Modern technology is now an unavoidable aspect of running any business. It's something you can't ignore, yet something that is so vast and fast-changing it can feel overwhelming.
For many business owners, it's become a thorn in their side, something they can't live with, but also something they can't live without. The necessity of having a well-thought out tech strategy is obvious, what to do about it not so much.
It may seem silly, but the fundamentals of any subject start with the definitions of the key terms of that subject.
How can you honestly say you have a solid strategy on a subject when you can't even define what it is?
Instant Communication
Let's take a simple example of a warehouse in the context of an e-commerce store.
Every action that's taken inside the warehouse, from receipting in goods, to fulfilling orders, is entered into the computer system by the staff.
That allows, in real-time, customers on the e-commerce store to view what is in stock and place orders. As orders come in, the computer system can immediately adjust stock levels, allowing other customers (who could be on the other side of the country) to instantly find out that item is not in stock.
The computer can also be feeding that information to the stock manager who gets an alert when stock gets low so they can re-order.
If you think about what the IT system is doing here, it is facilitating instant communication between all relevant parties. It reduces the time taken for people to get the information they need. That's what it is called IT - information technology. (Or sometimes ICT - information communication technology).
Compare that to an old-school sales catalogue. You mail in your order with a cheque, 3 days later you get some mail telling you the item is out of stock and so on.
Computation
They are not called computers for no reason.
Part of what is happening in the above example is also computation. This is basically just maths - adding up all the inflows into the warehouse, subtracting all the damaged items, and shipped out sales orders, to get a final stock value.
So computers are also computing. They are doing various maths calculations, and so they are not only communicating information between users of the system, but also in some cases modifying the information to make it more meaningful, often by combining lots of data into useful results.
Another common example is your tax submissions. It will take in all sales revenue, and sales taxes, subtract off your expenses, and produce a final number for your profit and loss statements.
We can also get computers to attempt to predict the future, like estimate when a product is likely to go out of stock, so we can plan the best time to re-order from the manufacturer.
AI
AI is actually nothing but the above to functions that computers do. If you take an LLM (large language model) like ChatGPT, it has simply absorbed all the data of the internet into a condensed format.
When you prompt it for information, is it able to very efficiently filter out of the vast data set the actual knowledge you are looking for. You are in effect, plugged into all the worlds experts and leading thinkers on any subject at any time. It doesn't get more instant than that!
What you would previously have to call a lawyer (and pay them money to learn), can now be obtained in a single prompt.
LLMs are also generative. This means they can create output, but how? They are simply guessing at the output most likely to be accepted, this is just a computation.
This is also what leads to "hallucinations" and is a great strength of the technology but also a weakness.
Business Logic
Another aspect of computation is a very important one - called "business logic". It are the rules around what are considered valid computations, and valid access to information.
For example, you might not want junior accountants to be able to authorise large payments. You won't want your customers able to access the same information that staff can see.
You don't want people to be able to place orders if the product is out of stock.
Business Logic are are just special types of computation that result in a yes / no answer, or in the language of computers themselves - true or false.
What makes software so challenging, is every business has it's own unique set of business logic rules. It's own things that can be true and not true. It is that which makes the business what it is, allows it to forge a niche, and differentiate itself from the competition. It is the essence of what the business actually consists of - what is allowed and what is not.
So while every business has common requirements like, they must submit taxes, they must sell to customers, the ways in which they do this are like snowflakes - every one is unique.
Cyber Security
A specialised version of business logic is cyber security. This revolves around limiting unauthorised access to your IT systems.
Criminals should not be able to wire money to their bank account without your permission. They should not be able to encrypt all your data and hold you to ransom, or read confidential information and so on.
How to build a technology strategy
Keeping the above points in mind should be the guiding principles of your technology strategy.
You should try and identify the following - what do I want people to know - what information do they need access to? This both in terms of sharing information and also transforming information.
And of course, what should be allowed and what should not.
Technology landscape
There are a few main areas to consider when looking at various technology solutions, as they all fall into various categories each with a pro and con.
Hardware
Ultimately software has to run on a machine somewhere. So you can purchase your own hardware and run the software on that. You might even be running parts of your business just on your laptop.
Purchasing your own hardware has several benefits and drawbacks. The first is - it's a one-off expense. This means no monthly subscription fee. However, it also means you are responsible for it. If it breaks or is stolen, it must be replaced. When it gets old, it must be replaced. If there is a power cut, you have no computer and so on.
