Why SMEs should invest on digital culture for 2021?

In the last two articles we have been covering why Small and medium-size enterprises (SMEs) should be focused on build and execute a digitalization roadmap on 2021 form technology, AI and digital culture and mindset. Today, our article covers how crucial is a digital culture on SMEs to promote the digital transformation vision in order to improve productivity growth, workers mindset and customer relationship.

Productivity growth is crucial to increase wages and living standards and helps raise the purchasing power of consumers to grow demand for goods and services. Therefore, slowing labor productivity growth heightens concerns at a time when aging economies depend on productivity gains to drive economic growth. Yet in an era of digitization, with technologies ranging from online marketplaces to machine learning, the disconnect between disappearing productivity growth and rapid technological change could not be more pronounced [1].

As it can be appreciated on Figure, digitization wave contains the promise of significant productivity-boosting opportunities, yet the benefits have not materialized at scale. There are several reasons that the impact of digital is not yet evident in the productivity numbers. These include lag effects due to the need to reach technological and business readiness, costs associated with the absorption of management’s time and focus on digital transformation, as well as transition costs and revenue losses for incumbents that can drag sector productivity during the transition. In order to maximize the impact of the digitalization, action is needed both to overcome adoption barriers of large incumbent business and to broaden the adoption of digital tools by all companies and citizens. Actions that can promote digital diffusion include: leading by example and digitizing the public sector, leveraging public procurement and investment in R&D, driving digital adoption by SMEs, investing in hard and soft digital infrastructure and clusters, committing to the education of digital specialists as well as consumers, ensuring global connectivity, and addressing privacy and cybersecurity issues.

On the other hand, the adoption of a digital mindset is another crucial aspect to be considered by any company, especially by SMEs to succeed and take advantages on a highly competitive marketplace. Entrepreneurial education is thought to promote equity, and many organizations have focused on developing an entrepreneurial mindset and capabilities in young residents of low-income communities. The attractiveness of an entrepreneurial career and citizens’ entrepreneurial capabilities are also important in increasing the development and survival rates of start-ups and SMEs. Many ideas are never prototyped or converted into a business plan. Risk aversion, fear of failure, and lack of capabilities can be just as significant barriers as lacking the regulatory and institutional support [2].

In an interview for ZDNet portal, John Hagel (o-chairman of the Silicon Valley-based Deloitte Center for the Edge) highlights “Rebuilding trust in our institutions is an imperative. To succeed in this challenge, we need to address trust holistically. We need to recognize that the foundations of trust are shifting and that many layers of trust will need to be cultivated. We also need to address the opportunity to strengthen trust by connecting people into impact groups, so that they can become even more excited about the opportunity to deliver impact that matters to others. It’s ultimately all about people, finding ways to move beyond short-term transactions and instead build deeper and enduring relationships that can help all to achieve more of their potential. There are no experts of tomorrow. The label of expert is more suspect in a world of constant and accelerating change. The erosion of trust is also based on experts struggling themselves in terms of guiding us towards the future. Expertise is based on skill and experience from the past. What matters is excitement and passion for exploring, while maintaining humility and a beginner’s mindset.” [3]

Leaders and companies must focus on the emotions of what is driving people, behaviors and actions to cultivate the passion of the explorer. According to Mr. Hagel talks about the growing need to find and cultivate the passion of the explorer to achieve far more of our potential. The mark of a strong leader is to get things done, but remarkable leaders are willing to show vulnerability and recognize the real presence of fear or uncertainty. All the high performing leaders had passion about their work, but they also had real fears. But because of their passion, they were able to overcome their fears, moving from mounting pressures to expanding opportunities.

Finally, another pillar that is changing due to the digitalization age, it is to deliver better customer outcomes. Unfortunately, COVID-19 pandemic has significantly accelerated digital business transformation. The pandemic led to breakneck speed shift to digital-first customer engagement and remote work, prompting service and support organizations to reconsider the future of their people, process, and technology. Research shows that in order for businesses to connect with their customers, they must focus on outcomes, a new set of customer health metrics, improved service agility and opportunities to co-create value. Experience Executives reveal that organizational hierarchies of the past are no longer effective to deliver the outcomes of the future.

Once, the customer strategic is clear, businesses must continue to measure effort and progress and the journey towards earning your customer’s future business starts with measuring and reporting outcomes to all stakeholders, cultivating a culture of responsibility and accountability starts with trust and radical transparency. Growing companies (especially SMEs) should measure their progress based on their customer’s ability to achieve their desired business goals [4].

In future posts, we will be continue writing about technology and business trends for enterprises. Furthermore, we recommend consulting the following literature to continue your digital transformation journey:

• Designed for Digital: How to Architect Your Business for Sustained Success, MIT review
• The Future Is Faster Than You Think: How Converging Technologies Are Transforming Business, Industries, and Our Lives, by Simon & Schuster
• Artificial Intelligence: The Insights You Need, by Harvard Business Review
• The Year in Tech, 2021: The Insights You Need, by Harvard Business Review
• The Deep Learning Revolution, by MIT Press
• Competing in the Age of AI, by Harvard Review Press

The objective of this blog is to provide a personal vision of how digital transformation trends will be impacting in our daily activities, businesses and lifestyle.

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[1] https://www.mckinsey.com/featured-insights/regions-in-focus/solving-the-productivity-puzzle

[2] https://www.mckinsey.com/industries/public-and-social-sector/our-insights/unlocking-growth-in-small-and-medium-size-enterprises

[3] https://www.zdnet.com/article/digital-transformation-mindset-and-heartset/

[4] https://www.zdnet.com/article/how-to-design-your-business-to-deliver-better-customer-outcomes/

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By Gerardo Beruvides

Industry 4.0 and Smart-mobility expert, his research interest includes Industry 4.0, Smart-Maintenance, Process Optimization, Machine Learning, AI engineering and Cloud-based solutions.