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Strategies for growth
in SMEs
The role of information and
information systems
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ELSEVIER BUTTERWORTH-HEINEMANN INFORMATION
SYSTEMS SERIES
Series Editors
Professor David Avison, BA, MSc, Phd, FBCS
Department SID
ESSEC Business School
Avenue Bernard Hirsch
BP 105
95021Cergy-Pontoise
FRANCE
E-mail:[email protected]
Professor Guy Fitzgerald, BA, MSc, MBCS
Department of Information Systems and Computing
Brunel University
Uxbridge Middlesex UB83PH
UK
E-mail: [email protected]
This is a new series under the Elsevier Butterworth-Heinemann imprint
which will provide medium for quality publications in the information
systems field. It will also provide continuity with the McGraw-Hill
information systems series, which has been discontinued. The new series
of texts is aimed at first degree and postgraduate students, and the global
research community in information systems, computer science and
business management. Information systems is multi-disciplinary. Where
formerly emphasis was placed on the technological aspects which remain
significant, it now stresses the importance of, and the links to, the
business environment particularly, in regard to the social and
organizational aspects.
If you have a book proposal for this series, please contact either of the
Series Editors.
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Strategies for growth
in SMEs
The role of information and
information systems
Margi Levy
and
Philip Powell
AMSTERDAM• BOSTON• HEIDELBERG• LONDON• NEW YORK• OXFORD
PARIS• SAN DIEGO• SAN FRANCISCO• SINGAPORE• SYDNEY• TOKYO
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Elsevier Butterworth-Heinemann
Linacre House, Jordan Hill, Oxford OX28DP
30Corporate Drive, Burlington, MA 01803
First published 2005
Copyright © 2005, Elsevier Limited. All rights reserved
The right of Margi Levy and Philip Powell to be identified as the authors of
this work has been asserted in accordance with the Copyright, Designs and Patents
Act 1988
No part of this publication may be reproduced in any material form (including
photocopying or storing in any medium by electronic means and whether or not
transiently or incidentally to some other use of this publication) without the written
permission of the copyright holder except in accordance with the provisions of the
Copyright, Designs and Patents Act 1988or under the terms of a licence issued
by the Copyright Licensing Agency Ltd, 90Tottenham Court Road, London,
England W1T 4LP. Applications for the copyright holder’s written permission to
reproduce any part of this publication should be addressed to the publisher
Permissions may be sought directly from Elsevier’s Science and Technology Rights
Department in Oxford, UK: phone: (+44) (0) 1865843830; fax: (+44) (0) 1865853333;
e-mail: [email protected]. You may also complete your request on-line via
the Elsevier homepage (http://www.elsevier.com), by selecting “Customer Support”
and then “Obtaining Permissions”
British Library Cataloguing in Publication Data
Strategis for growth in SMEs: the role of information systems
1. Small business – Data processing
I. Levy, Margi II. Powell, Philip
658’.022’0285467
ISBN 0 7506 6351 0
For information on all Elsevier Butterworth-Heinemann publications
visit our website at http://books.elsevier.com
Typeset by Charon Tec Pvt. Ltd, Chennai, India
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Printed and bound in United Kingdom
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Contents
Dedication vi
Foreword vii
1 Introduction 1
Part 1 Concept of the SME 17
2 Background to SMEs 19
3 Information and IS in SMEs 35
4 Flexibility in IS 51
5 Evaluating IS in SMEs 69
Part 2 Issues of IS strategy planning 87
6 Understanding IS strategy in SMEs 89
7 An organizational approach to IS strategy 109
8 Case example of ISS: Heath Springs 137
Part 3 Strategic resource: attitudes to information 157
9 Strategic context of IS investment 159
10 Strategic IS dynamics 177
11 Exploring business transformation through IS 201
12 Strategic alignment 217
Part 4 Knowledge and development of IS 235
13 IS role in co-opetition and knowledge sharing 237
14 Role of core competencies in developing ISS in
knowledge-based SMEs 265
15 Exploring business process re-engineering in SMEs 293
Part 5 Future: Internet adoption and strategy 315
16 Exploring e-business in SMEs 317
17 Strategic intent and e-business 339
18 E-business influencers 355
19 Managing IS: the future 373
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Dedication
To Michael, Nick and Aithne
To Paula and Sara
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Foreword
(cid:2) It is beyond question that a key influence upon the competitiveness of
enterprises of all types in a modern economy is their ability to utilize
information systems (IS). But, as in many other respects, the exemplars
of what is viewed as “good practice” is seen to be derived exclusively
from amongst large firms. Such firms are held up as illustrating the
benefits of developing a long-term approach to competitiveness through
appropriate use of IS. They have separate information technology (IT)
departments with a wide range of skills; they implement systems often
with substantial over-capacity in order to accommodate the expansion
that subsequently takes place. Their foresight is therefore rewarded.
