Digital transformation is as crucial for SMBs as it is for large organizations.
"Business transformation" is a generalized term for fundamental changes to the way any given company does business. When the core business is influenced by changes to processes – operational or strategic – you could safely say that the organization is in the middle of transformation.
But why does a business – especially a small or midsize business that is already pressed for resources or capital – undertake this process of transformation?
On the surface, there might be a variety of reasons, such as insufficient sales volume, irregular cash flow, subpar product quality, increasing customer service complaints, or poor productivity. However, the underlying cause of the decision to transform is always survival. When one or more of these problems threaten the very solvency of your business, nothing short of a transformation will do.
In any given business, strategy and operations are both driven by technology. Whether it is marketing, HR, production or finance, every core function runs on software-driven processes. Therefore, business transformation has become synonymous with digital transformation.
The concept of digital transformation is certainly nothing new. Business owners have been discussing this strategy for years. It has often been listed as a top priority for many companies. But the reality for many small and midsize businesses is that accomplishing this goal of digital transformation often seems impossible.
Digital transformation defined
First, let's be sure of what digital transformation actually is. This concept is often broken down into four categories: business process, the business model, domain and organization.
Business process: Business processes are often the main focus of digital transformation, as this involves incorporating technology to improve key aspects of common processes. This includes utilizing AI for inventory management, creating an app for mobile orders, or automating accounting processes.
Model transformation: This involves incorporating technology to change or improve the industry as a whole by creating an entirely new or different business model. Oftentimes, this includes the digitalization of resources or the integration of cutting-edge technology that alters the entire industry, such as Uber and Lyft's approach to ridesharing.
Domain transformation: This type of transformation is a bit more complex and not possible for every type of business. With domain transformation, one business can expand its services and offerings to create an all-encompassing type of organization. Amazon is a perfect example of this, as it has expanded from being just an online retailer into cloud computing and IoT capabilities, while also escalating to create its own delivery service.
- Organizational transformation: Organizational or cultural transformation is another way to approach digital adoption. This involves creating systems that improve company culture by creating innovative procedures, supporting higher productivity, and adopting agile collaboration methods.
There are certainly many benefits established SMBs can gain from successful digital transformation. But can smaller organizations or startups succeed too? Let's discuss.
Are SMBs struggling to make transformation a reality?
Although the majority of business leaders intended to make more moves toward digital transformation in the upcoming years, the pandemic essentially forced many companies to make this happen.
Business leaders reported that the massive shutdowns and necessary transition to remote working situations pushed them into digital adoption at a faster pace than they anticipated. This also led to a shift in other business priorities, such as improving operational efficiency and enhancing business processes.
Unfortunately, this resulted in numerous mistakes and challenges along the way. A report from Statista found that over half of the companies surveyed faced "skill gaps," as their current employees did not have the training or knowledge to utilize new technology. Additionally, 41% of teams struggled to transition into digital workspaces, and 39% found it incredibly difficult to integrate new digital systems into the current business models.
As a result of all these varied challenges (which, on closer inspection, are fundamental to business and not even related to technology), many business leaders have been quite frustrated and even started to question whether digital transformation is a long-term solution.
Speed or scale?
Rushing a business into digital transformation is certainly not ideal. However, companies are typically more successful when they tackle specific areas first that stand to benefit the most from digital transformation, then adopt technology at scale and expand throughout the company quickly. This helps in optimizing costs.
According to IDG's 2018 report on digital business adoption, the key focus of their digital transformation was data security, IT improvements and workforce strategy. Therefore, the first projects digitally transformed companies tend to approach involve big data, mobile technology and cloud computing. The current areas of focus in organizations undergoing digital transformation typically include AI, machine learning, IoT and software-defined networking.
Many companies do not have the option to integrate digital solutions one by one, as most objectives and projects require an integrated or wholesale change or approach. However, there are some benefits from a forced rush into transformation that is championed internally. For some businesses, this is the exact push they needed to make digital adoption a priority. It has helped team members to learn the importance of flexibility and innovative change. Additionally, it could open the doors for new positions and job opportunities in the future to close organizational skill and knowledge gaps.
The key to successful digital transformation is speed at scale – with strategic integration. Although SMBs may be integrating digital solutions quicker than they expected, they must start with approaches that solve their most urgent challenges. Full transformation will not happen overnight – careful, calculated adoption is the way to go.
A lot to gain or a lot to lose?
A Forbes study found digital transformation to be a top priority for many executives in large organizations worldwide. And it goes without saying that the focus of the enterprises today is the building block of the SMB tomorrow.
To make digital transformation a true success, SMBs should start with the most important elements that are poised to make the greatest impact. If a new digital tool makes processes more complicated or slows things down, then look for other solutions. Further, the impact should be not just on operations, but also take into account overall customer experience as well as company culture.
Next, SMBs must closely monitor the results from all strategies and gather feedback from both employees and customers to adjust and improve along the way.
The fact of the matter is that digital transformation is happening whether businesses are ready or not – and the pandemic has certainly catapulted this movement. Businesses that fail to adapt will fall behind even quicker as their competitors advance with tech. However, it is still important to implement systems correctly rather than just quickly.
There is no reason for SMB leaders to fear digital transformation. When tech is adopted successfully, there will be vast improvements to the customer experience, internal productivity and, ultimately, the business's profitability. The trick is to focus on finding solutions rather than on the challenges that stand in the way. Good luck!