In a post COVID world, digitisation of SMEs is crucial for their survival

In a post COVID world, digitisation of SMEs is crucial for their survival

Digitisation is a word which most of us might be hearing a lot ever since the coronavirus became a pandemic and the entire world went into lockdown. We had to stop all interaction with another human being and that implied no face to face meetings without protective gears, no working and collaborating physically, no taking out your clients for dinners etc.

The way we humans used to work fundamentally changed. Like everything, I think this shall too pass one day.

One day we will be free of the coronavirus, as we have survived earlier world-threatening events like the Spanish flu, the two world wars etc. but some things will change going forward.

Many of the white-collar jobs will have work from home clause, which shall become a negotiating factor for employees while looking for a new job. Higher adoption of digital tools will not only be important to improve efficiency but for the very survival of many companies.

A lot of things have changed ever since the pandemic happened. Meetings are happening digitally, many employees are working from home, using digital channels to do their work, coordinate and share their work.

It has become essentially important to adopt these new ways of working. Digital is no longer a term that is applied to high tech companies who are doing exceptional work in AI and blockchain.

Digital will soon become a concept of parity among companies. Therefore, if a company wants to just survive and do business today, they have to adopt digital tools and digital ways of working.

So before we go further, it is important to understand the current state of digitization in Indian SMEs.

A recent survey was conducted by Tally and Kantar amongst 2250 MSMEs of different industry verticals across 34 cities in the country.

The study revealed that 35% of MSMEs has adopted business management software and among them, more than 40% of the MSMEs already use digital banking and payment services with another 40% likely to adopt soon. However, less than 25% of business management software users have adopted business applications like financial applications, customer relationship management applications, etc., but a strong 45% looking to adopt these in the near future.

While the adoption of online services is relatively on the higher side, the adoption of applications that can greatly help improve business efficiency and effectiveness has been disappointing.

A staggering 68 per cent of Indian SMBs are completely offline, with only 2 per cent actively selling or promoting their business online.

In a study done by KPMG, SMBs were primarily divided into 4 categories.


So as far as digitisation is concerned, SMEs in India are not completely oblivious to the idea. But there are many challenges to the adoption of digital tools in SMEs as was found in a study such as:

35% of the respondents who are owners of SMEs do not believe that going digital ads much value to the business and the next most important reason was that they had limited knowledge or expertise about the internet and IT in general.

The hardware and connection cost was the third-highest factor behind the lack of adoption of digital infrastructure by the SMEs.

Additionally, the following points also contribute to the lower adoption of digital technologies by SMEs:

Unstructured business processes

Most SMEs do not follow structured business processes which are crucial for the adoption of digital tools like enterprise software or a CRM software. Most SMEs work just to get the job done.

They do not always follow a standard practice, which makes digitisation of their processes more cumbersome and difficult to implement.

Focus on today rather than tomorrow

Most SMEs owners in India are happy to just keep the business rolling from one quarter to another quarter.

They do not want to and neither do have the financial resources to do long term planning such as adopting an enterprise software.

Such investments are large and have long term orientation, which SMEs lack.

Solution Implementer doesn’t work with SMEs

As working with SMEs exposes solution implementers to a wide variety of systematic risks, we don’t have many solution implementers catering to this sector.

Lack of good solution implementer makes it difficult for SMEs to adopt digital solutions.

What should SMEs do to become more open to the digitisation of their business processes?

Change in Mindset- Going digital is sometimes at the bottom of the agenda for most SMEs.

Undertaking a digital transformation requires the commitment of the top management and also significant financial and human capital.

If the top management doesn’t feel like a digital transformation can take the company to the next level, it is impossible to have a digital transformation. SMEs must understand that digital technologies would be very important for most industries to not just survive, but to thrive.

If you are playing the long game, there is no other way apart from going digital.

Seeing digitisation as an investment rather than a cost

Most digitisation in SMEs happen due to requirements being put on them to have certain tools.

For example, many big firms won’t outsource their supply chain work to SMEs if they don’t have an enterprise-grade BPM tool.

Some companies may require that their partners use CRM software. Such a requirement make SMEs invest in digitisation.

But it is time that SMEs see digitisation as an investment that they should put efforts in rather than seeing it as an investment that needs to be done.

Why digitisation is crucial for SMEs to survive post-COVID-19?

Covid-19 has hit businesses which didn’t see it coming. A lot of businesses are in perpetual pain for the short to medium term.

The hospitality business, including hotels, airlines, railways, car rentals, restaurants etc are the hardest hit. Many would not survive.

