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Fintech 29 Dec 2016

SMEs strive to keep up with digitization

Spain’s small and medium sized enterprises still have a long way ahead to adapt to the digital economy.  The good news is that, in general, it is easier for them to tackle the huge cultural shift that digitization brings than for larger businesses.

“We are in an era were companies without scale can compete at a large scale, as small businesses can have the same penetration as large corporations. Competing at a large scale without scale has become a very disruptive element.” Juan Pedro Moreno, Chairman and CEO of Accenture Spain, used these words to sum up the tremendous possibilities that digitization has opened for SMEs, during a recent meeting organized by the La Vanguardia newspaper.

But, are they ready to seize them? Not quite, according to the recent second Study on Digital Skills drawn up by the Institute of Digital Economy of the ESIC Business School, in collaboration with consulting firm Millward Brown.

The positive side of the story is that, despite lacking financial muscle, SMEs, which employ about two thirds of wage earners in Spain, are better poised to keep up with the pace of digitization than larger businesses. In fact, they are slightly better prepared than bigger companies: according to the barometer developed especificaly for the report, their score is 13.74 vs. 13.63 by larger corporations.

“Digital transformation demands a dramatic cultural shift

In this case, smaller enterprises benefit from a higher level of flexibility: “Digital transformation demands a dramatic cultural shift: It has to affect a series of structures that, if too deep-rooted, can be very hard to change. Otherwise, digitization ends up becoming nothing more than a statement of good intentions,” says Carmen Agenjo, from The Valley Digital Business School.

How did ESIC elaborate this barometer? It is based on a questionnaire sent to 420 top executives from all sorts of companies, designed to gauge the importance they attach to digital skills. Then, the authors of the study compared these statements against the actual level of fulfillment of these skills in companies.

Pending Tasks

According to the report, more than half of the companies (64%) are familiar with the main digital functions, but only one-fourth of them (26%) has created a specific position to develop said functions. 30% of companies have a social manager and 27% an e-commerce manager, while positions such as affiliate manager and inbound marketing specialist, with 20% and 6% respectively, are not found that often in companies.

Although corporate websites have become just as commonplace in companies as Christmas dinners, businesses are much more reluctant to engage in initiatives requiring a higher level of development and strategic involvement, such as online stores or mobile apps. Here, the level of implementation depends a lot on the company’s activity. 70% of retail companies and 50% of tourism companies have an online store, and are also much more cutting edge in terms of mobile apps – 57% in retail, 44% in tourism-. In general terms, the retail industry is the most up-to-date in digitization, while the industrial sector is lagging in a number of areas.

One of the key findings of the report is that Spanish executives still prioritize traditional disciplines such as digital marketing (20%) and e-commerce (18%) over next generation disciplines such as big data (7%). For Joost van Nispen, Chairman of ICEMD, “investing in business training will become increasingly important to compete against international companies that are already aware of the importance big data, and have built a wealth of expertise in these areas.”

Demand for Training

After analyzing the digital habits in companies, the study evidenced the need for training in digital skills: 78% of executives feel they need to catch up. However, companies are becoming increasingly aware of the consequences of their shortcomings, and are starting to consider the need to invest in digital projects in the next 2 years (70% of respondents). In the case of SMEs, only 17% is considering a strong investment in digital projects, compared to 23% in Larger Companies.

In the case of SMEs, only 17% is considering a strong investment in digital projects, compared to 23% in Larger Companies

Still, this increase in resources does not guarantee anything, as digitization requires a cultural shift in the company. A high number of companies are already active in social media, although many of them are still not sure what for. “Many restaurants, for example, have realized that it is easier to post their daily specials on social networks than keeping their websites up to date, but some SMEs close their accounts as soon as they receive their first negative review or comment, or fail to reply to them,” explains Agenjo. Digitization entails tremendous change, and some SMEs are still at the early stages of the process.

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