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Upgrading SMEs in creative industries: A direct path to sustainable development, leaving no one behind

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Riccardo Savigliano United Nations Industrial Development Organization

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The article provides an overview of UNIDO technical assistance projects and tools targeting SMEs and their clusters active in the creative industry. It explores how digitalization-based business management practices, industrial design, branding are strategically linked to local cultural heritage.

In the context of post-pandemic recovery, the global outlook is still one of a protracted economic downturn with knock-on effects on efforts towards sustainable growth and transformational changes through technological innovation across industries. It is highly important to be mindful of the signs emerging from small and medium-sized enterprises (SMEs) and the informal sector, as they continue to play an increasingly essential role in both job creation and the well-being of people at large. This is especially true for developing countries and countries with economies in transition, where SMEs make up the majority of industries and have been far less successful in coping with the pandemic-related slump that brought large parts of industrial production to a standstill in early 2020. Looking back to the times preceding the pandemic, their development potential was often untapped due to a number of challenges ranging from limited access to financial and government support measures to a lack of expertise in adopting dynamic development strategies in order to maintain business continuity amid a crisis. In creative industries (CIs), COVID-19 has affected SMEs in a myriad of ways, literally making them the first to shut their doors. Evidence on the pandemic-related economic fallout suggests that SMEs active in CIs are also at risk, ending up among the last to fully return back on track, as they struggle to remain afloat amid shrinking customer demand, disrupted supply chains, and partial or total shutdown of related economic sectors, such as tourism. This expertise and cultural heritage are contributing to social change, and to improved livelihoods of vulnerable social groups and rural communities, including youth, women and refugees, through new employment and entrepreneurial opportunities.

Although the crisis is still largely ongoing throughout the world, efforts are underway to address the emerging challenges. In CIs, a large portion of development and recovery solutions are becoming increasingly associated with digitalization. Offering new windows of opportunities to nurture creativity and preserve traditions, the digital realm holds significant potential, in terms of accelerating the shift to more innovative and intangibles-oriented practices, such as industrial design, online marketing and strategic branding that can successfully draw upon the local origin of products, tradition and national heritage. Characterized by intense competition, digitalization also encourages the production of higher-quality goods and services that meet market demands. It can thus help improve many economic and social outcomes, and be a force to address development issues, including those related to the Sustainable Development Goals (SDGs).

Against this backdrop, UNIDO incorporates the perspective of country-, region- and enterprise-level economic actors that are willing to reinvent their modus operandi to reap the benefits offered by the digitalization era. As the need to reconcile digitalization with economic recovery comes to the forefront, UNIDO continues to expand its technical cooperation toolkit and technical assistance portfolio, while maintaining a high level of flexibility and being mindful of both emerging macroeconomic trends and the needs of its national counterparts. UNIDO has pioneered industrial design and branding among its other impactful approaches to promote and accelerate sustainable and inclusive industrial development. We have success stories in traditional and heritage-based industries, light industries and the handicraft sector where SMEs have been able to improve the quality of their products, achieve higher productivity, diversify, attract investments, contributing to improved linkages with the tourism sector.

Branding draws out the transformative value of intangible assets to the forefront and is a practical solution for enterprises to transit to a more robust and competitive digital representation. The branding approach constitutes a shift away from classic growth and crisis mitigation paradigms, opening the path to unleashing innovation, creativity and distinctiveness. In other words, urging beneficiary SMEs to explore recovery solutions that are based on the local identity represents a unique competitive advantage for the country and its creative industries. UNIDO’s project implementation experience shows that branding and industrial design do give a product an identity that distinguishes it from others in the market, reinforces business resilience, and contributes to the closing of the digital divide. UNIDO supports SMEs, helping them to grasp the importance of digital solutions and reinforce their ability to build a solid customer loyalty base. By embracing this digital transformation, enterprises can stay a step ahead of their competition and lay some very important groundwork for dealing with external pressures, owing to greater market potential and more direct access to customers through a strategically planned online presence.

