In my last blog, we looked at how SMEs regard transformation as key to business success. This blog focuses on the growing role that technology is playing as SMEs reinvent business models and transform their products and services. According to the study, SMEs: Equipped to Compete, conducted by Oxford Economics among 2,100 SMEs in 21 countries, almost two-thirds (64%) indicate that technology is central to their transformation initiatives.
SMEs believe transformation is critical to sustainable growth and long-term viability. And, when it comes to competing against global rivals, SMEs are aware they must do things differently. Over half (53%) say technology is rendering traditional business models obsolete. This shift in attitude is leading SMEs to rethink business models and strategies, and adopt technologies that were once out of reach.
One of the biggest trends that SMEs know they need to respond to is the shift in customers’ wants and needs. Evolving customer expectations are seen as having the greatest impact in the retail (41%) and wholesale (34%) industries. Even for professional services (24%), where it is cited least, it still ranks as the second biggest trend. Given this focus on the customer, it is not surprising that these industries are predicting the fastest growth in the use of analytics to help improve insight and meet dynamic customer demands.
Technology — the great equalizer
Alongside the power of analytics, today’s SMEs recognize that business management software can generate insight, revenue opportunities, and competitive advantage. Increased access to technologies is helping SMEs operate in ways that are more sophisticated – and specific to their needs. Michael Hecken, head of marketing and strategy for German bicycle-maker MIFA AG, foresees that technology will continue to transform his company for years to come. “I think there will be seamless integration of the whole value chain,” he says in the Oxford Economics research paper, Transformation and Technology. “That will mean more just-in-time delivery, where suppliers share systems to feed you information.”
At this level of sophistication, more SMEs are likely to feel that they are at no disadvantage in terms of technological capabilities – even when they consider the resources of global competitors. Combined with newer tools such as mobile, social media, and cloud computing, SMEs are fully equipped to compete on the international stage. And as current technologies mature and newer ones are introduced, SMEs will have more tools to support their changing strategies.
A strong correlation between early adopters of technology and an SME’s bottom line is another key finding in the Oxford study. The most profitable firms tend to be further along in the transformation process than their less-profitable peers. Firms that are 15% more profitable:
- have a greater appetite for growth,
- are 4% more likely to be driving innovation, cost reduction, and efficiency initiatives,
- are 9% more focused on customer relationships,
- and 6% more likely to be expanding globally.
In 40% of cases, the CEO or business owner is driving the change, indicating that transformation is a critically important strategic focus at the board level. While management sponsorship increases the chances of success, ultimately, performance will be determined by how readily and effectively a company adopts game-changing technologies.