SMEs look set to embrace digitalisation over the next 12 months, but they need help overcoming the obstacles standing in their way.
Where does your business plan to invest during the course of 2016? For one in five SMEs, the priority will be technology, according to the latest Close Brothers Business Barometer. Similar numbers plan investments in marketing (17%) and the development of new products and services (18%). A common theme runs through these business priorities: the desire to embrace digitalisation.
Yet there is much work to be done if SMEs are to capture the benefits of digital technology. One study published last year found that more than 70% of companies are not yet ‘digital ready’ – because, for example, they don’t have the ability to trade online. By failing to take full advantage of the internet as a sales channel, these firms are missing out on a huge opportunity to grow their revenues.
Investment in digital can have other benefits too. For example, a survey of 5,000 SMEs1, found that 39% of businesses with 50 to 249 employees had reduced costs through digital innovation. Even among smaller firms, 25% had been able to generate savings.
This is not to suggest moving towards digital will necessarily be straightforward. Many companies will be nervous about issues such as data privacy and cyber crime. SMEs with digital operations are urged to review their security on an almost daily basis, though help is available from officially-backed campaigns such as the Government’s Cyber Streetwise initiative.
One challenge will be ensuring the workforce is equipped with the digital skills it needs. This may be one reason why 34% of SMEs responding to the Close Brothers’ Business Barometer said that they intended to prioritise investment in skilled staff this year. That may mean more training or recruitment, but it may also mean finding new ways of working. One recent survey from YouGov found that many SMEs intend to hire contractors or freelancers with digital competencies for specific projects.
Fundamentally, businesses yet to make any investment at all in digital will need to think carefully about how to get started and where their strategic priorities should lie. Groups such as the FSB and the BCC can provide generalised advice and may be able to put businesses in touch with similar organisations in order to learn from others’ experiences. Organisations such as Exemplas, which work to develop SMEs, provide a range of services through links to Growth Hubs and Inspire2Enterprise.
Key takeaways:
- 70% of UK businesses still lack an online presence but research suggests that SMEs are keen to make 2016 the year that they "embrace digital".
- Making digitalisation a priority means more than just creating a website - many companies have experienced reduced costs through other areas of digital innovation.
- Ensuring you upskill your staff to complement any enhanced digitalisation within the business is vital
Businesses stand or fall on the quality of their people – and if your firm can’t recruit enough staff with the right level of skills and experience, that’s potentially a serious problem. Faced with supply and demand issues, how do SMEs confront skills shortages? We take a look at a number of potential coping mechanisms here.
1 Survey conducted by Business Banking Insight, a joint initiative from the British Chambers of Commerce (BCC) and the Federation of Small Business (FSB).
