What’s keeping SMEs from digitizing?

In our last blog article, we highlighted why small and medium-sized enterprises should not neglect digitalization and gave tips on how the digital transformation can succeed. Nevertheless, the question arises: If digitalization is so essential for competitiveness and internal efficiency - why isn't the topic being tackled decisively everywhere? Why are so many SMEs still lagging behind with digitalization?

 

The problem does not seem to be a lack of awareness of its importance. In a study conducted by Tata Consultancy Services, 0% of the companies surveyed said that economic success discourages digitization even without a focus on digitization. In other words, non-necessity or the lack of benefits for the company are not reasons not to address the issue.

 

Uncertainty about data protection issues

 

Rather, the hurdles lie at the implementation level. Data protection and IT security requirements are at the top of the list, at 62% and 56% respectively. The General Data Protection Regulation protects customer data, but also obliges companies to protect their data from unauthorized access. Both are of great importance, but the relevant regulations can be confusing and opaque for those responsible. In particular, smaller companies without their own legal department can have problems navigating the regulations. The fear of not meeting the legal requirements for data protection becomes a hurdle for a digital way of working. This starts with data protection declarations on the company's own websites. Templates can be partially adopted here if necessary, but it requires a certain degree of expertise to be able to safely assess which parts are suitable for one's own company. (More on data protection and GDPR here.)

IT security then presents the next problem. For one thing, the first step here would be to know about possible dangers in the first place. Secondly, precautions would have to be taken against security risks once they have been identified, and various protective measures would have to be taken. This requires specialist knowledge that, in the worst case, no one in an SME has. As a result, a patchwork quilt of half-baked digitization measures is often left to fend for themselves.

 

 

Decide and participate

 

Another problem is, not surprisingly, the human factor. At the planning level, insufficient know-how about the possibilities and requirements of digitalization means that no appropriate decisions are made or digitalization projects remain vague and no concrete goals are defined. In addition, lengthy processes and a lack of willingness to make decisions at the highest level can hamper progress. A lack of requirements from the top management thus represented a hurdle for 30% of companies interviewed in the aforementioned survey. Without a strategy, it is not possible to implement the change.

 

Getting employees on board

 

A lack of acceptance of digitization measures among the workforce can be another problematic factor. In Part 1 on this topic, we showed that employee involvement is essential for the digitization process in the company. The workforce must be involved in order to meet the demands of everyday work when designing digitized processes. The feeling that decisions are being made over one's own head, or even to one's own disadvantage in practice, can understandably lead to frustration and an aversion to the entire process. To avoid this, input from employees should be encouraged and taken seriously. If those who are ultimately expected to work in digitized processes reject them, the project has little chance of success.

 

In order not only to cultivate the right mindset, but also to prepare the workforce practically for new requirements, employee training courses should be organized. Here, awareness should be raised for general aspects of IT security (e.g., careful handling of passwords and sensitive data), but ideally new programs should also be introduced in detail. After all, the functionality of the new data management tool may not be immediately obvious to everyone. And if, in the end, no one knows how to use it, nothing will be gained from the expensive new software.

 

Change needs management

 

All this casts a rather bad light on human decision-makers and employees. But the good news is that these problems can be addressed. In addition to employee training, building a digitalization or change management team is an option. Lack of time hinders digitization in 19% of companies. Those who are already completely occupied by day-to-day business lack the time and mental energy to plan and implement a major change. Designated digitization teams can provide a remedy here. Although employees still have to get used to new programs, the planning burden is removed. Neither employees nor management need to become IT experts for the company to embrace digitization. Digitization teams can advise management on strategy development or complete it themselves. They can also use their proximity to the workforce to inspire and prepare them for the project.

One more incentive to hire accordingly. Specialists with digital skills, and possibly also data protection know-how, are becoming increasingly important for the future viability of companies. But employer branding must also match this. Young people are usually digital natives who have grown up with the Internet and therefore know at least the basics of the digital world - which is why they also have completely different expectations and ideas about the way they work in their company. (More on Gen Z in the world of work here.) In this way, they can contribute new ideas. The company needs to present itself as modern and forward-thinking to attract the people it needs to live that vision. A dusty and conservative-looking self-presentation is contrary to this goal, as it will discourage job seekers with a forward-looking mindset.

Of course, the needs of all employees in the company should be taken seriously and considered in decisions. But every now and then, explicitly asking young colleagues about their opinions and wishes can be very enlightening.

 

Digital transformation requires a lot of expenditure that does not pay off immediately. Investments in new employees are only one aspect. New hardware may also be needed. Digital tools, for example, for data management, with which one would like to work in the future, must be procured. Other projects that are more lucrative in the short term may have to be temporarily put on the back burner.

Not every company is willing or able to make these investments. 12% of the companies surveyed stated that investments in IT and digitalization were simply not financially feasible for them. 7% did not want to invest despite having funds available.

Thus, time and personnel shortages persist due to a tight budget. Digitization projects are either not planned properly due to uncertainty and / or ignorance, or are implemented only sluggishly and undirected. The attitude of the workforce toward the project, which initially primarily means additional work for them, deteriorates.

 

Conclusion

 

So there are a lot of smaller and larger obstacles on the path to digitalization in SMEs. A lack of awareness of the relevance of the topic is rarely the problem. Rather, uncertainty about data protection issues, a lack of know-how about IT security, a tight budget, little time and the absence of a unified strategy are slowing down the digital transformation.

 

But where to start?

 

We can't offer a cure-all for these problems. But in Part 1 of this two-part series on digitalization for small and medium-sized enterprises, we have provided some hints and tips on how to get started with digitalization.