Let us look at two different service oriented startup businesses — Business 1 and Business 2.  Each realized during their first six months of operation that they had some operational challenges; they were not operating efficiently and effectively.  Change was needed but what? 

Challenges they were dealing included:

• Client service satisfaction that was good, not great.

• Revenue was not promptly being received, and

• Staff turnover was high.

Both owners also felt if  payments were received faster, service offerings could be expanded increasing client satisfaction.   

When the businesses started both:

• Created business plans with target metrics, sales and marketing plans, and hiring goals based on growth projections.

• Obtained financing.

• Hired staff.

• Created marketing material.

• Purchased software and workstations.

Neither had created an information technology plan or thought about how software, hardware and data needed to support their individual business.  Both considered software and hardware as an expense – a liability.  

The differences between Business 1 and Business 2 start here.   

Business 1 -- After a review of the business processes, software and hardware, a number of operational changes were identified.  The payment difficulties were a symptom of a number of startup decisions such as:

• Proprietary industry software had been purchased that had limited functionality and was not compatible with Microsoft Office.  Instead of an integrated solution that enables clients or other third parties to be automatically invoiced, a file needed to be extracted and sent to a third party for processing.  Additionally there was no integration with the Accounting package.

• Since the software had limited functionality, Excel spreadsheets and Access databases were created to provide necessary data to measure and run the business.

• Workstations had been purchased that met the minimum requirements of industry software, but did not adequately support other software needs resulting in the workstations being slow.

Staff had become frustrated with the software, hardware and amount of redundant work necessary. 

To “fix” the owner’s operational problems:

• A three-year information technology plan was created.  The business plan and necessary business processes drove the plan.

• New industry software was selected based on the business processes, data and information requirements, and staff needs.

• New hardware was purchased based on the software requirements as well as anticipated future software needs.

It is important to note that although the owner was not pleased, money was found for the necessary changes to business processes, software and hardware.  The business has grown each year as well as expanded service offerings.   The information technology plan is updated annually. 

Business 2 – Again, a review of how the business was operating as well as software and hardware resulted in a number of recommendations.  Some of the start-up decisions were:

• Industry software was purchased but it was at the end of its lifecycle and with limited functionality.  Interface modules for credit cards, the accounting package, and third party ordering systems were not purchased.

• Numerous Excel spreadsheets were created so that data could be rekeyed.   Daily information necessary to run the business was not available.

• Workstations had been purchased that did not meet the minimum requirements for the software package causing the workstations to periodically “hang” and corrupting the database.

Again, Staff had become frustrated with the software, hardware, and amount of redundant work necessary.

To “fix” the owner’s operational problems:

• Additional memory was added to the workstations.

• Cabling changes were made so that credit card equipment could be used properly.

• An information technology “budget” was created.

The owner did not want to spend more money on new Information Technology until a certain revenue number was achieved or the hardware wore out.

Within a year, a CLOSED sign was on the front door.   Please note I cannot guarantee that changing the software and hardware would have prevented the owner from closing the doors, but I am sure it would have increased efficiency and effectiveness.

Could the business owners voided making startup mistakes?

Yes 

When the original business plans were created neither owner knew how to align Information Technology to their Overall Strategy and Goals.    It was not until there were difficulties that each realized how Strategic Information Technology was to business — new initiatives, business intelligence, eliminating duplication, and  the foundation for much of the business’ operations.

August 2009