5 Reasons Entrepreneurs Should Understand IT

5 Reasons Entrepreneurs Should Understand IT

Doug Bartholomew

When it comes to being an entrepreneur, Luddites are at a distinct disadvantage.

That’s the bottom-line message gleaned from a survey of 152 CEOs and senior executives at mid-size companies who have grown their enterprises from small businesses. The more IT-savvy business executives were, the faster they were able to expand.

Almost three out of four reported having been “totally involved” in decisions about information technology during their companies’ early growth years. What’s more, almost half of those who rated themselves as “total geeks”—48 percent— reported reaching the 100-employee milestone inside five years of launch, compared to only one-third of all survey respondents whose companies grew as fast.

Conducted online in July with 152 business executives and owners, the Business Rearview Mirror survey was done by CDW, a diversified technology services firm with $6.8 billion in revenues in 2006. “We wanted to learn from both an IT and a business perspective what it took for them to reach 100 employees,” says Lauren McCadney, senior segment manager for small business at CDW, in Vernon Hills, Ill. The bulk of the survey participants (84%) represented companies with 100 to 500 employees; the remainder ran companies with workforces of 500 to 5,000.

Among the lessons from the responses:

1. Integrate IT into the business strategy. According to the survey results, while 98% of small companies had a defined IT strategy, those that viewed IT as a strategic or competitive resource tended to grow faster than those that merely “spent just enough” on technology so that employees could do their jobs.

2. Understand the technology. The owner or top executive’s own technology savvy was directly related to business success; 73% of respondents who rated themselves as “total geeks” had companies that attained 100 employees inside five years of launch.

3. Get involved in IT decisions. Seventy-four percent of respondents said they were “totally involved” in IT decision-making in the early years of their business. As soon as their companies grew large enough, though, they saw the wisdom of assigning this responsibility to a fulltime IT professional.

4. Delegate IT management to professionals. Almost half of the fastest growing companies in the survey—those that expanded at more than 20 percent annually over the past 5 years— had hired or assigned a dedicated IT person or staff prior to reaching the 100-employee level. Among the entire survey population overall, just 24 percent had a dedicated IT leader or staff before attaining the 100-employee threshhold.

5. Find ways to apply technology to improve processes. Production, project management and supply-chain management were the parts of IT that had the most significant impact on the respondents’ bottom lines.

Does all this mean that CEOs and other top executives at small and medium-size businesses had an easy time of understanding and implementing technology? Hardly. When asked what ranked as the most significant challenges they faced in growing their businesses, “managing IT to our advantage” ranked second only to recruiting and retaining employees.

Copyright © 2007 Ziff Davis Media Inc. All Rights Reserved. Originally appearing in Baseline.