IT is a confusing topic. Each business is unique, and each uses technology for different things. One company may require enterprise resource planning (ERP) software, whereas another can get away with using customer relationship management (CRM). One company has an entirely remote workforce, while another may operate completely from within the company’s walls. The variations are endless, and this creates confusion in small business, especially when trying to create a technology strategy for success.

The good news is there are four very consistent categories to group IT efforts. Knowing what group your business fits into is the first step in building a successful IT strategy.

Stage One – Break/Fix

The primary motivation in a break/fix environment is cost containment. Businesses at this level tend to have a reactive relationship with their technology. When an issue arises it will be handled, but there is usually not a lot of time and dollars allocated to proactively manage the solutions to avoid future issues. Businesses at this level will usually have part-time IT help, a break/fix support contract, or even a technically savvy individual within the company playing the IT role. Budgeting is at the lowest of all of the levels.

Traditional small businesses, typically under 20 people, tend to be in this level. The need to transition to level two comes either when the company expands to the point where sharing information becomes difficult, or delivering services gets too complex to manage without a more advanced technical solution. The most common way for companies to make the transition from level one to level two is by hiring additional IT staff, or hiring a third-party IT management company. The primary focus for the additional resources is to build a solid infrastructure for the business applications, create policies and processes for your employees, and reinforce user training in the support processes.

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Stage Two – Operational Management

A company will typically transition into this level as the company becomes more dependent on technology. When system availability becomes necessary for operations, the break/fix model does not offer enough support for the business. The main focus is to keep things running as smoothly as possible. More attention is given to disaster recovery and redundancy, and spending typically increases. Budgets at this level will include additional staff, or managed services from external companies, and a larger investment in the infrastructure with business applications like CRM and ERP. Most of IT involvement and spending at level two are related to the management and maintenance of existing solutions.

This is where the majority of companies exist. Efforts related to technology are primarily in management and maintenance, which unfortunately does not provide much in return on investment (ROI). Companies that have systemic IT issues end up stuck in this level for an extended period of time. The best way to approach moving from level two to level three is to work on identifying where the IT issues are really coming from, and determine who is ultimately responsible to eliminate them. Once you have a stable foundation, you’ll need to leverage business analysts, technical consultants and potential development resources to help move to level three.

Stage Three – Enhance Operations

Level three is the first stage where IT starts to provide ROI for a business. The primary focus at this stage it to enhance existing systems, or introduce new ones, that will increase operational efficiency, create business process scalability, and enhance customer experiences. In other words, efforts that will make a company more money over time. Budgets in this phase are higher than in level two, but the additional spend most likely has a very well-defined ROI. Additionally, this is the level where IT budgeting goes through a transformation. The overall spend is no longer the primary driver. Companies start measuring cost of technology per employee and gross revenue per employee. As those two indicators increase, the overall percentage of revenue spent on technology should decrease. Companies at this level tend to hire additional consultants to help optimize internal systems, as well as some development resources to help automate repetitive tasks and create better data integration for disparate systems.

Companies in level three range from startups to enterprise organizations. These are the companies that are using technology specifically to create a competitive advantage. They use technology to amplify the efforts of their employees, and they see return through dramatically increased productivity coupled with business growth. Companies looking to move from level three to level four have typically optimized their current systems to the point where additional investments provide diminishing returns. They then focus their resources on research and development, in addition to new product and business model development.

Stage Four – Business Transformation

Level four is the most sophisticated of all the levels. The primary focus for businesses in level four is to integrate technology completely into their business model. Businesses at this stage no longer separate their business from technology — they are one in the same. Their products, services and delivery models are now completely leveraging advanced technology to help the company innovate and differentiate from their competition. Businesses in this phase can have a major impact on established industries — and will continue to — over the next five to 10 years. Companies like Uber, Lyft, Netflix, Dolly, Google, Apple, Microsoft, Honeywell, Dollar Shave Club, Amazon, and thousands more are examples of businesses that have completely integrated their business strategy with their technology strategy. The misconception that this level is reserved for tech startups is finally being debunked, and traditional businesses are starting to re-invent themselves with a new focus on how technology can be used to change their industries for the better.

When building your technical strategy, you first need to identify the level of IT within your business. Next, determine if you are okay with your current level, or if the goal is to progress to a different one. A different strategy will be necessary to venture through each of the levels, with level four requiring the most commitment from everyone within the company.