Locals who shy away from international ambitions. Technophobes afraid of change. A recent study by Oxford Economics, SMEs: Equipped to Compete, finally buries these stereotypes about small and midsize enterprises (SMEs). To compete in today’s marketplace, SMEs know they must embrace business transformation. And, they are not holding back. Rather, they are taking an aggressive stance in transforming their businesses.
Nearly two-thirds (64%) of the Oxford Economics survey respondents say they must transform to stay ahead of the competition, with slightly more (67%) having either recently completed, currently undergoing, or planning a transformation initiative. With the CEO or company owner driving no less than 40% of these initiatives, SMEs are taking business transformation seriously.
To put this in context, the term “transformation” indicates a major change in the approach to a company’s business model. It is not simply upgrading or adding technology. Transformation priorities include capitalizing on growth opportunities in expanding markets (41%), entering new geographic markets (36%), creating a culture of innovation (34%) and investing in new technologies (26%). As for results, the most profitable companies tend to be further along in the transformation process than their less-profitable peers.
While transformation is a major SME trend, how far companies have advanced along the curve varies by region and size.
- Nearly 80% of North American SMEs are at some point in the journey, while 46% of Latin American companies have no plans to undertake a transformation initiative.
- 43% of larger SMES say they are currently undergoing or recently completed a transformation compared with just 28% of companies with less than $100 million in revenues.
- Firms in business for more than 10 years are most likely to be engaged in transformation – while those in business for less than three years are most likely in the planning stages.
The focus on growth is a common theme among SMEs. Hibbett Sports, a larger SME with 880 stores across 29 U.S. states, regards transformation not only as a necessity, but also as a crucial part of its plan to break the US$1 billion turnover barrier in the next few years. Interviewed as part of the study, CEO Jeff Rosenthal emphasizes the need for technologies that will enable Hibbett Sports to make more sophisticated use of its data, a critical move for maintaining the company’s growth trajectory.
Yet, while expansion is the leading priority of transformation, it takes more than an appetite for growth to push SMEs down the path. So, what’s driving these transformation efforts? In the study, 64% of SMEs said they must transform to stay ahead of their rivals. More than half said technology has rendered traditional business strategies obsolete. And 52% cited growing supply chain complexity.
For most SMEs, transformation is understood not only as a strategic necessity, but as a key to survival. Most SMEs are confident their organization can make necessary changes. Nearly two-thirds say senior management is equipped to lead the change. Confidence in their own abilities is high – 59% believe they are more innovative than key competitors. And, with 57% indicating technology is at the heart of transformation, adopting technologies is how most will propel their transformation initiatives.
What’s driving your business transformation? Which technologies are most crucial to your transformation success? Check out this quick, at-a-glance infographic presenting some interesting metrics around these questions. Or visit our Community Experts Web site to read more about the Oxford Economics study or read the think piece, Transformation and Technology.