IT in the Small Business

Yesterday I had lunch with the owner of a small business. He has grown from one shop to eight shops in fours states. A central distribution center in Salt Lake serves them all. The business buys inventory from multiple suppliers. My friend is making good money and the business is a success by most outward signs, but he has a problem: the entire empire depends on him working 12 hour days to make the critical decisions. My friend holds tight control on all inventory and purchasing from suppliers because this is where mistakes lead to huge losses. He also manages the salesforce.

This story reminded me of a story told by Charlie Feld. Feld, who was CIO for Frito-Lay tells about his instructions Herman Lay, the founder. When Lay founded the company in 1938, he was in intimate touch with his suppliers and his customers, often picking out the potatoes himself and delivering the finished product to stores. If the company had cash, Lay knew it because the cash was in his pocket. Lay wanted Feld to build an IT system that would get him back in touch with the business. Feld succeeded by putting in a $40 million logistics system that became a case study in IT.

At first the story of my friend's business and the problems of Frito-Lay may seem to very different, but I see them as the same story from different points of view. At some point, every small company that becomes a big company passes the stage where the owner can know every aspect of what's going on. This is a defining moment; owners who can't build processes to keep control of the business and keep it profitable as it grows either stay small or go bust.

As a CIO, I see this through IT-shaded glasses. I like to think that the CIO has a central role to play in helping the business not just automate process, but develop the processes themselves. As I talked to my friend about concepts like enterprise architecture and IT maturity hierarchy, he kept saying over and over: "That's our exact problem. You're telling me my history."

Most people who start businesses aren't IT experts and they shouldn'thave to be. They're good at making pies, fixing cars, or some other specialty. Even so, its folly to think that as IT gains more and more prominence in helping large business operate successfully, that small businesses don't need access to good IT as well. Many of them can't even keep their PCs running and they limp by on antiquated inventory systems because they're scared to jump in and make what could be a crushing mistake.

I've thought about this problem over the last few months and wondered how to give small businesses access to good IT advice and experience. As I said, the principles that we talk about in enterprise architecture and IT maturity are perfectly applicable, they just need a different context and some scaling down. Take, for example, the IT maturity hierarchy show at the right (click for a larger view). Small businesses have infrastructure issues that need to be solved first. They have the need for security and storage management. They have data to keep track of and applications that they need to buy or create to manage their business. At this stage, they're finally starting to get a view into their business that allows them to manage past the transition point and still have a comfort level with the business operations even though they're out of their direct control.

The problem with this, of course, is that the knowledge needed to create these systems is hard to find and hard to trust for a small business. Many don't have the discipline or see the value in going through and enterprise architecture process that creates, as one of its first steps, a business architecture. Its easier to just call up Billy down the street and buy a few cheap computers and an accounting system or a sales contact system to run on top of them. Then they get a few months down the road and find their systems aren't serving their needs and they're forced to live with them.

I don't have an answer. Maybe I'll get a chance to help my friend and come up with some ideas as part of that process. If you have some, I'd love to hear them.

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Last modified: Thu Oct 10 12:47:20 2019.