Information, Technology and Small Enterprise
A Handbook for
Enterprise Support Agencies
in Developing Countries
Richard Heeks & Richard Duncombe
IDPM, University of Manchester, UK
With Support From:
UK Department for International Development
This handbook is for staff in agencies that support the development of small, medium and micro-enterprises in developing countries (DCs). It aims to provide those staff with a better understanding of the role of information and of information and communication technologies (ICTs) in enterprise development.
The handbook will also be of value to staff in donor agencies, government departments and professional business associations, and to researchers and students dealing with ICTs, with enterprise, and with development.
ICTs provide tremendous opportunities for DC small enterprises. This handbook identifies some of those opportunities. However, there are also tremendous dangers of failure and waste unless information and ICTs are properly understood. This handbook provides that understanding, based on research surveys and analysis in developing countries.
The handbook is divided into three sections: one on information in small enterprise; one on ICTs in small enterprise; and one on enterprise support agency strategy.
Each section is further divided into a number of sub-sections, each dealing with a key issue. Each issue will typically be covered on a single page with discussion followed by key questions that agency staff need to be addressing.
A glossary of ICT terms and some pointers to sources of further information are provided towards the end of the handbook. You are also encouraged to give feedback on the form enclosed as a final page.
Richard Heeks & Richard Duncombe
Institute for Development Policy and Management
With support from:
Enterprise Development Department
View/Download this handbook from: http://www.man.ac.uk/idpm/ictsme.htm
Table of Contents
Section 1: Information in Small Enterprise *
1A. Why Is Information Important? *
1B. What Information Do Small Enterprises Need? *
1C. How Do Small Enterprises Use Information? *
1D. Who Provides Information For Small Enterprises? *
1E. What Type Of Information Do Small Enterprises Use? *
Section 2: Information and Communication Technologies in Small Enterprise *
2A. What Approach Should Be Taken To ICTs? *
2B. What ICTs Can Small Enterprises Use? *
Fixed-line Telephone/Fax *
Mobile Phone *
Electronic Mail (Email) *
The Internet and World Wide Web (WWW) *
2C. What ICTs Are Being Used By Small Enterprises? *
2D. What ICT Support Should Be Provided To Different Enterprises? *
Non-ICT Users: Other Technologies First, Then ICT Intermediaries *
Non-IT Users: ICT Intermediaries and Better Information Practices *
Non-networked ICT Users: Rounded Support for ICTs *
Networked/Intensive ICT Users: Priorities for Assistance with ICTs *
2E. What Issues Do "ICT Intermediaries" Face? *
Opportunity Cost *
Section 3: Agency Strategy *
3A. One Size Does Not Fit All *
3B. Be More Needs-Driven *
3C. More Pull, Less Push *
3D. More Policy Advocacy, Less Single-Enterprise Activity *
3E. Improving The Agency's Own Information Systems *
1. Are You Following an Integrated Approach? *
2. Are You Following a Holistic Approach? *
3. Are You Closing Design-Reality Gaps? *
Basic ICT Jargon Explained *
Sources of Further Information *
Help Us Improve This Handbook *
Section 1: Information in Small Enterprise
Our whole world including enterprise support agencies and the enterprises they support runs on resources. Four tangible resources:
And one intangible resource:
The trouble is, while we are good at working with the tangible resources, we have been very poor at handling the intangible resource: information.
That's a problem because information is critical to two activities:
Without good quality information, bad decisions are made and learning does not occur. This is true everywhere in the world, but it's a major problem in developing countries. Why? Because they are so information-poor and because their information infrastructure is so poorly developed.
How does information poverty affect small enterprises in developing countries? It means that entrepreneurs fail to make decisions or make the wrong decisions. It means that entrepreneurs fail to learn or learn the wrong things. That has a direct effect that means they waste money, waste time, lose out on income and, often, go out of business. Information poverty makes entrepreneurs isolated, uncertain and risk-averse.
Put this the other way round. What if the agency can help the entrepreneur access better quality information; information that is more CARTA: more complete and/or more accurate and/or more relevant and/or more timely and/or more appropriately presented? Then costs can go down and income can go up.
