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Digital Transformation: 7 Steps for SMEs

digital transformation for SMEs

The way we do business has changed. And SMEs need to be able to keep up. As the world becomes more interconnected than ever, with every product we could ever want just one click away, consumer expectations are at an all-time high.

So how can you implement a strong digital transformation strategy without breaking the budget? Here we define digital transformation and provide some key steps to follow to help bring your business further into the digital age.

What is digital transformation?

Digital transformation is the process of adopting digital technology to transform the operations of organisations by replacing non-digital or manual processes with digital ones or updating older digital technology with newer digital technology. A few areas where digital transformation can be applied include:

Sales and marketing – automated customer relationship management (CRM) systems make it possible to take effective actions at the right time. This could be a follow-up email after a customer enquiry to make sure the question has been resolved. An automated ecommerce platform can automatically recommend complementary products and send reminders when it’s time to reorder consumables. 

Inventory and supply chain management – digital solutions can provide real-time updates throughout the supply chain, reduce manual effort, plan upcoming needs, accelerate ecommerce fulfilment and more. 

Data analysis and decision making – much data available is not leveraged to maximise business effectiveness and productivity. Digital transformation makes it possible to analyse data and make decisions. 

Here are a few ways to introduce and update digital solutions in business.

1. Evaluate existing practices

Before making any major decisions, you need to understand how your current business processes work. How are you meeting customer demand at the moment? In what areas can you improve? How will digital technology help you to meet long term goals?

For example, if you sell products through ecommerce, you’re probably experiencing a significant amount of cart abandonment. Research shows that following up with an email reminder within three hours of cart abandonment, results in a 40 per cent open rate and a  20 per cent clickthrough rate. Implementing a digital solution will enable you to automate this function and improve online sales. 

Businesses also need to recognise how the digital technology they currently use operates and how it can be integrated with new products and services. Many still rely on outdated or inflexible technology, while employees might lack the experience they need to work with new technologies.

For example, a new CRM might enable improved customer service but staff need to be trained and supported to use the new system effectively. So implementing new systems without training and ongoing support will not deliver the desired results. 

To ensure a smooth transition, you need to decide how you’ll meet these challenges. Instead of moving your applications, data and other services to the cloud all at once, you could split your digital transformation strategy into phases to bring staff up to speed and make it easier to track and measure changes.

2. Define goals and objectives for digital transformation

Now that you understand how your current business practices work, it’s time to ask yourself what you hope to achieve with your digital transformation strategy: Do you want to satisfy customer needs? Reduce operational expenses? Get further ahead in the market? 

Defining goals and objectives can provide a good opportunity to re-examine how you run your business. Prepare employees for major changes in the form of education and training. Also observe how well they adapt to new technology, but remember to focus on employees first instead of the technology itself. Give them time to understand these new products and services.

At this point, stakeholders and other internal departments should also be contributing to these digital transformation initiatives. Not only will your SME go through a digital transformation during this process, but also a major change in business structure and culture.

Most importantly, be realistic about your goals and objectives. Your digital business transformation should incorporate existing strengths with your newfound vision. Carefully assess the skills and expertise of your staff and be sure to communicate regularly with them.

3. Create your digital transformation strategy

This will, of course, play a key role in your transition to more efficient technology.

Although strategies will vary from one business to another, you should attempt to break it up into small increments, prioritising each area of improvement by levels of importance so that you’ll be able to stay on track and minimise the risk of errors.

By this stage, all levels of your business should be involved in this process. For a successful digital business transformation to work, you need to have a supportive company culture, one where everyone shares your vision. For example, if sales,  production and fulfillment departments are not on the same page with implementing digital solutions, this task will be much more difficult. 

Address any concerns people might have about upcoming changes and ease fears by informing them of the benefits. According to a 2018 study conducted by the SMB Group, 27% of SME leaders reported that staff resistance to change was a ‘top challenge’ when trying to implement a digital transformation strategy.

As mentioned before, you can also help employees get used to these changes by offering further education and training. You can also hire a trained technician to demonstrate these new digital tools or even show how to use them yourself.

4. Select the right technology for your business

Here you will prepare to use new digital technology as part of day-to-day operations, implementing a range of digital tools in order to protect data and cut down on waste, while also improving customer service.

