How small and medium-sized businesses can thrive in a rapidly changing environment Featured

8:01pm EDT January 31, 2012
How small and medium-sized businesses can thrive in a rapidly changing environment

Last month Steve Carter, president and CEO of ii2P, challenged small and medium-sized businesses (SMB) to take a look at investment decisions around their current support models. This month, he stresses the importance of adopting a strong sense of urgency to avoid upcoming challenges.

“SMBs worldwide are projected to spend $1 trillion on IT by 2014. But unless something drastically changes, that spending could be like a heavy weight on a vessel headed into a perfect storm,” says Carter. “We want to stop, take a pause, and not repeat history by spending money on technologies without really looking for a composite solution.”

Smart Business spoke with Carter about the challenges SMBs face, how to avoid common traps and the importance of managing cost pressure while strengthening customer intimacy.

Why do you feel there needs to be a heightened sense of urgency around creating change this year?

There are two fundamental problems facing the SMB market space: 1) cost pressures to stay competitive; 2) customer intimacy is in jeopardy. All companies with products and services wrestle with relieving cost pressures to maintain competitiveness. However, the most significant challenge I see is declining customer intimacy. This is an aspect that has been ignored. In order to sustain and grow market share, maintaining customer intimacy is paramount. Overall, a quality customer experience is missing, which shows up in lost market share.

What factors do you feel are causing these challenges?

A perfect storm is described as having multiple conditions that are colliding at the same time. There is a perfect storm in the SMB market today. First, all too often we see both cost and customer intimacy elements are chained to an archaic standard support model. Such a model is actually designed to cost more to interact with the customer. Historically, this has been why companies scrambled to find ways to cut back on support costs. This standard model is also designed to drive customer interactions out because it costs so much and reflects pure overhead. What this does is create an environment for the SMB that says, ‘Use it less, find a way to reduce calls for support.’ Sounds like a good thing, but it is deceiving. It’s a death trap for the SMB.

At the same time the demographics of the end user have changed considerably and it is imperative that you respond to their wishes. Our clients have grown up in the technology world and favor what I call the ‘preferred end user support model’ — they prefer to satisfy the needs themselves rather than call a support center for help.

Lastly, by not considering and committing to a holistic approach when installing new technologies into your business, you are actually burdening your organization with incomplete and ineffective solutions.

How can the SMB know if it is facing the perfect storm?

There are some clear, obvious indicators that every SMB should use as beacons:

? Check your specific market growth. Has your business grown at a healthy rate? If you are not growing at a healthy rate, the storm will ultimately catch you.

? Check your client retention. This one is big. You can’t glaze over client loss as being a result of some external factor. Truth is, if you are losing clients, your model is working against you. The two key components are your cost competitiveness and your ability to be intimate with your end users.

? Check your profitability. This one should be obvious, but can be deceiving. If your margins are falling, for example, don’t automatically blame costs of raw materials. The cost of your support model is a more obvious culprit.

What options does an SMB have if it determines it is facing a perfect storm?

There are three options that always apply, and the first two are the most common traps that sink businesses. The first option is to do nothing. Keep steaming straight ahead, believing the situation will improve. The second option is planning to do something in the future. While this one doesn’t sound quite as bad as doing nothing, it has the same result: the longer you wait, the more you lose ground.

There is a third option: Do something new. Now is the time to face the perfect storm.

How should an SMB go about implementing a new approach in order to avoid the perfect storm?

The thing to remember is that surviving the storm requires a balance between the two elements I spoke of earlier: managing cost pressure while strengthening customer intimacy. The first step to bailing water out of your boat is to analyze and optimize your current support model. Then establish a clear strategy and create self-improving client intimacy through customer-facing self-service.

We’ve all made the mistake thinking that just purchasing technology is the answer. Take a new holistic approach that will bring technology, process and management disciplines as a complete and total solution. Examine the investment in current IT expenditures and make the hard assessment: ‘Am I getting real return on investment?’ If not, make a change. Finally, establish committed continuous improvement processes that focus on balancing the customer intimacy mandate with prudent cost management. With these approaches in place, clearing the perfect storm is simply a matter of having your clients use your new model more.

Steve Carter is president and CEO of ii2P. Reach him at (817) 442-9292 or scarter@ii2p.com.