Technology as the Great Equalizer-Part 1, A Guest Post by Charles L. Colby

This is part 1 of 2 by guest poster, Charles L. Colby, Chief Methodologist, Small Business Success Index. Charles Colby is President of Rockbridge Associates, Inc., the DC-based market research firm that conducted the Small Business Success Index survey with Network Solutions and the Robert H. Smith School of Business.  He has 25 years experience researching business and consumer markets, and is an expert in service quality and technology adoption.

As one of the principal researchers for the Small Business Success Index, I examined whether technology makes small businesses more competitive.  Our hypothesis was that Internet business solutions such as web-sites and online shopping carts require less economies of scale than a purely “bricks and mortar” business model, giving small businesses an edge when they deployed these technologies.   A number of questions come to mind, including the following:  The idea of technology as an equalizer sounds great, but is it really true?  If so, how does it make small businesses successful?  And which specific technologies have the greatest impact on success?

To address the first question – whether this is true – the research team conducted a deep dive analysis of the 1,000 businesses surveyed in the baseline Small Business Success Index.  The survey cataloged usage of 14 different Internet business solutions, including web-sites, online marketing and advertising, online customer service and purchasing, security, and employee information sharing.  We classified small businesses into three categories based on the number of solutions they use:

o    Internet Tech-Powered, or uses 6 or more solutions (only 29% of all small businesses meet this threshold)
o    Moderate Tech-powered, or uses 2 to 5 solutions (38% of small businesses), and
o    Minimally Tech-powered, or uses zero or just one solution (33% of small businesses).

For example, a business that has just e-mail or just a web-site would be classified as “minimally tech-powered,” but one that uses both would be “moderately tech-powered”.  The presence of a combination of technologies is critical because the technologies should work in tandem to create synergies (e.g., a web-site should use solutions to drive traffic, such as Search Engine Optimization).

The research reveals that technology really does matter. The greater the degree to which a small business utilizes Internet business solutions, the more successful it will be.  One measure that led to this conclusion is the Small Business Success Index, an indicator of a small business’ long-term competitive health.   This measure reveals that 31% of the “Internet Tech-Powered” businesses are “highly competitive” on the index, compared to 24% of the “Moderate Tech-powered” and 19% of the “Minimally Tech-Powered” businesses.   The tech-intensive small businesses are more successful on other factors as well, including revenue growth, profitability, and achieving “soft goals” such as increasing the value of the company.

As intriguing as the technology-to-success linkage may be, does it hold up among the smallest of the small businesses? Note that larger small businesses rely more on Internet business solutions.  For example, 50% of companies with 20 to 99 employees are “Internet Tech-Powered,” compared to only 31% of those with 2 to 4 employees and 16% of those with zero or one employee.   However, when we look specifically at the smaller businesses (less than 5 employees), the relationship between technology and success is just as prevalent as with larger small businesses (5 to 99 employees).  It seems that it is worthwhile for even the smallest businesses to invest in Internet business solutions since they are more successful than their peers who rely less on technology.

IN PART 2: Charles continues his exploration of how technology can make a small business successful and what hot technologies are associated with small business success.

This entry was posted on Wednesday, May 6th, 2009 at 12:00 pm and is filed under Small Business Success Index, Technology. You can follow any responses to this entry through the RSS 2.0 feed.


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