How SMEs can cure their fear of digital transformation
Concerns about cost and a lack of in-house knowledge have deterred many SMEs from attempting a digital transformation. Here’s a guide to the process from some that have
Although the pandemic has accelerated the digital transformation of small and medium-sized enterprises, many firms in this category have yet to take the plunge, intimidated by factors such as the potentially high cost and their lack of in-house tech skills.
The organisations most likely to transform themselves are time-poor, fast-growing firms seeking to become more efficient and medium-sized companies keen to improve their processes, according to research by the Azets consultancy. Their most common objectives are to boost operational efficiency; enhance both internal and external collaboration; improve interactions with customers; and use data more effectively.
Those least enthusiastic about transforming, meanwhile, tend to be profitable, well-established businesses with an ‘if it ain’t broke, don’t fix it’ attitude.
Lynsey Robinson is director of DigitalCity, an EU-funded initiative led by Teesside University to support SMEs in and around Middlesbrough.
No matter where a firm stands on this issue, she says, digital transformation can appear “quite daunting, as people think it will be very costly and require a bespoke build or expensive consultant when that’s often not the case. So there’s a lack of confidence in some ways due owing insufficient skills and experience.”
Be clear about business goals
The first step for SMEs considering a digital transformation is to have a clear idea of the goals they are trying to achieve and why. This vision will be informed by the main opportunities and threats the business needs to address.
Salima Vellani, founder and CEO of the Absurd Bird restaurant chain, explains: “The vision has to come from the top, because leaders have the bird’s-eye view. It’s important to connect the dots and understand what’s happening, not only in your company and industry, but in the wider economy. You have to adapt continually, or you’re not going to exist.”
Vellani led her company’s transformation in 2018 after realising that saturation in the restaurant market was a limiting factor on the number of customers that its six city-based outlets could attract, while high rents and rising labour and food costs were eroding margins. Meanwhile, investment in food-delivery services such as Deliveroo was rocketing and the new ‘dark kitchen’ business model was also gaining momentum.
After analysing the problems and working through a series of manageable “baby steps”, rather than trying to do everything at once, Vellani used technology to transform each of the restaurant kitchens into “optimised delivery hubs” to cater to external orders and “meet customers where they are”. This approach has since helped the business to survive the lockdown closures.
“This was about investing ahead of the curve rather than being disrupted,” she says. “But the thing is not to get hung up on the digital aspect. It’s the organisational culture and goals you’re trying to optimise. Use technology to enable that shift and do things better.”
An investment, not a cost
It’s important to treat change as an investment in the future of a business rather than simply a cost, according to Robinson.
“There is inevitably a cost involved, but there are also benefits such as efficiency gains or the ability to enter new markets,” she says. “Don’t look at the cost in isolation, as that makes it feel like a burden. Instead, look at the return you’ll be getting.”
To understand this return, though, it’s vital to establish performance criteria by which to benchmark the progress that’s being achieved.
Fraser Nicol, head of business technology consulting at Azets, explains: “It might sound obvious, but people often adopt technology without making a business case for it. Many SMEs don’t even understand how their key processes work or how much these cost. First, think about what you’re trying to change and then about how to measure the benefits of that change before considering how technology might help.”
There is value in having at least some in-house technical knowledge when approaching a digital transformation, acknowledges Lucas Gundry, technology director at The Keyholding Company. In 2016, the security service provider automated most of its interactions with customers and alarm-response partners nationwide.
“Your technology partner may be an expert in its field, but it can’t know your business or its culture as well as you do,” he says. “It’s about having expertise on both sides of the fence linked by a common goal.”
If suitable tech expertise does not exist in-house, Robinson recommends thinking laterally about how to obtain it. One option, if the business can’t afford to hire a dedicated technology specialist, is to appoint an appropriately experienced non-executive director. Another is to work with a local higher education institution. Teesside University, for instance, operates an internship programme. Under the scheme, graduates are paid to work for an SME on a specific project related to their area of study for three months.
A further consideration in a wider business sense, Vellani says, is to “hire for cultural fit”. This means that “if your company is all about evolving, hire flexible thinkers who love tech. You can train people for skills, but you can’t train them for that mentality.”
Nicol agrees. “It’s important for at least some of your team to understand the potential of technology and how you could use data to become more flexible as a business,” he says. “Transformation should be an ongoing process. Taking advantage of the opportunities it presents is about having the right mindset, rather than a particular skill set.”