Given this direct value of information, no wonder the 21st Century is being called "The Information Century".
1B. What Information Do Small Enterprises Need?
Small enterprises (see diagram) need information about four main things:
Our research shows that entrepreneurs mainly lack information in three key areas:
Should all three be given equal weight? No. Above all, agencies should focus on helping entrepreneurs get demand-related information for two reasons. First, if sufficient demand can be found, many other enterprise problems sort themselves out. Second, agencies are already quite good at providing supply-related information (e.g. on finance and skills). They have been poor at providing demand-related information and must improve.
Entrepreneurs need information to answer questions such as:
1C. How Do Small Enterprises Use Information?
If you give information to an entrepreneur, it is always useful? No. To understand that answer, you must first understand that you don't give information to anyone. You give data. Data is unprocessed facts and figures which might or might not be useful. Only if the entrepreneur processes that data and finds it useful; only then does it become information. And it will only be useful if the entrepreneur uses it to make a decision that is then acted upon. If the entrepreneur can't process the data, or doesn't take a decision with it, or doesn't take action on it then the whole activity is worthless.
We call this set of activities, the information chain (see diagram).
What do entrepreneurs need to make this information chain work? They need four resources:
For small enterprises in developing countries, though, the problem is that these resources are often absent. Too often we find:
1D. Who Provides Information For Small Enterprises?
When information is provided for an enterprise, we can ask four questions:
Focusing on the second question, we see that small enterprises get their information from three different kinds of sources:
In general terms, agencies need to help enterprises link to more sources and to a wider variety of sources. They should also help more information flow along those linkages. However, other aspects may be more important. Agencies must help improve the quality of information content/channel (judged in CARTA terms: see sub-section 1A). They must help ensure the linkage is with the right recipient in the enterprise. And they must also help improve the other information chain resources provided by the linkage (see sub-section 1C).
In these terms, for poorer enterprises, social and institutional linkages may be a higher priority. For growth-oriented enterprises, business linkages may be a higher priority.
How do you build business linkages? In various ways:
Agencies should also provide inputs (finance, training, technology, etc.) via existing private sector providers. The agency itself should not provide these. This creates a more-valuable business linkage rather than a less-valuable institutional linkage.
1E. What Type Of Information Do Small Enterprises Use?
DC small enterprises mainly use informal information, typically self-generated or from family and friends. Informal information is essential to sustaining existing customers and to locating new customers. It is easier to use than formal information, more flexible, and richer in detail. Agencies must ensure they recognise this and don't lock themselves into an irrelevant formal information bubble.
But informal information can also be poor quality and restrictive, prompting bad decisions and stunting growth.
In order to develop, small enterprises must make a transition (see diagram) to a balance of informal and formal information. This enables them to access formal sources of inputs, to address more formal customer markets, and to manage the enterprise more effectively.
Agencies must be alert to those enterprises that need help making the transition. These will typically be in the '10-20 employee' and/or 'few tens of thousands of US dollars of annual turnover' categories.
Transition help should cover all of the information chain:
Section 2: Information and Communication Technologies in Small Enterprise
Enterprise support agencies must take a systemic approach to ICTs. This has two parts.
The first part a holistic view of information handled by a process chain is described in sub-section 1C. It means agencies using ICTs in enterprise support must track the entire chain to ensure data delivered by ICTs can actually be used and acted upon. It means a multi-resource information chain package not just ICTs alone must be provided.
The second part is an integrated view of ICTs (see diagram).
The integrated approach means agencies must:
Agency interventions must also be integrated: start with goals, then identify the information needs of those goals; then identify the role of information-handling technologies.
Training, for example, must:
A training programme should be, for instance, "Better Marketing" not "Using the Internet".
The same applies for other agency interventions. Technical assistance should be, for instance, "to improve the enterprise's accounting systems" not "to introduce computers".
2B. What ICTs Can Small Enterprises Use?
In keeping with the integrated approach, ICTs will be discussed in this sub-section but so, too, will some other key information-handling technologies.