The contrast with the “typical” small- and medium-sized enterprise
(SME) is stark. Setting aside the difficulty of identifying a “typical”
SME, the smaller organizations are viewed as, at best, reluctant users of
IT. Perhaps even more seriously they are accused of being misguided,
even stupid, in not recognizing the benefits IS can bring to their
businesses. In this respect there is a strong parallel with SMEs supposed
reluctance to invest in training of employees, as in both cases the SMEs
are seen to “under-spend”, compared with larger firms.
But such criticism of SMEs, in their decisions over IS is as misguided
as it is in the area of staff training, and for very similar reasons. As Levy
and Powell point out, small firms are not scaled-down versions of large
firms. Their owners have a diversity of objectives, almost none of which
correspond to enhancing shareholder value, which is supposed to
“drive” larger firms. Instead some owners have much shorter-term
objectives. They seek to run their business “flexibly” by which we
mean minimizing that part of their cost-base which cannot be adjusted
quickly to unexpected changes in circumstances. Hence the SME is very
unlikely to invest any excess capacity in IS, not necessarily because of a
lack of appreciation of the potential contribution of the long-term
development of the firm, but rather because the costs of being locked-in
are potentially fatal to the survival of the firm. In no sense, therefore, it
is a stupid or ill-informed reason from the perspective of the SME, but
to the outside observer it does appear very different from the strategy
adopted by large firms. What is clear is that, even size-adjusted
expenditure on items likely to yield primarily long-term returns, is
lower amongst small than large firms.
Superimposed upon this determination to avoid being financially
locked-in are other special characteristics of SMEs. In particular, the
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viii Foreword
unique role played by the owner – “the ego on legs” also requiring
emphasis, since the diversity amongst SMEs reflects the diversity of
human beings, making generalizations hazardous at the best. As the
authors emphasize some SME owners are “teckies” and their firms
reflect this, whilst to others computer systems are a last resort.
This book avoids the key pitfall of being judgemental on SMEs.
Instead, with its extensive use of case studies, it accurately reflects the
diversity of the SME sector. Its value is to recognize that the economic
and social environment in which SMEs find themselves, is different
from that of large firms, but it also illustrates the situations in which
SMEs’ investment in IS has yielded substantial economic benefits. These
case-based illustrations are much more persuasive to an SME owners
than the hectoring frequently meted out by those with responsibility
for enhancing productivity.
Professor David Storey
Director, CSME
Warwick Business School
University of Warwick
Coventry CV4 7AL
UK
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1 Introduction
(cid:2) Why research strategic information systems in SMEs
Information is transnational: like money, information has no “fatherland”.
Because information knows no national boundaries, it will also form new
transnational communities of people … who are in communion because they
are in communication (Drucker, 1989).
Over the last decade, the rise in the importance of information and
knowledge for business activity has been phenomenal. Globalization
has become a reality and competition is more dynamic (Porter, 1998) as
firms source materials and manufacture goods in many locations, while
innovation is vital for future business growth. Information is now
critical for the management and growth of business value. Knowledge
about competitors and customers is essential to understand the future
direction of business development. Harnessing this resource is
important, and yet, difficult. One means of tackling it is through the
development of organizational information systems that enable the
collection and dissemination of data, information and knowledge.
Organizations are increasingly using information technology to deliver
outputs from such systems. Data, information and knowledge can all
enhance competitiveness.
Information is a primary management resource. Like finance,
operations and marketing, its management cannot be left to chance. In
an increasingly competitive market there are three major reasons why
effective management of IS is essential for competitiveness. First, the
intensity of market competitiveness means that firms are under pressure
to work smarter and innovate faster than the competition. As the retail
banks have demonstrated, effective use of IS and IT can shorten cycle
times, while transforming the basis of competitiveness. Second, no firm
is an island. The value-adding process is one of transforming inputs into
profitable outputs. This means that the producers are dependent upon
the co-operation of suppliers, distribution networks and customers.
Third, information is an enabler of globalism. Changes in international
trading agreements and the monopoly power of local suppliers is driving
firms to use global sourcing in order to remain competitive. But a
precondition for accessing global resources is planned IS.
These issues have been researched extensively in large organizations,
and there is a vast literature on the values of IS and IT to improve
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