Impact of Increase in Prices of Information Technology on Small Businesses - Literature review Example

Impact of Increase in Prices of information technology on small businesses

Table of Contents

Introduction3

Implication description3

Situation assessment4

Change goal or vision5

Optional interventions5

Selection of the intervention and justifications7

Intervention or change plan8

Ethical implications10

Personal reflection10

Conclusion11

Reference List12

• Introduction

Change management plays an essential role for the success of an organisation. Addressing the changes and preparing the effective strategies to deal with such changes ensures success for the businesses (Kotter, 1996). This report intends to provide a thorough overview on the change management for the small businesses. The first part of the report focuses on the impacts of technology for the small companies. In this report, the strategies to manage the impacts have been revealed and a detailed scenario planning has been conducted. Most importantly, it can be stated that for dealing with such changes, the leaders or the managers of the concerned organisation are required to take necessary steps (Luke, et al. 2013). A lot of research has been conducted to address the issues of change management. The purpose of the report is to manage the impact of rise in prices that may occur due to the incorporation of new technologies in an organisation.

• Implication description

For the progress of an organisation, offering innovative products and services on the basis of customers’ requirement is important. Hence, involvement of technology in the businesses has become an inevitable aspect. Moreover, it can also be inferred that technology improves the operational efficiencies for the organisation and provides competitive advantages over the rivals. However, it has been found that incorporation of the technology requires huge capital investment for the firms. Therefore, the managers of the small businesses face difficulties to utilise the latest technology in their business. Supporting the point, Lyles and Schwenk (2012) mentioned that integration of technology creates a dilemma for the managers of small business. In one hand, for obtaining such technologies, the small firms are required to incur huge additional costs. On the other hand, for implementing the new technology, the organisations are required to train the employees which also incur huge costs. Therefore, the return-on-investment for utilising the technologies turns out to be poor. In this circumstance, a proper change management planning is required from the point of view of the leaders or managers of the concerned firms. In such cases, the leaders are required to consider the long-term benefits of the organisation rather than focusing on the short-term objectives.

• Situation assessment

Van de Ven and Poole (2011) mentioned that for managing the changes in a better manner, the most important criteria are to assess the situation of the organisation. However, along with the situational analysis, the managers are also required to identify the goals or objectives of the organisation. Therefore, it is also crucial for the concerned manager to classify the types of changes that may occur in the organisation. In this context, Kavanagh and Ashkanasy (2009) cited that any changes in the organisation can be segregated into incremental or continuous change and modular and discontinuous change or corporate transformation. Incremental changes introduce small or gradual changes to an organisational process or any particular organisational systems. On the other hand, transformational changes results in the major changes in the organisational culture or work process for improving the business performance (Burnes, 2008).

Technological changes can be considered as transformational changes. For upgrading the business processes, it is important for the managers of the small organisations to include new technologies. Moreover, due to the immense competition in the market, technological advancement has become an inevitable component for the businesses. Benn, Dunphy and Griffiths (2006) mentioned that technological changes can be considered as an option of survival for the small business. In most of the cases, it has been found that the small companies fail to maintain the sustainability to due to poor operational efficiency. However, in order to adapt the technological changes, the small businesses face the problem of lack of financial support. It can be understood that the small companies or the start-up firms operate with a limited resources. Moreover, due to the small scale operation, these firms may not rely on the huge profit margin on economies of scale.

In such cases, the IT managers of the concerned companies are required to prepare strategies that can help the firm to accept the technological changes within limited financial resources. Most importantly, the IT managers are required to select more than one solution that can provide an optimal solution. Firstly, the IT managers are required to convince the management about the requirement of additional capital. Lyles and Schwenk (2012) identified the rigid mentality of the management as one of the most common problems in the change management. It has been found that in most of the cases, the owners of the small companies avoid investing funds in the uncertain activities related to the business performance. Investing capital for the information technology deals with a certain amount of risk. Therefore, the most important objectives for the leaders of the small businesses are to communicate the importance of the technological advancement to the employess. However, it may not be a sound solution for the IT managers to rely only on the owners’ fund for incorporating the technological changes in the organisation. The managers are required to focus on the alternative funding strategies such as venture capitalist fund or external borrowings to arrange the capital required to set up the new technologies.

Along with the arrangement of the capital, the small firms are also required to accept the low profit margin for initial years after the incorporation of the technology. However, rather than focusing on the short-term objectives, the small firms are required to focus on the broader aspects to manage the changes (Burnes, 2008). In this regards, Lyles and Schwenk (2012) also suggested that for the small companies addressing the technological changes become difficult due to the narrow views of the leaders. In addition, the managers are also required to train the employees regarding the utilisation of the technology. Otherwise, inappropriate usage of the technology will increase the maintenance cost for the organisations.

