Why Small Business should really use Information Technology

In a study of 150 small businesses, there was shown to be a direct correlation between the firm’s performance and the use of IT. At the same time the CEO’s belief in the importance of IT to the business did not correlate with performance (Smith, 1999).

Another study went further, in finding that the CEO’s knowledge of IT was a significant predictor of the adoption of technologies and internet tools and applications (Chao, 2012) That tells us two things – small businesses should use IT for better performance, and they’ll use more IT if their CEO knows more about IT.

Fairly simple conclusions, but there are caveats. Beware the silver bullet, espoused by the silver-tongued salesperson. South African IT services companies spend about R300bn per annum on marketing, and it’s directed at CEOs and SME’s. (In the USA more than 90% of IT is bought by small businesses, and it’s probably no different here). So a small business CEO, in the process of acquiring IT knowledge, is likely to be the target of the tech marketing engine. They’ll promise everything, and deliver “everything”, but on their terms. What they don’t tell you is that 80% of the cost of IT is incurred after the initial purchase – staff training, technical support, configuration and implementation costs, and labour costs (the average employee can spend up to two hours a month supporting other employees in their tech).

There is a direct correlation between the small businesses’ performance and the use of IT.

Not only does a CEO of a small business need to know technology, but she also needs to know about technology management. Calculations like TCO (total cost of ownership) are standard and mundane for large organizations, not so much for small business executives.

The trick is to find a trusted advisor. One who will tell you not to buy something before they tell you to buy something. A trusted advisor is, well, trusted. They should be brought up to speed with your strategies and goals. Their job is to ensure that technology can be used to further those strategies and goals.

The CEO’s belief in the importance of IT to the business did not correlate with performance.

There have been great advances in technology, and small businesses often fall behind their clients on the tech adoption curve. When your clients work off mobile phones, you should offer mobile apps to link your clients to your products and services.

An example of this is when the George municipality used the growth in mobile phone use by their clients to launch a municipal app in 2017. The app allows clients direct and easy communication with the municipality, increasing their citizen engagement. This improved services and client satisfaction and gave the municipality an idea of which clients were interacting with the business, and how they were interacting.

Small businesses are linking up with complimentary businesses to provide services and a footprint far beyond taheir individual company’s reach.

Don’t underestimate the value of knowing your customer and having a direct link with customers. Here’s the opportunity to try out new products and services on clients who are satisfied with your services. They become the test-bed for your development. Lean start-up thinking works exactly this way. The start-up (it need not be a new business – it can be a new product or service in your business) finds ten to twenty business-friendly customers and tests ideas with them (not on them – it’s a cooperative effort). In that way, they avoid developing products that have marginal value to customers. Also, consider the value of customer feedback via digital channels – they can let you know what they want long before you’ve considered it.

Don’t underestimate the value of knowing your customer and having a direct link with customers.

Another value of technology in small businesses is the ecosystem effect. Small businesses are linking up with complimentary businesses to provide services and a footprint far beyond their individual company’s reach. An example is a small mobile network provider in the Western Cape. They have allied with one of the large telcos in South Africa. The telco lays fibre up a trunk route, and they provide mobile networks and data to previously un-serviced communities. The company is really small, but with the telco backbone behind them, they are punching above their weight. Other examples include a plumbing company that has linked with other plumbers, to provide a service footprint much larger than they could possibly provide.

Technology is good for small business performance. But it cannot be done without proper tech security, governance, reliability and access to customers. This requires the boring IT management practices that a trusted IT service provider can give you. Learn about the technology, use it, but don’t get bogged down in the IT management minutiae.

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