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Your Guide to Digital Transformation for SMEs

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Explore tools and methods that digitally transform SMEs.

Digital transformation isn't just about building a new website or jumping on the TikTok bandwagon. Rather, it's an overarching business strategy that encourages the use of modern technology to build a company-wide infrastructure that optimizes your processes.

As Canadian companies, employees, and consumers consistently spend more of their time and money online, SMEs need to adopt new technologies to meet their consumer's needs and stay competitive.

To help you learn about digital transformation and what it can mean for your SME, we’ve put together examples of successful transformations across manufacturing, retail, and construction, along with a short guide on how to create your own Digital Transformation Roadmap.

What is digital transformation?

Digital transformation is the use of digital technology to change business processes in order to improve performance. By automating processes such as hiring and onboarding, using digital platforms for marketing, and collecting data, SMEs can offer new services, deliver programs more efficiently and transparently, and often save money.

SMEs that had adapted digital technology saw double revenue growth compared to those just starting out, and eight times higher revenues compared to those that have no digital efforts, according to CISCO's 2020 Small Business Digital Transformation survey. “Even before the pandemic (businesses that have adopted digital technologies) were doing better and showing revenue growth and general resilience,” said survey author Thomas Goldsmith.

However, some SMEs in Canada can face significant barriers to digital transformation. Access to high-speed connectivity, low technology integration, and a shortage of skilled labour can be a challenge. In 2020, an IDC report observed 65.3 per cent of small and 68.5 per cent of medium-sized companies faced problems finding digitally-skilled labour. 

Keep reading to learn how to turn digital transformation challenges into demonstrable success.

Digital transformation across industries

Manufacturing

Manufacturers that use digital technology gain a competitive edge - productivity grows, operational costs are reduced, and the quality of their products often improve.

For example, Quebec-based Fabelta, an aluminum window manufacturer, recently implemented a digital system to connect their door and window installation teams remotely so they could share information in real time at a customer's location.

“The person taking the measurements will be able to enter them directly into the system, rather than writing them down on paper and then transcribing them when they’re back at the office, which increases the risk of error. This will make us more efficient,” owner Sylvie Desroches told the BDC.

At AGS Automotive Systems in Ontario, digital transformation has helped them remain competitive, boost productivity and improve quality at their manufacturing facilities.

“The auto industry is one of the most competitive sectors in the world, and AGS has long used sophisticated technologies such as robotics to boost productivity and improve quality,” said Joe Loparco, co-president at AGS. “The use of digital manufacturing technology is the next leg on that journey.”

Retail

In an increasingly complex retail landscape, where pandemic-related challenges include building resilient supply chains, Canadian SME retailers need to digitize to keep in step with the tech-driven consumer appetite. Consumers expect a digital experience, with mobile, e-commerce and contactless payment use. 

Digital transformations for retail SMEs are more efficient and transparent according to McKinsey, as consumers can buy from them at any time on any platform, and can track their purchases from point of sale to arrival at their door.

A comparative study of retail operations during the COVID-19 pandemic in Canada, China, and France found that the global pandemic accelerated the maturation of e-commerce in Canada. Research found that over the pandemic, Canadian SMEs were encouraged to move online, to develop traffic monitoring systems, contactless payment options and use of third-party logistics platforms during the customer journey. 

Construction

Digital transformation in the construction industry can mean delivering projects more cost-effectively, but can also help the industry to take on more complex and challenging infrastructure, according to a recent Canadian Construction Association (CCA) and KPMG report.

An industrial engineer works on a computer with several screens.

When asked to rate themselves on their digital capabilities, the majority of construction companies surveyed in the report said they had not leveraged them. Instead, companies were investing in integrating systems to reduce redundancies, improving back-office support, reducing back-office cost, and improving the employee and customer experience.


Management and analysis of project data offers huge opportunities for industry – like using predictive analytics to estimate costs, improve scheduling, optimize planning, or predict various risks before they materialize, according to the report.

“We’ve seen real-world applications of this technology with predicting the risk of injuries on construction sites based on a wide array of project and environmental inputs, which allows the contractor to proactively resequence work to minimize the risk of LTIs,” said Jordan Thomson, professional engineer and senior manager at KPMG.

Digital transformation in the construction industry may include using software to process documents and transactions, storing data securely in the cloud, enable SME's to digitize approvals permits and rezoning processes, or plan new projects using subsurface utility mapping. Some are already using artificial intelligence, predictive analytics, BIM, wireless monitoring, augmented reality, cloud, and real-time collaboration.

Artificial intelligence has been used in construction in Canada for planning, using design and production modeling, monitoring through the building process to predict risk. AI is being used to plan and design plumbing and electrical systems. 

For example, PCL has used an IoT solution called Eddy, which uses sensors, flow monitoring and automatic shutoff valves to detect water leaks in a new development in Port Credit, Ontario. The system monitored the whole building during the course of construction and post-construction.

Creating your own roadmap to digital transformation

Creating your own digital transformation roadmap will give priority to systems that help your business remain competitive, increase resiliency, productivity and profitability. Whether it is construction firms making use of robotics, entrepreneurs automating billing, retailers using ecommerce, law firms using digital signatures, plumbers using Google Adwords to attract consumers, digitization will only increase in demand from consumers and the market.

