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While cultivation expertise has always been at the heart of cannabis operations, the business technology side of the industry remains underdeveloped. Many companies excel at growing exceptional products but experience a technology gap in cannabis. They struggle with implementing the digital solutions needed for comprehensive compliance, efficient operations, and sustainable scaling.
As Michelle Whitmore, founding partner at H2 Talent and consultant at Higher Standards People Operations, pointed out during her Qredible Live Broadcast appearance, this technology gap represents both a challenge and an opportunity for forward-thinking cannabis businesses.
This technological divide is particularly notable when comparing cannabis to other regulated industries that have embraced comprehensive digital solutions to manage their complex operational needs.
When discussing the cannabis industry's technological maturity, Whitmore observed a notable gap: "One of the areas that I saw was somewhat lacking was technology adoption." She clarified that she wasn't referring to cultivation technology but rather "the administrative and compliance-based technologies and business process type technology."
This observation aligns with many cannabis businesses' experiences. While they may have sophisticated grow operations, their back-office functions often rely on manual processes or disconnected / non-integrated systems.
Several factors make technology investment increasingly important for cannabis businesses:
As profit margins narrow in maturing markets, operational efficiency becomes crucial. Whitmore notes that cannabis companies aren't "leveraging the technical tools that they have at hand" or "integrating automated improvements that drive greater efficiency."
Maintaining compliance with complex, constantly changing regulations is substantially easier with purpose-built technology. As Whitmore says, "the only way to stay in compliance is through tech."
Manual processes that work for small operations become bottlenecks when businesses expand. "The only way to scale these businesses is to not be throwing bodies at it all the time," Whitmore explains.
How can businesses overcome the technology gap in cannabis? Based on Whitmore's insights:
While discussing talent acquisition, Whitmore mentioned that roughly "30-40% coming from outside the industry" can bring valuable perspectives, particularly from "other highly regulated Industries like oil and gas."
Professionals from sectors with more advanced technology adoption can help cannabis companies implement proven solutions while adapting them to cannabis-specific requirements.
The tension between legacy operators and business professionals extends to technology implementation. The best approach combines cannabis-specific knowledge with technical expertise.
"Both sides are needed for success in cannabis," Whitmore emphasized. "Cannabis organizations need to understand the cannabis community and honor decades of experience in working with the plant, and for a company to be successful it needs to be built upon sound business principles and decision making."
With capital constraints, technology investments must demonstrate clear returns. Whitmore noted that companies prioritize areas "they feel are going to generate a pretty immediate ROI for them," particularly sales technology.
A significant factor limiting technology adoption is unique to cannabis: Section 280E of the tax code, which prevents cannabis businesses from deducting ordinary business expenses.
Whitmore highlighted how this impacts technology investment: "If we can just get rid of 280E... and let these companies have a chance to really operate as a regular business... it's just a shame to see how taxed they are and how they're really starting with an arm behind their back and a leg tied up... and they're asked to hop through traffic and make these profits."
She added that removing this barrier would allow businesses to "spend more money on compliance and technology and the kind of things that it's tough for them to spend on now."
Despite these challenges, the technology segment of the cannabis industry is poised for significant growth. As Whitmore noted: "If you look at the technology market growth in the cannabis industry, there is a lot of forecast for that to grow significant like almost 30% per year."
This growth is expected to span various technology categories:
The cannabis industry is steadily moving toward greater technological maturity. As Whitmore observed, the growing presence of "sport coat suits" at industry conferences signals a more professional approach to business operations, including technology.
Companies like Newold Advisers, which Whitmore mentioned would be featured in a future Qredible Live broadcast, are helping cannabis businesses "look at assessments, how well are you prepared for the future and the changes that are coming up, and how can you digitally optimize your business."
As the industry continues to mature and potentially benefit from regulatory changes like rescheduling, we can expect accelerated technology adoption. Those companies that invest wisely in technology now will be positioned to outperform competitors when these changes occur.
For businesses looking to stay competitive, addressing the technology gap in cannabis isn't just about efficiency—it's about survival in an increasingly sophisticated market.
