For many small and medium-sized enterprises (SMEs), the biggest challenge is growing the business while managing with limited resources. Successful organisations have proved that the key to accelerating growth is making innovative use of technology.

Computing recently hosted a live web seminar, in association with Oracle, on the challenges of IT innovation for SMEs. A panel of experts provided their advice on the best practice for making technology work for your business, and answered questions from readers.

Our panel members were:

* Doug Richard, founder and chairman of Library House, former Dragons’ Den panellist.

* David Hall, management consultant, writer and presenter of BBC business series Winning.

* Alan Hartwell, vice president, technology solutions and channels, Oracle UK.

* Julie Meyer, chief executive of investment and advisory firm Ariadne Capital.

Q: Are UK SMEs innovative enough?

DH: The good news is that 95 per cent of all innovations in the world in the past 100 years have come from firms employing fewer than 20 people, and the UK has had its fair share of that.

That happens through entrepreneurs, people who create value, people who take risks, who have passion and energy. And the way they do it is to identify customer problems or pain or difficulties, resolve it and go sell the answer to everybody else.

Existing firms find it difficult to innovate, even though 97 per cent of them say innovation is a priority. When they are being really honest the same 97 per cent would say they find it really difficult to do.

That is down to culture, and the culture in firms is very often about power and control, job descriptions, organisation charts, PowerPoint presentations, and so on. And that really acts like an energy vampire to the entrepreneurial process.

One of the challenges is how to help firms take an entrepreneurial approach, find problems and sell the solutions to everybody else, because basically that is a fairly safe way of innovating.

Q: Some SMEs have thought in the past that they will worry about technology when they are big enough. Has that changed? Do people now know that technology has to be at the heart of growing a small business?

DR: If you are a small business, technology occupies the same space in your mind as every other anxiety. If you have an anxiety about your payroll, you have anxiety about cash flow, you have anxiety that you should be making use of technology and you are not doing enough.

You have a laundry list of things you have not finished, so how are you supposed to be innovative using technology? And it preys on people, because I get asked questions such as what should we be doing with the web, how should we be using it.

One thing that can easily be overlooked is that the cost of being innovative has dropped dramatically in the last few years. A lot of things are open source and free. So you can do many things, at least up to a certain scale, at little or no cost.

The potential is there, but it is frequently about anxiety more than alchemy.

Q: The UK lags behind its major rivals in productivity. How can SMEs improve productivity, where can IT help, and is the problem with technology or with management?

AH: We are a developed economy, a high-cost, high-wage economy. But we have an opportunity to obtain efficiency and productivity gains from countries such as Brazil, India, Russia and China.

We can find efficiencies there but our true innovative productivity will probably come from ideas, because that is what the UK is going to be more and more – competitive in the knowledge economy.

That does not mean you have to be more efficient in terms of how many widgets you produce per hour; this is about gaining an intellectual property advantage globally, and we are well-positioned to do that.

SMEs have a whole range of great ideas all the time, and those ideas are often based around technology challenges and new ways of doing things.

We need to focus on that kind of intellectual challenge, that kind of knowledge economy, the information economy, the ideas economy. We have to help SMEs get big as quickly as possible.

You need to get people together as quickly as possible and allow people to participate – it is less about keeping your idea to yourself and growing it organically over a long period of time.

That will help productivity in the UK because we will move into areas where we can compete, where our higher cost is not a disadvantage, and we use our more educated and technology-aware workforce.

Q: Does the UK business environment hold back SMEs?

DR: I was surprised to find out that it takes more time to start a small business in the UK than it does in France. Yet the government spent a little over £12bn last year on supporting small business. The business of supporting small businesses has become a very large business in the UK. We have a number of challenges here, and the challenges are getting worse, not better.

The real question for the UK is, as a relatively small country with a very high density of intellectual property, of creativity and of knowledge, how does it play out on the global playing field?

