SME Digitalisation: Charting a course towards resilience and recovery
By Joakim Reiter, External Affairs Director, Vodafone Group, and Vinod Kumar, CEO, Vodafone Business
It is widely accepted that SMEs are the beating heart of the European economy. There are 24 million small businesses across Europe, employing a total of 95 million people and generating €4 trillion a year, and they are integral to innovation and job creation, creating 85% of all new jobs each year. This was a point reiterated by President Ursula von der Leyen in her first State of the Union speech earlier this month, saying “SMEs are the motor of our economy and will be the engine of our recovery”.
What is more open to debate is how governments can best support SMEs through this unprecedented period of economic challenge – and the role digital tools and solutions can play in driving greater business stability and resilience. At Vodafone, we provide a comprehensive range of digital services to small businesses in across 10 European Union Member States, and so we are well placed to help identify the solutions that will enable them to achieve the digital transformation that will deliver long-term growth.
Six months after the first wave of EU lockdowns, now is an opportune time to assess how businesses have been impacted – and governments have reacted – by the Covid-19 crisis to date. We commissioned research during May and June into the main challenges faced by SMEs during this time, and understand how digital bolstered their resilience. The learnings highlighted by this study, combined with additional analysis by Deloitte, provide tangible recommendations for future government policy across the EU.
Digital supports resilience and recovery
Our survey of 1,200 SMEs across Germany, Italy, Spain and the UK has shown that those SMEs that have digitalised are more likely to have found new business opportunities during the pandemic. In fact, the most digitalised businesses highlighted opportunities at more than double the rate of the least digitalised.
And it is highly likely that these digital shifts will drive long term changes. Just as more of us expect to work more flexibly in the future, 44% of businesses expect the measures they have implemented in recent months to be permanent as indicated in the Vodafone Business Future Ready Report.
However, too many SMEs have found significant barriers when it comes to the adoption of digital services. They are still much less likely than larger businesses to take advantage of new technologies, even though they connect to the internet at the same rate.
There are a number of reasons why SMEs have struggled to digitise:
73% said they had had trouble with the set-up and implementation of new technologies, integration with existing technologies and business processes, migration from previous systems and decommissioning old technologies;
51% said that they had struggled to identify the right technology to use, or the right supplier
38% of SMEs said that they needed support with training.
However, while there is much technology firms can do to make their products and services more accessible and thereby increase adoption, not every small business still understands the importance of greater digitalisation. Therefore, there is still a significant role that governments can play to help accelerate adoption in order to unlock further economic and societal benefits.
A tailored SME digitalisation framework
The research clearly shows that national governments should adopt a clear SME digitalisation policy framework that:
addresses availability gaps by supporting investment in areas where infrastructure is not available, or offers free or subsidised high-speed connectivity to those sectors in greatest need;
offers grants or vouchers for digital investment, so that SMEs have the capacity to find solutions based on their individual needs; and
delivers additional support measures to support capability such as curated online resources, training and incentives to encourage take-up.
It is important to remember that different Member States face different challenges – for example, they all have different levels of high speed broadband access, and different levels of adoption of core digital tools. While all governments should be looking to improve their rate of digitalisation, as measured by the Digital Economy and Society Index (DESI), a tailored approach is needed.
Building on our presence in Europe, our report suggests specific recommendations in each of the markets in which we operate – recommendations that will not only help Member States improve their overall DESI score, but will also ensure that all of Europe’s SMEs are able to digitalise fully.
As we seek to emerge from the crisis, we have an opportunity to shape the economic recovery in a way that delivers sustainable, long-lasting, impactful change. The EU reconstruction plan presents a once in a lifetime opportunity to contribute to this transformation. Investing in small businesses, and helping them achieve their full, digital potential, will ensure a stronger, future-proofed Europe.
The full report can be downloaded from here.