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Throwing Money at Technology Isn't the Solution
04/ 11/ 2002

by Michael Grebb

Small businesses no longer need convincing that technology is a powerful tool. But sometimes it seems the pendulum has swung in the opposite direction, and the impression is that tech gadgetry can solve any problem.

Not true, say experts. Some business problems run deeper than technology. Others don't seem to be technology related when in fact they are. Telling the difference is one of the biggest challenges facing small entrepreneurs in the modern age. And not knowing the difference can be disastrous.

So how can you tell if your business problems is technology-related? "I think that's the wrong question," says Wally Bock, a business consultant and author of the book Net Income: Cut Costs, Boost Profits, and Enhance Operations Online (Wiley & Sons, $29.95). "If you ask it that way, it presumes that technology is a solution rather than a tool."

Bock says small businesses must first identify and analyze their problems and then break them down into three components: Process, people and technology. "Any one of those three can multiply your efforts and results," he says. A database software problem, for example, might seem technology-related by definition, but it may be simpler than that. "It's a problem of how you keep your records," he says. "It's crucial to look at the problem first. It's funny. I get calls from people who want to improve their marketing or technology, and then we start talking about strategy."

Bock recommends, as part of the strategy discussion, a dissection of profits and where they primarily originate. In fact, small businesses should focus on problems that affect their biggest profit centers before spending money on new technology or other fixes.

That point may be the key. Even small business people who are sure technology can solve a problem must stop and think about whether the problem affects an area worth addressing. A business whose overall customer database is in shambles is one thing; it makes less sense to consider spending a lot to fix a problem affecting 10 percent of revenues.

"As a small business, I need to pick the low hanging fruit," says Ed Moran, partner for the Deloitte & Touche technology, media and telecommunications practice. "Where can I get the best bang for my buck? A lot of times, they're so busy running their business, they've never sat back and figured out where they make money... As you do that, you've really outlined how you make money. A small business can say, `Wow. If I put a couple more people here, I can make a lot more money.' You'd be surprised how powerful a tool that is."

So while technology can't solve every problem, it can come in handy when applied surgically and deliberately. Otherwise, you might just be throwing a lot of money out the window in pursuit of a solution that lies somewhere else in your business.

When used correctly, technology can be the best friend of an entrepreneur trying to squeeze more profits out of limited resources. And isn't that what it's all about anyway?

Grebb is a Washington, D.C.-based writer who focuses on technology and Internet issues.

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This article originally appeared in the April/May 2002 issue of MyBUSINESS magazine.

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