According to new research by Ricoh South Africa, small and medium-sized businesses (SMEs) are in danger of failing if they don’t adapt to digital disruption, regulatory requirements and the economic shifts that are fundamentally changing their markets.
By Kevin Laithwaite, head of digital at Retail Capital
34% of the 3 300 SME leaders surveyed from across 23 countries, including South Africa, say they will go out of business by 2020 if they aren’t able to innovate in response to these changes.
With 56% trying to increase profit and 54% working to grow their operations, SMEs must be ready to challenge traditional assumptions about growth.
How a business embraces the current digital disruption has become a crucial differentiator. But given the uncertain economic climate, SMEs are under pressure to drive digital transformation while still managing operations.
The research uncovers three key areas where SMEs should be applying technology to help focus their attention:
- SMEs must build closer customer relationships by using technology to facilitate and inform product and service development: 54% recognise they need to develop ongoing relationships with their customers
- SMEs must use smarter workplace technology to reshape processes, improve agility and make efficiencies: 74% of leaders say technology helps their ability to innovate
- SMEs must foster the full potential of talented individuals by using technology to empower employees and develop creative thinking: 42% want to encourage safe spaces for experimentation to see if ideas are successful
An opportunity in the challenge
Even though financial services organisations, IT firms and telecommunications operators have led the charge towards a digital-first market, the more agile SME companies currently enjoy an opportunity to leapfrog the more established players in their sector.
Unlike their larger counterparts still reliant on legacy systems, SMEs can circumvent the need to upgrade outdated hardware and software. Instead, they can focus on harnessing the innovative elements of the digital space that best suit their strategic directives. For example, software as a service is driving innovation in the provision of a host of business services including point-of-sale, payment processing, automated marketing, supply chain management and accounting.
The original disruptors
Think about the impact that the likes of Uber, AirBnB, Amazon, and Netflix have had on taxi services, the hospitality industry, book stores, and DVD rental shops respectively. And thanks to how user-friendly, pervasive and accessible technology has become, there is nothing limiting the savvy entrepreneur or small business owner in terms of upsetting the proverbial apple cart in this regard.
While it is natural for some SMEs to be hesitant to make the shift towards digital, the reality is that they no longer have a choice. If they don’t start taking steps to create a digital strategy the danger is that they will lose progressively more of their customers to competitors who had the foresight to develop a digital strategy and are now reaping the associated 50% improvement in performance.
According to the survey, although 92% of SMEs recognise the impact of digital disruption in their sector, 59% are not yet in a position to take advantage of its benefits. Furthermore, in the next two years, a quarter predict they will be unable to react swiftly enough to changing government regulation and 20% to the growth of automation.
Making the necessary changes does, of course, require some capital investment to ensure a smooth integration of technology innovation and business practice. Despite the temptation to embrace every new piece of technology becoming available, SMEs need to carefully manage their budgets to ensure that cash flow is still maintained. They must therefore be strategic in how they utilise digital disruption with the resources available to them.
This brings into focus the importance of being able to work with a partner who can provide the SME with the funding necessary to embark on digital transformation projects while still maintaining daily operations.
Ultimately, technology needs to work for the SME. Again, this is where digital partnerships are essential, i.e. where the SME can be consulted and advised on the best path for that specific business. Identifying where technology can speed up time-consuming, administrative-heavy tasks is always a good starting point.
Irrespective of the solution that’s implemented or the approach followed, cyber security should always form part of the equation. With cybercrime on the increase, the SME should never assume that it is too small to be a target. Having a solid business continuity and disaster recovery plan in place is a must.
Again, this is where funding becomes critically important. It is one thing to understand the need to protect internal systems, and another to access the money required to execute, especially if this takes away from more customer-centric solutions.
Fortunately, there are several funding partners like Retail Capital willing to drive this change with the SME. They will unveil how digital transformation can be leveraged for business development.
Digital disruption is here to stay. It is up to the SME to make the best of it and use the capital injection it gets to deliver the most strategic growth.