One of the reasons the UK is less productive than other nations is because if a sales person starts at my office and goes anywhere, they will travel a shorter distance over a longer period of time in the UK than almost anywhere else.

It is the simple things that we must get right to be productive – if we cannot deliver a package in a timely basis, or deliver a message, or have a meeting, or have any sense of assurance that three people can meet at a point in time and place, then we are less productive than those who can.

Broadband has a big role to play. The number one impact on the economy in the West Country in the past few years has been the distribution of broadband. It has brought more of an economic benefit there, through small business generation, because people are now connecting.

The trains brought distribution mechanisms 100 years ago, wires are bringing it today. It will be done wirelessly in due course and that has an impact.

So when you ask what kind of playing field we are on, you have to consider things such as regulatory overheads, worktime directives, health and safety, and the fact that for any regulation that is imposed, the impact on a small business is greater than on a large business.

A small business has fewer resources to deal with the same regulation than a large one, and yet there is very little or no accommodation made for it.

JM: It comes down to who is in charge – business or government. Unquestionably the problem is that government is driving the agenda rather than business. When small businesses thrive they create wealth for society; when governments thrive, providing help to small business becomes a big business. You get more bureaucracy and more slowing down.

The more people that are engaged in the SME sector, creating wealth and growth in the economy, the better overall for society. The size of government and its continuing growth and infiltration into our lives is a big part of the problem.

Q: How can IT best support the entrepreneurs?

JM: How do you compete if you are a UK entrepreneur in a country with 60 million inhabitants, compared with 300 million in the US or a billion in India?

There is such a thing as the Anglosphere – the influence of the English language – everybody wants to be a part of it right now, even people that do not speak English natively.

The good thing is the combination of the Anglosphere and the internet.

If you have a product or service and if you know exactly who you are trying to target, perhaps people who are early technology adopters, who are on broadband, then you can now find those people in a global rather than just geographic markets.

The most vivid example of this is Skype, the internet telephony company. Skype did not open a Skype France, Skype Germany and so forth, it was not competing with the existing voice over IP service providers.

Skype segmented its market globally, saved a lot on cost, reached out to an early adopter base, and it was not at all a disadvantage that the company was based in London because it was part of the Anglosphere.

That is how IT is helping entrepreneurs – the ability to reach out to segments of the global population using the internet.

What the experts say: innovation

Alan Hartwell, vice president, technology solutions and channels, Oracle UK:

If you are good, there are a lot of people looking for good ideas and you are probably not short of people to talk to. The problem is which one to look at first, which one is really going to help, and which only really have an angle, and that is a time of difficulty for small businesses. But you can make the right contacts if you have a good idea, and go straight to being a relatively fast-growing business, whereas before there was more of a standard clock-speed that it worked at. A lot of people are joining things up a lot quicker than they used to.

Doug Richards, chairman, Library House:

The problem is not that the IT community makes things too complex, but that it does not do anything to make it simple. Technology starts out complicated. If you set the bar as being able to do something instantly then you will rise up to that bar and this is what the web is forcing people to do. I tell SMEs that one thing they have to do is persuade customers in a sentence short enough to fit inside a Google adware box, because that is about as long as you get today to convince someone. The discipline of the web forces us to communicate what makes us unique in an uncommonly short set of words.

David Hall, management consultant:

Management is an interesting topic – it is the only profession you get promoted into because you are good at something else. It is also the only profession for which no preparation is thought necessary. A lot can be done to improve the quality of management because so much productivity is about how we manage ourselves.

Julie Meyer, chief executive, Ariadne Capital:

Startups are trying to get people to buy what they sell. So it would help if the people who are making purchasing decisions try to eliminate their bias against buying from startups. There are very few people in IT that know how to manage the risk involved in working with startups. There are ways of getting comfortable with a little bit more risk. The establishment can help startups by letting them do what they do best, which is to be the pathfinders and to develop ideas.