How to start digitizing for small and medium-sized businesses

Digitalization is the word of the hour. Originally describing only the process of converting analog media into a digital format, it now stands for transformation processes on a much larger scale.

All areas of life are affected by these processes. Private communication and media use, organization of everyday life, (slowly but surely also education) and of course the economy. Yet the digitization trend in 'the economy' is far from being reflected in every company. Small and medium-sized enterprises (SMEs) in particular are having a noticeably harder time with digital transformation compared to large companies.

Why does digitalization matter to SMEs?

But why should SMEs concern themselves with digitalization at all? If their field of activity lies outside of IT, is it really necessary to delve deeper into the subject?

Well, when people ask this question, the answer is usually already clear - yes, there are good reasons for SMEs in all sectors to deal with digitalization. It is obvious that this applies primarily to companies that are active in IT. But the topic is not just relevant to a few highly differentiated specialties. Nor is it a fleeting trend. Rather, it is an all-encompassing change that every company must confront at some point if it wants to be fit for the future. And better sooner than later.

However, digital transformation does not have to be seen as an annoying necessity. It not only prevents companies from being left behind, but can also offer direct benefits. By digitalizing data, for example, information can be made available centrally so that authorized employees can access it at any time.

In the office, a lot of time is spent on activities that serve to prepare for the actual tasks. This is where digitalization can increase efficiency in everyday work. By integrating digital data into automated processes, everyday procedures can be accelerated, leaving more time for the important tasks - the actual work.

Customer relationship management (CRM) programs can significantly improve customer service. Properly planned, customer data can be digitally captured as needed and is available for access at any time. This makes it possible to document customer contact, which can be viewed and tracked by anyone who is authorized to do so. This means that all information is available when it is needed. Targeted customer contact is simplified, and customers feel they are in better hands if they do not have to recount the entire history of their concerns with every contact.

Digital options also help your company's external image. Nowadays, various tools make it possible to present yourself on the Internet relatively inexpensively. A website is a must for providing information about your company, its field of activity and services, and for communicating your company philosophy to the outside world. It can also make it easier for potential customers to contact you, for example by providing contact details and forms for inquiries. A good website increases your company's visibility, makes it easier for customers to find you, and helps you stand out from the competition. Depending on the company's business model and field of activity, an online store can be a useful addition.

Why is this important? Customers are highly likely to be connected, well-informed, and digitally sophisticated in their own lives. Companies that have a convincing digital presence themselves appear more serious and give the impression that they are better suited to their customers thanks to a similar mentality - in other words, that they are more modern, move with the times, and are more flexible and progressive in their processes.

So basically, digitalization combines two major advantages. On the one hand, it is an opportunity to simplify internal processes and make them easier for employees, as well as to save costs in the long term. On the other, it can significantly enhance self-presentation. So in the end, digitalization is not just a question of cosmetics, but of improving one's own competitive situation.

Knowing how

This naturally raises the question of how this process can be accomplished. As surveys in SMEs have shown, it is often a lack of financial resources, a lack of vision for the digital future of the company or simply a lack of employees who can implement the digitalization that prevents the process from getting underway. (Read more about this here.) Often, the latter in particular represents a kind of vicious circle: without digital resources, you can't find employees who belong to the 'digital native' generation. But without them, digitalization cannot be contested.

How do you get off to a successful start in the digitization process?

Even if this point itself does not yet produce a visible outcome, the right attitude is a basic prerequisite. Digitalization is not a final goal, but a path that must be followed. A one-off package of measures may bring you up to speed, but you have to keep at it over the long term to ensure that you don't lose touch again over time. So it is not a matter of one or several items being worked off the to-do list, but an ongoing process. This requires commitment both at the management level and from employees.

It is important that digitalization is not perceived by the workforce as a project 'from up there'. Rather, this change must be supported by everyone in order to prove sustainable and effective. This means that the task of management and HR is not only to inform about changes, but also to actively involve the workforce.

Last but not least, it is important to be aware that digitalization is something that can hardly simply 'run on the side'. Of course, the end result should be a complete integration of digitized (and ideally simplified) processes that fit seamlessly into everyday work. But to reach this point, digitalization must be temporarily given increased priority over other issues.

The right attitude is the foundation for the successful implementation of a digitization strategy. For SMEs, a step-by-step approach is often advisable. Here, however, care should be taken to ensure that the individual measures follow an overarching strategy and lead to a predefined goal in order to avoid complicating processes.

It is also important that the linking of IT between the various functional areas in the company functions smoothly as a result.

This requires detailed and structured preparatory work. First of all, an analysis of the initial situation is necessary. What do the existing processes look like? Which aspects have already been digitalized, and which can be digitalized additionally? When taking stock, it is also advisable to evaluate where there are problems and which processes could be improved. These considerations should be taken up when planning the digitization process.

It is important to realize that digitalization does present opportunities for process optimization - but translating poor or inefficient analog processes into a digital form will automatically upgrade these processes. What's more, inadequate analog processes are difficult to digitize at all. So before thoughtlessly bringing existing processes into a digital format, it should be evaluated whether they have been running satisfactorily at all so far. If not, improvements will have to be made. At this point, it is already a good idea to ask for input from employees.

The process continues

Based on this analysis of the status quo, further plans can be made. It should be considered how the results of the preliminary considerations can be translated into concrete action steps, what new hardware and software is necessary, what skills need to be created among employees and whether new specialists should be hired, if necessary. (You can learn more about the successful introduction of new software here).

Likewise, be clear about financing issues. There are various ways for SMEs to obtain digital funding. One of them, for example, is 'digitaljetzt' from the German Federal Ministry for Economic Affairs and Climate Protection. (Read more here: digitaljetzt )

The (step-by-step) implementation of the planned measures should be accompanied by ongoing monitoring. Employees should be invited to provide feedback on how the digitalization strategy is performing in practice. Based on this, the original plan can be functionally developed further. In perspective, the digitalization processes that have been initiated can be examined for opportunities to further develop the business model. Perhaps existing analog services can also be usefully supplemented by digital ones.

What's stopping you?

This article is Part 1 of our two-part 'Digitalization for small and medium-sized enterprises'-series. After providing an overview of the steps to digital transformation here, Part 2 will look in more detail at what hurdles companies face on this journey. Stay tuned to learn more about how SME's can manage the process successfully.