NextGen Day

According to a recent World Economic Forum (WEF) analysis, the Covid-19 pandemic has raised small and medium-sized firms (SMEs) interest in digital technology, but various constraints prohibit them from implementing the technology needed to solve pandemic-related difficulties.

Despite greater awareness of the benefits of digital technology, many SMEs admitted to either postponing or having no plans to use it due to financial stress, according to a new poll done by the World Economic Forum.

Only 23% of SMEs stated the epidemic had advanced their digitalization aspirations, demonstrating that considerable impediments to digital technology adoption continue to exist, according to the research.

Limited availability and access to financial resources, competent labor, and infrastructure constraints to facilitate digitalization are among the obstacles.

“In general, SMEs are becoming more interested in digital solutions. Above and beyond increasing productivity and lowering costs, which used to be the core goals of most firms, agility, and flexibility in operations have emerged as key priorities. Furthermore, solutions that enable remote work and collaboration ranked first on the priority list for digital technology use cases, according to the whitepaper.

Challenges

The survey of 141 SMEs from six countries (Azerbaijan, Brazil, Colombia, Kazakhstan, South Africa, and Turkey) revealed that SMEs are increasingly interested in incorporating digital technology into their operations, particularly in areas such as the industrial internet of things (IIoT), cloud computing, big data, and artificial intelligence.

The majority of SMEs said they want to use technology to improve processes, ensure safety and security, improve quality control, and manage employee training and collaboration.

“SMEs account for more than 90% of all businesses worldwide and are the key drivers of social mobility, accounting for seven out of ten employment created.” Unfortunately, many businesses are having difficulty adapting to the Fourth Industrial Revolution (Industry 4.0). Larger companies (over 500 employees) are six times more likely than SMEs to use the industrial internet of things. According to a whitepaper released earlier this month, “this risks worsening economic inequality, suffocating prospects for social mobility, and pulling down global industrial output.”

The most noticeable change in corporate practices as a result of the epidemic is remote work.

According to the World Economic Forum, the longer the crisis lasts, a combination of on-site and remote working will become a permanent feature. This increases the pressure on SMEs to embrace digital technologies in order to adapt to the new reality, attract people, and stay competitive.

However, most SMEs are still at a low to moderate level of technical maturity, which stops businesses from fully benefiting from digital technology, limits the potential return on digitalization efforts, and discourages widespread adoption, according to the survey.

Financial restrictions are the most frequently mentioned barrier to digital transformation. Because of the uncertainty in the business environment, SMEs are focusing more on short-term goals and plans, as well as day-to-day operations and survival.

According to the publication, “the Covid-19 dilemma has caused corporations to divert cash to other areas such as health and safety, and job protection.”

A continuing lack of access to finance for SMEs is exacerbating the problem, as banks prefer to lend to large businesses due to the risk of default.

Another significant stumbling block is the scarcity of skilled workers to assist digital transformation.

The majority of respondents identified skill deficits in a variety of sectors, including big data analytics, robotics technicians, and IT managers.

Furthermore, when it comes to acquiring employees, SMEs face stiff competition from larger corporations.

Challenges with internet access and speed, as well as a lack of suitable data centers, have been identified as infrastructure hurdles, particularly in rural and distant areas.

Respondents also mentioned a lack of digital solutions on the domestic market, which is worsened by the country’s lower level of R&D and innovation when compared to advanced economies.

Furthermore, many SMEs are increasingly concentrating their efforts on local markets, which have less strong competition than the global market. This lessens the incentives for SMEs to embrace innovation wholeheartedly.

SME unhappiness with government support was also found in the poll. Respondents thought tax incentives, grants and subsidies, job support, and debt financing were the most appealing mechanisms of state support for increasing digital adoption.

In addition, the lack of industry standards raises both the actual and perceived costs of investing in digital technology, discouraging SMEs from doing so.

Solutions

According to the research, SMEs have a lot of potentials to employ digital technology, and policy may help them do so by focusing on providing financial assistance, boosting labor skills, and strengthening infrastructure.

For example, the government should provide financial support tools and initiatives to encourage workers to train and upskill.

Meanwhile, making high-speed broadband internet access at a reasonable cost and focusing on cybersecurity training and policies will create an atmosphere that encourages firms to use new technologies.

“Creating an effective environment for SMEs has the potential to accelerate their digital technology adoption.” This necessitates collaboration among key stakeholders such as industry, government, NGOs, and academia in order to improve company technical progress, according to the research.

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Disclaimer

This article is for informational purposes only and does not constitute endorsement of any specific technologies or methodologies and financial advice or endorsement of any specific products or services.

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