Digital Transformation in SMBs: Growth Rates, Trends, and Forecasts

12/07/2021

What is Digital Transformation?

Digital transformation refers to the continuous journey of changing existing business processes by using digital technologies. It replaces either hand-operated processes with digital solutions or older digital technologies with newer ones. It also involves changing the daily ways of working of enterprises to improve customer experience, boost sales, and help them adapt better to the changing market requirements.

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What are the Benefits of Digital Transformation?

Digital transformation solutions have continued to successfully change market dynamics and serve as a tool to survive in the tough economy, especially in the wake of the COVID-19 pandemic. Digital technologies, such as big data [1], artificial intelligence (AI) [2], and machine learning (ML)[3] can help you reshape your business to create value, overcome competition, and boost sales. Here are few more reasons for you to consider taking in digital transformation services in your business:

Ability to Meet Customer Expectations: Customers expect valuable and to the point solutions for their problems. Good customer experience forms the basis of a successful business. Research [4] suggests that the most important goal of the digital strategy framework is creating a better customer experience. Almost 35% [5] of executives too believe that digitalization can positively affect customer experience by meeting their expectations in a better way using data-driven insights [6]. These insights also help to make improvements and updates in your way of working.
Improved Work Efficiency: Introducing digital technology in business can help build strong company culture by encouraging employees to learn about the new changes together. In fact, 40% [7] of businesspersons believe that digital transformation solutions can improve work efficiency because it can encourage partnership across departments. Besides, it also helps improve the performance of employees.
Faster Time to Market: Almost 36% [8] of executives agree with the fact that digital transformation boosts business growth by reducing the time taken by brands to bring their products to their consumers. This reduces costs in the longer run and provides better ROI [9] (Return on Investment).

Major Challenges Faced by SMBs in Digitization

With the need for digitalization also comes its share of digital transformation challenges. Almost 62% [10] of companies face challenges in their digital transformation journey because of several factors. Knowing about these challenges can prove helpful when facing them or trying to overcome the same. Here are five such problems faced by small businesses in their digital transformation journeys:

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Unacceptance by Employees: Employees are often unwilling to accept the changes introduced as a part of the digital transformation strategy. This unwillingness develops from confusion and lack of familiarity with the newly introduced technology solutions. This unacceptance can be dealt with if employees are made aware and are encouraged to offer their suggestions. Research suggests that skill gaps between digital and traditional teams is the greatest challenge [11] resulting from digital transformation. Thus, consistency, clarity, and motivation are the keys to ensure that the employees can easily work together and accept the transformation.

No Access to Quality Data: Data forms the backbone of a successful digital transformation. It is only through data-driven insights that you can make the best decisions and introduce the desired changes in the most suitable way. Lack of quality data can prevent this and serve as a barrier as well as result in loss of valuable time and resources. Thus, it is important to research and gain the needed insights before starting your digital transformation journey.

Preparing an Effective Digital Transformation Strategy: A compelling strategy can work wonders when you are considering digitizing your business. Planning things out can reduce risks as well as provide you a better view of your needs. However, developing a detailed strategy for digital transformation can turn out to be a challenge for some companies.

Lack of Needed Experience and Expertise: Digitization can be an entirely new concept for small and medium business owners. Thus, going ahead would need guidance from experts. However, for most businesses, lack of experience and expertise can serve as a challenge in the road to successful transformation. Besides, 45% [12] of executives believe that the lack of needed technology is another major barrier in their digital transformation journeys.

Budget Limitations: Introducing transformations can be large-scale projects that can involve huge expenditure. However, with careful budget planning, managing expenses can turn out to be an easier task. So, to ensure that you implement transformation wisely and well within your budget, start by preparing a financial statement [13].

An Overview of the Digital Transformation Industry

Companies all around the world are adopting digital transformation. Research suggests that digitally transformed organizations would contribute to more than half [14] of the global GDP [15] by 2023.
Despite the recent pandemic, digital transformation spending will see a steady growth between 8% and 13.5% [16] in 2020.
The spending on the technologies and services that enable digital transformation worldwide is expected to amount to $2.3 trillion [17] by 2023.
Research [18] suggests that strong dedication towards transformation and clarity on the transformation strategy are the most important factors that ensure the success of the digital transformation.
Disruption in the market environment is one of the main reasons [19] that has slowed down digital transformation in 2020.
Global AI survey [20] suggests that adoption of AI can reduce the need for the human workforce in the automotive and telecom industries. On the other hand, such adoptions are likely to increase the need for the human workforce in high-tech industries.
Research [21] suggests that the adoption of cloud technology [22] is becoming increasingly popular among SMBs. According to a survey report, 29% [23] of the respondents reported that they are already introducing cloud technology in their enterprises while 79% [24] are planning to implement the same soon.
A significant number [25] of small and medium business owners are confident that digital transformation can help them bounce back in the post-COVID world.
75% [26] of the Indian SMBs believe that the adoption of digital technologies is essential for their business to succeed.

Conclusion

Digital transformation is arguably necessary for small and medium business post-pandemic. Companies must thus try to blend digital solutions for their business growth and smooth scaling. If you are still nervous about your digital journey, collaborating with e-commerce marketplaces can help you get started. Click here to know more!

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