Fixed-line telephone/fax is currently the most cost-effective communication technology for DC small enterprise. It has four main uses for small enterprise:
Mobile phones are particularly suited to business users. They let entrepreneurs answer customer calls immediately, and reach staff or business contacts while working away from business premises. This can make the difference between winning or losing an order. Although tariffs can be high, mobile phones provide greater flexibility, faster customer response and time savings compared to a fixed-line phone. They can also be obtained far more readily.
Digital mobile phones offer additional benefits:
Email is the exchange of messages between computers. It offers DC small enterprises a number of benefits, particularly compared with post, fax or phone:
In order to use email, enterprises need access to a network-linked computer. Owning this is costly, but email services can increasingly be accessed from shared facilities. Potential sources and recipients must also have access to email, so email is of particular benefit to enterprises that import or export.
The Internet is a global network of computers which can communicate with each other. Internet use by small enterprises in developing countries is growing very fast but is still very limited. For small enterprise, the Internet offers three main uses:
A Web site contains pages of data (words, pictures, sounds, video) that are linked together electronically. A Web site can be accessed by anybody who has access to the Internet. Therefore it links DC small enterprises to a potential world-wide market.
A small business user can use a Web site to promote the business, to advertise products and services, to accept enquiries and orders, and to accept payments using credit cards. Of course, this all comes at a price the space to store the Web site must be paid for and, for a site to be effective, it must be professionally designed and updated regularly. Enquiries from the site must also be given a quick response.
Those most likely to benefit from having a Web site include:
A broader range of firms will benefit from getting market, commercial, technical, product/service and other information from the Web sites of other enterprises and organisations. This leads to faster, cheaper, better decision making and reduces the sense of isolation felt by DC small enterprises.
E-commerce means undertaking business transactions electronically, such as buying an item at a firm's Web site by typing in a credit card number and other details. Some DC small enterprises have moved into e-commerce but this is very rare. Costs of setting up e-commerce are high, and requirements include computerised internal processes and high-bandwidth network connections. Despite this, for importers and especially exporters, there will be growing pressures to move into e-commerce because of the way that it reduces financial and time costs, and improves transaction certainty and record-keeping.
See next sub-section.
2C. What ICTs Are Being Used By Small Enterprises?
Not just in theory but also in reality, ICTs are bringing benefits to DC small enterprises. Our survey indicated that ICTs can reduce time and money costs of business processes, and can improve the certainty and quality of those processes. In terms of popularity:
Growth rates are fastest for use of email and the Web.
ICT-using enterprises typically meet two criteria:
Total Costs of ICT Ownership
Enterprises tend to be fairly good at recognising the immediate, overt costs of ownership:
However, they are not so good at recognising the other components that make up the total cost of ownership (TCO). TCO estimates suggest that other costs may make up as much as 60-70% of total costs. These ongoing and/or hidden costs can include:
The vast majority at least 90% and probably more like 99% of all DC small enterprises do not currently use ICTs. Why? For various reasons such as:
Some of these problems can be overcome by using ICT intermediaries (see sub-section 2E), but many cannot. Because of this, technological priorities for agency support should be (in descending order):
Wherever possible, ICTs should supplement rather than substitute for other information-handling technologies.
2D. What ICT Support Should Be Provided To Different Enterprises?
The summary of priorities provided in sub-section 2C is very generalised. In reality, different enterprises need different information/ICT interventions. These differences are summarised below.
Five different ICT-related enterprise categories emerged from our survey. Recommendations for each will be addressed here though, for ease of discussion, the networked ICT user and intensive ICT user categories are combined.
Non-ICT users are all those enterprises presently unconnected to any form of telecommunications or ICT-based information network. This includes the vast majority of DC small enterprises.
Information needs of such enterprises are quite localised. They will be met more by informal, organic information systems than by formal, ICT-based systems. Information-poor entrepreneurs are likely to be assisted in the first instance by strategies that help to improve natural support networks rather than by a strategy of formalisation. These might include:
The main technology-related priority for this group will be access to telephone services. This is the information-related technology that has done most to reduce costs, increase income and reduce uncertainty/risk. Phones:
Fax would be a secondary priority. Telecommunications like phone/fax should mainly be provided via a communal model or for those with a higher turnover via an enterprise-owned model.
