Investment in Technology

A Guide for Small Businesses during the Growth Stage

The growth stage can be a painful experience for businesses of all sizes, but especially so for small businesses. It requires critical investment decisions, some of which will ultimately result in the survival or failure of the enterprise. During the growth stage, many areas must be improved simultaneously, such as marketing, operations, finance, accounting, supply-chain management, internal organizational culture and information technology (IT). More and more so recently, even "non-IT" areas of the business - such as sales, finance, and operations - have the potential to benefit significantly from considering the technology options available, no matter siloed they may seem to be from other activities. In addition, some businesses have a legacy set-up where they use different software applications for different purposes in different problem areas. For example, a small business may be managing overall operations with an Enterprise Resource Planning (ERP) application such as SAP, a point-of-sale (POS) system such as a cash register or Square, an inventory management solution such as Katana, a Customer Relationship Management (CRM) tool like Nutshell, and any number of web applications. The question we will try to answer in this article is: should we consider investing in a complexity-intensive system such an ERP or CRM system to be a fixed cost expense in IT or a productivity-boosting improvement in "non-IT" business areas?

To continue to deliver great experiences to their customers, every growing business must manage changes to both the supply and demand for their products and services. Sudden growth in demand can push the existing business processes to unsustainable levels, requiring rapid and efficient scaling. Responding quickly to crises such as these for the sake of preserving the customer experience gives little time to consider the long-term financial and organizational impacts of these major decisions. If a stable retail business suddenly observes its gross sales increase by around 50%, then the impact will quickly be felt in all existing business areas. Through a few indirect steps, all other processes will be affected, including inventory, supply chain, sales management, customer support, finance, etc. To deal with the new challenge efficiently, the business would have to invest in effective business management systems to track and fulfill the sudden increase in sales. The increase in sales would also imply an increased supply of data to manage, which would have an increasing potential value to explore and analyze and therefore an increased opportunity cost to letting these data streams continue untapped. After a period of several years in a growth state, a typical small business might invest in setting up 4 to 7 different management systems of varying complexity to assist in various business areas relevant to that industry.

After one or more software solutions have been implemented, the new processes adopted, and the new systems in place, it may seem like all problems have been solved. But the bitter reality is that one problem has been solved and another more complex one has just started. The systems distributed across the various business areas will only deliver efficient and accurate results if they can "talk to each other." The new complex problem is to integrate software solutions so that they deliver information to each other effectively. Getting separate reports from different systems can unintentionally create confusion and influence the information used to make an incorrect decision. Many times, the business owner's method of processing all of this information is to collect all reports from the various systems and put them into a single spreadsheet to combine them and calculate relevant measures or metrics. Assuming this integration is successful, a new more complex problem appears after that, centered around monitoring data quality, networking, system updates, security, etc. Does it feel like this process could ever stop? When considering whether to invest in purchasing any software system at all, is there any hope of reaping a genuinely successful investment in technology or is it an endlessly futile cycle of digitalization?

Investing in technology should feel like part of the philosophy of an organization. It's far more than just a set of disparate decisions to buy or install software systems. Technology should be part of the mission and the vision of an organization. Investments in IT should have a detailed plan and roadmap with clear answers for when, why, and how an organization will progress. Some details worth considering include the desired experience of the technology, where the organization will be after 5 or 10 years, and how IT will help reach that goal. This plan should include "what-if" scenarios to handle unexpected incidents, scaling with the growth of revenue-generating activities, and triggers which will schedule future decisions on software upgrades or migrations.

Small businesses should integrate technology investments with both the mission and vision and start monitoring business data from day one. As an example of one use case, leveraging insights produced by Business Intelligence and Analytics is a must have for any small business. Applied skills in these areas can help business owners form an accurate picture of the current state of the world, make careful predictions of the near future, choose how to allocate limited resources, and handle sudden shocks. Most modern BI tools can connect with all types of data sources to combine all information into "one source of truth." Achieving this enables the creation of live Key Performance Indicator (KPI) dashboards and unleashes latent effort and creativity to answer powerful questions. Now the question is, how difficult and expensive is it to create an analytics platform like this? We will answer this question in an upcoming article.

Many small businesses would benefit significantly from even minor investments of time and effort into their technology infrastructure. There are many free software applications available to help business owners unleash their creativity on the problems that matter to them. ARS Analytics is dedicated to help small and medium-sized business implement business analytics solutions. We are available to discuss your particular situation and propose solutions.