Startups need to keep up with the competition, but not all new innovations are a good fit.
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Startups are the perfect customers for technology companies. They’re eager to grow, they need to keep up with their competitors and they’re open to new ways of doing things. Entrepreneurs themselves are often attracted to anything shiny and new; there’s not much convincing to be done.
But therein lies the rub: They’re startups. Fledgling businesses often have a limited number of employees and an even more limited budget. That means that enterprise systems or big-budget packages are out of reach or impractical, no matter how appealing they may be.
That sometimes doesn’t stop entrepreneurs from pulling the trigger. Research-and-advisory company Gartner predicts that IT spending will hit $3.8 trillion this year. If all of that technology was necessary, it would be a true win-win for everybody involved. However, startups rarely need everything they’ve committed to.
The Dangers of Tech Glut
Those who infrequently use digital tools aren’t immune to the allure of technology. Just a few years ago, the New York Times touched on entrepreneurs spending money on tech in industries that didn’t demand it, like agriculture. That same impulse, unsurprisingly, runs through startups geared around tech-enabled experiences.
One big problem in investing in unnecessary technology is that it pulls resources away from areas that truly need them. As a 2014 study in the Journal of Global Entrepreneurship Research explained, incorrect resource allocation leads to entrepreneurs “rationing the necessary resources that will truly promote increases in productivity of the economy in the long term.” That’s a real problem. According to economists, innovation accounts for 50 percent of annual U.S. GDP growth.
Related: 4 Huge Expenses That Can Bankrupt Unprepared Startups
Another complicating factor is productivity. When you invest in dozens of software packages, your employees are required to utilize them all to justify the investment. A 2018 Pegasystems report studied 5 million hours worth of desktop activity and found that employees switched apps 1,100 times a day. Those clicks alone waste time, but compound that with the number of apps that aren’t truly needed and the productivity penalty is even higher.
A sneaky, pernicious way that tech can hurt startups is through unproven platforms. Startups, likelier to support other startups, can fall prey to software not yet ready for primetime. And with budgetary constraints in mind, they’re more likely to invest in “affordable” options that don’t last as long or suffer from shoddy construction. That means the money spent was actually sunk.
For all these reasons, I’ve consulted with hundreds of companies, big and small, to help them identify ways to cut tech waste, and these are the seven recommendations that carry the biggest impact:
1. Audit your existing software.
Software with all the bells and whistles is endlessly attractive, but if you’re only going to use one feature, it’s often not worth it. Worst of all, when I go through companies’s existing packages, it usually turns out another one already contained the lone useful feature. At that rate, you’re literally paying for marketing. Do an extensive dig through your list, and compare features and tools to eliminate overlap or useless purchases.
2. Calculate your actual usage.
Data is the best determinant of how you should spend your money. Use time-tracking software for three months to see how your team spends its time. You may see that a manual process takes three hours but only occurs once a quarter. Weigh the cost of your team members’s 12 hours each year against the cost of software to automate the process. Conversely, if you’re looking to automate a daily process, determine how much employee time you’d gain back and what you could do — and earn — with it.
3. Adopt a “sharing is caring” attitude.
If you’ve determined that you’ll only use an expensive software package twice a year, look at alternatives. Freemium options are one; group accounts are another. While some subscription-based software can’t be shared, some can. One business I worked with installed graphic design software on a computer it shared with a building neighbor. Neither used the software enough to double-book the computer or justify its expense alone.
Related: How Entrepreneurs Can Manage Resources During Testing Times
4. Ask for personal reviews.
Read reviews online to pinpoint the best tech for each area you’re examining, but go one step further and talk to business owners with companies similar to yours in terms of size, revenue or market. Which options have they tried? Which were worthwhile? What do they wish they’d never done? Unless they’re getting paid to shill for a company, they’re likely to give you their honest opinions.
5. Talk yourself off the “status” ledge.
Let’s be honest: A lot of executives buy shiny new tech because it makes others envious. Sending your salespeople to conferences with Apple gear makes you feel like you’re putting the best face forward for your company. But throwing money behind expensive tech when mid-level versions will do requires some soul-searching if you’re serious about saving money over the long haul.
Related: Why Are iPhones So Popular With Business Owners?
6. Try a rent-to-own option.
I don’t mean this literally, although rent-to-own options do exist. If you’re looking at buying tactile technology that you’re not convinced will be used, borrow from someone for a week or so. If you currently use a regular whiteboard but are considering a digital version, leave both in the rooms people use for meetings and brainstorms. Tracking the use — and ease of use — of each option will help you make your decision.
7. Look for struggling companies.
This may sound similar to buying unproven tech, but it’s not. If a company (with strong tech) that previously enjoyed first-mover advantage in a space is rapidly losing ground to competitors, that’s an opening. When talking to salespeople, ask about discounts for long-term contracts or marketing help, like case studies or testimonials. Many businesses are happy to exchange a discount for a more committed partnership.
Tech is designed to be alluring, and it is. But entrepreneurs can’t afford to chase every shiny new piece of tech if they want to grow their businesses. By adopting tech glut-fighting practices, they can ensure they have the technology — and the cash — to reach their ultimate goals.