Small firms that use technology effectively are more likely to survive and grow than others.
Technology has a huge impact on UK SMEs – even to the extent of determining whether they survive or die. Antony Walker, deputy chief executive of techUK, the trade association of technology companies says: “There is a strong correlation between companies that are adept in using new technology and those that grow and thrive.”
Research in the Scale-up Report , which looks at what is special about the high-growth, high-activity firms that are the most significant drivers of the economy and how they can be supported from start-up to scale-up, shows that those which use technology in the most adept ways are those that are most likely to scale up.
Among the reasons is the productivity gain to be won by using technology as a business tool. “Technology has transformed the early stages of start-up,” says Walker. “It allows entrepreneurs to work from anywhere so it eliminates the needs for premises, it means they can build virtual teams, connect with customers and suppliers, promote their brand, and transact more easily and cheaply than ever before.”
The result is a boost in productivity which is a unifying factor behind all successful business growth, regardless of business size or sector. “There is a strong correlation between the use of technology productivity tools and productivity rates, and in the service sector in particular, between high productivity and the chances of a business succeeding or failing,” says Walker.
The impact of cloud on SMEs
The arrival of cloud-based services is also a factor. Accessing the cloud allows SMEs to use the same services as their bigger competitors, but on a more affordable pay-as-you-go basis, making such services as cloud-based IT support, accountancy or customer relationship management available even to micro-businesses. The result is a more level playing field where agile young start-ups can compete more effectively with long-established bigger players.
Online platforms can also boost SME visibility and help them compete with larger business entities. Once again cloud-based tools have made the building of websites and the capacity to conduct online financial transactions much easier than even five years ago.
The use of cloud-based services could also give young SMEs the edge over bigger, older organisations which use more traditional sources of say, IT services. “Recent research from the Broadband Stakeholder Group shows that micro-businesses under five years old are more adept at using digital and cloud-based services. They are the business world’s digital natives,” Walker says.
When companies start to see and use technology as an engine for growth, it is important that they keep up to date with new developments so they remain optimally digitally enabled and thus maintain their edge.
He credits the low cost and ease of entry into business brought about by technology as a major factor in the record number of UK business start-ups in recent years. Figures from national enterprise campaign Startup Britain, which monitors the number of UK start-ups registered with Companies House, show that a record 500,000-plus new companies have been started in 2014. Around 95 per cent are SMEs.
Technology the key to new business growth
Once a start-up is established technology can also be instrumental in giving it a competitive edge. “By their nature, SMEs are often more agile than larger organisations, but technology can increase their agility and flexibility, allowing them to respond faster to changes in market conditions and alter business plans quickly,” says Walker.
However, he warns that SMEs which start in a digitally-savvy way need to maintain their technological lead in order to remain competitive. “When companies start to see and use technology as an engine for growth, it is important that they keep up to date with new developments so they remain optimally digitally enabled and thus maintain their edge,” says Walker.
In doing so, they can use technology companies themselves as role models. It is no coincidence that productivity is highest in the ICT sector, says Walker.
“TechUk’s 850 members represent all kinds of tech companies from major corporations to SMES serving all markets, but the reason we tend to highlight the role of tech start-ups is not only because they create valuable business services but because they are natural early adopters of new technology and at ease with adapting it to their own requirements.
“They tend not to allow themselves to be shackled by old technology and as a result make good role models for businesses in other sectors.”