Other information-handling technologies should also be addressed for this group. As well as using organic social networks, the majority of current non-ICT users access information via intermediate channels (radio, TV) and literate channels (newspapers, newsletters, manuals). Such channels must be seen as the main formal information delivery mechanism for these small enterprises.
Where ICTs are used, they should provide a supplement, not a substitute, for existing information systems. In most cases intermediaries (and subsidised access) will be needed to bridge the financial, socio-cultural, and knowledge gaps experienced by current non-ICT users.
Priorities for application of such intermediated access to ICTs probably again lie in communication more than in processing of information. The formal information processing requirements of such enterprises are relatively limited, and can typically be met cost-effectively by improved paper-based methods. In communication of information, though, ICTs can substantially reduce costs and greatly increase access, and the third priority would be email followed by the Web.
However, it must be recognised that Internet-based applications are no panacea, and that many complementary inputs and actions are required if enterprises are to make use of the technology (for external marketing, for example), even via intermediaries.
These enterprises make no use of computers, but have access to and make regular use of telecommunication services (primarily telephone and fax).
Lack of finance and lack of management/workforce skills are key business constraints for this enterprise group. Most could not afford to buy a personal computer and most would find it difficult to obtain commensurate benefits in the short-/medium-term.
Non-IT users are more likely to benefit from improvements in their existing information practices using the information systems and technology to which they already have access. Improvements to enterprise capacities for information access, processing and dissemination can be achieved through integrated-approach training that covers, for instance:
Within such enterprises, it is only when basic skills and/or financial stability have been significantly improved that any true benefit is likely to be gained from applying ICTs. Of course, like the non-ICT users, they would find value in mediated access to ICTs. Again, communication via email and the Web is likely to be a priority for both receipt (e.g. market prices) and dissemination (e.g. product/service details) of information. Again, there are dangers in failing to recognise that objectives of 'enterprise' for some in this category relate more to social purposes and to reduction of vulnerabilities than to Western models of risk-taking and entrepreneurialism.
Non-networked ICT users are 'first-footers' in small business computing: they have access to computers on the premises, but levels of computer use are typically low.
Non-networked ICT users frequently lack managerial capacities and they share many of the characteristics of non-IT users. The same preconditions for enhancing basic management and information skills would apply before investments in enhanced ICTs are considered. These enterprises will also benefit from improving their organic and paper-based information systems.
Nevertheless, there are greater ICT-related pressures within this group than felt in the previous two categories:
However, there are high failure rates in the use of ICTs for this group. These can be addressed by incorporating both ICT use and design skills into training and technical assistance initiatives.
Entrepreneurs must be assisted to think not just about the immediate installation of information systems, but also about their sustainability. Entrepreneurs need to understand that their information systems will only continue to operate if they have a continuing supply of finance, skills, knowledge, spares and consumables.
These enterprises make considerable, networked use of ICTs: frequent use of email and the Web, and use of computers in applications such as accounting and customer invoicing systems. However, these enterprises have typically applied and adapted such systems on a largely ad hoc basis. In many cases, they lack the employee skills to effectively manage the systems that have been developed. In other cases, the development process is deficient.
Overall, such enterprises will benefit from a more strategic approach to managing information. This will help them evaluate the costs and benefits associated with improving both ICT-based and non-electronic systems. They also require complementary inputs to support their current systems. For example, a better understanding of marketing and promotion as a precursor to making more effective use of the Internet.
Better or best practice needs to be disseminated about the development and management of computerised information systems. They will thus benefit from the training and sustainability considerations identified for non-networked ICT users.
Given that many enterprises in this category have overcome key business constraints and that some demonstrate clear growth potential, they should be prioritised for ICT-related interventions.
2E. What Issues Do "ICT Intermediaries" Face?
ICT intermediaries are organisations that own ICTs and that act as gatekeepers between non-ICT-owning small enterprises and the digital world of computers and the Internet.
A number of issues arise about ICT intermediaries:
Who should the intermediaries be? They should:
Enterprise suppliers should be considered more as intermediaries:
Similar arguments apply for other commercial intermediaries.
