This archive report was first published on 20 August 2019.
Published on August 20, 2019, a survey by the Kenya Bureau of Statistics (KNBS) revealed a concerning trend of small and medium enterprises (SMEs) failing in Kenya. Between 2011 and 2016, over two million SMEs closed shop, with the average rate of collapse at over 400,000.
According to KNBS, the high rate of failure was attributed to a mix of factors, including a harsh operating environment that resulted in reduced earnings while increasing costs of doing business, as well as blunders by business owners.
Dr. Rudolf Absil, a management consultant with Gemini Consulting, noted that many business founders tend to outlive their businesses, which collapse in their lifetimes. He emphasized the importance of establishing a 'hundred-year' company, which requires a long-term vision, broken down into short-term plans that adapt to environmental changes.
Dr. Absil also highlighted the need to shift away from the traditional belief that 'big is best.' While larger companies may have advantages, such as better returns to shareholders, smaller and more agile firms can be more profitable. He cited an example where only seven percent of the 60 biggest companies are profitable.
Dr. Absil stressed that cutting costs is not a sustainable solution for companies facing trouble. Instead, he recommended focusing on putting people first, enabling them to succeed during transformation and beyond, and installing a culture of continuous learning.
Jotham Gichuhi, the Kenyan Partner for Gemini Consulting, added that companies must adapt to an increasingly changing environment. He emphasized the need for a learning organization that can adjust to new challenges and opportunities.