You can mitigate some of these issues by relying on backups to a third party vendor, which have their own hardware in an air-conditioned warehouse somewhere. But even that might get hit by an earth-quake, and so for really important things you will want to store copies in warehouses on different continents.
This gets onto the second point - "the cloud". I honestly have no idea why humanity settled on that term, but it basically just means shared hardware.
You rent some space on a computer somewhere, that is being shared with many other users at the same time. This usually involves a monthly fee, that over time will cost you more than just purchasing the machine yourself.
The benefit is, you can replicate your data world-wide for redundancy, you can add more computers with the touch of a credit card, sorry I meant to say button :D. And you can rely on someone else to manage physical security, hardware replacement backups etc. etc.
The drawback is you are relying on someone else for security, and if that person doesn't do a good job then you could lose your data.
Custom Software
You can of course build anything you want to, if you have the time and the money to do so.
Custom software results in something perfectly tailored to your business. There are no compromises, it does exactly what you want. This can be amazing.
It can have several serious drawbacks. First of all, you will be paying to solve common problems that have already been solved elsewhere. All business accounting is roughly the same, and so you will be spending time and money essentially replicating already solved problems, i.e. reinventing the wheel.
You are also now responsible for the code, managing developers, security updates and so on. You will at this point essentially become a tech company, or at the very least have a mini tech company living inside your IT department.
While it can be a good fit for some businesses, and in rare cases the only option, it is not something to be taken on lightly. It is likely to cost you MUCH more than you realise to build and maintain your own software, and so it really has to be worth it, or add so much value to your business that it's worth the massive investment.
Software as a Service
Otherwise known as SaaS, it amounts to paying a subscription fee to gain access to a shared platform.
The benefit here is that many many companies are now covering the salaries of all the developers and security and operations staff that need to exist to keep software running 24/7.
As such, you only have to pay a very small percentage of those costs to gain access to the system. This can result in you getting extremely complex and sophisticated software (like Facebook ads), for ultimately very little cost.
Often the software will excel at solving the particular problem you are facing, and can add a lot of value to your business.
The drawbacks of this model are that because you are sharing the system with many users, you will inevitably have to compromise on your business logic. Things you want to be possible will not be, and things you don't want to be possible will be.
There might be information that you want to access that is not provided by the system, or information you want to store that it will not allow.
You also face the issue of "vendor lock-in". In that your data sits on their computers, and may or may not easily communicate with other systems you use.
Once you have a plethora of SaaS subscriptions you are paying for, your monthly subscriptions can get quite high, and you might be dealing with the complexities and complications of communication between the different platforms.
For example, your project management tool might not integrate with your accounting software, or your customer help-desk platform.
You end up having to manually replicate data between platforms, adding time and complexity to systems that are supposed to be making your life easier.
ERP systems
Another approach is to go for an all-in-one, batteries-included software solution, that are called "Enterprise Resource Planning" systems. This is a historical name that has just stuck around and now means essentially "a system that does everything".
This solves the integration problem, because all the applications you use are inside the same system. Your project management app, your customer service app, your inventory and your accounting system are all parts of a single whole.
The drawback of course is that ERP systems effectively have to become the average of all businesses on the planet.
And so they become the jack of all trades and master of none. You will end up compromising on a lot of things as the price to pay for getting an integrated system.
Most ERP systems however allow for some level of customisation, and so for many businesses, they get a sweet-spot where the ERP does many of the most basic functions "out of the box (OOTB)", like accounting, e-commerce etc.
Then for the parts that make their business unique, it is possible to alter the ERP to close that gap.
As a result, they can avoid the immense cost of fully custom built software and not have to re-solve common business problems, but also avoid the isolated SaaS landscape of apps that don't integrate well with each other.
Having all the data in one system makes instant communication and computation very easy to do, and can result in a powerful system that performs the basic function of IT very well.
Of course choosing the right system, and making that financial and time commitment to move your entire business to it, can be very costly if you get it wrong.
Cyber Security
Cyber Security is a growing problem, and while it's a big subject, you should make an effort to stay up to date on the latest trends in this area.
There are some basics that are quite easy to implement such as:
- Using a password manager
- Taking regular backups
- Not giving out personal information when solicited for it (either through phone or email)
If you don't want to do this yourself, you can subscribe to our quarterly cyber security newsletter to get simple actionable steps to improve your security posture and lower the risk of future breaches.