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Trends and Challenges of Digital Transformation in SMEs

Arun Meena of RHA Technologies write an exclusive artcle for SMEStreet illustrating digital trends of today's SME/SMB scenario.

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Arun Meena, Founder & CEO, RHA Technologies is the author of this article

Small and Medium Businesses (SMBs) are today facing tremendous strain with the business impact of the pandemic.  They are also having to manage rapid digitisation of business transactions. This is due to increased customer preference for digital transactions, need for remote and paperless operations, government compliances going online, and the competitive advantages being enjoyed by organisations that are undertaking digital transformation. 

Digital transformation forces SMBs to navigate through numerous technological solutions of various complexity, capability, scalability, and costing. Additionally, they struggle with the question of IT talent needed for managing the digitally transforming organisation. 

This article focuses on a sustainable digital transformation strategy for SMBs, the latest trends, challenges, and pointer to overcoming these bottlenecks. Thus, allowing SMBs to digitally compete with the biggest, while having the least impact on their finances and management bandwidth.

Given the business priorities, sustainable digital transformation strategy implemented by SMBs should be prioritised around the following:

  1. Efficiency in aligning with regulation and government policies to avoid any penalties and freeing up valuable management bandwidth to focus on business growth plans
  2. Enabling broader access to market for the products and services
  3. Helping reduce costs of production, management of supply chain or billing for time of consultants
  4. Improving customer services for better loyalty and customer lifetime value which have a huge business impact
  5. Enabling management business insight for decision making and business planning to enable constant business growth
  6. Ensuring business continuity and de-risking the business from loss of data. This becomes especially relevant as businesses globally become more digital
  7. Reducing time intensive manual work and improving personnel productivity, thus also enabling innovation motivation and positivity

Most SMBs would already have accountancy software installed in their business and this can be a good starting point for the larger digital transformation initiative. However, one needs to ensure that the accountancy software is a legal and has the capability and scalability for future. Else, the first recommendation is to switch to a more capable accountancy software. The accountancy software should and will keep the SMB abreast of changing government regulations in accountancy and fiscal management of the business. It will also allow for management reports providing insights into the financial health and forecasts.

For the next step in the journey in digital transformation SMBs should consider the various global trends and pick the solutions that will bring the biggest benefit to their specific product / service and customers. These trends include: 

Conversational AI

Conversational AI enables the SMBs to mitigate the cost of support centre set-up with software driven services that leverage artificial intelligence to converse adequately like a human with comprehension and context. Conversational AI supports multiple business use cases:

  • Online customer support (shipping, sizes, cross-selling etc.)
  • Accessibility (text-to-speech, dictation, translation etc.)
  • Computer usage (search, editing etc.)
  • HR processes (training, onboarding, etc.)


AIaaS enables SMBs to implement AI in their business at a fraction of the cost of a full, in-house AI implementation. AI driven services range from Marketing Data Optimization, Chatbots, Legal Robot, Product Quality Assurance, Scheduling, Security, Financial Forecasting, Supply Chain Management, and the list can go on for different industry verticals. SMBs can leverage AIaaS to optimise current offerings and create new disruptive offerings.

AI driven end to end Supply Chain management

Supply chain management has immediate implications on margins and profitability. Digital transformation incorporating the latest advancements in supply chain management are creating time to market efficiencies and cost savings that were unheard of a few years back.

Big Data, Advanced Analytics, and Decision Intelligence

It has become extremely important for businesses to learn from and take decisions that are data driven. According to Gartner by 2023, more than 33% of large organizations will have analysts practicing decision intelligence, including decision modelling.

Robotic Process Automation

Robotic Process Automation is the process creating software ‘robots’ that can execute the repetitive day-to-day tasks and help organisations decrease costs and free employees’ valuable time. According to Gartner “Despite economic pressures caused by the COVID-19 pandemic, the RPA market is still expected to grow at double-digit rates through 2024.”

With the best of intentions SMBs are forced to deal with real world challenges in their move towards digital transformation. These can include:

  1. Lack of IT skills as good IT persons are expensive and most SMBs face difficulty in identifying and hiring the right candidates
  2. Digitalisation vs Digital Transformation confusion. Digitalisation only replicates the existing way of working without providing the much larger benefits of digital transformation due to the creation of domino effect of benefits
  3. Lack of funds, as SMEs work on tight cost and margins; therefore, investment on digital transformation and adoption becomes a tremendous strain on resources
  4. Constantly evolving technologies put a lot of pressure in terms of updating the hardware and software.

These challenges cannot be wished away. We advise our clients to not get overwhelmed, which can lead to never ending postponement of digital transformation and thus business competitiveness. What is required is end goal vision and a commitment to always keep moving forward one step at a time. Thus, pausing when critical and accelerating when possible. With the crossing of each critical milestone the business benefits of digital transformation start accruing and the journey progressively becomes easier. 

Some other factors that SMBs can keep in mind to remove the bottlenecks include:

One should partner with an organisation that can help create a digital transformation journey/roadmap specific to one’s business. Thereby first solving the key business priorities. Unlike large enterprises, SMBs have to implement the technology over a period in a staggered approach. They should also avoid freelancers as a good balance is needed between the ability to strategize, operationalise, trouble shoot and dynamically update/upgrade in line with environmental context.

Start the process of digital transformation with off-the-shelf SaaS solutions which can help the effort go live within weeks with minimal efforts. This gives SMBs the advantage of lower upfront cost which can also be shown as expenses and don’t need to be Capitalised. As SaaS solutions are built on best practices followed by large and successful organisation, using them can help SMBs compete with the largest players. Additionally, the subscription can be cancelled easily in case of the application not meeting the requirements. SaaS vendors also deliver free auto upgrades taking care of emerging regulatory changes, security threats, and best practice innovations.

With respect to IT personnel to manage the operations, the best approach for small SMBs is to have tech hardware and internet management person inhouse and everything else outsourced. In the case of medium size SMBs onwards, a combination of inhouse and outsource balance works best.

SMBs must remember that digital transformation is key to remaining competitive in this global economy. According to KPMG, profits of digitally engaged SME businesses grew at nearly double the rate compared to only 10% for offline business. The key is to undertake digital transformation in a sustainable manner is with the view that it is an investment for accelerated success of business.

SMEStreet Edit Desk

SMEStreet Edit Desk is a small group of excited and motivated journalists and editors who are committed to building MSME ecosystem through valuable information and knowledge spread.

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