HomeBUSINESSSMEs: The 5 Most Significant Challenges Of Digitization

SMEs: The 5 Most Significant Challenges Of Digitization

With the outbreak of the corona pandemic in the spring of 2020, many activities of daily life shifted to the internet. Companies that had already invested in digitization at that point had a clear advantage during this precarious time. Small and medium-sized companies in particular, which were still in the early stages of the digitization revolution, were sidelined.

Against this background, it is now clear that digitization in medium-sized companies is no longer optional. Those who do not steer their company in the direction of digital transformation miss opportunities and risk being left behind by progress.

Of course, it is becoming increasingly complex, especially for companies that have not yet actively worked towards digitization, to jump on this train. Listed below are five challenges SMEs face when entering the new digital world and approaches to solving these challenges.

Identify Potential For Digitizing The Company

Identifying the potential for the digitization of a company is both the crucial first step and the first significant challenge in this process.

It is clear to most entrepreneurs that ‘digitalization’ involves more than just eCommerce and online shops. However, it is not enough to know what ‘digitization’ is not. Instead, it is critical to be clear about the areas in which your own company can benefit from digitization.

The following questions can provide an impetus for these considerations:

  • Could communication and access to information be improved through digital tools?
  • When is it essential for people to meet face-to-face, and when could this be done more effectively digitally?
  • Which processes could either be improved through data analysis or controlled automatically?
  • Where is the competition already using digital tools?
  • How can digital tools improve customer experience?

From purchasing to sales – there is potential for digitization in every functional area of ​​the value chain. Therefore, each site should be subjected to a thorough check.

Strategic Planning

In an article from 2019, Handelsblatt describes digitization projects at many medium-sized companies as a “patchwork.” There is often a lack of an overarching digitization strategy that would allow entrepreneurs to not only keep track of the status of ongoing projects. You can also evaluate which concrete measures will be necessary for the future.

This strategy should include various crucial factors for the success of digitization measures. Should the entire business model change? Or is it just about digitizing supporting processes? Such decisions must be made and recorded in advance.

Of course, what we call digital transformation goes beyond purely technical digitization. Successful digitization is a prerequisite. But only when the business model and the organization itself are further developed with the help of an overarching strategy can one speak of an actual transformation.

Owners and managers must be aware of this difference to use the full digital potential of a company.

Build Know-How

A holistic strategy, as described above, needs the expertise to be successful. Decision-makers in a non-digitized company are often primarily consumers of digital tools. This means that one relies entirely on external partners, who usually do not have a detailed understanding of the organization, the market, and the company’s business model.

If you were to let an external partner do it, sooner or later, there would be conflicts, incorrect prioritization, and a lot of time wasted. For this reason, know-how must also be built up within the company.

Ideally, this is done by hiring the appropriate specialists and continuously training the existing workforce. And, of course, the management also has to continue to educate themselves to implement holistic digital concepts.

Decision-makers within the organization should develop the following skills:

  • Understanding the effects of digital technologies on the company’s processes, organization, and business model
  • Strategies and measures for the company’s digital development can be derived from this understanding.
  • The implementation of digital projects can be controlled with modern methods and tools.

In addition, employees must acquire digital knowledge to use the appropriate tools.

Change Management + Organizational Development

The development of know-how in the workforce also fulfills another function: together with the targeted use of change management and open dialogue with the crew, other training offers can reduce fears of digitization.

Such fears are unavoidable during a significant transition such as digital transformation. Every change in workflows and processes, every breakup of structures that ‘always were like this’ represents a challenge at the personnel level.

According to a study, 84% of all digital transformations fail due to internal resistance, among other things. Therefore, before starting this process, it is essential to clarify to all employees what digitization means for the company and what specific goals are being targeted.

To properly involve employees in this process, they must be able to participate. Further training offers, suitable software, and participation in implementing new strategies enable the workforce to identify with these changes and remain competitive.

Here it can be worth bringing an expert on board, for example, from change management or organizational development. A modern, transparent, and open corporate culture can be established more efficiently, promoting a successful digitization process with external support.

The following factors also help the digital transformation to run as smoothly as possible:

·         Flat hierarchies that can act quickly and flexibly

·         Transparency of information

· an open culture of error and criticism to enable constant learning

It is essential that management and workers/employees can trust each other.

Funding

Building and maintaining digital services in many companies is more an expense than an investment. This mindset is holding back digital innovation. It is essential to be aware that such tools and services are digital assets. Their purchase represents one of the most important investments for a modern company.

Investments in innovative technology, software licenses, and training require suitable financing to make investments in machines and systems. However, there is good news here: Numerous grants support the digitization of SMEs In the funding database under the search term “digitization,” you will find an overview of all available funding.

In addition to acquisition costs, permanent expenses for support, further development, and maintenance of digital services and tools must also be considered. Without these measures, today’s state-of-the-art technologies can become security risks. Therefore, digitization should not be understood as a “project” that can be completed but as an integral part of the company.

On the other side of these investments are the positive potentials of digitization. Leaner processes make it possible to save costs and reduce risks. In addition, customers can be better informed and retained through digital measures, and there is the possibility of reaching new clientele via digital channels.

Conclusion

SMEs that dare to take the first steps towards digital transformation not only have to be able to finance digitization processes. Holistic digitization strategies integrated into the organization must be planned, implemented, and further developed.

With digitization, the entire company is changing – that’s why it’s called ‘digital transformation.’ Such a fundamental upheaval may seem daunting to many, but it is well worth it. Not only are work processes, customer contacts, and information exchange easier: the digital world opens up opportunities for SMEs that entrepreneurs might otherwise never have been aware of.

Also Read : Digital-First: Opportunity And Challenge

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