But other sectors also have been affected. SMEs in the manufacturing industry had to shut shop for almost 2 months and many are still not working at full capacity due to social distancing norms and lack of demand from the market.

Many Auto ancillary industries are facing a difficult time as there is an almost dead stop in auto sales for the last two months of April and May. So problems are galore for these companies.

So can going digital save SMEs and if so how?

Well going digital has many phases. The first phase is usually to digitise all records that were earlier done manually. Working on spreadsheets rather than writing is the first step of going digital.

Next phase is usually adopting an accounting software that can help keep accounts easily.

Such adoption of digital tools makes employees more productive by reducing redundant tasks and using the computation power of computers rather than humans.

The next phase is the use of customer-friendly tools like a CRM that helps the companies in dealing with their customers and become more customer-centric.

The last phase is the use of digital tools to gain a competitive advantage over your competitors by adopting chatbots and AI tools to take your business to the next level.

If you are not convinced about taking the digital route yet, let us look at some of the advantages that SMEs have when they adopt digital technologies:

  • According to the research by KPMG, digital SMBs grow revenues and profits twice as fast as offline counterparts.
  • Having a website, a presence on social media, selling on e-commerce give SMEs greater reach and the ability to engage with customers better. With face to face, human interactions reducing post the pandemic, reaching out to customers and clients for B2C and B2B SMEs respectively will be crucial for their survival.
  • Through the use of digital technologies, SMEs can grow faster by using efficient processes, less wastage and achieve greater scale. All this contribute to greater margins and greater profits.
  • The more digital tools SMEs use, the easier it gets for them to coordinate with their employees, their clients or customers and share information among them. Again in a post COVID world, sharing of information on the internet is crucial for business continuity.
  • Adopting digital tools helps SMEs not only to expand their businesses in India but also abroad.

How can SMEs leverage technology to survive and thrive in a post COVID world?

Step 1- Understand the new realities of work

The first step towards digitisation is to understand the new realities of work. With social distancing and frequent disinfection needs, certain business processes need to change.

Evaluate whether digitising the processes can benefit the company.

For example, an SME in the FMCG sector can use digital apps for sales calls and for order taking rather than using a pen and paper that is passed from one person to another.

Digitisation of the sales call will enable sales agents to quickly enter the orders in the system and for the orders to get dispatched quickly, all without any human touch.

Identifying such processes which are crucial for your business is important. No one can do this work for SME owners. They have to do it themselves.

Step 2- Understand if adopting digital will improve efficiency or boost revenues

SME entrepreneurs need to brainstorm whether adopting technology can help boost revenues or improve efficiency in their company.

Does adopting process automation tool improve efficiency? Does having a demand predicting tool help in reducing inventory and its associated costs? Does having a website or selling through e-commerce channels increase revenues?

Then the SMEs should invest in these technologies. If you are in for the long game, you need to invest in digital technologies.

But you should not start chasing after the latest technology like AI or blockchain without a business purpose.

If a business requirement needs a technical solution, go for it. Don’t go the other way as in a technical solution trying to fit in a business requirement. The business requirement comes first.

Step 3- Set budgets for Digital transformation

If you have found out a business requirement that will benefit out of a digital transformation, you need to set aside a budget for that.

Budget is important as then the investment required is not seen as an extraordinary expense.

Along with the budget, an organisation-wide transformation communication is required.

It is important that the entire organisation is on board with a digital transformation project. So communication is very important.

Step 4- Find the right software and integration partner

Few vendors, especially the large ones, do not work with SMEs as the scale is too small for them.

But many software vendors work with SMEs and provide the right kind of SAAS tools that will solve the problem.

SMEs have challenges that are very different from big companies, so their digitisation needs are also very different.

So it is better to work with a partner that specialises in helping SMEs digitize.

Finding the right SAAS software and an integration partner is important for the successful digitization of your organisation.

Step 5- Do pilot projects

Before spending a huge amount of money on digitisation, it is always better to do pilot projects on a small scale to test whether the project is benefiting. If yes, a full-scale roll-out should be done otherwise some tweaking needs to be done. If the pilot is not successful even after major changes, then it is better to scrap the project altogether.

After you have gone through the steps, you successfully would have led the digital transformation of your organisation.

Bear in mind that digital transformation is an ever-changing process. So, you have to take periodic steps as in whether the transformation is working for your organisation.

Also, you should do these transformation step by step and not one at a go. Transformations are challenging for the organisation and its people, so one should not push them too hard.

Now is perhaps the best time to start your transformation journey as now, it is not only crucial for your organisation to thrive but your organisation’s mere survival depends on it.