Digital Transformation Strategy for Small Business


In a recent couple of decades, digitalization has brought an avalanche of improvements to our lives. When it comes to business applications, the technology is mostly known for accomplishing large-scale tasks, like crunching enormous volumes of data or establishing communication over long distances. However, this view overlooks the value of digital transformation for small businesses, which can now compete with multinational enterprises on fairer terms. 

Below is a look at how digital transformation is viable for SMEs along with a list of risks to avoid when starting the digitalization journey.

Importance of Digital Transformation in Business

Today, the business benefits of digital transformation are nearly universally recognized. In fact, you’ll be hard-pressed to find anybody who would doubt that IT solutions boost performance. 

However, conventional wisdom holds that such improvements are mostly restricted to large-scale organizations, either due to the prohibitively high average cost of digital transformation or other reasons that render it unsuitable for small and medium enterprises. In reality, however, small businesses have an entire host of unique reasons to embrace digitalization.

To understand what digital transformation means for businesses, one should look into its connection to innovation. While IT itself is already out of the domain of novelty and firmly in the mainstream category, digital transformation ideas have a self-perpetuating quality of sustaining the culture of innovation. 

At the same time, small businesses themselves perform the role of innovation incubators, making them a perfect match: 

  • On the one hand, they are usually more agile, allowing for higher flexibility in changing strategies and adopting new tech. 
  • On the other hand, they lack the resources of multinational corporations, so innovation is their primary means to maintain a competitive advantage. 

Simply put, it is both necessary and desirable for SMEs to adopt a digital transformation business model.

Digital Transformation Opportunities

digital transformation for small business

By now, the importance of digital transformation in business is so apparent that large organizations are starting to pay attention. Microsoft, one of the mavericks of digital innovation, has recently labeled it the future of the SMEs and identified seven areas of opportunity to look for:

  1. Flexible working
  2. Personalized customer experience
  3. Data-driven decisions
  4. Artificial intelligence
  5. Empowered frontline workers
  6. Cloud solutions
  7. Cybersecurity

As an exemplary case of a small enterprise growing into an industry leader through technology, Microsoft is unambiguous in its position: either you seize one of these opportunities or watch others do it (and stay behind).

Benefits of Digital Transformation

Digitalization is a broad concept, so integrating it into business operations will look different for each company. By extension, the advantages and improvements will also vary. So, to estimate potential benefits and avoid unnecessary expenses, it is important to understand which areas of digital transformation are suitable for your enterprise and whether adopting them would align with the company’s strategic direction.

Customer Experience

As our understanding of marketing advanced, the elusive category of customer experience has come at the forefront of business strategies. And, while it is equally desired by all organizations, it is SMEs that excel at capturing it masterfully, not in the least thanks to digital technologies. 

From offering incredibly fast deliveries of products to cutting costs by eliminating intermediaries – digital tools make it possible at a fraction of the cost and add a personal touch that modern consumers are so starved for.

Data-Driven Insights

Understanding and predicting consumer behavior is indispensable. For a long time, large corporations had the upper hand in this domain simply by having larger datasets. 

With the arrival of Big Data, it became possible to obtain insights of higher quality with fewer inputs – and receive them without delay. With this kind of data at their disposal, SMEs can achieve unprecedented levels of customer-centricity in their services.

Resource Management

digital transformation strategy for small business

Managing a large inventory sounds like something only a large company would be concerned about. What is often overlooked is the fact that small enterprises, who have fewer resources to manage, also come short on means to do it. 

Eventually, small business owners face the choice of hiring more managers or deploying a set of tools to keep this process in check. And the latter clearly does it faster, more efficiently, and, in many cases, cheaper.

Customer Expectations

The latest generations of consumers are firmly in the digital culture – to the degree that they are referred to as digital natives. Incidentally, they are also the largest group of consumers – at least in the U.S. 

They are also quite picky in their preferences and will severe their ties with brands without hesitation if their expectations aren’t met. Digital-first services are high on their list of expectations, so failing to digitize means losing a considerable chunk of the market.

Collaboration and Coordination

Another aspect of business that is often associated exclusively with large enterprises. Granted, it is easier to see the improvements in communication when you are dealing with a large staff, especially when it is dispersed across offices at several locations. However, both corporations and SMEs are increasingly leaning towards contingent workforce options. 

