The European Business Review

Just another WordPress weblog

Mobile Broadband: A Game-changer for SME IT for Innovation Success

Screen shot 2012-11-20 at 15.36.04

By Karen Patten, Ayman El Tarabishy, Katia Passerini and Michael Bull

The proliferation of mobile broadband technologies and applications represents changing business phenomena that are just as revolutionary as the emergence of the Internet. “Smartphones” capable of high-speed Internet connections represent not only the “always-on” implications of broadband Internet, but also the “anywhere” capability of modern mobile telecommunications. Coupled with the ability to remotely use software and hardware services through cloud computing, geography and manual transfer of data are no longer business limitations. In a world of ever increasing competitiveness, small and medium-sized enterprises (SMEs) can take advantage of their size to be more flexible. They can leverage the potential of the new “Broadband Economy” by reaching far beyond their traditional local perspectives to provide exceptional and innovative service to global customers. In the Broadband Economy, the watchwords are “innovation success though Internet for all.”

The Changing Competitive Landscape
Perhaps the most significant innovations of the past decade centered on increasing the capabilities of broadband Internet. Broadband improvement and Web 2.0 innovations have made the Internet more useful as well as more important for business. Innovative applications from Amazon, Google, Facebook, Skype, and Twitter, among others, have built new foundations for successful eCommerce and eBusiness for many small firms and independent businesses. Dial-up and unreliable connections are no longer transaction or service problems.

Even so, until recently, broadband was limited and short-ranged at best, and tethered by physical limitations at worst. This made for particular difficulties on the part of small and medium-sized enterprises (SMEs). Such firms were generally slow adopters of new technology due to resource limitations imposed by size. They simply did not have the resources needed to purchase the latest technological developments. Nor did they have the expertise required to develop strategies to leverage technology to add value to their businesses.

As a consequence, technological-based competitive advantage was biased in favor of large organizations. Large firms have the advantages of financing and well-developed value chains around which they could build proprietary processes. SMEs were viewed as “core in focus and constrained,” while larger and well-capitalized firms were seen as more “ambitious and glamorous.”

More recently, however, mobile broadband technology innovations, the development and pricing of IT as a commodity, and the creation of cloud computing “as a service” have largely leveled the IT playing field and have helped negate the equipment investment advantages formerly held by large organizations. Faster networks at lower costs, improvements and simplification of IT user interfaces, and the boom in the use of mobile technologies have created new opportunities for SMEs to prosper. Due to their size, SME owners and entrepreneurs have the advantages of flexibility, business acumen, and the ability to identify and track trends quicker than larger competitors. Now, through new and innovative uses of mobile broadband-based information technology, SMEs are able to augment and sustain these competitive advantages. Besides increasing their interactions with suppliers and providing superior services to global customers, SMEs can also use the new broadband-based information technology to improve their internal business management and develop new business processes.

The new realities of broadband-based Internet IT may have benefits that extend beyond those that apply to SMEs. If the new broadband-based Internet technology is implemented with thoughtful foresight, sound planning, and a willingness to continue to upgrade and adapt, potential benefits include improvements to innovation processes, government operations, and even whole economies. Tec-savvy SMEs may also benefit by being able to make a transition from the “core and constrained” to the “ambitious and glamorous.”

What Is Broadband and Who Are the SMEs?
The technical definition of broadband is in itself a “broad” term. There is no one definition, just as much as there is not just one kind of network connection. The International Telecommunications Union (ITU) defines broadband as Internet services that are “always on,” where a new connection is not required every time, and with a high capacity for data, while still maintaining relatively high speeds.

The definition of small- and medium-sized enterprises (SMEs) also varies by region and country. SME definitions are classified by revenue turnover, employee headcount, or just relative dominance and influence in an industry/economy. The European Union (EU) has consolidated and aligned a common definition for SMEs, with a third category titled “micro-” sized enterprises. Micro-sized enterprises are those whose headcount is less than 10, with a balance sheet total/revenue turnover of less than 2 million euros. Small enterprises are those with a headcount of 10 to 50, with a balance sheet total/revenue turnover of 2 to 10 million euros. Finally, medium-sized enterprises are those with a headcount of 50 to 250, a balance sheet total of 10 to 43 million euros, and a revenue turnover amount of 10 to 50 million euros.

The prevalence of SMEs in the EU (99.8% of all businesses) is high, yet current recessionary pressures and threats of renewed economic crisis have led to a general tightening of credit, which makes continued growth and expansion difficult for many SMEs, particularly in Southern Europe. Since financing is generally harder for SMEs to obtain than larger organizations across the EU, and interest rate imbalances for loans have been on the increase, SMEs in Europe will probably have to contend with “doing more with less,” which, when correctly implemented, broadband applications can very well accomplish.

