Why SMEs Should See IT as a Strategic Asset

David Southern | Date: September 9, 2016

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SMEs that don’t have an IT strategy risk missing out on growth opportunities

why-smes-should-see-it-as-a-strategic-asset.jpgHas your business put IT strategy at the heart of its plans for sustainable and profitable future growth? While many growing small and medium enterprises (SMEs) understand the importance of IT in ensuring their business is able to function smoothly and effectively, how many recognise that the right IT strategy can be a driver of growth?

Those SMEs that have made this connection are reaping the benefits. In research published recently, SMB Group found that 29% of SMEs “view technology as helping them to significantly improve business outcomes”. The report goes on to say that these very businesses are also more confident about growth.

In fact, there’s no shortage of compelling evidence to underline the importance of IT strategy as a central driver of business success.

For example, a study undertaken by Capgemini in conjunction with the MIT Sloan Management School found that digitally mature businesses financially outperform their less digitally mature rivals, no matter which industries they operate in – in fact they are 26% more profitable. An Ernst and Young study found companies leading the way in harnessing technology to support risk management generate three times the earnings before interest, tax, depreciation and amortisation as the laggards. 

These businesses are out-performing their rivals because they have thought hard about what technology can add to their business in a broad range of ways:

  • Standardisation – One problem for many companies is that different functions – or even different individuals – operate in different ways. Even in small businesses, inconsistent processes and operating practices can damage the effectiveness and efficiency with which the business serves its customers. Enterprise-wide IT solutions, by contrast, ensure everyone works together according to the same policies.
  • Transparency – Digital communication and visualisation tools ensure greater visibility across the whole enterprise. This is powerful in an external context, making it easier to build stronger relationships with customers, but also internally too. For example, the finance function has access to the management information it needs to assess performance, set budgets and make well-informed forecasts.
  • Agility – SMEs should be more nimble and flexible than their larger counterparts. This advantage will be enhanced by a smart IT strategy built to take advantage of new business opportunities as they emerge. Cloud-based tools and the as-a-service model provide quick wins for SMEs seeking to flex into new areas.
  • Speed – Those SMEs unable to move quickly, making decisions at pace and acting on them, will lose the competitive edge that their agility should convey. Your IT strategy should recognise that, with systems and processes designed to capture the data required by decision makers that can be implemented rapidly, with minimal manual intervention.
  • Cost – By improving productivity and efficiency, technology has the potential to deliver enhanced margins. And the evolution of the cloud means the costly IT renewal cycle of the past is becoming less of an issue.
  • Security – Not only are businesses dependent on their IT infrastructure but also, cyber security and data protection are now right at the top of the risk agenda. Your business’s IT strategy should address security as a central concern, managing these risks proactively.
  • Growth – A well-planned IT strategy will help the business to manage the often difficult process of scaling up the enterprise. By thinking in advance about how your IT infrastructure will meet the demands of growth, your business’s expansion will not be constrained by operational limitations.

The bottom line is that technology is crucial to every part of the business, enabling disparate individuals and functions to work together towards common goals. IT integration must therefore be part of the broader IT strategy, with IT collaborating closely with managers throughout the business.

For all these reasons, even the smallest businesses need to think hard about their IT strategy – the gains are too great to ignore. In practice, that means giving IT the level of resource it needs. That doesn’t necessarily have to mean an in-house IT function – outsourcing could be one alternative, for example. But SMEs that choose to muddle through, adopting IT solutions piecemeal without any strategic vision, often because IT is the part-time occupation of a manager or owner more focused on other responsibilities, are likely to find themselves left behind.

Takeaways:

  • IT strategy can enhance business growth as well as ensuring the organisation continues to function.
  • The benefits of an integrated IT strategy span efficiency, agility, speed, cost and growth.
  • SMEs need dedicated IT resource to ensure they can develop an IT strategy fit for purpose.

Build an IT strategy that meets the objectives of a broader business strategy. Download: Fail to Plan - Plan to Fail: The Business Leader's Guide to Business Strategy

Fail to Plan, Plan to Fail – The Business Leader's Guide to Business Strategy

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