Ready, Set, Grow
When Kim Miller accepted the chief financial officer post at Marina Administration four years ago, her boss set one overriding priority: gain efficiencies.
The Phoenix-based marina management firm ran two harbors in the state. The business cleared a sizeable profit at year's end, yet Miller's CEO felt it was a good business that could be better. And he was right. What Miller inherited was a good organizational ship that operated without a compass.
With the CEO-set priority as guidance, Miller plotted a four-year course that started with a real-time sales management system, expanded access to high-speed Internet and an integrated IP-based messaging system, topped off with wireless access for staff and customers. Some of the steps she took improved staff productivity and boosted income earning potential, while others simply cut costs. Either way, initiatives like these affect the bottom line, and technology is the thread that ties these far-reaching projects together.
"Technology tools provide an advantage to us in getting ahead and are a fundamental part of running our business," Miller says. "We did not have information at the time of sales to show where and when we were selling product. Now we're better able to understand what our costs should be, control them and find ways to grow the business."
Small-business owners who look to technology-driven resources are on the right track to build their companies into large, stable operations, says Rob Enderle, president and principal analyst at the Enderle Group in San Jose, Calif. Still, Enderle cautions that, with so many options available, businesses must develop tech-driven strategies instead of just considering IT a means to purchase notebooks and servers for the office.
"The portfolio of technology available to build a business quickly is unprecedented," Enderle explains. "But you really need a plan. You need to take a template of the best in your industry and build your plan from that. That way, you know what you need to do to be the best."
The sharpened focus at Marina Administration reflects a major shift among small-business managers, who increasingly view IT as a means to stage their companies for growth and fatter margins. Technology tools provide insight into areas poised for growth, support productivity enhancements to increase sales and help pinpoint areas for reductions, all of which impact the bottom line.
When Charles Rapier went from outside consultant to senior IT manager for Ovation Research Group in Highland Park, Ill., last year, he got clear marching orders too. Well into its second decade of operation, the drug outcome research firm asked Rapier to protect the firm's intellectual property and scale its technology infrastructure for further growth.
"When I first arrived, the most significant issue that we faced was to provide a cost-effective means of protecting our intellectual property," Rapier recalls. "The problem is not just with offering IP services on the network, but protecting the network when remote workers access from outside or a wireless port and protecting the data on the notebook. As our industry and the health-care environment continue to change, we remain dedicated to providing great client service, objectivity, and attention to detail, and practicality and technology are key to that," says Rapier.
According to Donald Rumball's research on economic development in Ontario, Canada, the distinction between firms poised for fast growth and all others is the scalability of systems and processes to respond to changing business needs. In Rumball's research on approximately 2,500 hyper-growth firms, those companies were better prepared to expand as opportunities emerged. Controlled-growth firms, by contrast, did not avoid growth. Because they lacked the preparation to seize and respond to circumstances, however, they grew at a more comfortable pace.
For Ovation, providing fingerprint authentication to key end-users, monitoring the network and instituting strict authentication protocols and encrypting outbound and inbound traffic fulfill the intellectual-property protection goal. But ensuring that the technology infrastructure can handle higher-volume sales is mission-critical work that's also critical to the company's growth strategy.
"There was a period where there was an explosion of sales and a critical velocity of time in receiving and responding to an order," Rapier says. "It was difficult to do the capacity planning, but we sat with the business managers about projects that were ramping up and reinforced the need to collaborate, so that IT was directly exposed to projected growth patterns. We made the investment in technology to support that need."
Another key factor in scaling a business involves looking for ways to cut costs to improve the income picture. Managing runaway spending can be a chronic and costly headache for small businesses, which need to reinvest funds for growth more than established businesses with a clearly established market niche. Upscale office space, imported coffee or overpriced equipment may eat up funds better spent on growing profit centers.
Miller says she got to know Marina Administration's business through a constant evaluation of goals and by crunching the numbers provided by the new IT systems.
"I can look daily to see what the store is doing at every property and how many people are on staff," Miller reports. "If we're overstaffed, I can cut back labor based on real-time information rather than waiting until the close of the month for a profit-and-loss statement. By then, we could have lost money—money that we could reinvest back into the business."
While cutting costs is critical, it pays to determine whether there's a greater return in improving processes with tools, or remaining tethered to a productivity pace set by outdated tools.
"When it comes to IT, if there is something we need, we buy it," explains Leslie Sinclair, CEO of Segreto Inc. and former Xerox sales executive. "The thing about technology is that it's essential for doing our job. When working with antiquated equipment, it just doesn't pay off. In the long run, it costs the company more money."
For Segreto, a decorative painting and faux finishing firm in Houston, automated paint software makes it easier to send sketches to clients and cuts costs because Sinclair and her staff of 14 painters, 12 plasterers, four muralists and faux finishers don't have to create the palettes by hand.
Segreto expects to post more than $1.2 million in sales this year and step up its investment in IT. "We are not at the point yet of making annual projections in our budget for IT," says Dede Reck, Segreto's IT manager. "Most of our 2004 budget was spent developing our Web site." Yet Reck says that this year, the focus is on upgrading the small company's network to better support business systems.
"Our digital camera and software are an integral part of our business, because we heavily rely on them to send images to our customers," Reck explains. "When that system slows down, I know it's time to upgrade."
Reporting by Lee Copeland, Jim Morrison, Veronica Patterson, Patrick Reilly and Christie Taylor
With growth sometimes comes the acquisition and integration of new lines of business or entire new companies. Here's how RQ2 managed a runaway tech integration.
When RQ2 formed last year through the merger of Reliable Communications and Quantitative Resources, the companies shared a history of fast growth. What they didn't share were IT systems. Reliable ran a Windows platform, while Quantitative was a Linux operation. Integrating the two disparate systems and their personnel proved far more complicated than the merged company imagined. Neither of the firms anticipated the IT fallout the merged company would have to address.
"We experienced a complete meltdown," says Jamie Miller, vice president of Technology and Data Acquisition for the St. Joseph, Mo., company. "We'd get something up and running and try to bulletproof it later. We didn't think long-term about what hardware we needed to support software, and we had to replace a lot of the software."
Even with an integration problem at hand, the merger made sense operationally. Together the merged company offered a unique Web-based means that allowed customers to return wireless units online or via a call center. What began as a refurbished cellular phone shop and a research company spawned four distinct divisions: RQ2 Interactive, RQ2 e.Products, RQ2 Data Acquisition and RQ2 Teleservices.
"We have essentially four different companies," say Lisa Whitacre, president of RQ2. "The IT department is required not only to support but to help grow all four of those divisions."
Until IT could find a way to integrate data from the two formerly independent businesses, however, new tech projects were put on hold to focus on the integration. The merged firm addressed redundancies by replacing two disparate phone systems with a fiber optic network that linked the company's buildings. It then tackled an even tougher problem: combining Linux and Windows to integrate customer accounts.
Both companies doubled their revenue annually prior to the merger, and post-merger, the new company posts an equally attractive revenue record.
"Now we're building toward the future instead of the present," says Ryan Cochran, vice president of Marketing and Interactive.