By: Ross Harling, CIO and EU Research Evaluator.
In Hamburg this week, the tweets and arm-wrestling antics of Presidents and Government Heads may seem a long way from the challenges of getting a reliable broadband service and digitising your UK business.
However, SMEs and early-stage start-ups are critical to the economic growth of both leading and developing nations. SMEs drive competition and innovation and contribute to job creation. In high-income economies, SMEs undertake the majority of private economic activity, accounting for more than 60% of employment and 50% of the gross domestic product. (OECD, 2014e). In the European Union, SMEs represent 99% of businesses.
Therefore it may be less surprising to know that the G20 recently commissioned an in-depth study, from the OECD, to identify the key Information and Communication Technology (ICT) barriers that inhibit businesses of all types from improving productivity; and gaining benefits from the digital economy, with a particular emphasis on SMEs.
Along with the development of better national and international ICT standards, security measures and infrastructure investments, the G20 report identifies the following five factors pertaining to SMEs.
Research points to a set of special challenges for smaller firms:
Another SME management challenge is the unwillingness to take risks and engage in the restructuring needed to realise full productivity benefits, which often requires considerable managerial skill. Higher managerial quality also raises within-firm productivity by being better able to address skills challenges within the firms, e.g. in screening job applicants, developing new work practices, internally reallocating over-skilled workers, and retraining or removing under-skilled workers.
The growth of digital security risks to economic and social activities, including risks to the security of data assets, as well as concerns that privacy and personal data protection is being violated, reinforces the importance of the lack of trust in digital technologies and activities as another barrier to adoption. These concerns become stronger with the introduction of newer, more advanced technologies and processes (e.g. cloud computing, data analytics, IoT), that raise additional challenges – most notably related to safety and liability.
Whereas many larger firms now use digital technologies quite widely, barriers to access and use are particularly prevalent for SMEs. SMEs trail behind larger firms in their use of digital technologies at every level of economic development. The initial costs of digital technologies, combined with a lack of adequate financing, are important barriers that help explain why SMEs are less likely to adopt digital technologies. Such costs do not just involve the digital technologies themselves, but also the associated costs and investments needed to ensure successful implementation, e.g. costs of related services, investment in training and business process innovation.
Skills are clearly a key factor in the uptake and effective use of ICT. Evidence suggests that despite increasing diffusion of digital technologies in business, a large proportion of people do not effectively use digital technologies at work or do not have adequate ICT skills. On average, only 25% of individuals use simple office software, e.g. word processors and spreadsheets, every day at work. Among them, over 40% do not appear to have sufficient ICT skills to use these tools effectively, (according to the OECD Survey of Adult Skills (PIAAC)).
In conclusion, the report recommends that the G20 economies take positive action now to encourage SMEs to leverage the opportunities of the digital environment for their business, and at the same time promote good practices to minimise potential adverse effects. While different types of SMEs face different challenges, all would benefit from integrating digital security risk management into their business decision making; increasing SMEs awareness of digital risk and elevating their capacity to manage is seen as critical.
Given that SMEs may lack ICT expertise and face resource constraints, then industry associations, governments and Managed IT Services Providers (MSPs) can play an important role in this area and share their knowledge, skills and expertise about best practices in managing digital risk.
If you would like to discuss the Digital Transformation Journey for your business or any of the issues raised here, please contact Netitude now for a free and confidential consultation.