million in new revenue created in the first year (typically growing significantly beyond this first year), and more than 1,000 new jobs have been created. Finally, for every R1 invested in the Accelerator, R4 in commercial opportunity has been created, highlighting the Accelerator’s resource efficiency and multiplication effect within the South African economy and society. A great example of an SME which has benefited from the Accelerator can be found here.
How to get involved:
With continued support from public sector funders and large corporates, demand for the Accelerator has grown significantly since its launch. For small businesses, it’s a rare opportunity to demonstrate their potential to large customers in their sector. For large corporates, it’s a unique way to find and develop future local suppliers while simultaneously optimising B-BBBEE outcomes.
Lead enterprises and any other stakeholders interested in partnering with the Accelerator are welcome to contact Accelerators@bmanalysts.com for more information.