- By Dr. Pradeep Racherla and Dr. Ram Nidumolu
Technology for MSMEs: Small and Medium Enterprises (SMEs) are the backbone of our economy and account for more than 30 percent of GDP and 45 percent of all manufacturing activities. The pandemic has affected them badly and also forced them to innovate and adapt. SMEs, once accustomed to the ‘physical’ model, are now experimenting with ‘digital’ ways to run their business. a grocery store now uses Google Sheets for maintaining inventory and managing receivables. A plastic mold maker has digitized its product brochures and uses Zoom to communicate with its customers. Fertilizer and pesticide distributor uses WhatsApp Videos and photos for farmers to study crop conditions and suggest the right products.
SMEs have somehow adapted to the situation, but they now need to take a more long-term approach to digital transformation. Data from around the world shows that the success rate of digital transformation is still at a low of 20 percent. SMEs face very specific problems when it comes to digitizing their businesses. In our experience working with multiple MNCs and small businesses around the world, we address five specific digital transformation challenges facing SMEs. This article explains the challenges and provides solutions for planning a trip.
FOMO (Fear of Missing Out): The first, ironically, is a social challenge. SME owners are part of a business network where digital is constantly being talked about. This creates significant pressure to go digital. However just because the world is going digital doesn’t mean that your business should go digital. It’s a good idea to ask very specific questions. What are the chances that your product or service can be delivered digitally? How much are your customers consuming or buying your products on digital channels? More importantly, are customers willing to pay for the added value digital brings? If the answer to some or all of these questions is ‘no’, it is worth waiting.
go big or go home: A popular belief among SMEs is that if you want to go digital, you have to invest big and grow big. This creates problems on both ends of the spectrum. Many people, intimidated by the magnitude of the work and investment, don’t even try. Others invest too much and fail to make a profit. Going big is a mistake. Digital transformation is an experimental exercise. There are many small things to try before consolidating and adopting a specific strategy. Experiment with multiple digital ideas, launch and collect data, and then find the best ones to keep and invest in later.
Where to start? Don’t know where to start this is a common problem. Even though business owners are completely convinced about digital, there is no specific framework to tell them where to start and how to start. Just as a child goes through stages of development, a digital strategy also develops through three distinct stages of maturity: Stage 1 where companies see digital as an opportunity. One can take small steps. For example, invest in Facebook or LinkedIn advertising with a concurrent reduction in traditional advertising, or digitally connect your sales support and clientele.
Phase 2 is where companies use digital to connect stakeholders in the value chain, for example, automating raw material ordering systems to increase efficiency and reduce wastage. Stage 3 is where companies are able to truly use digital to create new business models or new products/services. For example, a subscription service or an e-commerce platform. SMEs should map their current stage in this maturity ladder and define specific activities/resources to be used.
Start small but think big: A good place to start is in two areas: 1) just to grow the current digital presence. For example, how good is your website or do you even have a website? Is the website useful enough to enable business transactions and easy communication with your customers? 2) How much are you spending on marketing and advertising? Is it possible to increase my current budget in digital advertising and measure whether it is providing ROI or not? These are simple ways to get started and give you small wins that drive your digital transformation progress.
Who will do digital? Most digital initiatives fail not because of technology but because of the human element. One of the biggest mistakes small business owners make is controlling the process. This is a recipe for disaster. Identify and train at least two of your employees who can become your wingmen on the go. Involve them in the decision-making process, empower them to make decisions based on data and customer feedback, and more importantly train them to use and apply the new technologies you adopt Do it. You will find that ultimately these key employees will be the primary drivers of success.
Digital transformation is not easy for SMEs. Remember that digital transformation happens when you are open to possibilities, able to think small and experiment, have a laser-like focus on data related to performance and ROI, and empower your employees to take initiatives. make. able to empower. If done in the right way, it has the power to take your SME to a field that is far above the competition.
Dr Pradeep Racherla, Professor of Marketing, Mahindra University, and Dr. Ram Nidumolu is Professor of Organizational Behavior at the Indian School of Business. The views expressed are those of the author.