Rashid Al Mohanadi
In my co-authored piece with Dr. Frederic Schneider, “The Future of Business and Industry in Qatar,” we outlined several strategies for Qatar’s economic transition, including a call for fostering “hidden champions” within the SME sector. While the feedback was positive, some felt our article leaned too much on theory and lacked practical application for Qatari realities. Here, I aim to provide a concrete case study that illustrates how these ideas can manifest, with a focus on state-driven industrial policy, cultivating SME champions, and shifting attitudes towards professional services.
In developed economies, professional services contribute significantly to GDP. This high-value sector often highlights the skills of individuals rather than sheer service quantity. Given Qatar’s educated workforce and its draw of top global talent, the question arises: Why does Qatar’s private sector lag in professional services offerings, especially in exports?
One factor lies in the “two worlds” of Qatari professional services: the global providers, often big players registered in free zones, and local service providers, typically small firms working under challenging conditions. These local providers face hurdles in visibility, quality perception, and accessing larger contracts. The “upper segment” often thrives on government contracts in upscale areas, while the “underbelly” sustains itself on smaller, local jobs, operating in less visible spaces around Doha. These two segments operate in different spheres, rarely competing directly, which creates a disparity in service levels, client trust, and perceived value.
Three core issues hinder local SMEs in Qatar from competing effectively: trust, capability, and cost structures.
1. Trust: Larger organizations often prefer established international firms over local SMEs, even if both have comparable qualifications. The lack of trust limits the growth of promising local SMEs.
2. Capability: Many SMEs feel daunted by large contracts, resulting in self-doubt. Without initial resources or contracts, they struggle to develop the capacity needed to compete on a larger scale.
3. Cost Structures: High costs from registration fees, rentals, and service charges create barriers for local SMEs. This leaves many unable to scale or innovate.
To address these barriers, it’s essential to reverse this vicious cycle: foster trust through initial contracts, build capability with earned resources, and optimize cost structures. By creating an environment where SMEs can grow their capabilities, we can enhance trust in their services.
At Catalyst Consulting, we took an unconventional approach to escape this cycle. Initially, our model focused on providing high-quality advisory services to SMEs, offering competitive rates. However, we soon encountered the limitations of this approach due to delayed payments from SMEs (Apparently most of our SMEs have major cashflow issues). Recognizing this issue, we restructured our strategy to focus on what we call “Hyper niche- under serviced” areas. Through specializing in very narrow advisory sectors we can be the best at what a few can do. This helped us become very focused and compete with much larger entities who can’t afford to be as focused as us in these specific areas. So smallness became a competitive advantage rather than a disadvantage.
A turning point came with our contract with the Qatar Development Bank (QDB), which marked our entry into larger markets. Winning QDB’s trust allowed us to reinvest in our team and develop niche services, propelling us toward international competitiveness. By focusing on capability building and fostering trust with larger entities, Catalyst evolved from a small advisory firm to an exporter of professional services.
Today, 25% of our revenue comes from international clients, and our experience suggests that a Capability developing patron—a supportive government entity or semi-governmental organization—can significantly speed up the growth of SMEs. Had we had a champion at our inception, our journey would have been more straightforward. The most important aspect is the patron needs to make a strategic decision on what areas should be develop our SMEs in and based on that commission work to them.
It’s crucial to recognize that the perceived weakness of Qatar’s SME sector doesn’t necessarily stem from inherent flaws. Institutional and cultural challenges often impede growth, and targeted government support, especially in the early stages of an industry, can help create a vibrant, exportable sector in professional services. This local patron-champion model could be a vital step toward realizing Qatar’s national vision and achieving the objectives of the national development strategy 3.
Recently, a policymaker remarked that the market would naturally “eliminate weak actors” over time. This perspective, rooted in the traditional belief that competition alone drives improvement, overlooks the structural challenges SMEs face. As we shape the future of Qatar’s economy, we must be wary of letting outdated economic philosophies, like Adam Smith’s “invisible hand,” dictate our vision. Qatar’s economic strategy should be forward-thinking and attuned to present-day complexities, rather than adhering to assumptions held by dead economists.
By embracing a modern approach and rejecting one-size-fits-all economic doctrines, Qatar can build an SME sector that thrives domestically and competes globally, contributing meaningfully to national development and resilience.