If enterprise support agencies are used, then for stronger enterprises private sector agencies are better. Where non-profit agencies are used as intermediaries, they should move towards more entrepreneurial processes, staffing and structure in order to emulate a more commercial mode of operations. For weaker/poorer enterprises, community-run/-owned intermediaries along telecentre models will be better.
ICT intermediaries often struggle to sustain themselves. They face sustainability pressures on at least four fronts:
Questions of opportunity cost must be put in perspective. No-one can say conclusively whether it is better to spend US$1 on an ICT intermediary or US$1 on digging a well. In many cases, money is not fungible: ICTs are flavour of the month and money can be spent on them alone.
Nonetheless, donors and governments who fund ICT intermediaries at least must be aware that there may be other even better things to do with money invested in ICTs. This is particularly of issue in developing countries given higher technology cost/lower income and demand. It is also particularly of issue given the far greater penetration of radio, of television and of newspapers.
Section 3: Agency Strategy
Some further recommendations can be made relating to the overall direction of agency support for information, ICTs and small enterprise.
Sub-section 2D showed that "one size does not fit all". It gave examples of the different help needed by different ICT-related categories of small enterprise. Another example is the difference between start-ups and existing enterprises. For instance, start-ups need basic locational information about input supplies; existing enterprises need information on supply improvements.
Perhaps more important than these is the difference between:
These groups need to be treated differently:
3B. Be More Needs-Driven
Enterprise-support agencies too easily fall into one of two traps:
A third "needs-driven" viewpoint is required: an objective, third-party investigation of what enterprises actually need in order to survive or grow.
A balanced approach to planning information/ICT (and other) interventions would therefore combine the three approaches (see diagram):
3C. More Pull, Less Push
Enterprise support agencies think far too much about supply/push factors and far too little about demand/pull factors.
The same is true for information and ICTs. Agencies think and act too much on the supply-side factors (money, skills, access to ICTs) that are enablers to more formalised information handling, including use of ICTs. Agencies think and act far too little on the demand-side factors (linkages with ICT users, pressure from competitors, value chain processes amenable to computerisation) that are drivers to more formalised information handling, including use of ICTs.
Agencies must rebalance their perspective (see diagram), or else they will not achieve their information/ICT goals, and they will waste time and money on ineffective supply-side efforts.
3D. More Policy Advocacy, Less Single-Enterprise Activity
Enterprise support agencies spend too much of their time intervening with individual small enterprises. Although this can be valuable, more often such activity has been found:
Agencies should focus more on policy advocacy (see diagram), pressing for better policy-level interventions.
Two particular policy areas are important:
3E. Improving The Agency's Own Information Systems
There is a saying: "The shoemaker's children have the worst shoes". This is a warning to agencies that, in worrying about information systems in their client enterprises, they should not ignore their own internal information systems.
Agencies should be asked three key questions about their own information systems:
In designing agency information systems, are you ensuring that ICTs are seen as a means to an end, not as an end in themselves?
In very simple terms, agencies should be following three steps in designing information systems:
To date, such an integrated approach has not been present. ICTs have been ignored within agencies, or have been isolated: treated as an independent factor that can be viewed in isolation from the rest of the agency. Alternatively and increasingly ICTs are idolised: placed centre stage and regarded as the main solution to agency problems. None of these three represents an adequate approach. They must be changed if the potential of ICTs is to be realised for enterprise support agencies.
See sub-section 2A for more details.
A whole series of questions can be asked here:
See sub-section 1C for more details.
Most agency information system initiatives fail, either totally (no working system is produced) or partially (major goals are unattained).
This failure often arises from the gap that exists between two things:
Closing the design-reality gap will be a key priority for enterprise support agencies. How can this happen? Gap-closure techniques include:
Basic ICT Jargon Explained
Describes the way in which data is transmitted as waves by traditional radio, phone lines and early-model mobile phones.
How much data a phone line or computer network can carry, measured in bps: bits per second.
A measure of data storage. Megabyte (MB) means roughly one million bytes of data. Gigabyte (GB) means roughly one billion bytes of data.
