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Transcript of ProV Conf -Talk 7- Mr.girish Kelkar
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www.pmipunechapter.org 2008 PMI Pune-Deccan India Chapter
Challenges & Risksfaced by SME unitsGirish Kelkar
President PMI Pune Deccan India
Chapter25th Sept 2008
Hyderabad
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PMI Pune Deccan India ChapterVision
Nurture for excellence!
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Some important achievements
Chapter recognized as FASTEST growing chapter in Asia Region
The Winner of 2007 PMI Component Award for Component of the Year in th
world
Our Vice President Shantanu Bhamare, PMP is recipient of Volunteer Of
The Year 2007 Award given by PMI USA for his Leadership & Outstanding
Commitment to PMI Pune chapter and PMI activities
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Objectives of the presentation
Objectives: To give brief about problems faced by SME Units in India (Pune as an
example)
To discuss the following issues from Project Management:
Challenges faced by Small & Medium Enterprises in Pune about implementation
of new ideas and projects
Challenges for Risk Management for these units
To seek discuss possible solutions
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Running a SME unit is same as running a project!
Anything that can go wronggoes wrong!
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Running SME units
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Few details about Pune city
Pune is one of the oldest cities in India and has place ofprominence in terms of Historical / Political / Social / Cultural /Educational / Religious and Industrial activities in the India today.
The city is more than 800 years old with rich cultural background andheritage
Area of the city 450sq Kms
Current population of (Pune_Pimpri_Chinchwad metro) over 50 Million
Pune has provided many freedom fighters (pre-independence forIndian Politics) and eminent thinkers in India
Pune is cultural capital of the western India and will continue tohold this position for decades to come
Pune has earned a name for new idea generation and providedleadership to the country for many new initiatives in terms of culturalreforms and advances
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Few details about Pune City
Pune has a place of pride for Education & Engineering activities &is one of the most sought-after cities for Quality Education and
Scientific / Engineering Research
5 Major Universities, 100 affiliated colleges (28 Engineering Colleges,
5 Medical colleges) and over 300,000 Students in Pune
National Research Organizations
NCL & Biotech / MIRADO / IUCCA & Overseas Communication Centre etc
Super Computing Centre - CDAC
Indian Meteorological Department (IMD)
Software Technology park - one of the largest in India
A new upcoming Biotech Park
Research centre for Sanskrit and Oriental Languages
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Few details about Pune City
Important centre for Defence Activities for India HQ for Southern Command Indian Army
National Defence Academy of India
Army School of Intelligence / Army School of Physical Training /
Armed Forces Medical College / Artificial Limb Centre
Indian Air Force Centre for Western Command
Many Defence Research Organizations
High Explosives Manufacturing Unit / Ordinance Depot
Explosive Research & Development Laboratories
Indian Armament Technology Centre (IAT)
Armament Research & Development Establishment (ARDE) andmany others
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SMEs in Pune Small and Medium sized Enterprises (SME) in Pune:
More than 10,000 small units (Average size 1 to 5 Mn USD)
More than 500 medium sized units(Average size 5 to 10 Mn USD)
SME supply components mainly to Large Mfg units or MNCs as Tier 1 or
Tier 2 suppliers to large units
SME in IT / ITES sectors also work as vendors / sub-vendors to larger IT
companies
The operations mainly dependent on the main promoters who have strong
technical background
Entrepreneurs are first generation entrepreneurs & do not have business
background in the families
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Manufacturing in Pune
Pune plays a pioneering role as the Manufacturing Hub in India with over250,000 people involved in manufacturing activities.
The city is full of Manufacturing units-Large as well as Small & MediumEnterprises / Auto-components industry for the world market.
Over the last 5 decades Pune has become a hub for the Automobile
Industry for India / Asia
Many ancillary units supplying components for such Auto units
Pune has the largest two wheeler manufacturing facility in India (2nd
largest unit in the world)
Pune has more than 100 large Engineering units
Diesel Engine Manufacturing / Power Generators Complex Engineering Machinery for a variety of applications
Project Engineering activities
Electronic/Electrical Equipment Manufacturing units
Many small and medium size pharmaceutical units
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IT in Pune
Recently Pune has also become an important Hub for the ever
growing IT / Software Industry in India.
Pune has over 100 large IT units / 500 Medium sized units & 2500 smallunits involved in the IT Industry
There is population of over 100,000 qualified IT personnel (IT & ITES) in
Pune and Pune will continue to be an important location for the country
Punes IT Industry has been catching up with Mumbai in terms ofSoftware Exports in the last few years
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Business Environment of SME Units
Units generally set up by technocrats using personal funds:
These units are mainly dependent on larger customers for business
SMEs do not have very good reach for marketing that restricts their
volumes and makes them too dependent on large units (in spite of SME
expertise in niches)
SMEs are generally starved for funds and have to spend too much time for
collections of Accounts Receivable & external funding arrangements
Banks are not very keen on supporting these units for working capital dueto uncertain business cycles and growth
Too much time required to be spent with Govt. / Semi Govt. agencies
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Challenges faced by the SME units
Lack of adequate Management training and bandwidth amongst promotersof such units resulting in lack of:
Non-availability of Business plan leading to ad hoc decision making
Lack of Business & Financial discipline
Lack of Forward planning resulting in unforeseen situations
Lack of cognizance to even appreciate that there is a better way tomanage the projects
Lack of inadequate internal systems
Inability to attract & retain highly trained manpower in this segment sincethere is lot of poaching from larger units / MNCs in Pune
Lack of succession plans and new generation not available for such cause
Lack of awareness of modern Management practices and specificallyProject Management practices and methodologies amongst them
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Risks Faced by SME Units
Management Risks General Management skills / methods / training / attitudes Perpetuation of the units as an ongoing concern
Financial Risks
Lack of Financial Plans (Too many surprises & ad hoc decisions)
Funds & Cash Flow planning Marketing Risks
Reach & Net working
Dependence on few customers
Technology Risks (Scope / Costs / Quality)
Need for perpetual R&D
Technology obsolescence
Human Resource Risks
Need for formally trained manpower
Ability to pay competitive wages
Support Structure & Associates
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Who would want to look like this when one grows old??Running SME Unit??
