Why Small Firms need ICT
Micro, Small and Medium Sized Enterprises (MSMEs or referred to here as ‘smaller firms’) contribute significantly to the non-energy segment of the Gross Domestic Product (GDP) and provide the lion’s share of national employment outside of the Public Sector. Yet these firms have traditionally have faced many, sometimes crippling, challenges due to their restricted size and reach.
These challenges include:
• limited access to capital (particularly for start-ups);
• inadequate access to market information;
• an inability to attract the highest quality human resources;
• difficulty in servicing large contracts; and
• small promotional / advertising budgets.
These factors have traditionally militated against the success and growth of smaller firms causing many of them to fail in the marketplace.
At the same time however, the phenomenon of Information and Communications Technology (ICTs) has been accelerating throughout the world as well as right here in Trinidad and Tobago. Increasing numbers of people are now interconnected via high-speed (or broadband) links to the internet and are able to interact with the world right from their homes, offices and communities.
This phenomenon has opened up a world of opportunity, especially for smaller firms, to overcome some of their traditional disadvantages and so be able to compete on more of a level playing field with their larger counterparts.
Smaller firms now have access to affordable yet powerful ICT equipment, due to the fierce competition and shortened innovation cycles within the Global ICT supply sector. Many smaller firms have begun to uptake and as such SMEs in the Trinidad and Tobago economy are well poised to take advantage of ICTs. Some firms however remain either in doubt or are altogether unaware of the benefits that technology (i.e. working smarter) can bring. As such I will seek to highlight some of the key tangible ways that smaller firms can benefit through investment in and application of ICTs.
INFORMATION: Competing in the Knowledge Economy
Particularly for firms in the knowledge economy, competitiveness is based on the firm’s ability to:
• quickly access and gather relevant market information.
• interpret it faster or accurately more than competitors
• create knowledge (knowledge = information prepared for decision-making)
• execute a relevant strategic response
• capture the value inherent in the economic opportunity (profit)
This type of business model is completely supported by ICT. Through the internet, market information can be easily accessed via market reviews, industry reports, electronic business exchanges, posted requests for service / proposals (RFPs), information websites and the like – thereby uncovering various unmet market needs.
Internal company databases and other common tools, like office productivity software, can support in-company human resources to interpret and prepare gathered information to inform decision-making (i.e. to create knowledge). The knowledge created is then used as a basis for responding and interacting in real-time to with the competitive environment.
Market-sensing capacities such as these are becoming a requirement particularly where the market is significantly external (for e.g. in the tourism industry, when selling into Diaspora, or simply when selling a product into an export market). In such cases, more complete information is usually available on-line in the overseas markets and stakeholders usually also already posses a culture of doing business via the internet.
COMMUNICATION: e-Mail, Voice Over IP and Video Conferencing
Although the internet was originally designed simply to transmit data, with its evolution and continuous enhancement, both high quality voice and video can now be transmitted over these networks, in (close to) real time.
These innovations have enabled simple but powerful applications like e-mail but also newer applications such as voice over IP calling and video conferencing; which translated means that smaller businesses now have at their disposal, extremely cost-effective and enhanced abilities to connect, collaborate and coordinate with their key business stakeholders – around the world.
Such applications make certain types of business opportunities possible that otherwise would have been inaccessible just a few years ago. Once a relationship is built smaller businesses can now incorporate into their business model access to cutting-edge human resources and expertise no matter where they reside around the world. Also by reducing or eliminating the travel and accommodation expenses that might otherwise have been required to collaborate with clients, attend key business meetings, or connect with suppliers overseas, small business can operate professionally and efficiently and at a level never before possible by taking advantage of ICT.
Most start-ups or growing small to medium sized businesses, consider the option of investing in new or bigger physical facilities to accommodate staff. They can now offer their professional staff the choice to work at home or on the road, with full support from the office via an intranet or – in the latest state of affairs – through their mobile phone. This “anywhere, anytime” capability in respect of work, can means that employee commuting costs are reduced and productivity is increased (due to time not spent in traffic for example). Available office space also optimised, resulting in a forestalling or delaying of brick and mortar investments until absolutely necessary. In so doing critical cash flow is freed up which is the life blood of smaller businesses.
TECHNOLOGY: Doing Things Better
e-Business
Many international firms are moving to facilitate electronic procurement amongst their supplier base. What this means is that only firms that are registered on their electronic exchanges will and have the opportunity/capacity to do business with them. SMEs who are aware and proactive enough to register on such databases will then be more aware and better able to bid on opportunities that come down the pipeline.
Even further, those who are able to implement inventory management solutions (as an example), which allow them to give secured electronic access to stock levels, automatic generation of purchase orders when stock levels fall below an agreed level, electronic verification of goods and services and the authorization of electronic payments, can reduce their purchasing cycles from possibly 7-12 days to 1 day.
e-Marketing
More and more people have broadband connections in their homes, offices and mobile devices, and consequently are spending larger proportions of their time on-line. This means that small business have new and more effective channels available to them to get their branding message to massive yet targeted populations, than ever before.
Advertising through online communities, blogs, social networking sites, search engines, and setting up official company websites, are just a few of the many tools that are currently being used to target specific demographics with on-line marketing campaigns.
A major benefit is that effective on-line marketing can be performed at a fraction of the costs of traditional advertising particularly vis-à-vis television and print. It is here that MSMEs can begin to blur the distinction between small and large businesses, as they are now able to effectively reach markets that only ten years ago could only be accessed using large firm marketing budgets.
Small businesses can go further to enhance their customer service capability by pushing information on routine customer service queries to their website, so that customers can self-serve. This frees up key internal to give greater attention to more complex or higher value matters.
Moving up the Value Chain
With ICT it is now possible to follow traditional agricultural or mineral products up-market and understand the economic price escalation dynamic which happens as products get closer to the end consumer. Informed business cases can then be made to deepen processing capability in order to sell directly into end user markets and as such capture the full value and rents available along the product/industry value chain.
Such a deep understanding of the market into which its good or service is being sold will uncover ways in which the existing product or service can be enhanced or entirely new products, services, forms of organization or business models can be fashioned.
In Conclusion…
At the very least, remaining near the technological frontier is a minimum pre-condition to global competitiveness and associated economic growth. However, many businesses in the Caribbean aren’t sufficiently aware of the practical link between ICT their continued economic sustainability (or even relevance).
ICTs can increase operational efficiency, allow businesses to better serve clients, and provide a platform for employee innovation. It is in this use of ICT – incorporating knowledge and insights from the environment into higher value, branded T&T products – i.e. working smarter – which lies the key to economic success and sustainability, not only for small business but also for the economy as a whole.