Digital Transformation – SMEs, are you ready?
Many start-up companies believe that they are “digital” because they may be developing a mobile app or a web-based platform or some other digital product. And that is just it, the product. Technology start-ups especially fall into the trap of believing that the product they are developing is the business and need to understand that there are a few more elements to this entity called “The Business”. While the product may indeed be one that is in the digital space, what about issues such as customer acquisition and retention, managing staff, financial management and the rest of those tiresome things that require plenty of time from the founder.
Digital transformation in the context of this article refers to the all-encompassing process of getting the entire business connected. In the broadest sense this is defined as technology that connects people and machines with each other or with information. Even in a technology-driven business, this could entail a wholesale restructure of the business, right down to the foundational components of the business, from its operating model, processes and infrastructure. To refer back to the product issue again, this is about more than what the company sells, but also to whom it sells and how it goes to market. Every function of the business will be affected, from purchasing, human resource management, operations, finance, sales and marketing.
Digital transformation in this sense could be reflected as the third stage of embracing technologies, progressing from digital competence to digital usage and leading ultimately to the entire business being digitally transformed. Digital literacy of the business may be measured by the level of usage adopted by, and its transformative ability in running the business. Transforming business and operational processes using innovative and creative technologies is the objective, not simply enhancing and supporting traditional methods. Going “paperless” is not the objective but may well be as a result of transforming the company digitally.
One thing is clear, those digitally transformed companies, the Digirati, combine digital activity with strong leadership to turn technology into transformation. This could be termed as digital maturity, and those companies more mature generally outperform those that resist taking the digital route to transform the entire business.
One glaring example is the media industry, where digital technologies have disrupted traditional media companies enormously, leading to many a large corporate CEO looking anxiously over their shoulders at the next disruptive technology to shake the foundations of the industry even further.
A digital organisation may be termed as being focused on customer experience, regardless of channel, and has a digital “culture”, where the entire organisation is on board with regards to doing things the digital way. By transforming the company into a digital culture should result in an empowered and customer-centric team that makes data-driven decisions in all aspects of the business. By connecting all the people and information components in the company, there should be a collaborative and transparent environment, leading to a certain innovation culture.
Many SME owners and founders will be wondering whether this applies to their smaller organisation. Some interesting statistics that were shared at the Modern Biz Africa Summit in Johannesburg May 2016 included the overwhelming argument for small businesses that are the backbone of the global economy. Under the banner of “Small is Big”, a number of presenters informed delegates that 90% of all businesses employ 60% of the workforce, and generate 50% of the global economy. In short, yes, conducting a digitally transformed company is in the best interests of the company, and indeed, of the world economy!
The Boston Consulting Group surveyed 4,000 SME decision-makers across 24 countries and found that technically savvy SMEs grew revenue 15% faster than low-tech companies, and grew jobs nearly twice as fast. These staggering numbers are consistent across gender, industry and geographies.
Further, to attract top talent from the so-called “Millennials”, companies needed to be switched-on digitally, with this cohort of the next generation of business leaders believing that technology makes a company more innovative and makes working there easier.
Many SMEs do not use technology to manage the business as ICT equipment is expensive and there is a general lack of skilled ICT resources. This has led to many SMEs still relying on paper-based business processes, and even more concerning, the storage of business data not conducted in the cloud.
So, how does a company, irrespective of its size, come of digital age? The Sloan Review http://sloanreview.mit.edu/article/the-nine-elements-of-digital-transformation/ indicates that the business has to address all of the components that make up the business as a whole. This includes the pillars of strategy, technology, people and operational processes.
The ultimate outcome of digital transformation is where the organisation becomes entirely customer focused and has an understanding of customers based on data, not on the whims of staff members. This goes as far as understanding customers from different geographies and market segments, what makes them happy and even more importantly, what leads to customer dissatisfaction.
Transforming operational processes by connecting people with information and other people can enable companies to refocus their people on more strategic tasks. Employees are enabled to separate the work process from the location of the work, leading to potential cost savings and probably more satisfied employees.
Digital transformation requires strong leadership to drive the required change throughout the business, especially with entrenched processes in the company. It also requires a vision from the owner or founder as to what direction the company needs to take to transform at all levels as a business strategy, not only how to become more digitised. The way people work and collaborate, how business processes are executed within and across organisational boundaries, or importantly, the way a company understands and serves customers, digital technology provides a wealth of opportunity.
The very business model of the company can be transformed by entering into new digital directions on the global stage.
Bonnet,D., McAfee,A., Westerman,G. The Nine Elements of Digital Transformation. January 2014. Accessed 24 May 2016 from http://sloanreview.mit.edu/article/the-nine-elements-of-digital-transformation/