While an uncertain economy is likely to impede the overall growth of Canadian small businesses over the 12–18 months, firms that adapt quickly and creatively to market changes will survive – and even thrive – through these tough times, a Canadian expert says.
“It’s a time when the weaker businesses will dissolve, while strong [firms] could become even stronger,” said Ricky Mak, an IDC Canada analyst who covers the small and mid-sized enterprise (SME) market.
That’s a view shared by Conrad Mandala, vice-president, SME Channels, SAP Canada, who suggests that smart technology choices help distinguish the “strong” firms from those that don’t quite make it.
In tough economic times, the right technology choices can help small companies, not just to compete effectively, but also grow, he says.
This is especially so when a small business changes its focus, or the nature and scope of its operations in response to shifting marketing conditions.
It was such smart choices that enabled Calgary-based Datalog Technology Inc. to successfully implement and benefit from a significant business transformation.
Datalog, which provides drilling and geological monitoring products and services to the oil and gas industry, has offices and agents around the world.
The company changed focus last year from well-logging and mud-logging to geophysical wireline logging – an operation that it believed offered greater growth potential.
Wireline Logging involves measuring and recording the physical properties of formations by introducing sensors in a borehole via a “wireline” – an electromechanical cable. These measurements help identify the location of resources such as oil, gas, coal or other minerals.
Since 2005, Datalog had been managing its business operations using SAP Business One, a suite of applications that targets the requirements of small or mid-sized businesses – from Walldorf, Germany based SAP AG.
SAP Business One includes 14 modules to manage functions such as: administration, financials, sales opportunities, purchasing, banking, inventory and purchasing.
When Datalog shifted its focus to wireline logging last year, it needed to consolidate and centralize key operations.
For instance, the company had to standardize several geographically dispersed offices on a single accounting system. It also needed to ensure compliance with country-specific accounting regulations and multiple currencies.
“We are a fairly small company doing business internationally, so our challenges [included] communications, timely reporting, and information transmission from an IT perspective,” said Erin Shackleton, corporate controller at Datalog.
SAP Business One, she said, helped the company squarely address these challenges.
For instance, with transactions involving multiple countries, Business One enabled conversion between currencies and languages, greatly reducing the time and effort to accomplish these tasks.
On the financial side, Shackleton said, Business One has simplified tasks such as invoicing and tracking of time and personnel in the field.
Moving forward, Datalog will implement additional features of the application, including Web-based time sheets.
This will be helpful given that many Datalog employees don’t necessarily work from the office, but are out in the field, Shackleton said.
When the new reporting system is in place, employees will be able to log on to an online application and fill out their time sheet. It would then be forwarded to their managers for approval, and finally to Shackleton – and then feed in directly into the payroll software.
“This would reduce the amount of physical handling of time-sheets and keep it all centralized and more practical.”
The company is also looking at rolling out client-related applications that help with ops and financials and complement the SAP system.
CRM (customer relationship management) reports would be an example of this, according to Rob Duthie, a manager at Datalog’s logging services division.
“All business contacts will be entered into in a CRM reporting [application], so we would easily be able to transfer client data from employee to employee,” Duthie said.
Even if an employee left the company it wouldn’t pose a problem, he said, as all the data would be on a common hosted system that anyone would be able to access.
Datalog’s employee growth has more than doubled from around 200 to 540, while its revenues are around $42 million.
Shackleton says the company has been able to boost staff productivity tremendously by streamlining process within its SAP Business One system.
And like Datalog, there are other Canadian small businesses that have been able to ride out the current economic roller coaster, and thrive…with a little help from technology.
Mandala cites the example of the Toronto-based toy company Spin Master Ltd.
Spin Master is best known to Canadian consumers as the maker of the Air Hogs flying toy.
“There’s never a dull moment with an Air Hogs flying toy overhead,” runs a slogan on the company’s site.
And there hasn’t been a dull moment at Spin Master since the company rolled out SAP enterprise software in 2006, to run key business operations.
Spin Master says the software system has transformed its business, enabling it to go to market with new products much faster, and take customer satisfaction to an all time high.
Faster order fulfillment, more accurate sales projections, fewer non-compliance penalties from retailers, and the ability to “push and pull” products in response to market currents – are some of the other benefits.
The capabilities helped Spin Master experience dramatic growth in a relatively short period of time.
From a small business started in 1994 by three college friends with a little more than $10,000 in seed money, the toy maker has grown into a global firm with more than 400 employees, and revenues of more than $400 million.
Speeding up product development and enhancing customer contact processes were key business objectives of the SAP rollout.
From a technology standpoint, the company sought to integrate its IT systems and information delivery across multiple processes, including finance, product planning, sales, and distribution, new product development and logistics.
The idea, said Spin Master president and CEO Anton Rabie, was to allow employees access to information across multiple remote sites, thereby supporting faster and better decision making.
He said the SAP system helped the company achieve this, partly by offering employees visibility into data from various business processes.
For example, Rabie said, rather than wait for e-mails or manually prepared reports to arrive at their desks, employees can now access updates on multiple business processes on their computer screens.
The impact on staff efficiency and productivity is significant.
“Employees [now] understand how their day-to-day operations affect the entire supply chain.”
Armed with up to date information, Spin Master can make accurate predictions and plan its product and market strategy more effectively, Rabie said.
Complete supply chain visibility did wonders for the business, he said.
Inventory carrying costs fell. And as better information sharing and collaboration helped Spin Master meet order specifications and commitments consistently, retailer imposed non-compliance penalties reduced dramatically.
Responses to customer inquiries, which used to take three days, can now be provided the same day. Rather than wait days for feedback from other departments, employees are able to access pertinent data on the system almost instantly.
One of the most dramatic benefits, says SAP’s Mandala, is a sharp decrease in the product-development life cycle that allows Spin Master to go to market with new products faster.
This gives the company a definite competitive advantage and has contributed to its transformation from a small toy company to a dominant player in industry. The company now has more than 400 employees and a presence in more than 42 countries.
The ability to change direction quickly and appropriate in response to changing market currents is a key quality that has contributed to the success of Datalog and Spin Master.
Such initiative and creativity is vital at a time when shrinking funds is a key challenge confronting small businesses.
For instance, IDC’s Mak notes that financing entities – such as banks and venture capitalists – have become more cautious and risk averse.
SAP’s Mandala agrees, and says in addition to dwindling funds – small businesses will also have to creatively grapple with a slew of other tough challenges such as higher labour costs, a talent crunch, rising raw material and services costs, and increasing competition from countries such as China and India,
While such challenges aren’t unique to small businesses, he notes there’s greater pressure on such firms, given their limited financial and other resources.
However what they lack financially they gain in mobility, the SAP Canada executive says.
He says when planning such strategy changes, IT can play a pivotal role – as the examples of Spin Mater and Datalog demonstrate.
In the current environment, he says, IT is far more than an enabler of business productivity and efficiency. “It should be a core competency.”
With files from Nestor Arellano.