3 reasons to be excited about SME digitalization

Digitalization is often seen as challenging and a bit loose. Is digital technology relevant to our business? Do we address digitalization and necessary changes correctly? Do we even understand digitalization and what to prioritize? How do we create a relevant digital agenda and strategy for our company with our specific circumstances and how do we secure a higher return on our initiatives? These are some of the questions I am facing and I will try to elaborate on them, explaining that there are at least three good reasons to be excited about digitalization not only for startups put also amongst SME, MidCap and LargeCap companies.

Starting with the background, digitalization is so much more than pure technology. Using the internet over the last 10-15 years has empowered customers with eternal sources of knowhow. The old-school upper hand of managers and of sales people has being gradually lost and employees and customers are much more knowledge than before. Customers knows about options, products and suppliers and has entirely new expectations. Different online forums as well as free-of-charge professional and social media services offer reviews as well as how the brand and people working with it are viewed by others. To top it up customers expect great service when it suits them, not necessarily the usual office hours.

Digital technology not only change customer expectations and behaviors but it also leads to new ways to interact with customers, partners and suppliers. Traditional physical sales and project work is complemented with new digital work methodologies and tools for anything from marketing and sales to engineering and design of software and industrial hardware. And being local is not necessarily a necessity any longer with supply and demand going online allowing purchases conveniently delivered, hazel-free, from anywhere in the world.

Yesterday’s science fiction is already today mature technologies. Online and on-demand purchase of software codes, sub-contracted engineering solutions and testing is already a reality, pushing cost down, lowering the entry barriers and put new focus on how and where to add value to the end-customer. Traditions and habits delay this industry transformation somewhat, but change has already started and those who adopt are seldom, if ever, prepared to turn-back to old-times.

Using API (Application Programming Interfaces) to partially connect partners and suppliers to own processes and IT-systems rationalize anything from sales to engineering, distribution, logistics and billing. Gradually the business models are changing and the overall demand to stay relevant to customers is becoming much more complexed.

Where to find and how to use data to prospect for new projects and transactions, and to retain existing customer businesses and deliveries is also changing. And more of the same and with smarter and more cost-efficient tools and methodlogies is coming just around the corner.

I have meetings every week now days with corporate managers and entrepreneurs that seemed stressed over digitalization. The ongoing daily business comes first and fills the entire calendar. It is not uncommon to feel uncertainty on the relevance of digitalization for once own business. The questions we talk about is often relevance, were to begin and how to prioritize relative everything else on the agenda.

When advancing on digital technology and business model adjustments, there is a risk that the output and financial results does not materialize as expected. The digitalization project risk being trashed as lip-service only. Here are a few ideas on where to begin:

1. The visible basics of digitalization

Surprisingly many companies, not least in accounting services, consultancy services, engineering and manufacturing, financial services and logistics use web pages that is far from up to date. It is sometimes amazing to see considering the evolvement of “googling” and on-line researching as today’s standard practice ahead of almost any initiative, contact or early-stage sounding ahead of future investments to be made.

Following the original set-up of a web page; often few resources, if any, have been allocated to develop the company’s on-line presence. Using existing personal contacts are good, but any company’s future growth and relevance in its industry is increasingly dependent upon how online exposure is managed and maximized.

Improving the company online presence is an easy start of a digital agenda:

  • A fresh and user-friendly and inviting design. Google “web design inspirations” and look at web pages how those look like.
  • Design is one thing but content is the next step. Modern web pages are used for content marketing, not only as static texts and picture describing the company’s existence followed by a few addresses and phone numbers. Content marketing is used as an ongoing marketing tool to establish authority in the particular industry of the company and hence open new doors more easily, give sales people ammunition, promote being speaker at industry events, etc. One of several content marketing tools are down-loadable white papers that are written like 2-15 page memos or magazine articles and offer a deep-dive insight in topics of interest in your industry, hence creating an interest in your web page and your company. Using the web page for content marketing requires maintenance and at least bi-weekly updates. Either someone at the office is given the task, or you shall outsource the task to write such pieces. Its marketing, its establish industry authority, its establish relevance for prospective future customers and it’s a way to support retaining existing relationships.
  • Drive traffic to your (marketing) web page and increase the overall online exposure to reach more audience in the industry is a next step. That could be done by becoming active on different professional forums on LinkedIn, Twitter, Facebook and others. By writing short pieces on industry related topics the company again establish authority and awareness, and a link shall always be added driving readers between these forums and to the (content marketing) web page.
  • For some industries mobile apps can also be developed. It cost a bit more, it also requires another form of maintenance but it can add anything from marketing and customer retention to sales, distribution and service functionalities.

Starting with the basic surface of digitization like the design of the web page and becoming more active of different online forums and frequently adding content marketing materials to promote industry authority and awareness is a great way to start the digital agenda. It’s cost efficient, it creates immediately noticeable effects, it promotes the brand towards customers, prospects and industry forums as well as employees and partners.

