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SMBs and the Internet: Two steps for surviving online

by Julian Mills, with research by Cathy McKnight — In theory, SMBs are better positioned than large corporations to survive by embracing change. Small equals nimble, goes the hypothesis, which allows the company to evolve rapidly in response to ever shifting opportunities or threats.

“It’s not the strongest of the species that survive, or the most intelligent,
but the one most responsive to change.” — Charles Darwin.

In the business world, there is no environment more Darwinian than the Small and Medium Sized Business (SMB) sector. For every one success story about passion, great instincts and the first office in a garage, there are nine tales of long hours that end in an unpleasant meeting with the bank.

In theory, SMBs are better positioned than large corporations to survive by embracing change. Small equals nimble, goes the hypothesis, which allows the company to evolve rapidly in response to ever shifting opportunities or threats.

This thinking suggests that SMBs are ideally suited to thrive online, an environment in which the capacity to lead and manage change is a critical survival skill. The available research suggests this is not the case, and the importance of strategy needs to be addressed to understanding why.

Larger companies have processes and resources dedicated to strategy. While these companies can be caricatured as process-oriented bureaucracies willing to let others make the first move, their large existing customer bases and deep resources allow them to take a more cautious approach to change, knowing that they have at least a quarter or two to get things right.

SMBs, on the other hand, are in a constant race for survival. A few can win in a sprint: have a great idea, promote it well, and get bought. For most, however, it’s a marathon: create the model, launch the business and then carefully measure costs versus revenue month after month. For these companies, the Internet is only gradually becoming a part of their plans.

Those SMBs that are now starting to move online, or enhance their existing presence, have two competitive advantages in their race for survival:

Not too many competitors have moved ahead of them yet, which allows some time to get things right.
Given the ineffective online presence of most SMBs now, an immediate differentiation can be attained through two easy tasks: developing a web strategy and designing an effective site.

“Change is good; you go first.” — Dilbert.

SMBs and the Web: “you go first”?

The SMB sector is crucial to North America’s economic performance, so understanding shifts in the technology adoption are critical. SMBs represent 97% of businesses in Canada and generate close to 85% of Canadian GDP. In the U.S. there are more than 5.6 million SMBs.

In an age in which corporations have made significant investments to webify their business, SMBs appear to have embraced Dilbert’s theory of “you go first.” Not that there’s anything wrong with that. Winning companies invest in the areas that offer the most obvious return, and for many SMBs that is not perceived to be their website.

Some research indicates that 57% of SMBs are making money from their websites, either online or via offline sales. While it’s a growing percentage of revenue, it has not yet reached the level where every SMB can quantify the benefits of investing in their website. As a result, statistics indicate that SMB’s adoption of the web lags behind that of larger organizations:

The Yankee Group has found that 81% of all SMBs with less than 500 employees have Internet access, while just 30% have their own websites.
Similar results were posted in a 2002 study conducted by Verizon, which found that nearly 70% of small businesses with less than 50 employees do not have a website — no different than the number of small businesses with websites in 1999, indicating that little had changed during the previous three years.
For many of the smaller firms that were polled by Verizon, having an online presence has been beneficial — nearly one-half of the companies surveyed, at 42% of respondents, said that their website had met or exceeded their expectations.

However, researchers suggest that these adoption rates are about to change. “The Internet has become a critical communications and promotional resource for the largest share of small businesses, changing the way they reach customers and prospects,” according to Raymond Boggs, vice president, Small/Medium Business research at IDC. “Small business spending on Web hosting alone is growing by 9.5% annually and will top $7.4 billion by 2009.” Other stats from IDC suggest how important this sector is about to become:

Internet access will become more widespread and roughly 80% of all small businesses will have Internet access by the end of 2009.
Internet use for promotional purposes will continue to increase and five out of six online small businesses will have a home page by 2009.
Online selling, while increasingly easy to implement, will remain relatively rare and only a quarter of small businesses will use e-commerce by the end of the planning period.

