How SMB Leaders Can Pursue Digital Transformation—And Stay Ahead Technologically

Claire Rutkowski is Chief Information Officer at POWER Engineers.

Generative artificial intelligence, automation and data analytics are three digital transformation and maturity strategies that the corporate world is currently discussing.

However, I’ve observed that many small and medium-sized companies feel left out of the conversation. While bigger firms have the budgets, staff and time resources to build their own digital transformation tools or purchase them from big-name vendors, SMBs usually don’t, and as a result, some are falling behind technologically. The idea of hiring a consultant to help them catch up is similarly beyond reach.

Data gathered in 2022 by McKinsey shows the contrast in technology spending between different-sized SMBs alone—even with big enterprises out of the picture, the contrast is stark. SMBs with less than 25 full-time equivalents (FTEs) were found to spend an average of $33,000 on technology annually, whereas SMBs with 501 to 1,000 FTEs had an average annual technology spend of $2,330,000.

Understandably, pursuing digital transformation as an SMB can be daunting, especially when facing budget, staffing and time constraints. But these barriers can be overcome. Digital transformation is no longer an option; it’s imperative for survival. If you’re an SMB leader, it’s important that you act now to get your company up to speed with digital transformation. The longer you wait, the further your company will fall behind, making it increasingly difficult for you and your team to catch up.

The Importance Of Pursuing Digital Transformation Initiatives Now Versus Later

By pursuing digital transformation initiatives now, you can help your SMB remain competitive, meet evolving customer demands and survive market fluctuations. This is not something you can afford to delay.

Research from Deloitte shows the value of being what it deems a “digitally mature” organization. The 2021 “Deloitte Digital Transformation Executive Survey” found that “more digitally mature companies are more resilient and better able to navigate rapid change, and they do significantly better financially as a result.” Specifically, “higher-maturity companies were about twice as likely as lower-maturity ones to report net profit margins and annual revenue growth significantly above their industry average.” Companies are in a better position to succeed when they are technologically developed.

The longer you hold off on implementing digital transformation initiatives, the more challenging it will be for you to get back on track later. And in the process of trying to get back on track, you might lose customers who turn to competitors with updated technology.

How SMBs Can Reach Digital Maturity With The Resources They Have

SMBs can achieve digital maturity with their existing resources.

As a leader embarking on a digital maturity journey, the first step is to think about what digital transformation means to you. I recommend focusing on the customer experience first, but if you have significant operational issues, you could free up a lot of funding by putting the emphasis there. Just be sure to focus on something that will actually make a difference, not lots of incremental adjustments that don’t add up to much.

Once you have decided on your general first area to transform, you need to think about the build versus buy question—building technology in-house versus purchasing it from a vendor. In my experience, it’s a common misconception that companies must pour a substantial amount of money into building in-house solutions. But in my view, unless an SMB has a niche need or wants to build a solution that has a significant competitive differentiator, the team should not attempt the in-house approach. Building a technology solution in-house is usually an expensive, time-consuming endeavor, especially if a company has limited resources. For many SMBs that want to implement a digital transformation plan, such as automating processes, then buying technology is likely the most effective option.

Once you start speaking with vendors, you will find that everyone wants to help in many different ways. It’s important to develop a strategic plan and prioritize the highest-impact digital investments so you don’t get distracted. That way, you can avoid ending up with a random assortment of solutions that don’t generate ROI. Some technologies might be widely used, but that doesn’t necessarily mean those solutions are right for your company. Analyze your existing business needs and technology gaps to identify which investments stand to give you the biggest increase in digital maturity or profits. Depending on your SMB’s unique needs, leveraging SaaS, cloud and/or open-source software could help you achieve digital maturity by giving you enterprise-grade capabilities without large upfront costs. If you’d like to have a greater degree of customization and control, you could explore low-code and no-code platforms that enable you to create custom applications without a large development team.

Why Digital Strategy Must Be A Company-Wide Priority

Digital transformation is not solely about technology; it’s also about people. As you embark on your digital transformation strategy, a strong change management approach is key.

In particular, you should clearly explain to your team members why the company is pursuing digital transformation. Change can be challenging for people, especially technological changes—colleagues might fear their jobs drastically changing or that they will lose them altogether. When your employees understand the “why” behind your company’s digital transformation initiative, they’ll be more likely to be active participants. Additionally, get buy-in from your team members before you sign a contract for a new technology solution. Your employees will be using the technology on a daily basis. If they don’t find a solution intuitive, they’ll be less likely to use it.

Ultimately, digital transformation is a matter of survival. SMB leaders who commit to taking action, doing their research and involving their teams will future-proof their companies.

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