A guest blog by Bertrand Dufour, Partner, RSM France
Despite the rapid rise and dominance of digital businesses across the world, research published in January by Bpifrance shows that SMEs in France do not see digital transformation as a strategic priority. This oversight not only puts their business at risk through loss of market share, but also at risk of business failure if nimbler and more advanced competitors harness digital transformation to seize their market share altogether.
Whilst larger corporate businesses may seem far removed from the SME experience, larger companies do have lessons to share. Most of the success stories of the last ten years have been technology led businesses like Amazon and Alibaba. Similarly, start-ups are constantly using digital developments to reinvent business models and disrupt traditional markets across multiple sectors - from financial services to the hospitality sector. However, even at the lower end of the scale, firms are measured on their digital prowess. For example, venture capital companies often target SMEs that have achieved a sufficient level of digitalisation. This means that firms are more attractive partners for venture capital if they can demonstrate their digital capabilities.
From my own experience, many start-ups are very strategic and not the erratic businesses that people expect them to be. For example, the small companies I work with have formalised structures and processes to organise their activities. These are business models that put the digital nature of their operations at the heart of everything they do.
Despite this, we must also recognise that not all businesses can easily apply a digital model. It takes significant time and investment for some businesses to transform their operations digitally. This requires SMEs to commit to spending their cash reserves and often reorganising supplier relationships and other physical structures that the company has been operating within for years.
To make the transformation process as smooth as possible, businesses should start it early. What should be avoided is to name a Chief Digital Officer that is solely responsible for implementing and co-ordinating these changes on their own. Change and transformation of this kind will not work if done in silo. Many of the SMEs I’ve worked with have operated in silo and, if one person tried to change everything overnight, it simply didn’t work. It is better to elevate the digital understanding of all key people in a company so they can be empowered to transform the company together. Collaboration is the best route to success.
Digitalisation is often compared to a drug you should take to cure an illness you don’t yet know exists. Whilst that analogy may be an apt way of describing the unseen threat of disruption for businesses that don’t adapt to digital transformation, it is perhaps a little unfair. Digital transformation shouldn’t be viewed as a burden. As well as delivering significant benefits, it can also be fun. For example, I previously worked with a regular small industrial enterprise in France. They operated a classic method of production and had been doing so for 40 years. Now they have a project to implement virtual reality to improve their communication with customers. This is not a revolution by any means but a way to change a perspective of a business, and ultimately raise the value of its delivery. This is an opportunity that SMEs should not miss either.
This blog is based on discussions from the Euromed Conference in Barcelona which took place in January 2018.