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Strategies to Digitally Transform Small and Medium Sized Enterprises

Strategies to Digitally Transform Small and Medium Sized Enterprises

Digital transformation has gained significant popularity in last couple of years. On doing a quick Google Trend analysis, one can see significant increase in worldwide interest on the topic from 2017 to 2018. This can be corroborated by the fact that many traditional non-IT enterprises looking to transform themselves have established new business units that blend the functions of its IT and business teams. Titles of employees at newly formed units can range anywhere from digital officer or digital transformation officer, to anything with the word “innovation” in it.

While large enterprise with endless cash-flow, talent, and desire to reinvent themselves have no issue adopting digital transformation strategies, traditional smaller and medium sized enterprises are still struggling due to a lack of proper resources to transform themselves. Talent and budget are the most obvious factors; however, awareness can be a subtle factor that keeps small businesses from reinventing themselves digitally.

The greatest lack of awareness can be explained by inertia — a well-known term in physics. Inertia is the resistance of any object to change in its state of motion. However, in business instead of physical inertia, we need to look into psychological inertia.

In a recent Forbes op-ed piece called The Three P’s Of Digital Transformation, Billy Bosworth mentions people are the key to successful digital transformation. He further mentions that before digitizing the enterprise, people need to transform. This ties directly to the psychological inertia. Humans are reluctant to change their usual behavior and habits. From executives to junior employees, changing behavior takes a mental and emotional toll. This usually manifests in the form of executives not taking risk in order to maintain their bottom line and employees fearing losing their job. This fear blinds them to the necessity of digitally transforming their business, and the area that needs transformation.

To overcome this, SMEs can develop a strategic plan of attack to tackle awareness, budgeting, and team hurdles associated with digital transformation. Here are some steps that can be used as a framework by SMEs to get started with digital transformation effort.

Creating Awareness

Executives and managers can use team bonding events to foster creativity among employees to brainstorm and identify key areas in their business that can be transformed. This initial identification needs to be a fun activity and not look like work. Once the areas have been identified, management needs to prioritize the area according their strategic objective.

Talent

Once the strategic alignment has been established, management needs to find talent that can take ownership of the project. This is usually cross functional between tech savvy IT and creative marketing personnel. A smaller company without an IT team can identify a tech savvy employee in marketing and have them lead the project. It is important that it is a marketer because digital transformation is all about creating new experiences both internally and externally. Marketers have the creative knack to define such experience. The role of this newly formed team would be to define timelines, research tools and resources, create implementation strategies, define budgets, and key performance indicators to measure success before, during and after the implementation.

Tools and Resources

Depending on type of transformation project, the team needs to choose software tools and resources that best fit the need. However, choosing a perfect tool right off the bat is a difficult task. The team can utilize free research tools like G2 Crowd, Capterra or SaaSMax. Most of the software tools these days are on cloud and offered as a subscription including free trial at the beginning. The SME can try the tool for free before they buy. Some software companies might not offer full premium features in the trial version, but it doesn’t hurt to ask those companies if they can offer those premium features on the trial for evaluation purpose. If the SMEs don’t find a good tool and need to build something in-house, a cheaper option would be to use freelance services like Upwork for a cheaper software engineering labor.

Implementation Planning

The implementation planning phase consists of defining KPIs, rolling out strategy, scheduled employee training and support after the roll out. Coming up with a roll out strategy is where most digital transformation projects might derail. DX teams need to adopt a lean methodology thereby first coming up with a “minimum-viable-solution” for their niche. For example, if a company is looking to implement full marketing automation solution, they can start by implementing a newsletter automation or social media automation first. After that, Measure the KPI and then move onto another area.

Key Performance Indicators

KPIs depend on type of business, vision and mission of the company. A good data-driven KPIs not only helps measure success of the digital transformation, but could also give insight into overall strategy of the company. Defining KPIs is the most challenging part of digital transformation and needs data-driven thinking. Sometimes the straightforward capture of data from newly implemented system is not enough to measure success and such data needs to be correlated with various other business parameters to come up with a success metric. At the end of the day, there is no one size fits all in terms of KPIs and each business will have its own data strategy.

Training and Education

Most of the employees in traditional SMEs might not be well versed in the latest software. The transformation team needs to set a scheduled training early in the roll-out period, at least for the first three months, depending on the learning curve of their employees.

Budgeting

This phase is where most digital transformation projects are likely to fall through. The biggest pushback from the budgeting team comes when the transformation team decides to implement full solution which might look expensive at the outset. The transformation team needs to communicate clearly to the budgeting team their lean methodology of implementing a “minimum-viable-solution” (MVS) within their niche.

The budget projection should include the cost to implement full solution and the cost to implement an MVS in the starting phase, including subsequent costs for each new roll-out within that niche. As Peter Bendor-Samuel describes in his Budgeting Is A Big Constraint In Digital Transformation article, the budgeting for each roll-out should be done as a portfolio investment within that transformation area rather than overall transformation project.

Post Roll-Out

Using the portfolio transformation strategy will help both the budgeting and implementation team measure the ROI for the individual transformation within that portfolio and the ROI for overall portfolio within that area. This gives a clear insight to success and failure of each transformation thereby creating a roadmap for multi-year budgeting and the sustaining of the transformation project. Any project within the portfolio that isn’t successful can be slashed.

This framework should help an SME without significant cash flow or a pool of talent to start their digital transformation projects on budget.


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by Manas Mudbari // Manas is the founder & CEO of Lexeme Inc., a natural language processing company helping researchers accelerate scientific discovery through collaboration and assisted knowledge discovery. Before that, Manas worked at a consulting company that helped startups connect with Fortune 500 companies for strategic partnership. There, he created strategies to digitally transform traditional enterprise.

Opinions expressed by contributors are their own.