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What would you want to look like when you grow old??
Managing SME Units is a challenge indeed!!
Learn to anticipate risks and deal with them
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Look at the plight of Promoter of SME
Is this a normal way??
How do you run the business? Single-handed??
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Risks faced by the SME Units in running normal operations
Promoter of SME units
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Project Process Groups
Time
Effort
Project CompleteProject Start
Control
Planning
Initiation
Closing
Execution Risks all over
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Period of greatest Risk Impact: Typical Project Environment
Planning Definition Implementation Termination
Min
Max
Risk Ability toChange easily
Ability to IdentifyRisk / Opportunity
Amount of Stake
Cost of Change
Time
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Period of greatest Risk Impact: Typical SME Environment
Planning Definition Implementation Ongoing-operation
Min
Max
Risk
Ability toChange easily
Amount of Stake
Time
SME Organization has risk thr all over the phases & it is continues for ever! Think !
Risks for SME units tend tobe perpetual
Critical Period forRisk IdentificationPlanning & Control
Cost of Change
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Risks faced by the SME units & Suggestions
Management Team: Senior Management Team
Vulnerable for slowing down or going under if the original owners are not active or have nottrained capable next generations
This can be managed if right from the beginning you have planned for successions
Lack of formalized Planning process: Emphasis of Planning right from early stages
Lack / inadequacy of good planning practices right from the beginning
This can be managed if right from the beginning you have planned for systems with requisitdiscipline & rigor . This has to be taken seriously but at times not given adequate attention
Costs / Finances / Funds Inadequate attention to financial disciplines and cash flowcontrol.
Inadequate financial plans & control over Cash Flows (perpetually caught up in this viciouscycle). This can be dangerous
Inability to pay competitive wages / salaries to trained professional in working classes
Meticulous attention to funds flow & cash flows & follow up on regular basis
Lack of adequate marketing contacts & reach:
Vulnerable due to complete dependence on single or very few customers
This can be managed if right from the beginning you have planned for successions
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Risks faced by the SME units & Suggestions
Lack of formal training of the Team: Senior Management Team
Vulnerable due to non-availability of trained staff is an important challenge / risk for the SMEsegment and the risk is real
This can be managed if right from the beginning you have planned for such exercises andtraining programs for technology plus leadership skills as part of the on-going activity
Lack of formalized focus on SMART & Efficient operational procedures / methods:
Need for formal systems / Need for learning from others experience & planning for veryefficient ways and methods right from the beginning. This means this will have to continuecontinuous reviews & improvements
This can be managed if right from the beginning one has planned for right choice technologymethods even if the initial project costs are higher
Lack of awareness of IPRs and legal issues (IPRs / Patents / Copyrights / Registration
in these units: In the era of globalization it is important issue to attend to. One tends to give secondary
treatment for this. But one can not neglect these issues for even in SME units
This can be managed if right from the beginning you have planned for successions
Need for training of the leadership and Promoters of such units with right managemen
thinking / attitudes & practices
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Risks faced by the SME units & Suggestions
One can easily appreciate that such situations are very common for many SME
units in and around Pune.
However this may ably represent issues faced by many such units in India
operating in such sector of the Industry.
SMEs are becoming an important segment of our economy and one can no mor
neglect such needs any more.
How ever the challenge is to decide where do we start and what is the way to
promote such thinking for this vital sector.
We all need to change our ways of thinking and think for the long term to prote
our own interest for all such units & start soon. SMEs definitely needs special
attention from everyone
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How do you insure SMEbusiness Performance?
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Marketing is the name of the game!
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To be fair inselectionprocedures all ofyou must climbthe tree!
HR dilemma??
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Some bloke wants to know if we have carried out a thorough risk assessmentproperly!!
Over enthusiastic attitude of some young players
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How do we improve the situation? Journey is not simple
Capacity to Excellence Capacity is basic potential as a given
Capacity is converted to Capability once you arewilling to put in action your potential capacity anddevelop ability
Capability is honed into Competence when you do
well over & over again in flawless way. Youdevelop a particular skill at reflex level and canrepeat the same in an effortless way
Excellence emerges when you develop passionfor your activities and master the art of doing itand living your life with zest and vigor
At times journey and the process are far moreimportant than the destination
Organization Development path would mean thatwe move from Capacity to Excellence
Capacity
Capability
Competence
Excellence
Journey from Capacity to Excellence isthe Path one needs to travel all life foractualizing Goals in Life of an individualas well for an organization
Focus &Attention
Speed &Productivity
Action Control &Repeatability
Values &Passion
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Can we manage / balance the world for ourselves
We need to work continuously to
ensure that we reach our goals andhappiness in our own way
The task is not so simple and youmust make it a serious business foryourself
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Thank you!