Digitization is changing SMEs and their opportunities
New opportunities and risks arise for many SMEs when it comes to digitisation
A study by IFH-FHS shows where the challenges but also opportunities for SMEs lie. Different industries have different approaches, and we show some points of this study.
Uncertainty in SMEs due to digitization is increasing. The digital transformation is on everyone’s lips and for years the large corporations have been actively engaged in the implementation of new strategies and new opportunities. However, the topic of digitization, in particular, has usually not been addressed to the smaller companies or the extent and speed of implementation were not appropriate.
In 2017, the SME-Survey of the IFU-FHS at the University of Applied Sciences St. Gallen found that there is a great deal of uncertainty about the focal points of digitization and that across all sectors. Thus, different industries have different challenges but are similarly poorly prepared when it comes to preparing for change. To the Survey (german)
What do SMEs understand by digitization?
Prof. Dr. Rigo Thies of IFH-FHS, one of the authors of this study, explained that there are still great uncertainties and ambiguities about what digitization is and where the demarcation and definition of digitization lies. The question of the definition of digitization therefore also looks different for each industry.
In general, many SMEs associate digitization with words such as Digital Marketplaces, Platforms, Big Data, Industry 4.0, Digital Manufacturing, Online Marketing, Internet of Things (IoT), websites, and much more. So they already have an idea of what it’s all about. Unfortunately, there are often no statements by SMEs on topics such as corporate culture, changing customer needs, or new business models.
Digitization looks different everywhere
These ambiguities about what digitization means at all can also be seen when it comes to implementation. It is possible that different companies and industries already follow some topics, but these topics can be quite different.
Even independently of the study, it can already be stated here that the extent and above all the scope of the associated changes will be serious for many industries and companies. Digitization has already disruptively changed the retail trade, gastronomy, hotels, and taxi companies.
Prof. Dr. Thies sees great potential but also great pent-up demand in trade and the construction industry. He also sees the greatest potential in market-related aspects such as customer acquisition, development of new sales channels, and much more.
SME entrepreneurs see opportunities but also risks
Especially for SMEs, large projects are usually an unmanageable risk. Thus, many measures but also projects involve massive resources of money, know-how, and time to implement them. It is therefore possible that projects cannot be implemented purely due to a shortage of resources. Mr. Thies mentions in his study that many entrepreneurs also see the opportunities to better protect themselves from threatening competitors or to use digitization as an opportunity.
Major topics that are repeatedly addressed are efficiency increases through automation and the development of new marketing channels as well as new digital sales channels. However, the weighting of opportunities and risks is different for all industries and the topics vary.
The use of digital technologies varies
When it comes to whether digital technologies are used, there is a clear picture. There are some processes or even possibilities that are used frequently. Also, we see for example the data of the catering trade. This often uses possibilities such as online reservations or evaluation platforms. However, when it comes to mobile ordering systems, mobile payment options, apps, or 3rd party online ordering systems, more than half of the companies are already not involved. Data analyses or self-service check-in are rarely used or still find little demand in gastronomy, although they promise great potential.
SMEs are triggers and main affected at once
SMEs in particular have the opportunity to react quickly to the changes. Thus, owner-managed companies are often at the forefront of innovation and drive technological progress. Young companies, start-ups, and even existing small IT companies fill various market gaps and want to outdo each other with the most innovative products.
As expected, these companies are also generally more affine for the technology and benefits of Software as Service models and platforms. The only thing that stands out here is that the IT industry monitors fewer data or ignores the possibilities of crowdsourcing to a large extent.
In general, the topic of digitization will develop into an opportunity for many SMEs to advance or even survive in the future. Many medium-sized companies also have to reinvent themselves and find new ways to address their customers or offer new products that correspond to the changed customer behavior. They should also not focus too much on technology, as digital change can only succeed with a cultural change and a changed view of customer needs.