Developing a strategically designed site

These statistics often come to life in the discussions we have with SMBs. For instance, in a seminar we recently conducted for a group of 12 small and medium-sized business owners, their experience confirmed the research.

All the companies had websites, but only one was using it as a primary sales channel.
Only one company, the online retailer, had a clear mission statement and measurable objectives for their website.
Aside from the online retailer, the companies cited the same barrier to success: a general lack of knowledge of website practices and no one assigned the responsibility for upkeep of the website.

As we advised the companies, there are two critical first steps to take.

1. If you have a site, clean it up

In our review of the SMB’s websites, we noticed a number of common mistakes which, given the lack of resources assigned to them, were not a surprise. But the web is a harsh world. Visitors move from site to site quickly and if they come across one that isn’t good, they will judge it and the company it represents. And they won’t be back. Based on common mistakes we’ve seen on SMB sites, here are some easy ways to improve your site:

Don’t display e-mail addresses on your site. It’s a guaranteed way to receive spam. Instead, use an online form that visitors can fill in if they need to contact you. Not only does this approach keep junk out of your already full inbox, it provides an easy qualification step you can use to assess prospect interest.
A splash page adds complexity, not value. Allow visitors to come directly to your homepage and make immediate decisions about what content they want to access.
Content is king, regardless of the size or business model of the company. Scour your site and make sure the content is current, relevant or gone. For example, one site’s announcement of a new site design was a year out of date. Visitors will make judgments about your responsiveness and currency based on the information they see on your site.
Maximize your real estate. Too many sites had either too much text and graphics crammed onto the page, or an expanse of white space overwhelming tiny fonts and graphics. Make sure there is an even balance between space and text and that the most relevant information is showcased appropriately.
Don’t make promises you can’t keep. One site offered a link to product information that led to a page that was under construction. If you don’t have the information ready, don’t tease your visitors with rumours of its existence.
Understand the basics of website design.

2. Develop a high-level strategy for the website

It’s easy to say, and hard to do. However, it’s the most important step in developing an effective web presence. Best of all, it doesn’t cost much money but will save a lot in unnecessary investments. The main areas to address are:

How does your web strategy support and enhance your core business model? As the statistics suggest, most SMBs can improve their business without selling online.
Where does your revenue come from today? If it comes through channels—direct, indirect or both—consider how an effective website would make them more efficient, rather than redundant.
What are your pain points? Don’t assume revenue growth is the only issue. For instance, if inventory management is a concern, think about using your site to receive direct input from customers. You might discover an opportunity to develop a more accurate forecast that will improve your bottom line.
What do you know about your customers? Many business owners assume that because none of the customers they know personally are using the Internet regularly that there’s no point in trying to reach them online. Dig a little deeper with your sales team. Maybe you’ll find that the decision maker is not online, but key influencers research solutions online before providing recommendations to the boss.
What are your competitors doing online? The beauty of the Internet is that it allows for free research on competitive activity and positioning. Every business owner should know his or her five main competitors and visit their sites once a month. A prudent business person will place key customer, employee or channel partner information behind a password protected section of the site. But the existence of such a section will tell you a competitor is using the web as a key business communications tool.
How are you going to connect to your goals and measure success? Whether you’ve decided the goal is to increase sales force efficiency, improve customer self-sufficiency or generate more leads, you need to assign a measurable target to that goal and track performance against it.

While it’s not certain when SMBs will reach the tipping point online, what is certain is that those companies that take a strategic approach to managing change will survive the Darwinian environment. While allocating scarce resources to enhancing your online presence may offer uncertain returns at this point, you can’t afford not to take a strategic approach to your site design — especially when the investment in time and money are relatively low.

Julian Mills is Senior Consultant with Prescient Digital Media, with a background in strategic management and marketing communications. You can read his regular postings on Internet Strategy on Prescient’s Get Strategic blog.