Broadband Technology Business Advantages for SMEs
Business needs for technology-oriented SMEs cut across many different areas. Kirchhoff differentiated the typology of small enterprises based on growth and innovation potential. Those who have high growth, but lower innovation are considered “ambitious,” while those who have high amounts of both are considered “glamorous.” These are considered to be the “ideal types” of technology-based organizations as they are quick to adopt new technologies and at the same time drive growth for themselves and the larger economy. Tec-savvy or IT-based SMEs, more likely to fit these specific criteria, are identified as the “next-generation SMEs,” as their innovation in the use of IT-based and wireless technologies gives them more opportunity to experiment and gain time-to-market advantages.

A survey conducted in 2010-2011 by the New Jersey Institute of Technology and the New Jersey Technology Council (NJTC) in conjunction with other local and international partners identified key business factors for both macro and micro IT SMEs. These include business factors that the firms have little or no control over, chiefly environmental, regulatory, and economic. Of these, SMEs cited the lack of qualified employees in science, technology, engineering, and mathematics-based fields (STEM) as most important (41.2% of respondents). Also important were technology (19.1%) and capacity (17.6%) issues, as well as government regulation (10.3%). Concerning more controllable factors such as marketing, SMEs identified ease of use, new product areas and innovations, customer service improvement, and finding ways to better manage demand (increasing sales) as most critical.

“Technology-oriented SMEs believe that they will be able to boost their firms’ revenue by focusing on innovative, user-friendly, and customer-oriented products.”

SMEs overwhelmingly reported that ease of use on both the front-end and back-end is the most important factor, with 69% of respondents saying that it was “somewhat critical” or “highly critical.” This is a particular challenge, since back-end IT systems are becoming more and more complex. Cloud computing services allow computing power and services to be used only as needed, like a utility. In addition to helping to reduce large IT investments, these new services help simplify the necessary employee technical skills and time to maintain the systems, freeing-up time to focus on delivering excellent products and services. Innovation was identified as the second most important factor in the survey, although the largest group of SMEs (25%) reported they spend less than 5% of their IT budget on R&D investment as compared to existing product offerings.

Better demand management and customer service were high on the priority list, which reflects the SMEs’ propensity to invest heavily in sales and marketing in order to increase sales. New Internet marketing technology tools, particularly social media, will likely improve demand management and customer service. Overall, technology-oriented SMEs believe that they will be able to boost their firms’ revenue by focusing on innovative, user-friendly, and customer-oriented products. Operational concerns, such as supply chain management, lower costs, partner coordination, while still considered important, were ranked slightly lower. However, respondents still noted that “…successful IT-based companies will be those who are able to combine efficient projects and implementations with a real understanding of how the solution will integrate into the way a company does business and makes its money.”

Broadband Technologies within the Value Chain
The use of models or frameworks aid the determination of how well firms manage their businesses. The generic business value chain is one such model, which can be used by SMEs to analyze their industry-specific business functional areas and prioritize their use of mobile broadband technologies to support these operational areas. (See Figure 1)

Screen shot 2012-11-20 at 10.19.33

“Inbound logistics” include identifying and managing suppliers, managing procurement, and replenishing raw materials. The second component depends on if the SME is focused on “manufacturing” a product, referred to as production, or setting up and managing “operational” activities related to the delivery of specific services, if the SME is focused on providing services. The third component, “sales/distribution,” deals with the delivery of the product or service, sold to the end customers through marketing, sales, and distribution activities. Finally, the fourth component is “customer support,” which is essential in order to manage customers after the sale and to gather feedback on product performance.

The NJIT/NJTC SME survey, discussed earlier, identified important business priority areas considered essential for continued business growth. These priorities can be met by different broadband technological options that support the various components of the generic SME value chain. SMEs can increasingly access these technologies in terms of costs and ease of use. Some of these applications are more mature while others are still in their infancy and may further lead to disruptive changes.

Ease of use and lower costs → supporting sales/distribution: New infrastructure models for hardware and software sourcing through cloud computing such as IaaS (Infrastructure as a Service) or SaaS (Software as a Service) can lower infrastructure costs and eliminate costly in-house IT services where possible. This saves the up-front new technology implementation costs, plus the on-going operational costs, since SMEs can now scale and scope their access to technology based on their business growth or loss. Besides the cost savings, the capabilities of these new hardware and software services provide SMEs with the flexibility to use only the services needed at any particular time.

