Center for Management of Emerging Companies

Identifying the Fundamental Technology Guiding Your Organization

When designing the appropriate organizational structure and creating a supporting organizational culture it is important to understand the fundamental technology that drives your business processes and the flow of day-to-day work.  Here is a helpful checklist for determining your dominant organizational technology.

Department-Level Technology

Technology is an important factor in designing work activities at the department level.  To learn more read my report on Charles Perrow and department-level technology.

Technology and Organizational Effectiveness

Technology is important because of the impact it can have on the decisions a company makes regarding its strategy and the design of its organizational structure.   The role of technology in the overall conversion process--acquiring inputs, transforming the inputs into finished outputs (products and services) and marketing and selling the outputs to customers to generate capital to purchase more inputs and sustain the business--is discussed in a report on technology and organizational effectiveness.

Creating Effective Information Systems

A comprehensive and effective information system is essential to the success of any business.  The term “information system” refers to processes and tools that companies use to collect data, interpret and process it into information, and disseminate the information to those who need it on a timely basis and in a form in which it can be used by the recipient. The elements of an information system include personnel, data collection, storage and processing equipment, communications and dissemination facilities, procedures, security planning, and controls.  It is important to distinguish between “data,” which is essentially the raw material (e.g., facts and figures describing known events or occurrences) for “information,” and the “information” that is created from interpreting the data.

The first functional element of any effective information system is inputting the appropriate data.  Managers should establish procedures for timely collection of all data necessary to generate the required information.  The data should be checked carefully before it is entered into the system.  The second functional element is referred to as data maintenance.  The goal of this function is to be sure that data in the system that is no longer current or relevant will be replaced.  However, the maintenance function should include the capacity to archive and preserve historical information for future reference.  The third functional element is the output function, which focuses on creating and disseminating useful information for consumers within the organization.  In order to be prepared for output, the data must be retrieved, selected, processed, and reported in a manner that conforms to the information requirements of the organization.  The output can be disseminated in a variety of media, including written reports, newsletters, speeches, and as part of an electronic “infobase” that can accessed as needed.

Once the essential functions of an effective information system are understood, management must proceed with designing and implementing a system that satisfies the unique requirements of the company.  This process begins with conceptualization of the goals and objectives of the information system, including the specific types of data generated by the company’s activities and the outputs that are most valuable to the managers and employees of the company and outside stakeholders (e.g., regulators, lenders, investors etc.).  The next steps include feasibility studies, an analysis of the current systems used by the firm, and creation of a project team to coordinate the effort.  The project team must then select one or more vendors to design and construct the system.  Before the system goes online, the responsible managers and technical staff should be provide with intensive training, and provision should also be made for further in-house training of other personnel as needed to effectively utilize the system.  Also, the system should be thoroughly tested alongside the company’s existing systems and procedures to be sure that it works efficiently.  An information system is not static and should be regularly evaluated to ensure that it continues to meet the needs of the company as it grows and evolves.

The content in this post has been adapted from material that will appear in Business Transactions Solutions (Fall 2008) and is presented with permission of Thomson/West.  Copyright 2008 Thomson/West.  For more information or to order call 1-800-762-5272.

IT on a Shoestring

Everybody understands and agrees that information technology (IT) is a key tool for launching and growing a successful business.  Unfortunately, most emerging companies lack the time and resources to stay up with best practices and acquire all of the IT equipment that they would like to have.  In most cases, the founders will need to take a few shortcuts until capital is available from investors and operations to begin creating a formal and scalable IT infrastructure.  Here are a few simple tips to keep in mind from the very beginning:

• Seriously consider leasing, rather than purchasing, IT equipment in order to take advantage of tax benefits and provide greater flexibility to upgrade to the next generation of equipment when the time is right.  In general, IT equipment becomes obsolete well before the date that it is fully depreciated for tax purposes.
• Most emerging companies lack the funds to invest in a trained in-house IT staff.  However, IT for the business is usually not something that the founders can afford to spend the time learning about since they need to remain focused on the other key aspects of the business during the concept and launch stage—product development, marketing and contacting potential investors.  The best solution is an alliance with an experienced outside vendor, perhaps even a company from which equipment is being purchased or leased (i.e., CDW, Dell or HP), for technology support and consulting services.  These firms can assess the start-up’s network and other technology needs and design a solution that is scalable and fits within a modest budget.
• When creating your IT budget don’t forget that most of the costs come after lease or purchase of the equipment—new hardware and software will need to be tested, properly installed throughout the company, and managed and maintained over its useful life.  Another cost that needs to be considered is taking equipment out of service when it is time to upgrade and transitions should be carefully planned to make sure that there is no disruption in in-house productivity and/or service to customers.
• There is always a crucial tradeoff between cost and performance.  Start-ups often attempt to save money by selecting a low cost alternative that is not able to keep up with projected rapid growth of the business.  The result is lost business and a major disruption to expansion plans.  Whenever possible, companies should make the necessary investment to build a strong communications infrastructure that allows employees to load and share all necessary business data relating to finance, customers and suppliers on a common network that can be accessed from anywhere that the company is doing business.
• IT equipment should be viewed as productivity tools that make life easier for employees and thus keeps them happy and motivated.  Cell phones, including high end devices such as BlackBerrys, should be made available for mobile employees and work inside the company’s facilities should be eased by providing employees with several monitors so that they can work on multiple applications at one time.
• Don’t forget to factor security and disaster planning into your IT strategy.  Make sure that data on the company network is backed up and that security measures are taken to prevent the loss of sensitive data in the event that laptop and other off-site computers are lost or breakdown.  Also take precautions against problems that may be caused by viruses and spyware on company networks including the possibility of outsourcing e-commerce activities and e-mail to third parties that are better positioned to deal with those problems.

Once the company is up and running it should be expected that a major IT upgrade will be required every three years or so, usually corresponding to the end of the warranty period on the prior purchase.  This will be a continuing expense for as long as the business is operating and should always be an important consideration in the regular business and financial review process.