• Chris Donovan

5 Reasons Why SMBs Struggle to Leverage Digital Technology & Why It Matters

Why are so many SMBs lagging behind in the adoption of digital technology?

Could this be a sign of a larger competitive problem?


Digital technologies, including analytics and process automation, are transforming markets; rewarding those who figure out how to use them to create a competitive advantage. Most larger organizations have been on their digital transformation journey for some time now, but the majority of small to midsize businesses (SMBs) are significantly lagging behind in adopting game-changing digital technologies.


This poses a significant competitive threat as larger organizations and more innovative SMBs start leveraging these technologies to improve their execution effectiveness, which translates into increased market share.


In this article, I discuss the five primary reasons behind the slow adoption of data-driven digital solutions among SMBs and share some industry best practices that leaders can use to steer their SMBs to capture the many benefits of modern digital technologies.


Overview:

  1. Not Understanding the Value of Data

  2. Operating Under a Break-and-Fix Model

  3. Budget / Cost Barriers

  4. Access to Talent

  5. Corporate Culture

  6. Conclusion



1. Not Understanding the Value of Data

Before the COVID-19 pandemic, very few SMBs had a good grasp of the important role that data plays in helping them gain a strategic advantage. All the theoretical scenarios for business continuity were put to the test during the pandemic and it was mostly organizations that had robust digital and data strategies that rebounded the quickest, enabling them to survive and grow in those harsh times.


The lack of skilled personnel who can explain and demonstrate the value of data to an organization, the absence of a clear technology strategy, and the assumption that investing in digital transformation is way beyond what they can afford stifles the growth of many SMBs.


2. Operating Under a Break-and-Fix Model

Another common problem that we see very often among SMBs is they operate under a “break-and-fix model”. This is when you wait for a problem to develop before you look for a solution to remedy the situation. This means that a company is in a constant state of putting out fires as opposed to implementing well-thought-out technology strategies that can elevate its market position.


A lack of foresight to anticipate your business' growing technology needs leads to vendor creep; a situation where you implement “point solutions” to manage a problematic part of your operations. While it is true that point solutions solve immediate pain points, they are typically disconnected and siloed from each other. This lack of integration becomes a barrier to establishing optimal workflows as it's difficult to share data across these disconnected systems. This commonly leads to user frustration as completing simple tasks may require several unnecessary steps.


Instead of this, create a clear technology vision to establish your True North to guide your technology decision-making. A technology vision will give you the knowledge and confidence you need to develop a technology strategy and implementation roadmap that iteratively produces substantial business value.

3. Budget / Cost Barriers

SMBs, unlike established large organizations, have tighter budgets and require very careful cash flow management to ensure every dollar spent on technology and talent translates into value.


Larger organizations often get away with less stringent budget controls because they have better revenue and can afford to experiment with different solutions. SMBs can’t do that. They must ensure the solution works right off the bat. This is why a lean-agile approach - like the one we use at Adaptive - works so well in such an environment.


Investing in digital transformation to become a modern, data-driven SMB is often viewed as a large capital expense. But this doesn't need to be the case. A smart, iterative adoption strategy can be employed to effect a “surgical” implementation that focuses on solving your company’s biggest pain points first. This ensures you have a cost-efficient and quick “time-to-value” technology deployment with minimal capital outlay.

4. Access to Talent

The average SMB IT team is compromised of members who are primed to maintain the status quo. Very few invest in employing people that push the envelope to create original solutions. This is because such talent is usually very costly and in high demand - making them unwise hires for a small or midsize business. Such talent is hard to find, onboard, and keep because of the many enticing offers they receive from recruiters.


An onshore/offshore staffing model works very well in this scenario. We’ve implemented this model for our clients and the cost savings are phenomenal. For example, a full-time BI Analyst in the US costs about $130,000/year (including benefits) while a senior BI Analyst offshore costs about $69,000/year flat.


We understand the value of having part of a company’s IT team physically present and accessible at all times, but SMBs can gain significant economies with a hybrid model of onsite and offshore resources. This model levels the playing field for SMBs and gives them access to a highly skilled team of resources that can implement advanced digital solutions at a fraction of the cost of an onshore team.


Download our case study to learn how we used this approach to transform L2 Brands - a 9-figure decorated apparel manufacturer in Pennsylvania - into a data-driven organization in 100 days.


5. Corporate Culture

This is perhaps the biggest of them all - corporate culture. At Adaptive, we like to say that people will always be people. They resist change and will do anything to simplify their lives. The irony is that the solutions that can help your people simplify their work and produce better results require learning new skills, but this is not always welcome.


In an Accenture survey, the majority of respondents had an appetite for data, but data literacy among them was low. The results also showed that about 80 percent of the people they interviewed reported that they were not happy working with data.


To foster a modern, data-driven culture, you need to help your team understand how the use of data can benefit them. When they begin to appreciate the connection between adopting new data-driven tools and their ability to be more effective and productive, they will naturally begin to adopt the new approach. We also find that if rolled out correctly, a workforce will get excited about adopting new technologies and learning new data skills that will add to their value in the labor market.


Therefore, a core component of digital strategy must include a thoughtful, effective rollout strategy that engages and excites your employees.


Conclusion

Small to midsize businesses are the backbone of the American economy. As such, there is fierce competition to gain market share, earn better profits, and become more efficient. Developing a modern technology strategy that includes arming your workforce with data solutions and data skills will give you the advantage to scale and dominate your market.


If you would like to discuss the challenges you’re facing in your organization as you develop and implement your technology and data strategies, feel free to book a meeting here.