Launching new and innovative products and services → supporting manufacturing/operations: The greatest advantage of the new, broadband services is the capability to develop new products and services through the collaborative work of SME employees with their customers and suppliers. Open collaboration systems provide SMEs with the capability to generate and share knowledge through Wikis, blogs, and open-source document management tools. In the past, only the largest enterprises had access to collaborative platforms such as Microsoft SharePoint, etc. Today, SMEs can take advantage of the simplicity, ease of use, and wide access to open-source collaborative tools.

“The greatest advantage of the new, broadband services is the capability to develop new products and services through the collaborative work of SME employees with their customers and suppliers.”

Better marketing and global outreach → supporting sales/distribution and customer service: The Web 2.0 social networking evolution allows any enterprise including SMEs to reach customers from anywhere in the world. SMEs can market their products anywhere using on or off-line tools thus potentially increasing their customers and increasing sales. By capturing online sales transactions and transferring this information to mobile devices, SME employees will know the location of the customer and his/her preferences. The employees can then use mobile emails to quickly follow-up and provide service personalization. By following Twitter or YouTube users, employees can also obtain additional leads.

Customer service improvement → supporting customer service: Mobile broadband technologies provide SME employees the flexibility to work from anywhere including customer locations. Mobile applications using handheld devices can augment the effectiveness of field employees’ face-to-face customer interaction with speedy access to enterprise records, catalogues, or databases to quickly allow orders to be filled in real-time. New social media Web 2.0 technologies allow the customers to provide real-time feedback, which allows the SMEs to quickly respond and offer personalized services. Mobile email and remote access to databases through smart phones also improve the flow of information and knowledge management with suppliers as well as customers.

Stories of Successful Entrepreneurs
Often innovation and its subsequent success come from the vision of a single person – an entrepreneur or the owner of a small business. This vision often is to provide a product or service that meets a very specialized need. It could be an innovative product or service. It could meet unique customer needs at much lower costs than similar products or services. It could reach a whole new group of customers anywhere in the world who had no knowledge of the existence of particular products or services. It could improve and personalize customer services. The new products and services could be very technical and technology-dependent or they could be more social in nature using “technology as a tool.” It is all dependent on determining a more “human” way of using IT to gain that competitive edge. The following stories describe how broadband information technology was innovatively used by two entrepreneurial enterprises to achieve success.

In Italy, the Tecnomodel story not only describes a visionary SME in a regional industry struggling to stem the effects of outsourcing, but represents an innovative way of scientifically codifying very “tacit knowledge.” Founded by married couple, Daniele Scoutucci and Daniela Funari, Tecnomodel originated from Scoutucci’s tinkering and reverse engineering of computerized sewing machines for clothing. He applied these same techniques to the manufacturing of women’s dress shoes. The actual intangible designing of such shoes was counterintuitive to that of quantitative machinery, but through the couple’s advanced technical skills, they were able to have the machines store and execute dress shoe production data. Funari and Scotucci turned down numerous offers to divulge their trade secrets and instead founded Tecnomodel.

Tecnomodel further took advantage of changing local industry conditions. Around this time, independent footwear designers and stylists were becoming popular as foreign outsourcing to Eastern Europe and Asia was beginning to take its toll on the competitiveness of Italian manufacturers. The standard industry practice for women’s dress shoes was for the designer to contract with a manufacturer to produce a small sample of prototypes for evaluation, and then mass produce the dress shoes for distribution and marketing. While the Italian companies could offer higher quality skill sets and expertise in manufacturing, the cost compared to foreign manufacturers was untenable.

Tecnomodel successfully created a new value chain from this challenge. Instead of one manufacturer producing the prototype, sampling, and mass production, it contracted with the designers to help design, develop, and produce prototype samples, plus collect detailed technical documentation. After producing satisfactory prototypes, the designer could then take the codified technical designs from a central server and have it digitally transferred and manufactured elsewhere at the most opportune market price. By segmenting the value chain, Tecnomodel demonstrated not only a new approach to an old business, but the importance of broadband technology to help the firm stay in touch with every relevant link and intermediate step in the value chain.

In the U.K., a company with a name like Wiggly Wigglers might just be asking for laughs. But founder, Heather Gorringe, of the UK, found that although WW may be very different from its original intent, it still made a name for itself as an extensive entertainment business that also just happens to sell gardening products and services.