What’s more, it is not uncommon for the latter to avoid physical offices altogether, opting instead for virtual ones. In such a setting, a properly configured collaboration tool is essential. And even in less extreme cases, coordinating a small team is as valuable for business operation as a large multinational one.

Reduced Expenses

As mentioned above, the cost is one of the contentious points that actually discourages companies from adopting a digital transformation model. And, of course, the concerns are not baseless – digital services do indeed cost money. 

However, once we look at the entire picture instead of focusing on short-term expenses, it turns out profitable. A recent article on Forbes cites three examples of organizations choosing the digital transformation route and achieving financial improvements beyond cost reduction:

    1. Airport: increased revenue generation
    2. Hospital: 25-30% savings beyond service cost
    3. Energy company: 10% in market share

Of course, such effects stand out more when it comes to million-dollar revenue streams. Nevertheless, small enterprises with tight budgets would also appreciate long-term financial stability.

Employee Skills

The digital-first approach is becoming the new standard in the business domain, so the workforce has to keep up. Reports indicate that enterprises of all sizes increasingly recognize the importance of digital skill sets and invest in employee training. 

For companies, this is a question of enabling digital leadership throughout their workforce. For an employee, working in a digital-first environment is a way to keep up with the demand in the job market. In other words, by assigning digital transformation roles and responsibilities, SMEs attract talent and stay ahead of the competition.

Successful Cases of Digital Transformation

digital transformation for small business

No matter how amazing the theory behind digitalization is, what matters are real-life examples of how digital technology has transformed business activities. So, to back these claims, here are some of the cases from our experience.

  • A seed-to-sale software solution for Emblem, a cannabis producer from Canada, boosted sales by 60% and increased the user base by 70% through AI-powered real-time inventory forecasting and reporting suite.
  • A garden assistant app for Flower Power that helps customers to care for their plants increased plant management productivity by 40% and greatly improved customer experience.
  • An intelligent fleet monitoring solution for SmartBin, a waste management and recycling company, used IoT-powered sensors to optimize operations and reduce costs up to 50%, resulting in annual savings of over $80,000.
  • A mobile collaboration tool for Gopher Leads managed to bring the company new clients, help unify their teams, and increase sales by 20% on average.
  • A social network for dog lovers, ThreeMillionDogs offers exceptional user experience and, consequently, boosts traffic by 350%. 

Digital Transformation Risks

With evidence of the benefits of digital transformation emerging almost on a daily basis, it might be tempting to dismiss the concerns voiced above. Yet, unsurprisingly, the reality is somewhat more nuanced. 

As with any business endeavor, digitalization requires careful planning and thoughtful integration with other aspects of the company’s strategy. So, in order to avoid setbacks, one should factor in potential risks associated with the digital-first strategy:

  • Technological: Everything from hardware failures to compatibility and performance of software solutions.
  • Security: The possibility of unauthorized access, data theft, and deliberate workflow disruption.
  • Privacy: Mismanagement of sensitive corporate information or personal data of employees.
  • Strategic: The mismatch between digital transformation methodology and corporate strategy.
  • Regulatory: Lack of compliance with technology-related policies and regulations (particularly relevant for operations within multiple jurisdictions).
  • Third-Party: Issues arising from inappropriate handling of data by external parties.
  • Resilience: Over-dependence on tightly coupled systems that leave little space for error.

Of course, none of these issues are critical and can be avoided by formulating a suitable strategy and approach implementation in a systematic manner. In case you have any questions on any step of the process – we will be happy to lend our expertise on digital transformation for small businesses.

Digital Transformation: Leveling the Playing Field

Despite being trumpeted as having unprecedented market ramifications, the phenomenon of digitalization is hardly unique. 

Numerous technological advancements in the past have bridged the gap between large organizations and small enterprises, giving the latter a competitive edge. What’s more important, these technologies have paved the way for innovation, making businesses more profitable while also bringing value to our lives. 

What makes today’s situation different, though, is information availability: more than ever, we are able to recognize the opportunity and make informed decisions. With the right tools and knowledge, the success of your small enterprise can literally be started with the press of a button.


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