Small business invests for the digital future
The small and medium business (SMB) sector has generally taken a utilitarian or functional approach to technology, seeking efficiency rather than a competitive edge. But the rise of the digital economy and the dramatic shift in how businesses engage with digital-savvy consumers has upped the technology ante for SMBs.
As business focus moves from ‘customer service’ to the higher plane of ‘customer experience’ – which increasingly means across multiple channels and touch points – SMBs are responding to both the challenge and the opportunity to transform their businesses for the new digital marketplace.
As Deloitte Consulting Australia partner Vanessa Matthijssen noted, businesses need to create value “beyond the standard product” for their customers.
“Used well, digital services and connected products enabled by IoT have the potential to thoroughly change the relationship between consumers, the product and the brand. They can boost consumer engagement to deliver substantial value for both consumers and businesses,” she says.
This impetus for SMBs to take decisive digital steps is reflected in the findings of IDC’s FutureScape: Worldwide SMB 2017 Predictions report, which forecast a record $US557 billion in SMB IT spending in 2017, a 3.9% increase over last year. Most notably, that spending will continue a shift from hardware to software and solutions.
Among IDC’s predictions:
• Cloud service brokering (CSB) will be key for mid-market consumption of cloud services, leading almost two-thirds of global SMBs to choose CSB partners by 2019–20.
• Mid-market firms’ mobile investments will rise by up to 50% in 2017.
• Mid-market firms will spend 30% of their IT budgets on mobile projects in 2017.
• By the end of 2019, 70% of mid-market firms will implement cognitive/AI-enabled enterprise software and intelligent assistants.
• 40% of SMBs will be using a big data and analytics solution by 2018.
An analysis by KPMG Enterprise of mid-market companies listed on the Australian Securities Exchange (ASX) found that companies investing in intangible assets such as digital technology are growing their revenue at a faster rate than those which are not (+4% growth compared with -2%). Profitability is also higher in these companies.
KPMG concluded that ‘accessing new horizons through technology is a fantastic opportunity for the mid-market’. This is particularly significant, given that the mid-market sector represents more than 65% of the Australian economy.
Gen Y impact in Asia
Alan Lau, a former senior partner in McKinsey’s Hong Kong office, has noted the generational impact on digitisation in Asian businesses.
Lau, who is now based in Shenzhen, leading the creation of a new fintech business for Chinese internet giant Tencent, says countries such as China, Indonesia and India “are really pushing the boundaries and innovating the most” when it comes to digital transformation.
“Digital is not just about having a website… it’s about digitising your entire enterprise. It’s digitising the process and the customer experience, modernising your IT, injecting big data analytics and AI into your core operations,” Lau says.
“Having visionary leaders, as many Asian companies have, helps tremendously. Many of these are founder-owned companies. They’re first-generation entrepreneurs and they have the skills and commitment to drive through digital transformation.”
The transition to a 21st Century digital business requires vision, commitment and investment from SMBs. Fortunately, the IDC report shows that many businesses are now embarking on this vital digital journey.