The term digital transformation seems to be everywhere these days—but what does it really mean for SMEs, the backbone of the Greek economy?
Research on digital transformation shows it is imperative to the survival and competitiveness of businesses, while also emphasizing the complexity and the risk inherent in the undertaking, with failure rates in achieving set goals amounting to a discouraging 70%. Yet in reading the relevant studies, one quickly realizes that they mainly refer to very large, at least by Greek standards, companies (mostly over 1,000 employees). This can lead SME managers and employees to assume that digital transformation is not for them or that, even if it is, the risk and complexity involved far exceed their company’s capabilities in terms of resources and abilities. This in turn often leads to inaction.
Digital transformation is a marathon for the many, not a sprint for the few
Nevertheless, it is obvious to all that uncertainty and volatility have become the main features of the business environment for all companies, regardless of size and sector. Therefore, business agility at a strategic and operational level concerns all businesses, and digital technologies and capabilities are essential to achieving it.
This begs the question: How can small and medium enterprises in our country start their digital transformation in a way that is adapted to their own needs and capabilities? First of all, digital transformation does not necessarily need to take the form of cataclysmic change, and each company is a unique entity with its own needs and capabilities. The starting point is thus different for every business.
The literature suggests three specific stages: digitization, digitalization, and digital transformation. The first stage, digitization, pertains to the conversion of analog data into digital form. Many if not all small businesses have already to some extent implemented the digitization of their data and processes to some extent. This stage is important because it lays the foundations for more efficient operation of the business (automation of processes, reduction of operating costs, speed) and contributes to saving resources and creating a database that contributes to decisionmaking.
The second stage, digitalization, has to do with the use of technologies in order to change and optimize existing business processes. The goal of this stage goes beyond cost reduction and can aim, among other things, to better coordinate various processes or to create additional value for customers.
Digital transformation is the third stage, which is the broadest in terms of its impact on the company and concerns changes that lead to the creation of new business models. Consequently, digital transformation is linked to strategic changes and does not refer to standalone business processes; its implementation presupposes and brings about significant changes in the strategy, structure, culture, and human resources of a company, as well as in its relationship with the wider environment.
In this reading, it becomes clear that digital transformation is a gradual process that SMEs are already undertaking, to one degree or another, and can begin methodically planning the next steps based on their needs and capabilities. At each of the aforementioned stages, companies can methodically enhance their performance and simultaneously create the resources for the next steps, while management and employees can acquire important skills and knowledge to do with new technologies and creating a competitive advantage. When compared to larger and older firms, SMEs have the advantage of less complexity and need for laborious structural changes. Digital transformation, then, is a marathon for the many, not a sprint for the few.
A longer version of this article previously appeared on Kathimerini.gr in May 2022.