According to the 5th edition Small and Medium Business Trend Report by Salesforce Research, 95% of small and medium businesses (SMBs) worldwide have moved at least a portion of their operations online. It reflects how widely the SMBs have recognized the significance of adopting digital technologies.
Digital transformation is the adoption of digital technologies for business operations which can benefit every business irrespective of its size or the industry. However, digital transformation is not about just adopting many digital tools. It’s a transformation of the entire organization and how it is adding value to its customers.
Digital transformation can benefit not only SMBs but also well-established, large enterprises. However, digital transformation does not mean the same to SMBs and large enterprises. Often, digital transformation is a set of complex, long-term projects with significant investments in large enterprises. On the other hand, SMBs must take advantage of their lean organizational structure to adopt digital technologies in a succession of quick, incremental steps.
Why digital transformation matters to SMBs?
In many countries, SMBs are a significant part of the economy, and they are the primary source of employment and contribute up to 40% of the GDP in developing nations . Therefore, the growth and sustainability of SMBs are crucial factors in a country’s economic development.
Also, SMBs have more intimate relationships with their customers when compared with larger companies. So, SMBs can cater to specific requirements of niche market segments. Therefore, they are an essential part of today’s diverse needs.
Although they are an essential part of the economy, SMBs face many challenges today. Digital transformation can help SMBs overcome many of these challenges, as described below.
Competition from large enterprises
Large companies have access to more resources and more money to invest. So, SMBs often find it hard to compete with them. In such competitions, SMBs could even go out of business or get acquired by other large companies.
New digital tools can help SMBs gain more leverage without making significant investments. Innovative use of these tools can enable SMBs to stay on par in the competition with their larger counterparts.
Chaos in organizational structure
Compared to large enterprises, SMBs have a less formal organizational structure and reporting hierarchies. While this increases agility, some team members may feel disconnected, leading to chaotic situations.
Digital transformation can enhance organizational structure by creating new channels for communication and collaboration. Improved collaboration will create more unity among the team members creating a lean and efficient organization.
Shrinking markets
Shrinking markets could challenge the growth of SMBs. Digital transformation can help SMBs navigate the shrinking markets by tapping into new opportunities and expanding the reachability for more customers.
Serving the new generation of customers
The customers of the new generation are more likely to do their transactions online. Businesses that do not adopt the digital transformation will fail to serve this new generation and will not survive in the future. Therefore, SMBs should never ignore the importance of digital transformation.
How to implement digital transformation in SMBs
The concept of digital transformation does not vary from one organization to another. But, different SMBs may expect to solve various problems with digital transformation. Here are some common aspects of how digital transformation can help SMBs.
Sales
A typical small business has a small set of customers limited by geographic presence. It’s practically impossible for a traditional brick-and-mortar store to break this barrier and expand its customer base. However, a web presence can easily overcome this and let the product or the service be accessible to a broader audience.
Customer support
Most small business owners struggle with customer support due to technology and human resources unavailability. A large business can establish a separate customer support division with 24×7 operations to be accessible to their customers. This kind of customer support channel is not feasible for a small business. However, SMBs can create a very efficient customer support channel using social media and instant messaging apps. Some instant messaging apps offer product catalogs and business profiles to support these requirements.
Cloudification
Traditional enterprise software requires a business to have an on-premises data center to act as a host. Such data centers are, in many cases, too expensive for SMBs. However, the advances in cloud computing have generated many other alternatives for SMBs to use enterprise software.
Public cloud providers offer cloud computing as a service. So the SMBs can use the public cloud to host their software without big Capex investments in building data centers.
Also, the popularity of cloud computing has led many enterprise software vendors to offer their software as a service (SAAS). These applications are billed in a monthly or annual subscription model so that the SMBs can quickly adopt such software without Capex investments.
A.I and Analytics
Analyzing customer and market behavior can yield valuable insights for business decisions. Decisions based on correct insights can drive growth, improve customer retention and optimize operating costs. Artificial intelligence (A.I.) and analytics can help SMBs gain such insights.
Hiring professionals in A.I. is not feasible for most SMBs, but with the advances in A.I, many analytics apps are offered as a service. SMBs can use such services and derive insights from their data without hiring A.I. professionals.
Process automation
Automating business processes can improve organizational efficiency and reduce the demand for human resources. So, SMBs can use process automation to solve the shortage of the talent pool.
Automation also reduces human errors that sometimes could be costly in an organizational context. Automating the business processes also enables an SMB to quickly scale based on customer demand.
Internet of things (IoT)
IoT – a relatively new technology – has expanded automation in many industries. From tracking vehicles, monitoring production lines, and automating machines in remote locations, IoT has a wide variety of applications. SMBs can use IoT to reduce manual labor and increase efficiency.
Now, let’s look at how digital transformation can be applied to SMBs in different industries.
Retail
Retail is a highly competitive industry, and Modern-day SMB retailers have to compete even with the hyper-scaled tech giants such as Apple and Amazon. To stay ahead of the game, e-commerce and social media are essential parts of the digital transformation in SMB retailers.
As the first step of online presence, SMBs must enable customers to do their transactions via web or mobile app.
SMBs must also consider advertising and doing promotion campaigns on social media. These can be targeted to specific user groups yielding better results than traditional newspaper or television advertising.
Construction and Civil Engineering
Construction is one of the least digitalized industries. Primarily dependent on human labor and often taking place in environmentally harsh conditions, digital transformation has not been a top priority for the construction industry and SMBs. However, many aspects of the construction industry will benefit from digital transformation.
Project management is an integral part of a construction company. However, most of the time, a laptop is not ready at hand for the SMB construction industry employees. Therefore, SMBs must consider using mobile-friendly project management tools. And otherwise, the employees are less likely to adopt such tools.
Using AR/VR, a client can experience a building before construction and give realistic feedback to make improvements. It can reduce costly alteration requirements that may arise at later stages. Also, it can help SMBs to improve customer satisfaction.
Hospitality
While there are flashy new technologies like robotic concierges in the hospitality industry, those may not be applicable or beneficial for SMBs. Similar to retails, SMBs in the hospitality industry must consider the online presence via commerce and social media as the top priorities of digital transformation.
While it is good to own a website with online booking, SEO ranking is challenging for SMBs. Therefore, they must also consider listing their offering in online booking services.
Health care
Health care companies can improve their efficiency by automating internal processes via digital transformation. It can improve the quality of service for its customers by reducing the waiting time, eliminating human errors, and providing faster responses. This can give SMBs in health care an advantage over their larger counterparts.
Legal
Legal firms process lots of documents. While digital transformation can help improve this document processing, some large companies in this domain are reluctant to adopt digital technologies because legal work demands caution, client confidentiality, etc. However, due to their lean organizational structure, SMBs can quickly address these problems and implement digital transformation to gain a competitive advantage.
Software development
The larger companies in the software sector are increasingly shifting their software offerings to a Software As A Service (SAAS) model, but the SMBs are mostly lagging. The availability of cloud computing services has eliminated most of the technical barriers for SMBs to adopt the SAAS model. So, the SMBs must also strive to shift their product offering to this model, which can help them attract more customers.
What now
Not embracing the digital ecosystem will challenge the survival of any business organization in the future. In a competitive environment, the companies that adopt digital transformation will gain an advantage over those not.
Therefore, SMBs must also transform their business by adopting digital tools. However, it is not required to do a complete transformation. Based on the requirements in the current context, SMBs can implement digital transformation in incremental steps.
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