UNIDO success stories in Tajikistan and Armenia:  Blending tradition and national heritage with innovative modernity for high-performing home textiles and fashion brands

Amidst the pandemic, UNIDO project beneficiaries in Armenia and Tajikistan found themselves to be well-equipped to instantly adopt digital know-how, seizing online opportunities by reorienting their sales promotion activities to social media marketing tools, e-commerce and online B2B platforms. This move allowed our beneficiaries to maintain business continuity by receiving production orders and acquiring new contracts with new partners both domestically and abroad. “LA’AL Textiles” and “5900BC” are two unique umbrella brands established and nurtured with UNIDO technical assistance.

Since 2014, UNIDO has been supporting Armenia in the revitalization of its garment industry by strengthening the technical and managerial capacities of Armenian light industry manufacturers.

Armenian textile and leather manufacturers united under the “5900BC” brand increased their technical and production potential leading to numerous fashion collections with improved design and quality that opened access to international markets. As a result of our support, a pool of experts well-versed in the fashion industry and its modern trends was created to provide regular consultations on key topics to support the generation of additional value-added.

The Armenian textile and garment industry learned how to use digital technologies and maintain business continuity when conventional marketing channels become limited or unavailable. Based on the lessons learned during the pandemic, the support from UNIDO ensured that beneficiaries operating under the “5900BC” brand strengthen their positions in local and international markets by efficiently using the relevant digital business tools, minimizing the impact of crises-related constraints through the adoption of new market outreach vision underpinned by a strong brand identity with high-recognition value and trust from its customers.

Since 2016, UNIDO focuses on industrial upgrading and the modernization of carpet-weaving, embroidery and traditional textile sectors in Tajikistan. As a result of our interventions, textiles and home deco umbrella brand “LA’AL Textiles” was created bringing together 9 project beneficiaries that specialize in the production of home textiles, hand-woven and machine-woven carpets. Over 6 years, having inherited a blend of well-preserved traditions in carpet-weaving and embroidery with modern home decor trends the “LA’AL Textiles”, showcased its brand and collection at numerous national and international exhibitions, winning customers’ hearts in Tajikistan and beyond. In 2019 and 2020, the endeavour further expanded to cover a wider geographical area. Additional 11 beneficiary enterprises joined the project and embarked on upgrading their business, improving their production cycle, increasing their competitiveness and enhancing product quality to eventually, gain access to markets, building on the support of national technical expertise.

Further digital transformation has since taken place, expanding the brand’s online alternative marketing and business performance optimization solutions. Beneficiaries launched the “LA’AL Textiles” official website that also hosts and manages an online store, enabling further brand promotion and commercial activities to be conducted in a centralized way. “LA’AL Textiles” products are now available worldwide via its online business platforms on Instagram and Facebook.

In order to ensure the long-term sustainability of the “LA’AL Textiles” home deco umbrella brand, we facilitated the official registration of the first-of-its-kind export consortium enabling beneficiary companies to take on larger-scale exports and investments. The next step that we plan on taking is the establishment of a specialized light industry training and service center that will serve as a full-fledged industrial platform with production corners for: textile products, jewelry, leather and textile accessories, carpet weaving and product design development.

The UNIDO interventions have kept a strong focus on the socio-economic dimension and development of human capital, helping SMEs to embrace the digital transformation era.  The results from our initiative have helped to build the resilience of these enterprises, expanded brands’ visibility and preserved businesses continuity maintaining jobs in turbulent times. Going digital has enabled a solid foundation to be established – helping SMEs in the Cis to better deal with external pressures in the future.

 

*Riccardo Savigliano serves at UNIDO as the Chief of the Agro-Industries and Skills Development Division (AIS), within the Department of Agribusiness. The Division consists of 35 colleagues at HQ and around 400 in the field, and managing projects.

The AIS portfolio focuses on interventions related to industrial development in the areas of sustainable resource management, impact assessment, skills development, agricultural mechanization, digitalization, and creative industry as well as a number of commodity value-chain programmes. 

Riccardo holds a PH.D in Plant Pathology and Pest Management and conducted various research on the economic impact of agro-industries on local communities, including innovative models to identify and quantify externalities from agribusiness, land use and natural resource management.

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