I did some work a while ago on SM in SMEs (that's Service Management in Small to Medium Enterprises of course: SMISME? SM4SME [the one I use]? SMESM?). When seen through the distorting lens of SME priorities, frameworks like ITIL look pretty different. Every 70s deadbeat like this writer knew that you can learn by tripping out, so it is enlightening for us to look at ITIL in REALLY small organisations. I wrote an article about it but the website is no longer available so here is the article:

TRIPPING OUT ON SMALL BUSINESS

Large enterprise can learn from looking at ourselves in a new way. Making large-organisation best practices fit in Small to Medium Enterprises takes us into an alternate world where nothing is quite the same. What loomed large has vanished and what was trivial is suddenly enormous. In Timothy Leary fashion [you kids look him up on Google] we can learn much about our everyday reality by getting outside it for a change.

Differences

Small organisations have some special characteristics. When we shift from a corporate to a SME perspective, things get weird. What was small now looms large. What matters to corporates is now irrelevant.

Here are some differences:

Owner/managers

Foremost is that most are managed by their owners, who are generally “amateur” managers.

Risks

SMEs take daily risks that would appal corporate managers. This stems in part from the entrepreneurial nature of the managers, but more from necessity: there simply are not the resources to devote to risk mitigation. Telling a small business owner that they should address a particular risk is like telling a wartime bomber pilot to give up smoking.

Strategy and planning

The lack of strategy and planning is amazing to those used to the corporate world. “The root cause of either small business failure or poor performance is almost invariably a lack of management attention to strategic issues” (ref 1). Some owner/managers are not even aware of the deficiency; others just have more pressing priorities. “SMEs are likely only to undertake formal planning when faced with some major change or crisis.” (ref 2)

Process

One reason small businesses don’t plan much is the competitive advantage of being flexible and nimble.

“Recent research has shown that clear links between an organisation’s approach to strategic planning and its business performance exist in small as well as large organisations… However these findings leave SMEs in particular with the challenge of matching the requirement for an improved strategic planning processes [sic] with the competitive advantage associated with being a ‘simple’ and highly responsive organisation” (ref 3).
“Formal planning among successful entrepreneurs was rare, at least in the early stages of their business development. ….. their greatest contribution to their business venture was the ability to provide vision and focus.” (ref 4)

Not only are many small businesses culturally opposed to process (“red tape”), but it actively undermines one of their key competitive differentiators over their larger competitors: agility.

Sources of IP

SME owner/managers listen to customers and peers, not consultants. One survey reported 83% of sellers getting small business customers thru referrals (ref 5). In a Canadian government survey (ref 6) “When asked to rate various information sources in terms of their importance to their business as a source of business information, [small] business managers pointed most often, by far, to ‘informal’ sources – their clients, suppliers and colleagues:
• 86% identified clients as important (most say very important)
• 73% suppliers
• 56% business managers and colleagues

“Business managers were divided in terms of the importance of three other potential sources – banks and other financial institutions, industry or trade associations, and the media. Approximately equal numbers view these as important and unimportant. For all other potential information sources, more people gave low ratings than high ones. Private sector consultants ranked lowest.” Lower than politicians.

Village culture

Organisational structures tend to be informal and dynamic. Communications are equally informal and ad-hoc. People sit together and eat together. Decisions are more consensual (people have to get along).

In comparison, corporate culture looks more like city culture - impersonal, hustling and abrasive - and small business people tend to take the same view of it that rural people take of the city.

Specialists

Knowledge tends to be “broad and shallow”. Few have the luxury of specialising except in critical operational areas that differentiate the company.
If we ask an organisation to spend 5% on a new process, e.g. quality management: in a large organisation that means allocating 5% of the people; in a small organisation that means 5% of the existing staff’s time. Those people will not be able to apply themselves totally to making a study of the new discipline. They will find an hour or two a week for it.

Tribes

There are several rules-of-thumb of group dynamics that say a group of people will split into two when it reaches somewhere between 20 and 100 people depending on the theory. A small business of less than 20 people does not usually suffer from “us and them” – at least it does not need to. In particular, there is almost never an IT unit as a distinct person or group, unless it is outsourced to an external service provider.

What small businesses care about.

Large corporates could be characterised as caring about profit, market-share and risk-control; and government characterised as pursuing policy compliance, public service and allocation of funds. What do small businesses care about?

Costs

Small businesses are typically chronically short of time and money. Contrary to popular belief, SMEs are in many ways quite in-efficient, because of the lack of economies of scale and the lack of specialisation and process optimisation.

They make up for it by minimising costs in general and waste in particular (it is the owner’s money), and by doing entirely without some processes (see Risk).

Growth

Small businesses are often characterised as being happy just the way they are but this is generally not so. In the same Canadian survey, “88% said that growth or expansion over the next few years was important to their business (55% said very important)”.
Survival
Small businesses typically operate on narrow margins and low cash reserves. They lack the diversity and momentum of larger businesses. They are tossed about on the seas of change, and often are completely absorbed in just staying afloat.