Central Processing Unit: the 'brains' of the computer that undertakes calculations and controls other parts of the computer system. On personal computers, also known as the microprocessor. Chip speed is often measured in Megahertz (MHz).
Database Management System
Application software that handles storage and selective search of data on a computer.
Describes the way in which data is transmitted as 1s/0s by computers and modern phone lines and mobile phones.
A collection of computer files stored in one place.
A special disk that stores data or semi-permanently. Some are magnetic disks: a hard disk is held inside the computer; a floppy disk can be carried around. Some use optical compact disks: DVD-ROM (digital versatile disk read-only memory) has at least seven times the capacity of CD-ROM (compact disk read-only memory).
Electronic Data Interchange: computer-to-computer exchange of electronic documents for business.
The transfer of messages between computers.
When work is done on a computer and then stored on a disk, the result is a called a file.
Global System for Mobile communications: a digital phone network standard.
Physical items of ICT: computers, cables, etc.
The first page you see when you connect to a Web site on the Internet.
HyperText Markup Language: a computer language used to create Web pages.
A connection linking different Web pages via the Internet.
Information and Communication Technology: electronic means of handling digital data.
World-wide communication system a network of networks that connects computers and allows them to exchange data.
Integrated Services Digital Network: a digital phone line capable of transmitting data more quickly than a standard line.
Internet Service Provider: a company that provides you with access to the Internet.
Modulator/demodulator: a device that allows computer signals to be transmitted over analogue phone lines.
Computers joined together so that they can communicate with each other. A local area network (LAN) covers a single building; a wide area network (WAN) covers a broader area, typically linking computers in different towns or countries.
Anything that is not part of the main computer case but connected to it. This includes devices such as the keyboard (for typing); mouse (for moving the pointer on screen); scanner (scans words/images on paper into the computer); monitor/screen (that produces the image on a computer); or printer.
Two types of computer memory that store data on special computer chips. Random access memory (RAM) loses its data when the computer is switched off; read-only memory (ROM) does not lose its data.
Software that helps you find what you are looking for on the Web.
The instructions that make a computer work. A particular set of instructions that performs a function is called a program. If offered for general sale, this is a package; if produced for a single, specific customer, this is custom software. There are three main types of software: systems software (that controls basic computer operations, like the operating system); application software (that carries out a particular task, like word processing); programming software (that builds other software).
Application software that handles numerical (and other) data on a computerised matrix of cells.
Wireless Application Protocol: a system that allows mobile phones to access the Internet and its services.
World Wide Web (WWW)
A collection of linked documents (pages) connected via the Internet. The pages can hold words, pictures, sound and video.
A collection of Web pages published by a company, organisation or individual.
Application software that handles documents on a computer.
Sources of Further Information
on information, ICTs and small enterprise:
Web Site: http://www.man.ac.uk/idpm/ictsme.htm
on information and ICTs generally:
Book: Laudon, K.C. & Laudon, J.P. (2000) Management Information Systems, 6th edn, Prentice Hall, Upper Saddle River, NJ.
on building information systems:
Book: Bell, S. & Wood-Harper, T. (1998) Rapid Information Systems Development, 2nd edn, McGraw-Hill, London.
on closing design-reality gaps:
Book: Heeks, R. (2001) Reinventing Government in the Information Age, Routledge, London.
on ICTs and development (including relevant donor initiatives):
Web Site: http://www.man.ac.uk/idpm/devtlinx.htm#itdev
on small enterprise development:
Book: Mann, C.K. et al (1989) Seeking Solutions, Kumarian Press, West Hartford, CN.
Web Site: http://www.man.ac.uk/idpm/devtlinx.htm#sed
Help Us Improve This Handbook
Please help us to improve this handbook by providing feedback:
1. Please tell us which parts of the handbook we should keep for the next version, because you found them useful.
2. Please tell us which parts of the handbook we could remove for the next version, because you did not find them useful.
3. Please tell us which new topics we should add to the next version, because they were missing from this version.
Please return this form:
Please include your name and address if you wish to be sent any future versions of this handbook.
Return to the eCommerce for Development Handbooks/Reports Page