Digital strategies for SMEs: how do I get started?

Everyone is talking about digitisation and the ‘Digital Revolution’ as if it were another Industrial Revolution. What does it mean in practice and how well prepared for it are small and medium-sized companies?

Dr. Ole Wintermann: At the end of November, we published a brief study showing that the subject has hardly made an impact in small and medium-sized companies. And if it has, there is often a misunderstanding whereby digitisation is confused with mechanisation, and people only think about increasing efficiency. Digitisation describes a totally different form of work culture to that of the industrial age. Less planning, more agility in planning. It is about constantly reinventing yourself. Companies need to understand, authorise and facilitate that.

Constantly reinventing yourself sounds both radical and stressful. Why is that the decisive task in digitisation?

Dr. Ole Wintermann: In automated mass production, there was a single qualitative leap and then everything continued that way for many decades, with only increased efficiency considered. With digitisation, we are experiencing an exponential development: faster and faster. Continuous qualitative leaps. There is no phase where you can sit back and relax. The processes and products have to be questioned. But in many successful companies, we see considerable persistence. For example, they say: we have been producing beer for 150 years and will continue to do so as we have up to now. But disruption and qualitative leaps cannot be predicted. Suddenly, competitors from completely different sectors enter the market. In order to be able to react successfully to that, a lot has to change within the company.

Does a cobbler have to get involved in that? They repair shoes and assume they will do that in their three branches until they retire.

Dr. Ole Wintermann: Every company that wants to have a future has to deal with the subject. Up to now, a cobbler has considered how they can repair three pairs of shoes an hour instead of one pair. That was the linear development of the business model. If the cobbler acts disruptively, he might consider printing shoes in the near future. He measures the feet of his customers and can print new, perfectly fitting shoes – individually designed – within a day. If I only thought about mechanisation, I would not hit upon that idea. Or a baker: he can deliver the dough pieces to bake rolls to the customer the evening before. Maybe he doesn’t need a retail outlet at all anymore? These examples illustrate the new logic that has to infiltrate entrepreneurial thinking in order to recognise the opportunities of digitisation.

Many SMEs do not even have a real corporate strategy. How do they arrive at a digital strategy and a new work culture for the digital transformation?

Dr. Ole Wintermann: We have identified four models for how digitisation starts in a company, which we will investigate in further detail. In model (1), the management board or CEO is tech-savvy and active. A typical example is that their grandchild has explained to them how to Skype on a tablet. They think that would be useful for communication with field agents and bring the idea into the company. In model (2), the impetus for digitisation comes from the Human Resources or IT department. They are familiar with the latest developments from their specialist areas and want to make use of them. In model (3), employees bring digital know-how from their private lives, because they think tools such as doodle or Google Docs would be useful in their work. Model (4) is also widespread: the impetus comes from an external source – from a customer or competitor. The customer says: you are too slow for me; or a competitor puts the company under pressure.

That sounds more like reality than like a major strategic plan. How well do these approaches to digitisation work?

Dr. Ole Wintermann: In every model, it is important that the CEO, owner or management board advocates it, and allows and promotes the initiative. Most approaches fail without reinforcement from the top. Ideally, the boss knows and uses the tools and communicates in an authentic and credible way with everyone. That is also the starting point for a new work culture. Digitisation means: communicating and working with each other on equal footing, without hierarchy. That cannot be delegated to the management assistant. Digital-savvy employees within the company can be found everywhere and represent a huge opportunity. But many managers and bosses find it difficult to be told and shown by them how new tools and apps work. Reverse mentoring would be suitable in this case. The incentive is often lacking for the employee with the digital know-how: why should I pass on my knowledge to my superior? That brings us back to culture: is hierarchy-free communication about the questions of digitisation within the company possible?

So what is the most successful way to reach a digital strategy in my doctor’s practice or handicraft business?

Dr. Ole Wintermann: There is no blueprint for a successful digital transformation; the conditions are too varied for that: the sectors, the characters, the technology, the work culture. There is a meme in the digital world of work that says ‘Just do it’. That might sound blunt, but that is what it is all about, doing – with the right attitude. A starting point could be getting together with interested employees and asking critical questions: where are we? What is required? What would help us? How can we improve? The second step requires the right attitude. A few of these digital-savvy employees are provided with time, space and finances to develop ideas. Without a project plan, milestones or proposals. Simply with trust that they are capable employees. Google introduced this principle of an open ideas workshop or in-house accelerator years ago and it has contributed significantly to the success of the company. Ideas are centralised so as to persist in future and survive the disruption.

Where do the ideas for my company with a digital future come from?

Dr. Ole Wintermann: Without doubt, curiosity and openness help. There won’t be any new ideas to be found on the TV news, but certainly on the Internet. The talks from TED conferences can inspire, as can specialist forums with discussion groups online. Depending on the region, some Chambers of Commerce also offer very good courses on the subject of digital transformation. It is absolutely worthwhile interacting with others who have similar tasks to accomplish but who come from very different contexts. Many people regularly arrange meetings on Meetup.com and discuss specific topics – including outside of major cities and conurbations. Another important source of ideas is data that I collect, maintain and evaluate within the company. Nowadays it is not just about collecting: the products and services themselves should collect data and reveal something about usage in the process. These analyses allow new product and service ideas to be generated.