Planning for digital business transformation with SMEs
Having already come to prominence before the pandemic struck, digital transformation has become even more important for firms of all sizes since the outbreak of Covid-19. As businesses look to adjust to the rapidly changing environment, Consulthon Co-founder Marieta Bencheva says that the situation also offers small and mid-size companies opportunities to win business – if they can find the right strategy for it.
According to definitions given by the European Commission, a small company has less than 50 employees and up to €10 million annual turnover. The medium-size enterprise has less than 250 employees and up to €50 million turnover.
These are just figures, though. The term SME reflects much more than just a company of a certain size, and looking deeper, an SME consists of unique people, the materials, chains of extraction, manufacturing, supplies and deliverable services. These are as important as the figures – even more so today.
SMEs are the most widely-spread type of companies, forming the backbone of every economy. One of the main challenges they face today is that of digital transformation. When an SME decides on the way to go forward with digitalisation, a lot of questions come to the fore. One of the first should be, “Which approach is the most appropriate for this company?”
Choosing the right approach
Before choosing the right approach, SMEs must understand where they want to see their company when a transformation is finalised. What do they want to achieve? In order to realise this, they need to define the problems they face, and then start on the approach.
The first approach many firms choose when approaching any transformation is the top-down implementation. In other words, they put an emphasis on the capabilities that will enable their business to lead the transformation. For example, using certain tools to transform the way the company works. This is a useful approach for companies in the service sector or for financial companies.
It is important to note that this is not possible for every business, though. Many more SMEs will find that they are better-suited to a bottom-up approach, where they transform their business from the low levels, from the operation levels. Beginning here, where things are actually ‘getting done’ can be particularly impactful in production-based work. For example, if an SME is in the manufacturing sector, this is where the company’s core profits come from, and so this is where they need to start. What is important here is not only the investment an SME needs to make in tools and machines, but in people and their training.
At the same time, this need not be a binary choice. Medium-sized enterprises with different business models may consider a mixed approach to transform both their service and production operations. Beyond this hybridised methodology, there are even more options available, depending on a company’s makeup and needs.
A data-driven approach, for example, can be used in a small insurance company combining data gathering and choosing the right AI tool to enhance services. In this case, firms can decide on an approach enhancing customer satisfaction if that is the main goal. It is especially important these days, when trying to differentiate a company or service for the attention of online customers.
Digital strategy
Once the goals and approach have been decided upon, SMEs can move on to drawing up an actual strategy. One of the first things they need to ask themselves is “Do I really need a strategy?” The short answer is yes, you always need a strategy, no matter what the transformation is. There are a few steps to help flesh out the development of an initial plan.
Initially, SMEs should analyse the industry they function in, the region and the environment on all levels. This will give them a clear idea where they are, and show them the path to take. Firms should then make an in-depth analysis of clients. This will show the growth opportunities present, and another point of view on the transformation goals to be chased. Then, companies should draw up definitions of their needs and goals, and compare them with the existing environment and client needs.
After this, companies should set up a working group; getting leaders to participate in a brainstorming session. This can help decide on the exact steps to take and, if necessary, on whether to hire an external consultant or not. External expertise can be particularly useful in the case of bigger companies, or with regards to more serious and wide-spread digital transformation processes.
