An extract from another interesting article from the team at "European Bank For Reconstruction and Development". Click on the link to find our more or register for their regular updates:
‘Going digital’ can be a game changer for small businesses that are trying to be more competitive and grow. From industry 4.0 to e-commerce, from the Internet of things to micropayments, digitalisation opens up a plethora of opportunities and establishes a level playing field with large firms.
Being ‘small’ offers the benefit of being agile and easily adaptable to transformation, whereas for large corporates the number of obstacles, from staffing to subcontracting, can quickly multiply.
In the Western Balkans and across the globe, companies are exploring how to integrate digital technology into their business models to access new markets, improve market intelligence and deliver higher value to customers.
But, far from being a panacea, digital innovation requires a strong commitment to review processes and services. And the means to invest: in research and training as well as in technologies.
What digital transformation means for small businesses was debated during the 2019 EBRD’s Annual Meeting and Business Forum in Sarajevo by experts from the business community, financial institutions and other stakeholders.
The Bank has a strong focus and track record in increasing SMEs’ competitiveness. Through its Small Business Initiative, it invests over €1.1 billion every year in direct and indirect finance for SMEs and supports about 2,300 consultancy projects.
All this is combined with supporting governments to deliver reforms to create a better business environment. Being ahead of the digitalisation curve is crucial for SMEs in the economies the Bank serves.
For now, small businesses are not necessarily jumping at the opportunity. So what are the challenges?
IT literacy and know-how are certainly some of them, especially for very small firms. Support can be found locally, from business associations. International financial institutions, such as the EBRD, are focusing on training platforms in emerging markets.
For example, Georgina Baker, Regional Vice President of International Finance Corporation, reported on the Digital Lab experience in Latin America, where financial institutions and small businesses share information and best practices.
Regulations also hit the top of the list of challenges according to Alexios Seibt of consultancy firm Arthur D. Little, based in Vienna. A study of the Austrian market revealed that local SMEs were unprepared for the advent of General Data Protection Regulation (GDPR) and led them to rethink how they see digitalisation.
“Having an email address and a website is not equal to having embraced a digital business model,” he stressed.
In parallel, regulators should go digital too to help cut red tape. This is also the experience of the Western Balkans, according to Tatjana Zabasu Mikuž of South Central Ventures, a venture capital fund active in southeastern Europe. One such initiative was the online Western Balkans regional business registry, which the EBRD supported. The region has talent for technology and investments in digitalisation pay off, according to Ms Zabasu Mikuž.
Access to finance, all panellists agree, is a traditional problem for SMEs and this also applies to investments in digital transformation. One of the problems can be that lenders themselves might not always understand digitalisation and what they are asked to invest in.
However, smart technologies are not always expensive, especially for lean SMEs which can rely on available (and cheap) applications and therefore save money.
Qais Sabri is very positive about the digital cross-over for SMEs and an incarnation of its success. “Access to new technology is no longer rocket science”, he said. He is Director at Eon Dental NV, a Jordanian manufacturer of custom-made dental appliances, which uses CAD/CAM and 3D printing technology.
“Digitalisation is happening around us at an individual level, and crossing over to business is inevitable,” he stressed. A start up like his should think in terms of a digital approach from the onset, using available consumers data and try to provide services and good tailored to the their needs, cutting out intermediaries.
Another success story comes from Dusko Radovic, owner and CEO of Transfera LLC, a Serbian transport and logistics company which employs 200 people. His company owns no assets: ‘no wheels and no walls’, as he put it. They trace shipments with an application and save lots of money in the process. Just a few years ago a company like his would have not existed. Now it enjoys the benefit of complete disintermediation and provides the same level of service as much bigger players.