How SMEs can cure their fear of digital transformation

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.”