Least practice

What does best practice mean to small businesses? Often: not much.
For any methodology to work for them it needs to be three things: achievable, applicable and acceptable. The writer uses a set of 14 transforms for filtering IP so that whatever comes out the other side is achievable, applicable and acceptable to small business. I call it the BSF: the Common Sense Filter.

What does ITIL look like thru the BSF?

Service Level Management

SLM is not about us and them: there is no “tribal effect”. So there is less measurement and reporting and more defining the catalogue and focusing efforts on services. In this SME context I prefer to call SLAs Service Level Definitions. Awareness of the service-centric mentality is important. So too is awareness of the need for planning.

Change

Change Management boils down to a change log, a CAB, and moving the organisation through three levels of change maturity:
• Know about changes
• Know about them before they happen
• Have a say in whether they happen

Configuration

This will generate debate, but I think pragmatism dictates that Configuration Management boils down to a financial asset register and the rest stored as “him over there”: all the relationships and impact analysis are in someone’s head.

Other processes

In general, processes are stripped of much formal process. Most of the remaining processes focus on having an Owner, making plans, aligning the process with the business strategy (and the need to have one of those), and making forecasts to cope with growth and reduce the costs of surprises.

Measurement is limited to a few basic KPIs to ensure the process is working.

With some processes, the aim is merely to create awareness that the process exists and get ownership so somebody thinks about it. Examples are continuity and capacity.

No tribes

Perhaps the most fundamental difference is that there is no IT, so it makes little sense to talk about service management in the context of IT services delivered to the business. Service management is about managing all services, whether delivered to staff, partners or customers.

Likewise the business is too small for IT to have its own processes: so change management is about business change, continuity is about business continuity, security includes physical as well as computer security, and so on.

We cannot have a methodology that only talks about IT: we have to deal with the business as a whole. Perhaps ITIL for small business should be called BILL: the Business Infrastructure Library of Least practice.

Takeaways

What can we at the “big end of town” learn from all this?

Taking it to the business

In this small-business model, many ITIL processes reside in the business (something we are just starting to see in the corporate world too). Perhaps small business can lead the way in bringing Service Management to the whole organisation.

CEOs consistently list dealing with change as one of their top issues. Why don’t they have a Chief Change Officer? Why does the Change Manager sit somewhere one or two levels below the CIO?

If “IT is the business” why doesn’t the COO run IT production along with sales, manufacturing and distribution?

Most of all why not peel Service Management off from IT and provide it as a distinct discipline within the business? We are seeing it with service desks: we will see it more often with the whole SM domain.

Cultural fit

Small businesses are not the only environment where the implied ITIL culture does not fit. Look at your own organisation’s culture (the way we do things). Perhaps less emphasis on management by numbers would help acceptance of ITIL, for example.

Best practice as a sacred cow

It is taken as a given that organisations want to achieve best practice in everything they do and an organisation that doesn't is somehow less worthy than those that do. This should not be the case.

Pursuing Best Practice is a strategic decision, which should be taken when there is an agreed ROI (tangible or intangible) for the resource investment required to get there. Not everyone can afford or wants best practice.

Best practices work for those organisations that have the commitment and resources and reason to adopt best practice. For those who do not, something more pragmatic is required, which can be distilled from best practice as well as from legislative requirements and other sources.

Footnote: if you have read this far, you may be wondering where the “ITIL Lite” book ITIL Small-scale Implementation (ref 7) fits in all this. There is small and then there is small. Methodologies like ITIL set out to be comprehensive and end up being large and complex. They do not scale down. The ITIL “small-scale” book suffers from this. It will work for small corporates; it will struggle for acceptance among small businesses.

References

1) The performance and competitive advantage of small firms: a management perspective, Jennings and Beaver, International Small Business Journal 15(2), 1997
2) Business Strategy – do SMEs face special problems?, Frizelle, Institute for Manufacturing, University of Cambridge, MANUFACTURING INFORMATION SYSTEMS: Proceedings of The Fourth SMESME International Conference http://iprod.auc.dk/sme2001/paper/frizelle.pdf
3) Balanced scorecard implementation in SMEs: reflection in literature and practice, Andersen, Cobbold and Lawrie, 2GC Ltd, SMESME Conference, Copenhagen, May 2001
4) Planning and Growth Characteristics of Small Business Owner-Managers, Mazzarol, Centre for Entrepreneurial Management and Innovation (CEMI), University of Western Australia
5) November 2005 Survey “Selling to Small Businesses”, www.smallbiztrends.com
6) Small Business Information Needs Assessment Survey: Report to Industry Canada, February 2001
7) ITIL Small-scale Implementation, Office of Government Commerce, The Stationery Office Books, 2006