Digitalization in SMEs: Innovation pays off

SNP Experts
| 3 min read

Not only large corporations, but also medium-sized companies are increasingly exposed to global competition. Digital transformation is crucial for them in order to be able to continue to move quickly and agilely in the market. But what about the implementation? What opportunities does digitization offer to medium-sized companies and what obstacles do they need to overcome?


New IT structures, innovative applications and digital competence for more agility and growth: Digitization is a topic that affects medium-sized companies worldwide. However, the progress of companies with their digitization projects is often slower than one might assume regarding the high relevance. 50 percent of small and medium-sized US businesses plan to take measures to help them adapt and transform their organizations. Only about one third of them are already implementing plans. Increasingly, individual applications of digitally networked information and communication services are being used. However, even fewer companies have a comprehensive digitization strategy that could, for example, provide for the use of innovative technologies from the areas of artificial intelligence, cloud computing and data analytics.


Digitization pays off

From supply chain management to networked customer services, investments in new technologies pay off. Digital change promises streamlined processes, new customers and more revenue. Companies that are considered to be pioneers in this respect register a growth in sales and profit that is eight times higher than that of digital laggards. This is the conclusion of a global study conducted by market research firm IDC on behalf of SAP, which surveyed 2,000 midsize companies worldwide in the context of revenue growth, sales, customer, and profit development segments. The study concludes that digital pioneers benefit from significantly higher customer satisfaction and employee productivity.


Challenges and opportunities for SMEs

Small and medium-sized enterprises form the backbone of US and European economies. In the USA, approximately 30 million small and medium-sized enterprises employ 47 percent of the total workforce. As diverse as medium-sized companies may be – from hairdressing salons to mechanical engineering and logistics companies – the opportunities and challenges of technological change affect players across all industries. For example, the introduction of ones own cloud platform in the field of mechanical engineering offers various advantages: Maintenance and malfunctions that affect customers are detected faster and data from the systems is stored and evaluated. Further, customers continue to benefit from networking: using the analyzed data on the cloud platform, they can identify their own production bottlenecks – this opens up opportunities for process optimization.  


Know-how for the digital future

However, many companies lack the digital literacy and financial resources to get much-needed digitization processes off the ground. Further obstacles include organizational difficulties and uncertainty regarding data security. Some companies are successfully active in the market without digitized processes: they lack the incentive and often the time to reinvent themselves in the age of digitization. But the pressure is increasing. In order not to fall behind, they should now critically question firmly anchored processes and walk the path into their digital future.


Transformation affects the entire company

Existing IT structures in particular provide information about the extent of the necessary transformation. Business processes often need to be rethought and system landscapes that have become outdated must be modernized. In contrast to conventional IT projects, digital transformation is a transformation process that affects the entire company. Not only the IT area, but all departments should be involved. Thus, before SAP S4HANA can be introduced, employees must be qualified for its use according to their level of knowledge and area of application. Only then the possibilities of the new ERP suite can be used optimally.


Strategic cooperation with specialists

Decision-makers should be aware that restructuring and modernization, such as complex data migrations into the cloud or far-reaching changes to IT system landscapes, are generally risky due to the time and cost framework, which is difficult to calculate. Transformation projects should therefore always be transparent, for the company itself to be able to keep track of them. In addition, system downtimes must be reduced to a minimum and ongoing operations should be impacted as little as possible in order to keep costs low. For this to succeed, it makes sense to cooperate with a partner who specializes in transformation issues. After all, the digital transformation of an organization has too many pitfalls for a company to be able to afford to have a go at it alone or to obtain poor external advice.


Using ones own strengths

In order to successfully advance digital transformation processes, small and medium-sized enterprises can further focus on their own strengths. In contrast to large corporations, decision paths are generally shorter with a higher tolerance for errors and flatter hierarchies – important factors that simplify the implementation of digital projects. One advantage that should not be underestimated is the direct proximity to the customer. Problems in the existing business can be more easily identified and form the basis for new digital projects, such as cloud systems and apps that offer added value to the customer. The effort to invest in ones own future is worth it, as the future belongs to digital companies.