Why Digitization of SMEs Is a Must for the Indian Economy

Small and Medium Enterprises (SMEs) contribute a major chunk to India’s GDP. Despite being the backbone of our country’s economy, these businesses are prey to challenges that come from traditional practices and lack of digital influence. To add to that, intense competition, ever-demanding customers and tight funding often pose more problems for growth. Hence, digitization of SMEs can go a long way to overcome these issues and help small businesses reach more customers and reap more profits than ever before.

If small and medium enterprises wish to prosper, they must adopt the latest technology and tools which can promote workforce efficiency, reduce human errors, and measure growth parameters in a very concrete manner. Other reports also support this theory and stress that SMEs should go digital without delay. A digital makeover will also help SMEs grow fast globally, without heavy investment.

Traditional SMEs in India

At present, problems that traditional Indian SMEs face are like,
 

1. Lack of infrastructure

    These require government or private intervention at times and are often ignored due to lack of sufficient funds. Many SMEs are not aware of the various financing options available to them from NBFCs and banks, and they lack the digital knowledge to gather information online.
    

1. Low productivity

   Undoubtedly, digitization has enhanced productivity in progressive companies with all manual processes becoming technology based. But traditional SMEs have slow processes and their employees often lack basic computer skills. This hampers productivity.
    

1. Low sufficient funds

   Besides improving or expanding the infrastructure, funds are required for marketing or advertising the products offered by traditional SMEs. Plus, lack of digitization means that there is no strict monitoring of cash flow and the SMEs cannot do a cost-benefit analysis. Also, digital marketing is way cheaper than physical marketing, which traditional SMEs cannot employ.
    

1. Lack of new innovation

   With no digital literacy, conventional SMEs cannot think of new ways to attract customers. And since most shoppers go online and use their tablet or smartphone to buy things today, traditional SMEs cannot acquire them. They cannot accept payments online or send e-invoices.
    

1. More risk

   Since traditional SMEs depend on manual operations for selling their products, there are high chances of human errors in terms of quantity sold, payments made, total revenue, total cost etc., resulting in less precision and more risk.
    

1. High cost

   Operational costs, advertising costs and expansion costs are always higher for a traditional SME than a digitized one. If you go digital, you can earn revenue from any city and any country without having opened a new plant or shop. Plus, more the digitization, lesser will be the need to invest in manpower.
    

1. Lack of training and skills

   Lack of knowledge about computer usage, digital marketing, websites, social media and web analytics hamper conventional SMEs by negatively impacting productivity. There is no one to monitor the day to day sales, profit, and competition this way.
    

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What is Digitalisation in Business?

 
Business digitisation refers to the use of advanced technology in your existing business model. It contributes to the transformation of various departments, as well as the way businesses interact with customers and stakeholders. The actual digitisation of businesses is much more than just automating payments. Digitalisation can aid in effective employee management, making business decisions based on analytical data, calculating ROI, and a variety of other tasks.
 

Benefits of Digitalisation in Business

1. Customer Acquisition

   Going digital means you can engage more with your target audience and reach customers in any country, for enhanced visibility. Customer relationships can be managed more efficiently and you will gain customer insight through different tools. This will help you market products better and devise new sales channels.
    

1. Operational Efficiency

   As a digitized SME, technology can automate your core processes, making you more efficient. This will help use resources in a better manner and give you more control on logistics.
    

1. Workforce Enablement

   With digital tools, you can figure out areas which need skill development and identify shortfalls in the workforce. It will be easy to track employee productivity, train them and make them aware of the latest concepts in digitization.
    

1. Risk Management

   By going digital, you can protect your company’s sensitive information and financial data through security software. You can also keep an eye on physical assets through advanced surveillance and make logistics more powerful.
    

1. Improves productivity

   Incorporation of digital tools can help employees work faster and more efficiently. They can work remotely as well and at anytime, to meet business emergencies immediately.
    

1. Innovation

   By adopting digital tools, you can assess your business better with metrics. Activity metrics like web traffic, process metrics like sales and acquisition, knowledge metrics like consumer insights, and people metrics like employee satisfaction can help improve different aspects of your enterprise easily.
    

1. Save costs

   Digitization will help reduce operational costs by automating core processes and making everything streamlined. Moreover, you can open up to any country in the world for business, without spending anything on advertising.
    

1. Reduces manpower

   Since digital tools will make most business processes automated, the need for manpower will go down. There will be less chance of human error and less monitoring will be required.
    

How to Get Started with Business Digitisation?

 
Transforming your business by thoughtlessly integrating technologies may result in a negative outcome. This transition process necessitates careful planning and the execution of a few steps. Here is how to do it in the right way.
 

• Identify areas of improvement

  Changes to your company's structure can be overwhelming at times. However, you must first learn about the department that requires digitalisation. Check to see if your suppliers still use paper invoices or e-bills. Determine whether it is truly possible to store all of your documents digitally and what challenges you will face during the data storage process. Another important consideration is whether your current staff is tech-savvy; if not, you will need to spend more money on their training.
   

• Get your team on board

  Once you have identified the areas where digitalisation is absolutely necessary, the next step is to collaborate with your team on strategy and execution. Ask for their opinion and discuss how digital transformation can be executed and what changes it would bring to your small business. 
   
  At this point, you should also pay attention to your prospect's buying behaviour. For example, if your target audience is in a rural area where people are less tech-savvy, you may not benefit from digitising things like online payments, order placement through an online mode, and so on.
   
  Hence, you must discuss the disadvantages and advantages of digitalisation in business with various departments, especially sales and marketing.
   

• Integration

  After a thorough discussion with your team, you can now integrate advanced software in various departments. However, instead of integrating advanced tools all at once, it is recommended that you start one at a time. You can start by integrating the HRMS tool for employee management.
   

Also Read: 5 Practices for a Safe Net Banking Experience
 
As more and more industries, as well as the Indian government, is realizing the importance and benefits of bridging the digital skill gap for SMEs, digital training programs, tutorials, and free tools are coming up, to rise to the occasion. Companies are conducting special sessions for improving digital skills of employees and in the near future, conventional SMEs are expected to go digital with full force and hope.
 
Disclaimer: This post was first published on 15th June 2018 and has been updated for the latest information, freshness, and accuracy.