Here's how you can start.

Assess

First, assess your current operations, processes, digital technology and activities and business strategy. Start by asking the right questions. Here are a few to consider:

  • How will you stay competitive in the market?

  • How can your processes be optimized and digitized? 

  • How can key elements be prioritized to increase efficiency, productivity or profit? 

  • Do you need secure real-time communication between remote employees?

  • Do you have a corporate culture that will embrace innovation and digital talent?

Identify where you can benefit from digital transformation and what you want to accomplish. It's this analysis that will help you determine what changes are needed in a clearly-defined and well-articulated digital strategy with steps, timelines, budgets, short and longer term projects and resources you will need to achieve your objectives. You can create a committee or task force or hire consultants to oversee and execute the digital transformation process, set priorities, adhere to budgets and timelines, lead rollouts etc.   

Review digital solutions

In this step, research platforms, software, services, talent and capabilities that will support your digital strategy and meet your budget and objectives. Here are some options:

Website

Canadian companies benefit from having an online presence. A website not only provides a way for consumers, customers, businesses and clients to learn about you, but also positively impacts business growth and can bring in revenue from e-commerce. Learn more about how to create a business website here.

Supply chain or inventory management systems

Supply chains have been chaotic over the last few years. A supply chain or inventory management system can help keep your SME on track. According to trade publication Canadian Manufacturing, using supply chain or inventory management systems can help SMEs more effectively track the movement of their products, predict disruptions and make more informed decisions.

Customer relationship management (CRM) software

Customer relationship management software can have a big impact on transforming internal operations. It brings together information about customers so that your business can coordinate activities to acquire, grow and retain customers. CRM software profiles clients, client interactions, leads, and much more. Here are some options.

Electronic human resources management systems

In addition to alleviating the burden on HR employees, e-HR resources systems offer SMEs “the potential to simplify and enrich; steer and support; and shorten and speed up the pursuit of organizational and employee goal accomplishment,” according to the The International Journal of Human Resource Management.

Cloud computing

Cloud computing is applicable across industries and business sizes. In particular, it covers productivity software like Google Docs and the Google suite of tools, to storage, like Dropbox or Google Drive. Cloud-based services allow SMEs to access digital assets, tools, storage and productivity remotely and scale quickly.

Culture change

This is an important step in the roadmap, as digital transformation for SMEs can be met by fear and trepidation. The ability to implement change can only be measured with a strong strategy and vision, support from the top, planning and training. Change management is key when employees find new processes daunting, so leaders need to be transparent about their goals for the transformation, and provide space for employees to learn or train in the new technologies they're expected to work with. Digital transformation of an SME isn't just a business transformation, but also a personal one, as employees' professional identities and practices change. It's up to leadership to model and communicate transformation ideas and goals, how these innovations will fit within the SME's existing values and norms. 

Plan a timeline

Once buy-in is gained, it's time to develop a roadmap. For SMEs, this step involves outlining transformation plans anywhere from six months to five years, including projects both large and small. Here are some visual examples from McKinsey and BCG

Cybersecurity

Digital companies need to be able to protect their businesses, protect their data and employees and respond to security threats. By increasing their digital maturity, SMEs also increase their exposure to cyber crime and must invest in cyber security. Yet, few do. In a 2021 Insurance Bureau of Canada survey, 47 per cent of SMEs polled reported spending nothing on cyber security.

A woman wearing a yellow shirt looks at a cellphone and a computer.

The impact of cyber crime hurts SMEs. According to Statistics Canada, 28.6 per cent of small enterprises reported extra time was required by employees to complete their day-to-day work because of a cyber crime, while 27.3 per cent reported cyber crime prevented their employees from carrying out work. All reported additional repair costs and some loss of revenue. 

There are many options for SMEs to look into when it comes to cyber security, including security for mobile, web, email and networks. There is also anti-malware software to protect against viruses, spyware and ransomware. There is security for data protection, for apps and software, for point-of-sale (POS). And finally, there are security options for identity and access. SMEs may want to look at CyberSecure Canada, the nation's cybersecurity certification program for small and medium-sized organizations.  

Integration and implementation

The final step in the digital transformation roadmap for SMEs is integration into systems and implementing the projects on their roadmap. By following the steps outlined in this guide, SMEs create positive customer experiences, remain competitive in their markets, streamline processes, deliver products and services sustainably and ensure their future growth. 

Funding for digital transformation

Canada Digital Adoption Program

Apply for a grant to help develop a digital plan and leverage funded work placements to help with digital transformation. The Canada Digital Adoption Program helps SMEs leverage e-commerce opportunities, upgrade or adopt digital technologies, and digitize operations to stay competitive and meet customers’ needs in the digital marketplace.

The funding is divided into two parts: the $2,400 Grow Your Business Online grant for smaller, consumer-facing businesses to grow their e-commerce, and the Boost Your Business Technology grant for SMEs, up to 90% of the cost of developing a digital adoption plan (maximum of $15,000), that want to further improve their productivity and become more competitive. Check your eligibility.

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