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How can SMEs transition from a traditional business to a digital business?

The world is online, now. It is an SME owner’s choice to work hard or to work clever. Traditional businesses often involve labour intensive activities but digital business can enable your SME to grow and to earn money whilst you sleep. It often only involves the click of a button, or less, to process business transactions.

The impetus to go digital
In a recent global survey of SMEs nearly every executive (72 percent) cited competitive pressures to change. This relates closely to increases in the pace of business and respondents rated the current pace of business relative to five years ago as much faster. Most indicated the pace will continue to increase, leading to further pressure to transform their businesses.

The necessary steps that an SME must take to participate in global digital business are:

  • The transition in mind-set of SME owners and operators from a traditional business to a digital business
  • The involvement and participation of decision makers and employees to acquire the skills and professional knowledge to run and operate a business with a digital model
  • Realising the integration and transformation of their business model through the combination of online and offline transactions through digital business platforms

Changing the mindset of your SME
Innovation and going digital does not necessarily mean a complete overhaul; it can involve a simple, smooth transition. However a change in mindset is required. Some SMEs may not be willing to upgrade and adopt technology, they may feel that the implementation of digital technology is too complicated but, in order to survive, SMEs must understand and anticipate market trends, and find solutions.

The owner of a retail SME in Malaysia is now building a strong e-commerce platform beyond its bricks-and-mortar model. A decision was made to use a digital accounting solution from a banking partner to synchronise transactions from different operating accounts. This easy to use solution provides the managers with real-time information as well as an auto-reconciliation of transactions with the bank, such as purchase orders to suppliers and daily takings, improving productivity and freeing up important resources for other key business functions.

The owner of a jewelry SME in Hong Kong has adopted three-dimensional (3D) printing technology into its process of jewelry design. Developed with funding support, its research and development team adapted the technology to provide customers with a precision-printed 3D model of their jewelry design, and then rolled this out internally. A process which used to take up to three weeks has been shortened to three days. In addition to increased productivity, the group has also seen an increase in the conversion rate of sales by up to 10 per cent due to the increased likelihood of a purchase with a view of a 3D model.

Transitioning skills
Many SME businesses involve data and cyber security, both of which represent important assets for them as they adopt new technology and go digital. It could be that part of a data and cyber security business offers computer and network security via Cloud computing, while another part offers client solutions through physical controls. Creating protection for critical assets should involve assigning trustworthy staff with good awareness to monitor these assets. These key staff should have the confidence to report suspicious activities or potential theft or security breaches, a key skill required to protect a new digital business. This may require reshaping the way that the office looks and the way staff interacts.

Logistics is another traditional industry that is harnessing both existing and emerging technologies to tap into the growth of e-commerce in ASEAN. Warehouse and distribution centre staff need training to become familiar with automated storage and retrieval systems (ASRS) which offer highly accurate, efficient and high volume inventory management capabilities. When supported by advanced technologies, ASRS provides an integrated solution for logistics companies which include monitoring of warehouses, stock-keeping unit (SKU), and shipment. The growing e-commerce sector should also look to combine ASRS with emerging technologies such as data analytics to improve delivery and inventory management capabilities and this requires vision and communication through leadership. Companies must be willing to make the transition by scrutinising all aspects of their existing operations and training staff accordingly. To innovate requires continuous tweaking and not just for business but in ensuring staff are up to speed and competent with new processes.

Integration of traditional and digital business
An SME manufacturer of coatings in India has digitally transformed its business step by step. The firm has been able to maintain fast growth and globalize while increasing efficiency and reducing its impact on the environment. In the early 2000s, as part of an effort to reduce debt and increase internal efficiencies, the firm implemented an enterprise-wide ERP and advanced Supply Chain Management system. This helped to create an enterprise-wide platform that formed the basis for improvements in sales and customer processes. The firm made further improvements in efficiency by linking subcontractors and suppliers on a B2B portal and, in 2003, invested in a CRM system. In 2010, the firm centralized its order taking process into a single call centre. This change helped the company further improve operational efficiency and sustain growth. In customer-facing processes, the move entailed much more than just creating the call centre; retailers were encouraged to place orders through the call centre, where they could receive a consistent service level, centralized data also enabled delivery of products to large institutional customer job sites, giving the company a capability that competitors lacked. The biggest change resulting from centralizing order taking was in the way salespeople interacted with retailers. The sales team could focus on building stronger relationships to enable a more meaningful dialogue between the sales team and each retailer. The company provided salespeople with vital customer data in the field using mobile devices. A rollout of tablet devices will further mobile-empower the sales staff. Digital transformation also extended to internal production processes. High growth in paint demand created the need to set up new manufacturing plants every three years. Given the scale and size of these plants, the firm has begun to focus on creating highly automated plants leading to greater scalability, better quality and stronger safety and environmental protection. These new plants are fully integrated from an information management perspective and data from shop floor control systems and automated warehouses are linked seamlessly to the ERP.

Transitioning from a traditional business to digital is vital for SMEs to move with the times and stay relevant in the face of fast moving change and competitive pressures. It doesn’t have to be a volatile or painful process if the right moves are made.  

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Paul Conway
Paul Conway
My role as CEO is to take the business to the next stage of growth. I already have a fantastic and growing team. There are opportunities with payments, banking channels, additional software, cloud deployment and with over 300,000 customers in South East Asia and a publicly listed majority shareholder in Censof holdings, the opportunity and tools for growth are very real.

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