• Change goal or vision

For managing the changes, the concerned small business can pursue the following goals or vision:

The business will increase the operational efficiency within 2030 with the incorporation of latest technology. In addition, the business will focus on reducing the operational cost within 2030.

• Optional interventions

The change management goals discussed in the earlier section can be achieved through more than one way. Kavanagh and Ashkanasy (2009) mentioned that selecting various options for achieving the particular goals enhances the chances of success related to the change management process. It can be assumed that change management process deals with a lot of uncertainties. Hence, to deal with these uncertainties, it is important for the managers to select one or more effective plans. However, in order to select any particular plan, the IT managers are required to analyse the feasibility of such planning from the current situation of the organisation. In this regards, Burnes (2008) viewed that every change management strategy needs to be aligned with the environment of the particular organisation. The optional intervention planning has been represented for the concerned change management problems as under:

Diagnosis

Current

Data from the case

Fit/misfit

Alternative

Priority

Strategy-structure

Operational structure

Conventional or manual operating systems

Misfit-the existing structure of operations increases operational cost for the company.

Incorporation of the latest technology or more automated operating systems.

1

Strategy-systems

Manufacturing systems

Old fashioned manufacturing systems.

Misfit-The manufacturing process of the small firms are quite time consuming and ineffective. Hence, ROI is poor.

Incorporation of the latest technology.

2

Strategy- staff

Human resources or labour

Aged staff, lack of energy and experience of the new technology

Misfit-The employees of the small firms are incompetent with the most recent technology.

Offering trainings related to the latest technology.

3

Strategy-Style

Operational process in the organisation

High operating cost

Misfit- Increased operating cost have been affecting the net earnings of the company.

With the incorporation of technology the productivity can be improved.

4

Strategy-skills

Human resource

Unskilled staff in terms of the utilisation of the latest technology.

Misfit-Affecting the organisational efficiency.

The staff are required to be competent enough with the new technologies.

5

Strategy-shared values

Production

The small firms are only concerned about offering the required products and services to the customers.

Misfit- Without offering the values to the customers, the firms cannot create brand loyalty or survive for the long run.

Effective technology with controlled cost can help the small firms to offer values to the potential customers.

6

• Selection of the intervention and justifications

In order to include the technology for the small businesses, the managers need to consider the two important aspects that is, long-term benefits and cost factors. Kavanagh and Ashkanasy (2009) mentioned that strategies to mitigate the problems related to the change management require to be supported by the present organisational problems. In this particular case, the small firms are required to focus on the strategies that can enable them to survive in the long run. At the same time, the managers are also required to consider the cost associated with the inclusion of technology. Therefore, the small firms can consider on adding values to the customers. In that process, the firms will be in a position to compete with the big companies. However, for increasing the values, the firms need to improve its information technology. Therefore, arranging the capital through various ways can be beneficial for the companies. It may enable the firms to incur the additional cost for upgradation of technology. Most importantly, with the improved technology, the companies can improve the productivity. Therefore, increased revenue may also help the firms to sustain in the competition. Therefore, based on the given circumstances, the companies can focus on shared values. However, from the above mentioned six optional interventions, the most important one for the concerned case is the strategy-systems.

The main challenge with the incorporation of the latest information technology in the small firms lies with the financial problems. Hence, it is important for the management to formulate strategies that can enable the small businesses to improve the information technology with the limited fund. More precisely, it can be stated that the concerned management needs to focus on the strategies that can help the companies to control the cost even after incorporating the latest technology.

• Intervention or change plan

Intervention can be considered as the sequence of planned actions that may help the organisation to improve its efficiency (Kotter, 1996). In order to formulate an intervention planning, the managers of the small business are required to consider the cost, time and organisational resources. Intervention planning also plays a vital role for the change management process.

In the concerned case, the major problem is to manage the additional cost due to the inclusion of the information technology. Porras (1987) has presented the stream analysis to develop the intervention planning. A stream analysis for the selected intervention planning has been discussed as under:

Figure1: Stream analysis

(Source: Author’s creation)

