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Information Technology (IT) and Small Businesses

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How IT can help Small Businesses to Survive the Economic Crisis

It seems to me that a basic strategy that small businesses everywhere need to adopt centers on communication, specifically, communication made possible by new technology.

How IT can help Small Businesses to Survive the Economic Crisis

 

Surviving the Crisis

Call it what you will. As the U.S. economy goes deeper into recession, small-business owners are finding it just as hard as larger businesses [1] to figure out how to survive. What’s more, America’s small and medium businesses are just as, if not more, important to our economy. Small businesses, which by definition employ less than 500 people, account for half of all of our economic output! And most small businesses actually have 20 employees or less.

 

That economic conditions are getting worse is not new news. The National Federation of Independent Business [2] polled small firms (with less than 250 employees) and found that more than three-quarters see business activity as getting weaker or, at best, not changing much. [3]

 

Since we’re not likely to see any of the 700 billion dollars allocated by congress for the “rescue” plan, what can small business owners do? Well, to some extent they’re already doing it. They report spending more time at their business, with more oversight of operations and more hands-on decision making. Two-thirds are managing cash flows more carefully. More than half say they are watching inventories more closely than they were at this time last year. The only good news is that the great majority—70 percent—has not yet had to lay off employees. So far, then, these tactical actions—a closer and more personal degree of on-site involvement, more careful management of income, expenses and inventory, and keeping a careful eye on pricing—have helped. Even so, tactics alone have never won a major battle, and we may be going into the most difficult economic fight for survival that’s been seen in almost a hundred years! What’s needed if a small business is to survive is a sound strategy, along with effective tactical maneuvers.

 

It seems to me that a basic strategy that small businesses everywhere need to adopt centers on communication, specifically, communication made possible by new technology. There are two fronts, here: internal and external. I’ll explain what I mean with regard to each.

 

Technological strategy for internal communication - The economic crisis demands increased efficiency and productivity, as well as careful monitoring and, if at all possible, reductions in capital expenditures. So it may sound counter intuitive for me to say that one of the most important actions small businesses can take is to invest in updated and upgraded information technology. Specifically, this means unified IT communications. [4]

 

Unified communications offers:

  • Integration of existing technologies and processes that result in new capabilities and much greater speed.

  • A single network of enterprise applications within the business. All communication technologies would be included. And this doesn’t necessarily mean major new costs. Hosting services, premises-based equipment, and open-source routing are examples of ways to cut the cost of unified communications.

  • Financial help because it can yield a fixed cost rate and a single per-user price that makes it easier to budget IT operations. A well-negotiated leasing arrangement will provide fixed pricing over a stretch of time that gives the small business increased economic “breathing room.”

 

When planned out carefully, an internal communication strategy -- based on application of technological innovations-- can be a life-saver for a small business struggling to survive an economic crisis that may last years.

 

Technological strategy for external communication - My exposure to small businesses around the world leads me to conclude that a key strategy for survival will be reaching out (not just to customers but to potential partners within the U.S. and worldwide via the Internet). I doubt that I’m telling you something you don’t already know, but to survive this crisis, small businesses must adopt a stronger customer focus. Customers must become partners, not just sales figures on a balance sheet.

 

We’ll get into more detail one the second point in part two of this post scheduled for tomorrow, Oct. 21.

Note from editor Ayman El Tarabishy is the Executive Director of the International Council for Small Business (ICSB). [5] He brings perspective on not just what goes on with small businesses here in the U.S. but in member groups around the world.

 

Making it through the crisis intact and ready to prosper

In my last entry, I outlined a basic strategy for surviving the economic crisis through communication technology. The second part of the strategy focuses on external communication via the Internet.

 

Automatic yet personalized Internet communications can help foster partnerships with customers. What’s more, a strong Internet presence can stimulate customer awareness and make one a more effective competitor. And this means worldwide, not just within the U.S.

 

A relatively unknown [6] small British gardening supply company, “Wiggly Wigglers,” [7] set up its first Web site in 1995. Since then it has built an Internet presence that has led to significant sales in China, India, and New Zealand (among other nations), as well as in the U.S. We are in a global economy. The bad news is that economic problems here in the U.S. are going to affect economies around the world. You only have to watch the U.K., French, German, Singaporean, Chinese, and Japanese stock markets follow a bad day on Wall Street with their own bad news. The good news is that savvy firms can reach out to customers anywhere and everywhere, becoming global competitors. This can be especially crucial for small businesses with highly specialized niche products.

 

Outreach to new markets, especially those outside the U.S., was once impossibly costly. Today such global marketing is limited only by one’s imagination—and access to IT that make it possible and inexpensive.

 

So, what will it be? Hunker down, cut costs to the bone, reduce the number of employees and demand that those remaining work even harder? Cost cutting is a tactic, not a strategy for long-term survival. It works best when there is slack to begin with and when a relatively short time horizon exists. But small businesses don’t usually operate with a lot of slack. And the economic crisis we are experiencing is expected to last years, not months, by those who should know, such as Mort Zuckerman [8], editor-in-chief of US News and World Report, and Paul Krugman [9], who just won the Nobel Prize for Economics.

 

The sort of sound strategic IT approach I’ve outlined in these posts provide the best chance for long-term survival, and for coming through this crisis not only intact but ready to prosper in the good times ahead. And the strategy I’m betting on concentrates on building strong and enduring communication networks, both within the business—in order to manage operations effectively—and externally, to build customer/partner networks worldwide. No one is saying this will be easy, but doing nothing is not an option if a small business expects to survive. And what better reason to reevaluate old and outdated processes and technology and look toward the new efficiencies now made possible by the strategic application of IT.

 

* Note from editor Ayman El Tarabishy is the Executive Director of the International Council for Small Business (ICSB). [10] He brings perspective on not just what goes on with small businesses here in the U.S. but in member groups around the world.

 

Included in this section are blog posts written by Dr. Ayman El Tarabishy, Executive Director of the International Council for Small Business (ICSB), regarding the current world economic state and ways in which small businesses can stay afloat with the latest in information technology (IT). Thoughts and comments are encouraged and welcomed!

 

Retrieved from: http://www.icsb.org/wiki/index.php?title=Information_Technology_%28IT%29_and_Small_Businesses

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