Traditionally structured companies are faced with the challenge of adapting processes, structures and the culture in the company to the new circumstances with digitalization. Small and medium-sized enterprises (SMEs) have some structural advantages here - however, there is a lack of resources when it comes to implementing digitalization in SMEs. Uwe Fischer describes and analyses how the implementation of digitalization in SMEs can succeed and which approach is expedient in his contribution to the anthology "The Enterprise Transformation Cycle".

Digitization in SMEs: first "what", then "how"

Katja Heumader: What is the current status of digitalization in SMEs and what challenges do SMEs in particular face in the digital transformation?

Uwe Fischer: After a Bitkom study almost a quarter of SMEs still do not have an overarching strategy for exploiting digitization opportunities. As a result, they risk missing the necessary steps or tackling unsuitable topics. They are often tempted by individual software providers, for example, and then later discover that the solutions cannot be combined, have redundant functions or require interfaces to be created at great expense. Sometimes the realization also follows that neither the SME nor its customers have a recognizable advantage from the expensively created solutions. This is all the more annoying as SMEs typically have limited resources, both human and financial. They can afford neither specialized staffs and expert departments nor financial risks. At the same time, they are often integrated into the value chains of their major customers with their specifications and constraints on digitalization.

KH: However, transformation processes tie up a lot of resources over a long period of time - which SMEs lack. How can digitalization in SMEs still succeed?

UF: A suitable transformation process for SMEs begins with the definition of priorities, for example on the basis of identified bottlenecks in the company's development and expected trends. The ETC can provide assistance here. Once the "what" has been clarified, attention can be paid to the "how". The first question should always be what is the right thing to do and what is the best sequence. Then comes the task of getting it right.

gt In both cases, the "fail fast" principle applies, i.e. learning quickly, evaluating the experience gained and having the courage to quickly correct undesirable developments. In addition, in SMEs, change cannot be delegated to a staff unit. This requires all managers to be aware that they themselves are responsible for shaping change. In addition to the more methodical side, knowledge and skills, e.g. in the context of digitalization and business models, often need to be built up in practice. SMEs in particular can use their strengths in the transformation process: short decision-making paths, innovative strength and flexibility.

SMEs are more flexible

KH: SMEs are more flexible than large companies due to their smaller size and shorter decision-making processes. Can't they benefit from this?

UF: That's right, flexibility helps to quickly adapt the chosen approach based on experience. After all, there are no "departmental sinecures" or separate budgets to defend. In addition to this opportunity for reflection and the steep learning curve, results in SMEs are usually better anchored in the organization. The reasons for this are the clearer practical relevance and also the acceptance of the results if they are developed from their own resources with direct contact to "real life" and with the involvement of those affected.

KH: What can companies do specifically to drive digitalization in SMEs? Are there particular weak points that SMEs need to address specifically?

UF: In order to prioritize by identifying limiting bottlenecks, it is important to be aware of individual needs and opportunities. These can vary greatly from SME to SME and are also shaped by the corporate culture, the market environment, the local people and the established processes. This is precisely where the ETC proves to be an excellent tool for looking at all dimensions and finding the right individual approach. What all SMEs have in common is the challenge of building up the skills required for digitalization and fundamental further development. An honest analysis will reveal that current job profiles and training occupations, for example, focus too much on skills that are currently required - instead of looking to the future.

Taking people with you instead of implementing individual technological measures

KH: The central building block of digitalization is the networking of people, departments and skills. Digital infrastructure makes this possible. How can the use of digital infrastructure be initiated and established with as little effort as possible?

UF: The same applies here: first do the right thing (effectiveness), then do it right (efficiency). This means that once the bottlenecks that are hindering digital development have been identified, suitable measures can be implemented quickly in line with requirements. These must also be put in a suitable order in terms of interdependence and affordability within the organization. To ensure a common understanding, roadmaps can help here, for example, which show the activities for each field of action on a timeline. This allows the organization to focus on the tasks at hand.

It doesn't always have to be the big step. To put it bluntly: "first organize, then electrify". In other words, the foundations must first be laid for new forms of collaboration and, above all, their acceptance. Digitalization requires new ways of thinking and behaving - and we humans usually find that difficult. For this reason, SMEs must also pay attention to the successful design of the change process itself for digital transformation and not just its technical or procedural content.

Implementing digitalization in SMEs: Knowing the requirements of the future

KH: How can SMEs build up the necessary skills among their employees without tying up resources in the long term?

UF: If an SME proceeds in the manner described above, clear and limited activities are the result. This prevents resources having to be released over a long or even unpredictable period of time. The employees deployed should be selected on the basis of existing strengths in terms of technical, methodological and social skills and integrated in a targeted manner. If there are recognizable white spots in the required skills, this is already apparent when the bottlenecks are identified. The targeted development of these skills, e.g. in the form of accompanying skills development programs with innovative learning approachesis an integral part of the transformation.

Another optional tool is the targeted purchasing of rarely required specialist skills. Purchasing here can be the recruitment of new employees, cooperation with a research institution or support from a consulting firm. This approach can certainly be compared with sourcing concepts. However, their use in securing the required skills presupposes that the skills required in the future are known. Cooperation across company boundaries is also suitable for SMEs. I am thinking here, for example, of networks that, in addition to the exchange of experience, also enable access to specialist skills that are not available within the company itself.

KH: How is it possible to create acceptance for digitalization in SMEs and the associated change processes?

UF: As already mentioned in one of the previous questions: Digitalization also requires changed ways of thinking and behaving. Suitable change approaches are required to establish and operationalize these. This also includes taking the concerns of those affected seriously and making the process transparent. Starting with the need for change, through the argumentation of the benefits, to active participation opportunities. Digitalization is changing workplaces - we should give everyone the chance to move from the supposed role of victim to that of creator. This is why a transformation program is needed that takes all dimensions into account and involves people rather than just focusing on individual technological measures.

KH: Dear Mr. Fischer, thank you very much for this interesting interview.

"The Enterprise Transformation Cycle" - published January 2019

The Transformation Consulting International has been supporting national and international transformation projects in companies for many years. This extensive practical experience has now resulted in the volume "The Enterprise Transformation Cycle"published by the renowned Springer-Verlag, edited by Mario A. Pfannstiel and Peter F.-J. Steinhoff. In the 400-page anthology, numerous authors describe the extensive applicability of the agile and flexible "Enterprise Transformation Cycle" approach in theoretical and conceptual articles as well as in practical case studies.

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