2. Digitization of processes, with improved customer experience and efficiency

Even if the digital surfaces like web pages, professional and social forums and apps is often the first step on the digital agenda, working the company processes is where the biggest returns on investment can be made, but it takes a bit more of an effort. One can of course argue that process improvements is not a digital agenda, but that does not really matter as long as focus is put on improving the processes.

The digital view on process improvements are two:

  • Internet has changed customer expectations and behaviors: In itself that is a reason to review and update current processes. User experience is a keyword – i.e. how user friendly and in line with modern expectations is your customer processes. Conversion ratio is another word – i.e. how much self-service can you build into your customer processes to either close the deal right there, online and digital without manual interaction; or by supporting your customers making downloadable manuals or service-instructions available to them; or simply by logging traffic on your web page and forums identifying prospects that seems to be browsing your online content pages and forums. Speed and simplicity are other keywords, addressing the hazel-free end-to-end and channel free process for any customer interaction.
  • Digital technology allows front-, mid- and back-office processes to be highly automated and hence create substantial efficiency improvements, cost savings and/or improved customer experiences. Examples include administrative processes such as the billing processes that today can be almost entirely digital and automated to gain efficiency, including notification, reminders, collection and book-keeping. Another example is a more structured sales processes including pipeline management and use of offensive sales supporting data when using modern CRM-applications, that can be mobile and also cloud-based to increase output as well as cost-efficiency. Engineering and production processes known as CAD/CAM to semi- or fully-automated materials ordering and handling processes are other examples of process improvements with a digital twist.

Working the processes is not as easily done as improving web pages and the company online presence. Process improvements is likely to come as a second step on the digital agenda. A higher degree of competent resources is required and changes to current degree of standardization, work methodology, responsibilities, organization and staffing is most likely an outcome that needs to be considered. The customer benefits, efficiency gains and scalability benefits are large however. Typically, one would start by discussing and identifying where current processes can be improved and from there create a few selected business cases, like for any investment, and then prioritize against every other initiative and ongoing businesses.

3. Adjusting or re-inventing the business model

This is the most complexed side of digitalization.

  • The need can emerge because the industry at large is changing. For example, when travel agency’s bi-yearly catalogues and physical branches where challenged by cost-efficient and global online full-stop services like bookings.com. Or when Uber challenge the traditional taxi industry with superior online user- and provider-experiences. Or when regulators introduce PFD2 in banking, opening the bank accounts for 3rd party vendors. Or when software coding, development and/or testing now are being possible to purchase online across the globe as any other commodity.
  • Initiating business model re-invention can also come from competition and margin pressure and a need to create better customer retention or more user-friendly and cost-efficient processes.

Digitalization offers new approaches and a couple of new tools to traditional business model development that used to focus primarily on developing pricing models, distribution channels, supply chain management or partnership structures. Below are a few examples of new digital business model approaches;

  • There are entirely new possibilities for more integrated and seamless partnerships and supply chain management than before, using API’s (Application Programming Interfaces), a technology that allow others to link selectively with your ERP-systems (Enterprise Resource Planning). This opens up for entirely new possibilities for expansion, sales channels, customer interactions and self-service applications regardless if being a retailer or engineering/manufacturing company. Other areas were API’s can be very powerful include logistics and supply chain efficiency improvements and distribution of technical documents. The potential for growth and improved returns are large, to say the least.
  • Work methodology heavily effecting the business model has also changed with digitalization. Agile work methodologies with much more distinct short-term targets and deliveries than traditional waterfall project management models are one example. Scrum and other methodologies has developed the last few years within software engineering. This work methodology is not limited to software maintenance and development only but can also be used in other areas like product management, industrial product engineering and maintenance operations.
  • Digital driven customer expectations and new digital techniques are also re-inventing strategies in terms of re-defining the core business vis-a-vi non-core business, i.e. the traditional outsourcing discussion but now on an entirely new level. Commoditization of many previously viewed proprietary competences and deliveries put the finger on the value chain and where to add value and where to focus own management time, key sales, engineering or production resources and not least scarce sources of working capital.

Don’t through the company headless into digitalization. Take time, understand what digitalization is, what the relevance of digitalization is for the industry and particular business.

The key will be how to prioritize digital initiatives and possible key competence adjustments relative ongoing business priorities and organization. Look around the corner a few years ahead and visualize a couple of options. Map a road forward with milestone deliveries and you will gradually become a winner from digital possibilities with increased sales, efficiency and return without losing focus on the ongoing businesses.

Once you get traction digitalization will be as natural in growing and developing the business as any other initiative you may have. Possibly with so much more leverage than before and with new businesses and greater return on your initiatives. And being up to date with time is not bad.

Thank you for reading. Please feel free to like, comment, share, tweet, email, etc. Hopefully the Pareto principle, also known as the 80-20 rule, will apply. I.e. 80% agree and 20% will give a constructive challenge.

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