Why SMEs should invest on digitalization for 2021?

Digital Transformation
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Small and medium-size enterprises (SMEs) have been the lifeblood of the Global economy, accounting for more than two-thirds of the workforce and more than half of the economic value added. Yet the results of a recent McKinsey survey of more than 2,200 SMEs in European countries indicate just how hard their prosperity has been hit by the COVID-19 crisis [1].

The survey highlights the lower revenues and how they have been fallen for most SMEs since the onset of the COVID-19 crisis. The Fig 1 presents the severity of measures to control the virus and their impact on business activity.

Fig 1. Covid-19 impact on SMEs companies in Europe (source: McKinsey)

Without doubt Digitalization and digital tools can help SMEs reduce costs, standardize and automate business processes and reduce the reliance on manpower. An article published on ZDNet summarizes 8 trends that it be shaping digital transformation in 2021 [2].

Digital-ready culture: Organizations are under greater pressure to digitize services quickly at scale to meet rising customer demands and create new revenue channels.

Democratization of innovation: Line of business users is trying to develop digital customer experiences faster. IT needs to drive cultural change by empowering the business to self-serve and deliver solutions quicker.

Composable enterprise: Hyper-specialization has created a groundswell of applications, leading organizations to shift to a composable enterprise to become more agile — where digital capabilities can be composed of existing applications using APIs, rather than being built from scratch every time.

Automation: Organizations are using automation to drive operational efficiency and improve business processes. APIs are key to driving automation and scaling productivity.

McKinsey estimates that automation could raise productivity in the global economy by up to 1.4% annually. Salesforce finds that 70% of service agents believe automating routine tasks would allow them to focus on higher-value work. The PwC Finance Effectiveness Benchmarking report finds that up to 40% of the time in the finance function can be reduced with automation and behavior change, as it can be appreciate on Fig 2.

Fig 2. Potential value of automation

Across all industries, 60% of line of business users agree that an inability to connect systems, applications and data hinders automation initiatives. One solution to reduce automation complexity is a better use of APIs. According to many experts, APIs are key to driving automation APIs have emerged as the most elegant means of scaling-controlled access to a defined scope of data or functionality, abstracting the complexities of the underlying systems (see Fig 3).

Fig 3. Process automation by industry

API security: The average enterprise has 900 applications. The proliferation of new endpoints creates new avenues for intrusion, requiring robust API security.

Microservices: Organizations are turning to microservices to rapidly build new customer experiences. Companies deploying microservices to production will require some form of service mesh capabilities to scale (see Fig 4). Microservices expose data and functionality as a collection of loosely coupled services. With microservices, organizations can quickly adapt to changing customer requests and demands, as well as offer services that create a competitive edge. Per Gartner, 65% of Financial services CIOs plan to increase spending on infrastructure technologies, such as microservices, APIs, and cloud in the coming year.

Fig 4. Microservices adoption is increasing across industries

Data divide: To keep pace with evolving customer expectations, organizations are looking for faster ways to unlock data and gain insights. 2021 will be the year that data separates organizations from their competitors and customers the ability to unlock, analyze, and act on data will become foundational to growth.

Data analytics: Organizations are investing in data analytics to transform customer experiences. The value of data analytics will be dependent on the data they are fed.

Applied Data Analytics, Machine learning and in general AI-based solutions are one of the most promising field to watch for SMEs to improve daily management performance, market adaptably, exponential growth and profit. In our next post, we will be going deep on the role of AI-based application and trends for 2021.

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:

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.


[1] https://www.mckinsey.com/industries/public-and-social-sector/our-insights/covid-19-and-european-small-and-medium-size-enterprises-how-they-are-weathering-the-storm

[2] https://www.zdnet.com/article/top-8-trends-shaping-digital-transformation-in-2021/


By Gerardo Beruvides twitterlinkedin2

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.

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