Big data and machine learning can work hand-in-hand in creating a personalised customer experience. While big data can extract and analyse information from huge amounts of data, machine learning uses input data and algorithms to estimate unknown future results. For SMEs, this can be useful when it comes to learning more about your target demographic, their preferences and their behavioural patterns.

Artificial intelligence can also automate similar processes for customer and tech support in the form of product design, chatbots, sales forecasting and self-service. It can help you to better understand customer behaviour, personalise services and capture their interactions with your business, as well as simplify tasks.

If it applies to your business, also look at how you can raise supply chain performance – how can digital applications improve on delivering on cost, service and inventory levels? How can organisational and process changes be implemented in a way that makes a positive impact on operations?

Cloud computing, meanwhile, is especially important when implementing a digital transformation strategy, and has become big business for SMEs in recent years. In a 2019 report by Microsoft, the value of the cloud market sector was valued at $11.5 billion, while 85% of all spending on cloud-based apps was made by SMEs. Cloud computing allows you to do business from just about anywhere, can be easily integrated with existing technology and is a faster, more cost-effective solution when it comes to storage, servers and databases. The rapid uptake of cloud accounting programs, such as Xero for accounting, shows that SMEs can implement digital transformation without having to make large lump-sum investments. 

Also consider your digital channels, including online search, display ads and social media, along with online support and mobile apps. In order to market products and services to a wider audience, you need to decide when these channels will be activated and how to integrate them with existing channels. 

If you decide to develop your social media marketing, for example, there are a number of digital solutions to choose from, such as Sendible, Buffer, Sprout Social and Hootsuite, to automate this function. The challenge is in choosing the best one for your requirements.

5. Establish strong leadership and an equally strong team

Now it’s time for your business to assemble a highly qualified team to implement your digital transformation strategy.

But if you’re unable to recruit the right people from within the company, tech providers could be a good alternative, who can help meet expectations and share your goals and objectives.

Reaffirming leadership is also essential at this stage. However, if a leader cannot be appointed internally, a ‘CIO as a service’ option with an external partner might also be possible.

You can even bring in a consulting firm to help implement your digital strategy, or widen your search online for potential leadership. But remember, as an SME, you can’t afford to have major disruptions, so make sure your partner is someone with the right industry expertise, who can seamlessly integrate new software with existing technology.

6. Set a budget

Of course, a substantial amount of investment is needed to implement your digital transformation strategy.

Rather than just taking money straight from your IT department, you need to carefully divide up your budget. It can be tempting to throw money at every leading digital tool on the market, but it’s wise to stick with what’s most essential, and will deliver the greatest return on investment. 

Focus spending on areas such as data analytics, cloud computing, business processes and customer experience. Aim to streamline time-consuming and repetitive tasks. Look at how digital transformation will make existing processes more affordable in the long run. Many small businesses also prefer to use simple tools with high impact, such as cloud-based accounting or CRM systems.  Consider a business loan for funding digital transformation costs.

7. Expect the unexpected

As technology evolves at a rapid pace and behaviours change quickly, you need to prepare for anything. For example, as consumers and businesses quickly switched to online purchasing as a result of the pandemic, ecommerce businesses needed to update or expand ecommerce platforms to keep up with the demand.

Be sure to revise your business strategy and digital initiatives on a regular basis to see if they still meet your goals and objectives. Also prepare to shift to new platforms or business models if your circumstances happen to change. Even after receiving the education and training they need in order to operate new technology, remind employees that there’s always something new to learn.

Mistakes might happen along the way, but they can also help us to recognise what’s working – and what’s not. A digital transformation strategy isn’t just about implementing new technology in the workplace, it’s also about innovation, experimentation and confronting challenges head on.

Starting your digital transformation journey

While the term ‘digital transformation’ sounds ambitious, remember that steps can be taken one at a time. Find an area where new digital solutions will have the most impact and work on this first. Also, while digital transformation can deliver ROI, there will be a gap between spending money and seeing results. Unsecured business loans from Moula are one option for financing digital transformation.


Business content for Australian SMEs. Sharing guides, growth hacks, and expert tips on finance, sales and marketing, and tech.

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