The COVID-19 pandemic changed life as we know it &, along with it, introduced several trends for the better.
While a few of them were completely novel, others, like the need of SMEs (small & medium scale enterprises) to digitize their offerings & operations, were radically accelerated due to the onset of the pandemic, although they had been in the works for a significant amount of time.
Over the course of the last 2 years, SMEs across the globe across a wide catalogue of industries have travelled the extra mile in redefining themselves via digitizing their offerings, more so in developing countries. However, this begs the question as to why the trend of digitization is occurring among SMEs now & also what are the several benefits they stand to gain from this modernization.
That is exactly what we will be answering in today’s blog post.
The Trend of SME Digitization
Industry experts & observers have long stood ground on the fact that the digitization among SMEs, especially among developing economies, has been due for a long time. The reason behind this simply being that the modern customer seeks a hybrid interaction with businesses at best & those who fail to provide the same stand to lose out on potential opportunities. To understand this better, let’s take the example of banking.
For the longest time, banking as we know it, has been functioning traditionally wherein a majority of the tasks are manual & human-driven & thus require the customer to physically visit the institution to get anything done.
Due to this increased dependency on manual processes, not only is the overall efficiency of the process extremely limited, but also banks tend to lose out on customers for whom travelling to the branch is a logistical challenge.
During the onset of the pandemic, the above-stated problems got heightened, which triggered an industry-wide disruption to digitize.
Today, a majority of financial institutions across developing economies offer a part of their services & products online. Functions such as updation of bank passbooks/account books, generating a statement of account, customer onboarding for new account opening & for loan origination are primarily conducted online & each of these shares the common philosophy, of functions that can be completed online, should be completed online.
Not only does a digital overhaul in industries such as finance expand the ability of these institutions to reach a wider array of customers, but it also radically increases their efficiency & reduces their cost of operation.
However, banking & financial services are not the only industries adopting digitization; others ranging all the way from manufacturing to retail & services to maintenance are undergoing a digital transformation. While the exact specification & outcomes of each of these initiatives might be different from each other, a common hamstring that binds them together is the advantages these SMEs stand to benefit from due to digitization.
Some of the most significant benefits are as shared below.
Low Cost of Operation
One of the first & most impactful benefits of digitization lies in the low cost of operations it arrives with.
Irrespective of the fact that whether a business chooses to adopt a wholly digital mode of operation or a hybrid one, there is a significant cost saving aspect included in both.
For instance, if a small retail business chooses to start procuring their inventory online & add doorstop delivery for its customers, within a short period of time, the business will be equipped with the data to accurately estimate when a particular batch of inventory needs to be procured.
Being aware of this in advance & planning accordingly will not only reduce the amount of time inventory lies idle but also have a direct positive impact on its sale. Overall with a relatively small investment, the business is able to significantly lower its cost of operation.
Another advantage of digitization in SMEs, which runs in tandem with operational cost savings, is increased efficiency.
As of date, the businesses have access to a wide repository of tools which can be simultaneously used to record & analyze business information & simultaneously deliver intelligent insights.
These insights, at their essence, encompass a wide range of aspects right from the financial well being of the business to its operations & thus, it can be effectively leveraged to boycott inefficiencies & welcome a streamlined & efficient chain of operations.
Positive Bottom Line
Although observers from across the board agree that a digital transformation in the initial days of the business can be a costly process, further down the line, it has been proved to deliver a positive impact on the bottom line.
For instance, by letting go of human dependency & lowering the overall cost of operations, it is a given fact that businesses stand to gain from a positive bottom line in the long run.
Along with this, as digital tools empower business owners with increased access to data, these can be intelligently analyzed to discover new revenue opportunities. For instance, if a bank primarily extends secured business loans to small & medium-sized organizations, they can leverage the information they have on their transactions to offer small ticket unsecured loans, which these businesses can repay comfortably.
At first, glance, adopting digital transformation for a business of any scale is a challenging task mainly because of the high cost involved. However, as I showcased in this article, there are a host of advantages businesses stand to benefit from digitization, making it a task worth embarking on.
Thank you for reading & I will see you in the next one.