by Matthew Jones

For small business owners across the country, technology is generally viewed as the great equalizer, allowing organizations with fewer employees to juggle complex and time consuming functions – such as payroll, inventory, taxes and procurement – efficiently and accurately.  The use of technology should, in theory, provide a level playing field for business owners, regardless of race or gender.

According to a recent survey completed by Microsoft Corporation, in partnership with the Urban Institute, there is still a performance gap between women- and minority-owned businesses and their Caucasian male counterparts when it comes to such important measures as sales, profitability and survival rates.  This performance gap exists despite the fact that most small businesses, regardless of the race or gender of their owners, are using technology to the same approximate degree.

It raises the inevitable question – why are women- and minority-owned businesses less likely to succeed?  Microsoft turned to the Urban Institute, one of the country’s leading non-profit, non-partisan economic and policy research organizations, to find the answer.

The study looked at more than 1,100 small businesses, and the extent to which they use technology to help run their operations.  Of the sample, 75 percent of the companies surveyed were owned by women or minorities.  The study covered six major metropolitan areas – Chicago, IL; New York, NY; Los Angeles, CA; Miami, FL; Seattle, Washington; and Washington, D.C.  Each business in the survey had between 1 and 50 employees, and had been in operation for at least two years.

Examining the Performance Gap

The numbers are harsh.  According to Gayle Cruise, Group Manager, overseeing Microsoft's Diversity Communications and Marketing,  minority- and women-owned business enterprises (MWBEs), as defined in the study, are three times more likely to fail in their first two years of business.  The study also shows that MWBEs achieve a lower sales and profitability rate.

In short – women and minorities aren’t using technology effectively to advance their businesses, and it shows up on the bottom line.

The Urban Institute estimates that if minority- and women-owned business made greater use of technology, they could contribute up to an additional $200 billion to the nation’s gross domestic product (GDP).

On the micro level, lower levels of technology use mean lesser productivity and profitability for small minority and women owned businesses.  “There’s a lot of misinformation out there,” said Cruise.  “There aren’t a lot of (technology) organizations providing support services.  There’s still a lot to do, and (the industry) has to do a better job of communicating what their products and services are.”

One area for improvement lies in how technology is used, and to what extent.  While the raw numbers come out relatively even for MWBEs and their counterparts, the real difference shows up below the surface.  According to the study, “over 40 percent of (MWBEs) reported minimal or no reliance on computer technologies for their core work activities.  This group of firms is also less likely to apply computer technologies to scheduling, inventory, payroll and accounting functions.”

Web sites are another example of technology use on a superficial, rather than substantive level, with the report noting “42 percent of firms reported having a Web site.  Yet…it became clear that few were using high-functioning Web sites.  Most Web sites were informational only, and did not allow for other functions, such as ordering products, scheduling services, or filling out necessary forms.  Not much customer acquisition took place through Web sites.”

Despite some discouraging numbers, there is still a huge opportunity for MWBEs to close the performance gap, using technology to lead the way.  According to the study, effective use of technology in core daily activities can increase productivity by 41 percent and profitability by up to 49 percent.  Those aren’t insignificant gains, regardless of the size of an organization.

Accessibility was, surprisingly, not a huge factor in MWBEs lack of technological dependency.  Of the businesses surveyed, only about 20 percent cited financial barriers to technologies.  With the costs of technology continuing to fall, that number is likely to be even less in the future.

Far more so than cost, the study hypothesizes that lack of skills and access to training are greater hindrances enhancing technology use.  In a segment that relies heavily on personal resources (family and friends) as a whole, MWBEs have fewer friends and contacts in the IT industry than their white counterparts, particularly those with lower income.

One very interesting fact behind the study was the decision to group Caucasian and Asians together within their gender groups, statistically speaking.  In addition to low polling numbers among Asian small business owners, the technology usage habits were nearly identical.

“Their patterns were very similar,” noted Cruise.  “If you didn’t look at ethnicity, you would never know they were different groups.”  As an inferred result, success rates were similar, as well.

You Have to Play to Win

The performance gap problem is much bigger than just technology alone. A number of socioeconomic factors come into play, including education levels, access to cash and capital and yes, even cultural factors.

Perhaps the most disturbing finding of the study lies in the fact that much of the battle is lost right out of the gate – women and minorities are less likely to own their own business in the first place.

