SMEs: Crisis, innovation and digital transformation. When will it be possible?

How to survive in times of Covid-19? This question must have been asked by thousands of SMEs and start-ups in recent months. An absolutely critical situation, with a historic slowdown in the market, which this year represents a drop of more than 12% in GDP in Spain.

As a teacher of Business Innovation at La Salle-URL, I receive input from students constantly, professionals, and companies on how the SME sector (650,000 companies in Catalonia) can move forward and take a definitive step in its digital transformation, competitiveness and opening up to new business models that allow, beyond survival, to open new channels that promote growth and position in national and international markets.

After some intense debate on how to combine the scarcity of resources and time of many of these companies, my recipe goes through the following key steps:

Awareness

A significant number of these companies still insist on continuing to keep with the products and services that have fed them in recent years, and that is good, but it is not enough. The steamroller of digital transformation is beginning to sift through many markets and when it reaches ours, we are either ready or we will won’t last a minute.

Time management here is key because the question is not whether it will happen or not. The question is when will it happen, and it may not take long. And whenever we think that large companies can carry out these changes and not the small ones due to lack of resources, we will have to rewind and make a clear and definitive purpose for change, because YES, WE CAN.

Reflection

The next step is to sit down and make a deep reflection on the situation of the company, its context and market, the initiatives of the competition, the business opportunities that we have been able to visualize at some point but have been left behind, and other important factors in the strategic management of our business. This reflection should help us to definitively clarify where we want to be in 2-3 years, but also where we can be if we do not take any action in that regard.

This reflection should involve all the sensitive parts of the company and, if possible, count with the support of business organizations, programs to promote the company, or other expert support aimed at SMEs.

Action Plan

As a result of the previous year, each company must be able to define an action plan that includes the following key aspects:

• Analyze the opportunities offered by technology to achieve greater value to customers, to visualize new business models, and to design technology investment plan with reasonable and scalable costs (web, cloud and open source solutions).
• Strategic business initiatives aimed at increasing the contribution of value to customers, either with new products or services, improving the approach and experience of the customer, or optimizing the key processes of the company to pass on the value achieved to the customer, either in time, price or quality. In short, to establish a continuous innovation scenario by getting support from technologies, products and digital models.
• Changes in internal work procedures that facilitate the identification of opportunities, continuous improvement (always with the customer in mind), effective collaboration based on digital tools (digital first mindset), provide the necessary daily spaces that allow the implementation of these measures and, finally, ensure the involvement of the entire organization.

Implementation

Some of the measures may be implemented by reorganizing the main work procedures of the company, systematically including opportunity identification scenarios, work sessions with clients and suppliers, and with different areas of the company. It will not be necessary to invest significant resources, but the attitude will.

To carry out investment projects in technology and business, beyond the internal financing possibilities, it is important to get immersed in the range of possibilities offered:

• Programs to promote innovative projects and initiatives by the Generalitat, the Spanish Government and central Ministries (CDTI, ENISA, MINECO’s, etc.) or other public agencies such as ACCIÓ or Barcelona Activa. Also technology centers or clusters of the sector.
• Support through the promotion programs of business associations such as PIMEC or CECOT, Chambers of Commerce, and other local entities.
• Search for partners or collaborators in the project who can contribute and capture part of the value of the initiative and assume part of the risk of the project (suppliers, clients, technology partners, etc.)
• Establishment of alliances or agreements with Universities that propose corporate training and support programs and services for companies, as well as research and innovation programs, especially based on the application of digital technologies. As we do at La Salle-URL.

Finally, the fundamental task in the day to day work on cultural change and establishing recognition models that encourage the organization in those successful actions and innovative proposals, aligned with the strategic action plan.

The current circumstances of the pandemic, generational crisis, and digital change, have converged in the perfect storm, but they provide a unique opportunity to take the step, by many companies. The injection of European funds, those 140,000 million euros, if well conducted (we trust that they are) to the industrial sectors through support programs for R&D, Innovation and Digital Transformation, in financing and subsidy plans, and other public and public-private mechanisms will mean a magnificent opportunity to make the leap in value and growth of our companies. It should not only be used to get out of the crisis and pay debts, but to get muscle, new business, and strength to face the next one, which will undoubtedly come sooner rather than later. In fact, we already live in constant change, as Einstein said: "The only constant in the Universe is Change."

Victor Espinosa

Professor of Innovation in Business

La Salle Campus Barcelona – URL