Study Shows that Extensive Technology Use Helps Minority- and Women-Owned Small Businesses Succeed

WASHINGTON, March 16, 2004 — When Tracey Reese founded her company, T.R. Designs, eight years ago in New York, she started as a single designer armed with a sense of purpose and a strong vision for her business. As that business grew, expanding to a second clothing line, so did her production and communications needs. While demand for Tracy Reese’s apparel was great for business, coordinating with overseas production facilities made an already-complicated process of design, production, and merchandise fulfillment even more difficult.

Today, Tracy Reese collections can be found in major department stores such as Neiman Marcus, Nordstrom, Bergdorf Goodman and Saks Fifth Avenue. The company generates more than US$12 million in revenue a year.

According to Reese, T.R. Designs uses a number of technologies in its business, including desktop productivity tools and software, design tools, a company website, apparel-related applications, and infrastructure technologies and software. The effective use of technology has helped increase the company’s annual revenue by more than $11 million, a result of a 40-percent decrease in the time spent processing orders, increased reliability and ease of communications, and allowing for greater creativity and experimentation in product lines.

“I experiment more with each piece in a collection,” says Reese. “Before, I had to take each decision to heart and simply hope for the best when creating prints. Now I can see my results immediately, try the same design 15 different ways, and then decide what works best.”

Not all women- or minority-owned small businesses have been as successful. During the period in which Reese started her business, U.S. Census Bureau statistics show that the number of minority-owned firms increased at four times the rate of all U.S. businesses. The growth rate of women-owned firms was more than double the growth rate of all U.S. businesses during the same time period. Despite these encouraging trends, the failure rate of these businesses is often higher. The most recent Census data indicate that while nearly 49 percent of white-owned businesses that were started in 1992 managed to survive through 1996, only 35 percent of black-owned and 45 percent of Hispanic-owned firms in the same time period were still in business in 1996.

Recently, the independent research organization Urban Institute conducted a survey of more than 1,100 small-business owners from six cities with high concentrations of minority- and women-owned enterprises: Chicago, Los Angeles, Miami, New York City, Seattle, and Washington, D.C. What they found was that companies using computers and other technology extensively are significantly more successful than those who do not. And perhaps even more noteworthy was the determination that more extensive use of technology by minority- and women-owned businesses could potentially add up to $200 billion to the nation’s gross domestic product each year.

Microsoft funded the six-month research project as part of its ongoing commitment to educate key audiences about the benefits of maximizing technology use. Businesses using technology effectively contributes to the efficiency of office operations, systematic controls over financial and accounting functions, and greater productivity of service or product delivery, all leading to higher customer satisfaction rates, sales, and profitability.

Kfoury Construction Group, a Hispanic-owned company that provides general contracting services to the Washington, D.C., metropolitan area, specializes in high-end commercial interior and base-building services. Inc. Magazine has rated it as one of the fastest-growing companies in America for five years in a row. As the company grew, however, managing relationships with multiple subcontractors, facilitating concurrent projects, and communicating across diverse organizations grew ever more complex.

“In order to go after more prestigious work, we had to demonstrate a higher level of proficiency and expertise,” says Jeff Martello, Kfoury executive vice president. “That moved us to embrace technology.”

Kfoury did just that by taking advantage of a variety of technologies, such as a Web-based document retrieval system, estimating and bidding software, as well as desktop productivity tools and software. The result was an increase in efficiency by over 200 percent, with streamlined communication between architects, engineers and clients.

Gone are the days when access to the right technology was the primary stumbling block for a small business. Urban Institute’s study found that only 20 percent of women- and minority-owned small business owners believed that technology was not affordable or that they lacked the capital to purchase computers. The difference is in technology use — less successful firms are not fully realizing the potential of the technology they already have.

Gayle Cruise, Microsoft group manager for diversity marketing and communications, agrees. “We’re hoping the results of this research will offer our nation’s policymakers and technology leaders the information they need to further explore these findings,” she says. “Microsoft will spearhead a national coalition, committed to bringing real solutions to challenges plaguing America’s minority- and women-owned small businesses.”

“It has meant everything in terms of how competitive we are,” says Nick Timreck, president of Kfoury. “Put simply, we wouldn’t still be in business if it weren’t for our investment in technology.”

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