Top 5 Challenges that SMEs face in their Digital Transformation Journey; and how to overcome them?

Laxitha Mundhra
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Startup Guide: Drive digital transformation success through digital adoption solutions

Small and Medium Enterprises (SMEs) are a very important ingredient of a country and its business ecosystem. They contribute to the economy, employment and complement the larger companies and conglomerates to operate seamlessly. For any country, it is critical for its SMEs to perform optimally.


The governments, in countries such as India, have taken a keen interest in encouraging entrepreneurship across sectors so that many SMEs are there across the country. Well-functioning SME ecosystem enables a nation to enhance productivity, and output across sectors, as well as accelerate the pace of exports. It enables the development of the business landscape across Tier 2, Tier 3 cities, and beyond.

It is important to note that sectors such as manufacturing and services adopt technology slower than the other sectors. However, the digital era that we live in today enables every sector to undergo a radical transformation across areas such as sales, marketing, financial management and customer engagement by leveraging the power of digital technologies. Digital Transformation creates a democratic level playing field for SMEs.

However, there are challenges that the SMEs must overcome to embrace technology and embark on the path of digital transformation.


Let us look at a few of these challenges.

1. Insufficient Growth Capital

SMEs comprise a few proprietors who bring in limited capital with respect to their equity. They work with cost and margin pressures and focus more on sales and sustenance. Hence, they often do not seem to have sufficient growth capital. Thus, technology adoption and digital transformation are often put on the backburner.


2. Lack of Awareness of “Digital Transformation Impact”

There are SMEs who are not aware of the impact that Digital Transformation can have on business enablement and acceleration as well as customer retention and loyalty. Hence, the decision to embrace a Digital Transformation roadmap is often delayed or not taken at all.

3. Lack of Inherent Technology Expertise


SMEs do not often come with inherent technology expertise and it becomes difficult for them to create a Digital Transformation Roadmap all by themselves. The inertia to get an external consultant or even consider it important might be high too.

4. Dynamic Nature of Digital Technologies

Digital Technologies keep evolving to empower customers with newer, faster, and more convenient ways of doing business. SMEs often dread such a pace of change. Hence, the resistance with respect to adopting digital technologies to augment business. It also puts a lot of strain on their capital with respect to purchasing the latest smart devices, availing the services of the best internet and cloud service providers, and hiring skilled employees to manage this transformation.


5. Managing the Data and creating a Back-Up Plan

With digital technologies, companies tend to create and store critical data – structured as well as unstructured. It is difficult for SMEs to store, manage, analyse, and transform data into insights for business decision making. Managing the data, the systems, the cloud and training the resources required to handle these make SMEs apprehensive when it comes to embracing digital technologies.

Can SMEs overcome these challenges?


SMEs can reap rich benefits if they can approach digital transformation with a positive mindset. And the result of a successful digital transformation by an SME could be sustainable growth and value creation. Any StartUp that focuses on these five points, they can build a ladder to slowly come out of the challenges, or narrowly cross them.

1. Market intelligence

For any business, it is necessary that you know your consumer, your investor and your competitor. This helps to differentiate your product from the competition. It will also ensure your audience will see, hear and remember you and not just the product.


2. Establishing and earning recognition

ITC was not ITC before people started talking about it. It was just a tobacco seller. What happened then? It ventured into building a name. Amul, for instance, has brand recognition in online and offline platforms. The little girl is a mark of its recognition. People want to know what the brand thinks. They cannot follow Amul on Instagram to buy milk, or cheese or chocolate.

So, what can you do? Even if you are an offline business, venture into online platforms. Build a community on ideologies.

3. Building a digital presence.

For any SME, it is very important to know that social media is important for their business. Consumers don't consume products online, they consume the idea of the product. You can cater to a large audience around the world if you build your SME and spend some time online. Explore your options with user-friendly websites and social media platforms like Facebook, Instagram and Twitter, all of which actively facilitate audience interaction and engagement.

4. Investing in resources.

You can't do everything yourself. It isn't going to go long, especially when you’re trying to establish a foothold in the market. So, try hiring people for a short term, maybe invest in a digital marketeer or an intern who is eager to learn. This will align with your overall business plan, be a growth area for both of you, and also help reach your audience in a more productive manner.

5. Get a starter pack.

Even if you have the capital, start small. Try to invest in starter packs and see how that works for you. Then linearly grow as your business grows. Whether it is cloud backups or data management or contract management, increase investments as your business grows.

Vimal Pillai, AVP-Marketing and Digital, Clover Infotech with minor inputs by Laxitha Mundhra>