Strategies for Growth in SMEs

The Role of Information and Information Sytems

Margi Levy, Philip Powell

• Publisher: Butterworth-Heinemann
• Year: 2004
• Print ISBN: 9780750663519
• eBook ISBN: 9780080481166
• Topic: Betriebswirtschaft
• Subtopic: Business Intelligence

Strategies for Growth in SMEs explores for the first time the role of information and information systems (IS) concepts in small and medium-sized enterprises (SMEs). Most IS research focuses on large firms, yet the majority of firms in most economies are SMEs. The book considers the applicability of IS theory and practice to SMEs and develops new theories that are relevant to these firms.Composed of 6 sections, it covers, amongst other things; the nature of SMEs, the background to IS, and SMEs' use of IS, issues of IS strategy and planning in SMEs, the way that firms can transform through use of IS, evaluation, IS flexibility, business process re-engineering, resource-based strategy and knowledge management, the appropriateness of existing theories and the development of new models to address SME-specific issues. The final section of the book reviews the learning in the previous chapters and poses future agendas for research.Written by two of the leading figures in the field, this book will be essential reading for researchers in IS and SMEs, students on entrepreneurship or IS courses, and others that focus on SMEs.* A unique text relating IS theory to SMEs* Benefit from the authors' years of experience in the field* Familiarise yourself with this growth area for research and courses

1

Introduction

Why research strategic information systems in SMEs

Information is transnational: like money, information has no “fatherland”. Because information knows no national boundaries, it will also form new transnational communities of people … who are in communion because they are in communication (Drucker, 1989).

Over the last decade, the rise in the importance of information and knowledge for business activity has been phenomenal. Globalization has become a reality and competition is more dynamic (Porter, 1998) as firms source materials and manufacture goods in many locations, while innovation is vital for future business growth. Information is now critical for the management and growth of business value. Knowledge about competitors and customers is essential to understand the future direction of business development. Harnessing this resource is important, and yet, difficult. One means of tackling it is through the development of organizational information systems that enable the collection and dissemination of data, information and knowledge. Organizations are increasingly using information technology to deliver outputs from such systems. Data, information and knowledge can all enhance competitiveness.

Information is a primary management resource. Like finance, operations and marketing, its management cannot be left to chance. In an increasingly competitive market there are three major reasons why effective management of IS is essential for competitiveness. First, the intensity of market competitiveness means that firms are under pressure to work smarter and innovate faster than the competition. As the retail banks have demonstrated, effective use of IS and IT can shorten cycle times, while transforming the basis of competitiveness. Second, no firm is an island. The value-adding process is one of transforming inputs into profitable outputs. This means that the producers are dependent upon the co-operation of suppliers, distribution networks and customers. Third, information is an enabler of globalism. Changes in international trading agreements and the monopoly power of local suppliers is driving firms to use global sourcing in order to remain competitive. But a precondition for accessing global resources is planned IS.

These issues have been researched extensively in large organizations, and there is a vast literature on the values of IS and IT to improve competitiveness. However, there is little literature that explores these issues in small- and medium-sized enterprises (SMEs). The strategic role of information is not necessarily a prerogative of large firms. This is particularly true in the Internet age where “pureplays”, firms set up solely through and because of the Internet, abound. While many have succumbed to the dot.com demise, some have gone on to develop and grow. However, it is not only these firms that are of interest. Many large corporations only continue in business due to their suppliers. These suppliers range from small specialist firms to medium-sized ones producing commodities. The rise of the small business sector is phenomenal. The drivers for this rise vary from a decline in agriculture in the developing world to a focus on core business leading to outsourcing of services by large corporations. However, there are not only macro-economic reasons driving the growth of small firms; the desire for independence or an innovative idea leads many people to start their own firms.

