5 Minutes Read By Dr. Stefan Sambol, Christian Brugger, Sinan Erhan

Digital Transformation in SMEs: Strategy First

#Digital Strategy#Digital Transformation#Industry Trends

Digital transformation is a buzzword that has been echoing in the corridors of businesses worldwide. But what does it truly mean for Small and Medium-sized Enterprises (SMEs)? The journey of digital transformation is not just about integrating the latest technologies; and it’s definitely not an end in itself. It's about having a clear vision, a purposeful business strategy, and establishing the right mindset within the organization.

Germany’s SMEs are weakening

For a successful digital transformation, it's imperative to first establish an overarching vision, a meaningful business strategy, and the right mindset within the company. Only then should investments in technologies follow. The German economy, once dubbed the "sick man of Europe" 25 years ago, has seen its ups and downs. Today, the country's investments in Information Technology, which can be seen as a key factor for future economic success, are far behind those of other nations. The German SME sector understands the importance of digital change, but there's still hesitation, possibly due to the failure of many digitalization projects.

No transformation without goals

Many SMEs fail to set a clear vision for their digital transformation and define clear goals for their specific case. To achieve this, the following six factors are crucial:

  1. Creating a shared digital vision within the company
  2. Prioritizing the most important digital tasks
  3. Continuously validating new digital approaches
  4. Adopting a flexible, governance-oriented leadership style
  5. Developing suitable technological infrastructure and building appropriate digital skills
  6. Enhancing genuine data transparency

A shared digital vision

Vague expressions like "being digital" are insufficient to describe the profound changes associated with digital transformation. To develop an impactful digital vision, companies need to look beyond the current status quo and ask themselves what unique value they can offer in the future digital landscape. This requires thorough self-reflection on their role in the future world and the special offerings they wish to present to their customers.


Prioritizing tasks

The primary thing to do should be to identify the most pressing issue relevant to the current business objectives. This shouldn't be sidetracked neither by technological nor by merely cost-saving considerations: For successful digital transformation, the prio 1 tasks must align entirely with the overarching vision.


New digital approaches

For digital transformation, many companies stick to traditional methods, which may no longer be effective in a digital age. Instead, they should adopt agile strategies inspired by Lean Startup principles, emphasizing continuous testing and validation. This approach requires taking risks and frequently reassessing business assumptions, but it offers a consistent learning curve and adaptability to real-world conditions.


Modern leadership

For successful transformation, companies need a leadership style rooted in modern governance that holistically views and adapts to change. Instead of focusing on cost savings, they should explore new revenue opportunities through digital services, requiring internal teams to collaborate multifunctionally.


Digital Corporate Culture

Embracing a genuine digital culture gives leading companies a competitive advantage. While digital pioneers integrate digitalization seamlessly into their operations, many medium-sized German family-owned businesses lag in digital competence, especially among board members. This hinders understanding and discussing digital trends at top levels.


Data transparency

To drive successful digital initiatives, medium-sized companies must make significant adjustments to their systems and infrastructure. This involves breaking down data silos to ensure smooth information exchange between various departments and management teams. By doing so, they can harness the full potential of the data they already possess, leveraging it for further growth. Moreover, it's crucial that their software and hardware setups are designed with flexibility in mind, allowing for the easy integration of new functionalities as needed.

This article was originally published in manage it.

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