From the above figure, it can be represented that in order to manage the increased cost due to the inclusion of the information technology in the small business, the intervention planning can be segregated into three steps. Firstly, the firms are required to address the staff of the organisation. In that case, the managers can conduct proper communication with the staff. Understanding the relevance of the changes is vital for the staff of an organisation (Kotter, 1996). In this case, the managers can also arrange trainings for the staff. In addition to that the human resource management of the organisation needs to recruit more experienced staff who has the skills to deal with the software maintenance problems. The perception of the management to buy everything new related to the information technology also needs to be changed. Rather, the management can focus on purchasing the systems such as software only after its price becomes cheaper. On the other hand, the working environment of the organisation is also required to be changed so that it can address the innovation and technology in a better manner. Incorporation of the automated systems is important to these structural changes of the small business. Most importantly, the IT managers are required to identify the problems in the systems in the initial stages. If significant problems lie in the existing systems, it is important to replace the same with new one to minimise the operational cost and improve the output. In most of the cases, it has been found that the small companies face major problems with bad systems. For example, due to the poor database management system, the company may lose important data related to the business. Moreover, poor information system can be considered as a hindrance to the small firms to create sound customer relationship management. In addition, the firms are required to focus on its financing system to procure the capital required for the installation of the technology. Proper capital structure is important for the small companies as they are pruned to be unprofitable due to poor cash flow and high financial risk. Lastly, the increased networks can also help the small businesses to arrange the capital required for technological advancement. For example, association with the venture capitalists or the managers of the banks can help the small firms to arrange the capital required for the improvement in information technology. In order to procure the latest equipments and software with the affordable cost, the concerned small businesses can make dealings with other small companies. The small companies can set up administrative councils for transferring common strategies among themselves.

• Ethical implications

In order to implement the technical advancement within the allocated capital, the managers of the small firms may face some ethical issues. According to ethical implication, dilemma is an integral part of the change management process (Lyles and Schwenk, 2012). It affects the decisions of the managers regarding a specific issue. In the concerned case, the management of small companies may have to streamline the processes or organisational workforces as a cost cutting approach. As identified earlier, inclusion of the information technology may hike the operating costs for the firms. Therefore, the cost reduction process may be a chosen approach for the managers. Most importantly, it can also be assumed that with the help of the information technology and automated systems, the number of staff can be reduced. In that case, the less competent employees may be fired from the organisations. Employees are an important stakeholder for the organisation; hence, sacking them can create an ethical dilemma in the organisation. On the other hand, in most of the cases, it has been found that due to the limited funds, the employees are compelled to use the latest technology without any prior training. It is considered as technical incompetence.

• Personal reflection

Through the reflection on our previous experience, we can enrich our learning process. The assignment has offered me a great scope to deal with the challenges of change management process in an organisation. I have learnt a lot of new skills to address the concerned issue that may help me to act as a consultant in future. Among all the problems that are faced by a professional consultant, change management is the most common and critical ones. As the changes incur additional cost for the management, failure to manage it in a proper way can result in huge losses for the firm. I have learnt the step-by-step approach to handle the changes and its impact in an effective way. Firstly, I need to identify the changes and its relevance from the point of view of the organisation. After that its impacts are required to be assessed as a consultant. The study has enhanced my skills of analysing or diagnosing a particular issue related to the organisation. Most importantly, as the issues have primarily been dealt with the small business, I have experienced the techniques to manage the changes within the limited funds. During the course of the study, I have practically implemented the tools such as 7s and stream analysis.

The assignment has helped me to identify my strengths and weaknesses as a consultant. Firstly, I think that the ability of logical thinking has helped me a lot to formulate the strategies in the concerned case. Secondly, my analytical power has enabled me to assess the situation and recommended the approaches in an effective manner. Thirdly, I have used my foresightedness to evaluate the long-term objectives of the organisation. However, I have identified that I need to increase my patience. Lack of patience may affect my performance and hamper the creativity of the thinking.

• Conclusion

The assignment has been initiated to formulate the strategies that can help the managers of the small firms to deal with the increase in prices due to the inclusion of information technology. Based on the intervention planning, it has been found that the managers of the small corporations need to strengthen their financial positions before addressing the information technology. In that case, the managers need to obtain capital from the diversified sources. In addition, the small firms are also required to arrange the trainings that may help the staff to learn the new technologies and implement the same in a proper way.

• Reference List

Benn, S., Dunphy, D. and Griffiths, A., 2006. Enabling change for corporate sustainability: An integrated perspective. Australasian Journal of Environmental Management, 13(3), pp.156-165.

Burnes, B., 2008. Complexity theories and organizational change. International Journal of Management Reviews, 7(2), pp.73-90.

Kavanagh, M.H. and Ashkanasy, N.M., 2009. The impact of leadership and change management strategy on organizational culture and individual acceptance of change during a merger. British Journal of Management, 17(1), pp.81-103.

Kotter, J.P., 1996. Leading change. London: Harvard Business Press.

Luke, R.A., Block, P., Davey, J.M. and Averch, V.R., 2013. A structural approach to organizational change. The Journal of applied behavioral science, 9(5), pp.611-635.

Lyles, M.A. and Schwenk, C.R., 2012. Top management, strategy and organizational knowledge structures. Journal of management studies, 29(2), pp.155-174.

Porras, J.I., 1987. Stream analysis: A powerful way to diagnose and manage organizational change. New Jersey: Prentice Hall.

Van de Ven, A.H. and Poole, M.S., 2011. Explaining development and change in organizations. Academy of management review, 20(3), pp.510-540.