What does digital transformation look like for SMEs?
Updated: Aug 2
One of the biggest misconception about digital transformation is that it is something only larger enterprises or MNCs implement. Many small-medium businesses shun at the idea of investing hard-earned revenue into digital transformation projects as they simply do not see the value that it brings. Of those that do recognise the value and benefits digital transformation brings to their business, they lack the resources and expertise to drive such projects and often end up with pilot projects that fail or die off very quickly. However, digital transformation can be successful for small-medium businesses if they focus on how they get there (strategy) instead of the end results (executing e.g. procurement without planning).
There are 3 pillars of digital transformation namely customer experience, operational processes and business model. Depending on the stage a business is at, businesses would normally tend to focus on specific pillars. The pillar that is crucial for small-medium businesses to get started on is Operational Processes. By focusing on this pillar, small-medium businesses can realize quick wins within shorter timeframes than expected by working with the right agencies on digitalization projects. Businesses who achieve success in this pillar often end up with well-thought business processes which are streamlined and embedded into the technologies/systems that their employees use. Unfortunately, this is the area that many businesses struggle with.
It all boils down to the golden triangle - people, process and technology. Small-medium businesses usually lack the people (expertise) to design processes that are streamlined and most end up doing it themselves and not achieving anything more than a complicated set of flowcharts and SOP (Standard Operating Procedure) documents that nobody reads or follows.
Apart from the lack of expertise and processes in place, the messiest of all - technology. While the Microsoft suite (excel, powerpoint, word, Visio etc.) is undoubtedly one of the greatest software suite ever made, they are only good for creating business artefacts (e.g. proposals, quotations, invoices, presentation slides etc.) which are essentially the intermediary/final outputs from different stages of a bigger process/workflow.
Many small-medium businesses usually get stuck at this stage and try to create 'centralized' spreadsheets to track customers, projects, tasks, processes and more but get quickly frustrated at how inefficient they are in handling unexpected changes and mistakes - not forgetting the occasional anxiety attack that occurs when their excel formulas and macros stop working. Basically, they are using the wrong tools that don't do the job effectively.
After a few heated meetings over wrong orders, mistakes in deliveries and outdated customer details, some start to realize that they have a problem - they don't have a system and they need one. This is where they start searching for solutions (preferably cheap ones) that are able to hopefully solve all their problems. The only problem right now is that they don't know what their problems are and which ones need solving. Do they need an accounting system? Or should they get an inventory management system? How about project and task management? And not forgetting staff leaves/absences, payroll and claims. As they continue their search, they go neck-deep into multiple product landing pages, product review sites and end up with some or all of the following conclusions:
Product A only solves 40% of my problems
Product B solves 70% of my problems but it's too expensive
Product C solves 60% of my problems but creates new problems
Product D solves 80% of my problems but I can't customize certain features according to my business
Should I engage a software development agency to build a custom system for my company? Will they be able to work with my limited budget?
Which problems do I need to solve? I shouldn't be spending too much time on these problems
At this point, some would have given up while others would have procured software that probably only solved 50% of their problems. How could they have done better? What steps should they have taken in their search for a solution? Essentially, small-medium businesses need to understand how software works. In simpler terms, most products in the market comprise of 3 main components - the front-end user interface (what you interact with), the back-end program logic (what you don't see) that executes actions based on triggers (e.g. button clicks) and the database (what is stored) that stores all business information.
The most crucial component is the database which is the central hub where all information lies and most small-medium businesses find that they can get by with spreadsheets (until a certain point where it is operationally infeasible) because they are actually working directly with a 'database'. The problem with spreadsheets is that the data is not relational. You cannot link things together (e.g. linking invoices to customers, purchase orders to suppliers etc.) This is why small-medium businesses are encouraged to start with relational database platforms and work with the right agency to speed up the whole digitalization process. Good digital transformation agencies take time to understand business problems/challenges, business objectives/priorities and create solutions together instead of outrightly selling a product/software. Worthy to note, it would be wise to engage an agency that actually implements the strategies they recommend on their own business otherwise you'd not get much value from the project (e.g. Working with an agency who builds custom CRMs for businesses but uses spreadsheets to track their own customers.)
Small-medium businesses can succeed in digital transformation with the right strategies
Optimizing operational processes is crucial for small-medium businesses
Small-medium businesses wanting to go digital should work with the right agency on digital projects instead of doing it themselves
Don't look for solutions before understanding which problems you want solved
Spreadsheets are not the way to go to manage your business; Start with a custom relational database system instead