According to the report, “as of 2000, nearly one in seven employed white men worked in their own business, as compared to about one in 18 employed African-American men, 1 in 12 Hispanic men, and one in 14 employed women.”

While participation numbers are lower, education levels within the small business-owner segment remain relatively level, with the exception of Hispanic men and women, who are less likely to have a college degree (28.6 percent for Hispanic men, 32.9 percent for Hispanic women).  African-American women were the most likely to have a college degree (40.3 percent), followed closely by white men (40.0 percent).  African-American men were only slightly behind, at an estimated 37 percent.

This was not a huge surprise to Cruise, who, by her own observations, noted “most African-American small business owners originally intended to join corporate America.”  Unfortunately, many black business owners found themselves with limited recognition and opportunity working for someone else.  “As a second alternative, they went the entrepreneurial route.”

Cruise also noted a high level of familial involvement in the Hispanic segment, among small business owners.  “For example, (in the restaurant business), you’ll have Mom at the register, and the kids serving the food.”  In these scenarios, you are more likely to see the venture succeed financially.

All in all, women and minorities need to have more players in the game – particularly among black men, who have the lowest participation numbers in the segment.

“Entrepreneurship is not as embedded in the African-American culture as it once was,” noted Cruise.  “The same thing plagues the Hispanic market.  We need a push to encourage us to become entrepreneurs.  (If we can turn things around) we’ll see more (economies of) scale, greater social networks, and cross-pollination.  We’ll be more likely to be successful.  Success is based on an education and support system.” 

First Step of the Journey

For Microsoft, commissioning this study is only the first step in addressing the performance gap for MWBEs.

“We’re approaching the challenge in a long-term way,” said Cruise of the company’s commitment to the issue.  “The problem is systematic – it’s bigger than Microsoft.  We needed to partner with other stakeholders (in emerging communities).”

Microsoft is creating a Task Force to address the technology and performance issue, which will be comprised of representatives from government, community leaders and corporations.  The goal is to create tangible solutions that yield measurable results in closing these gaps within the next 12 months.

“The first step is to understand the barriers and challenges,” she added.  “Then, you can start pushing hard to develop national solutions.”  This report, as a first step, provides Microsoft with a detailed and insightful look at the challenges.

“Three years from now, we’ll do another research study,” said Cruise.  “Hopefully, we’ll see that the gap is closed, or closing.  I’d like to see that kind of dynamic.  I’d like to see that we’re on the right track to make that happen.”

Cruise: Shining the Light on Diversity at Microsoft

Cruise came to Microsoft four years ago to ignite the industry leader’s diversity marketing effort.  Since her arrival, Cruise has led numerous efforts to help reach out to, and educate, emerging communities not only on how technology can help them achieve their business goals, but also how Microsoft can help.

Her charge at Microsoft combines several passions and talents.  From her college days at Florida A&M University, Cruise knew that marketing was what she wanted to do.  She credits Professor Melvin Stith with helping to illuminate her path.

“He was a dynamic, engaging man,” said Cruise of her former marketing professor, who now serves as Dean of Business at Florida State University.  “I knew that marketing was a field that would suit me well.”

She also knew, however, that she didn’t necessarily want a career selling traditional packaged goods.  With her passion for addressing the needs of diverse communities, as well as her love of marketing, directing Microsoft’s diversity activities is a perfect fit for Cruise.

“(My job) brings these things together,” said Cruise.  “It allows me to use my professional assets, as well as deal with issues I care about – the success of African-Americans, Hispanics and women.  What’s most relevant to me is the African-American community.”

Growing up in Cruise’s home, the focus was always on achievement through education.  “It’s a common mantra in middle-class African-American homes,” said Cruise.  “Get an education, get a job, and go out and get it done.  Whatever we chose to do, whatever it was, it didn’t matter – we just had to be successful at it.  (Being successful) was never a choice.”

Cruise has a potentially tough road ahead of her in trying to create a level playing field for women and minorities through technology.  She is, however, more than up to the challenge.  In addition to possessing the knowledge and intelligence required for the task, Cruise has the passion and enthusiasm.

“”It’s a pleasure for me to spend time with small business owners – after the meetings.  They walk out feeling more empowered,” said Cruise.  Such meeting offer Cruise the opportunity to provide solid counsel and effective products to communities she cares about.  “A $300 box of product can fundamentally change the way someone feels about their business, and their performance.  Nothing is more rewarding.”

The End