After bouncing around several different business attempts, Gorringe originally founded Wiggly Wigglers as a seller of do-it-yourself homemade worm compost kits. The product itself notwithstanding, Gorringe’s persistence in sending out many press releases meant local media was quick to pick up on the story of the company. At the same time, Gorringe focused on selling her product offerings via catalogue instead of big name gardening centers that she found impersonal and too oriented for upselling. Due to the company’s remote location, she purchased computers, created a database and a website, and became an eCommerce business in the early 2000s.

Eventually, her public relations efforts through the media and WW’s early adoption of broadband Internet applications converged through the use of social media. She found that spending 10% of gross margins on business advertising was not cost effective. Nor did she believe that radio or TV spots could appeal to customers of such a specific gardening niche as hers. After discovering the versatility and customizable possibilities of Apple Podcasts, she embraced this technology and found success in creating a sort of gardening broadcasting program for WW. The firm continued to embrace social media as its sole marketing tool and soon had over 70 hours of free social media in all different forms. Its innovative approach to such an unusual industry niche earned the firm fans the world over. In 2008, the company won the “Dell Small Business Excellence” award for the UK and was also named the overall worldwide winner.

Looking at the Future
Entrepreneurs and SMEs are not just a small part of today’s Broadband Economy story. They are integral to every aspect of today’s developed economies. They are the main drivers of the creation of new jobs worldwide since the vast majority of all enterprises are, in fact, small. Especially in times of austerity and economic crisis, it is crucial to remember that SMEs can compete, grow, thrive, and ultimately provide healthy economic growth and activity by using mobile broadband technologies to leverage customer data, information, and knowledge.

About the Authors
Dr. Karen Patten
is an Assistant Professor in the Integrated Information Technology Program at the University of South Carolina, Columbia SC. Dr. Patten researches in the areas of executive IT management, wireless and mobile telecommunications, and IT curriculum development. She is the author of Data Networking Made Easy, the co-author of Information Technology for Small Business: Managing the Digital Enterprise, and has published in referred information systems journals and proceedings. She teaches courses in telecommunications, IT management, and project management. Dr. Patten’s professional background includes fifteen years as an emerging IT manager and network engineer for AT&T and AT&T Bell Laboratories.

Dr. Ayman El Tarabishy is an Associate Professor of Management at the George Washington University’s School of Business, where he teaches entrepreneurship and leadership. Dr. El Tarabishy is the Executive Director of the International Council for Small Business (ICSB), the oldest and largest non-profit organization in the world devoted to advancing small business research and practices. A co-author of Information Technology for Small Business: Managing the Digital Enterprise, Dr. El Tarabishy’s research is on innovation, social entrepreneurship, and entrepreneurial leadership. He has published in a number of business and entrepreneurial journals.

Dr. Katia Passerini is the Hurlburt Chair of Management Information Systems and an Associate Professor in the New Jersey Institute of Technology’s School of Management. Dr. Passerini conducts research in the area of computer-mediated learning, IT productivity, and knowledge management and teaches courses in MIS, knowledge management, and IT strategy. Besides being a co-author of Information Technology for Small Business: Managing the Digital Enterprise, she has also published in a number of refereed IS journals and proceedings. Dr. Passerini’s professional background includes multi-industry information technology projects in Europe, North America, and the South Pacific while working at Booz Allen Hamilton (now Booz & Co.) and the World Bank.

Michael Bull is a Research Assistant at the New Jersey Institute of Technology, where he works on information technology management projects for small and medium enterprises including research for the book, Information Technology for Small Business: Managing the Digital Enterprise.

References
1. Bruce Kirchhoff, Entrepreneurship and Dynamic Capitalism, Praeger, Westport, 1994.
2. Katia Passerini and Karen Patten, Next Generation Small and Medium Enterprises’ Mobility Strategy Roadmap, Proceedings of the ISOneWorld, Las Vegas NV, 2007.
3. Katia Passerini, NJTC Global I/T Outlook 2010-11, presented at the Future of Software, IT, and Communications Conference, Bergen Community College, Hackensack NJ, 19 May 2011.
4. International Council for Small Business (ICSB), Results of the 2008 Dell / ICSB International Small Business IT Survey, 2008, www.icsb.org.
5. European Commission, Small and Medium-sized Enterprises (SMEs), European Union, 2003, http://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/sme-definition/index_en.htm.
6. European Commission, European SMES Under Pressure: Annual Report on EM Small and Medium-sized Enterprises, European Union, 2009, http://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/performance-review/pdf/dgentr_annual_report2010_100511.pdf.

Leave a Reply