What it takes to succeed as an SME in Scotland?

Yet, the journey to business success in Scotland is not always easy and comes with its own set of challenges, from navigating unique legal and regulatory frameworks to adapting to rapid economic and technological shifts. Determined to help locally owned Scottish SMEs grow, thrive, and strengthen their communities, Guy Hayward – a previous CEO of leading, international advertising agencies – leveraged his 30 years of experience to launch his independent agency, Local Heroes.

In the interview below, Guy Hayward provides insight into his expertise, delving into the key factors that define success for SMEs in Scotland, including brand identity, a focus on the consumer, and the latest advancements in technology.

Guy, in your opinion, how important are SMEs for Scotland's business success?

They’re absolutely critical – and that’s not just opinion. Data from the Scottish government has shown that there were a massive 338,385 active small and medium-sized enterprises operating throughout the country as of March, 2023 – providing jobs for an estimated 1.2 million people. That makes up 55.9% of private-sector employment. If that’s not evidence enough, SMEs have also been shown to generate 42.4% of all turnover in the Scottish private sector, which just goes to show how vital they are, not just to people in terms of custom and employment, but also to the economy.

What are some of the biggest challenges facing Scottish SMEs?

The main issues that Scottish entrepreneurs face boil down to visibility and competition. Whilst SMEs may be important to the locals, many often remain invisible to the wider

population, falling under the radar due to a lack of publicity, advertising and public awareness. Business owners looking to expand their horizons can nonetheless overcome this by taking what makes them special and amplifying this around the world. We live in a world in which it is very possible to earn media, so that is the opportunity – to earn that media. At the heart of this is to do things that are genuinely interesting to people while still being true to who you are. Harris Tweed has done it with its partnerships with even bigger brands like Chanel and Nike – generating fame and interest in the brand without once compromising origin story or identity. Whilst earning media in such authentic ways invariably has costs associated with it, these are just a fraction of what brands would pay for paid media – particularly when weighed up against the rewards.

Where do SMEs get it wrong – what are some of the most common pitfalls you’ve seen from Scottish SMEs?

Many Scottish SMEs are hugely successful, turning over millions in profit and reaching customers worldwide. But my experience is that entrepreneurs will often show too much humility in their company’s development, especially in the face of competition with the big corporates. Independent businesses have many weapons to help them win this battle: humble beginnings, local origins and independent thinking that leads to a passionate launch into the market. These are things that create a real sense of exclusivity and authenticity. And this authenticity is the independent businesses superpower.

McKinsey & Company’s True Gen study makes it clear that Gen-Z consumers (born between 1997 and 2012) seek out brands that are authentic, transparent and true to their values, rather than simply following the big-brand crowd. And this is a true competitive advantage in the battles with the large corporates because, try as they might, the latter struggle to be authentic. So, rather than holding back, entrepreneurs should be stepping out proudly, showcasing their unique identity and values and taking business from their corporate competitors.

How can SMEs strengthen their brand identity?

It’s all about leaning into that authenticity. Be distinctively you and don’t be tempted to try to deliver too many things at once. By that, I mean that it’s much better to deliver a few high-quality services or products, directed towards a clearly defined, well-understood target audience, than it is to try to be everything to absolutely everyone. That never works. You need values. You need a niche. And you need to stick to it.

How important a role does the consumer play in SME success?

Consumers are vital. In many ways, your brand belongs to them, because your success hinges on what they need and what they want. The extent to which you respond to those needs determines how they think and feel about your business, ultimately, shaping the outcomes. So, it’s really important to get them involved. Talk to them. Ask them what they want and really listen. When you truly understand their needs and learn to meet and even anticipate them better, you’ll take up a much greater portion of the market. It really is that simple. Just let them talk and keep asking questions about what they say. And be confident that the corporates are also in touch with their consumers – but on a much longer timeline, which means that you can be more agile and respond to shifting consumer needs more quickly.

Should SMEs embrace the latest advancements in technology such as AI?

Oh, yes. This is the case in any industry. Whilst by no means a human replacement, AI will undoubtedly make things more efficient – and if used correctly, can help brands make the most of available data to understand their markets and consumers even more. Just make sure you’re also complementing this with human insight and customer service. AI and other technologies are meant to complement and streamline things, easing the burden of repetitive tasks to create more space for creativity. It’s a case of ensuring you wrap AI in HI – Human Intelligence.

What advice would you give Scottish SMEs looking to navigate the year ahead?

There are multiple points, really. Don’t be afraid to share and amplify your origins and your story. Find out what makes your business unique and make that your secret weapon. And really get to know your consumers. This can be through a combination of AI-powered data insights and your own knowledge of the market – with businesses recognising and tackling niche problems performing better. But the number one thing is to keep innovating and talking. Respond to feedback and really take what your customers are asking for on board.