Business drivers are no different for small firms than for large. There is still a need to manage the operational activities, identify suppliers, market goods and services, determine customer requirements and consider the impact of competitor actions. Thus information and knowledge is as important to small firms as their larger counterparts. Information systems can assist small organizations work more effectively. Many SMEs already invest heavily in production technologies to produce their goods or services. However, their use of IS and IT to manage business more effectively is often problematic.

The problems may be due to the operational focus of many small businesses where the owner’s knowledge is directed to the delivery of orders to customers. However, as larger firms have found, it is possible to use IS to manage more efficiently and effectively. Others reasons may include difficulties in finding systems and technologies appropriate to the size of business, limited skills and knowledge about IS within the smaller business. A key reason is the financial investment involved in IS, with many smaller businesses preferring to spend their limited capital on production and operational technologies rather than management support.

However, the advent of personal computers and local area networks has made investment in IS and IT more accessible. Information technology suppliers are recognizing that small businesses have a requirement for business systems. Even large IT suppliers such as Microsoft, IBM and SAP are seeking opportunities in the smaller business market. There is often a natural scepticism in small business owners that makes them want to ensure that they obtain value for money from any investment. Hence, they tend to be cautious and drive relatively hard bargains when it comes to IT.

The danger for many SMEs is that they defer investment in IS until their businesses have outgrown existing systems. These crises of growth require urgent action by the smaller business if it is to develop. This book examines the reasons for the limited investment in IS and IT. It proposes approaches that the smaller business can take in planning and developing strategies to manage investment in IS and IT. By understanding the business drivers and approaches to business growth, the smaller business can make manageable investments in IS and IT that will enable it to have effective management IS.

This book considers the role of IS in supporting the strategic management of smaller firms. It considers the relevance of the role of current IS management theory to smaller businesses. The extant theory is adapted, where necessary, to provide insights that are relevant to SMEs. The knowledge generated provides a way for small businesses to consider the strategic role of IS when planning their future investments. From the IS theory perspective, the outcomes of this research invite questions about the validity of the theory as to its generic applicability. This is not to say that IS management theory should always be generic, but that it should specify the nature of the organizations to which it refers.

The research that underpins this book is developed from multiple case studies of firms undertaken since 1994. The cases have been researched primarily by the authors and some by associates. The research process is ongoing, and many of the case firms have been researched longitudinally. The cases focus on the way the small firm uses information to manage their business within the strategic context. An outcome of the case analysis is the development of theories that suggest how small businesses might consider investment in IS to manage the business. These theories focus on IS strategy and information as a strategic resource.

The book, therefore, provides support and knowledge of the strategic use of information to two main audiences. It will be of benefit to both academics and business advisers. The book provides IS academics with knowledge of the relevance and appropriateness of strategic IS concepts to smaller businesses. It provides the entrepreneur, innovation academic and small business advisers with models and frameworks that are directly relevant to information strategy in small, fast-growing firms. Where relevant, chapters demonstrate implications for theory and for management practice.

Researching SMEs

SMEs are interesting phenomena to study, particularly as they are not a homogeneous group and come in many sizes, shapes and structures. This makes researching SMEs an exciting opportunity. Yet such research is fraught with difficulties due to the fluidity of structure and management that applies to growing firms. This is an issue for this book as management IS theory suggests a steady growth and development path towards the use of more complex systems to achieve business value. This implies some conflict between the aims of SMEs and that of IS theory. The book seeks understanding of the role of IS in managing SMEs. The research underpinning this book contributes to that understanding.

The background to the research undertaken over the last 10 years is discussed to outline the rationale for the app...

Table of contents

• Cover image
• Title page
• Table of Contents
• ELSEVIER BUTTERWORTH-HEINEMANN INFORMATION SYSTEMS SERIES
• Copyright
• Dedication
• Foreword
• Chapter 1: Introduction
• Part 1: Concept of the SME
• Part 2: Issues of IS strategy planning
• Part 3: Strategic resource: attitudes to information
• Part 4: Knowledge and development of IS
• Part 5: Future: Internet adoption and strategy
• References
• Index