Digital maturity for SMEs
Technological change is happening at an ever-increasing pace. To remain competitive and ensure their future, companies can’t just adopt digital technology; they must embrace it. The mere use of digital tools is not enough: to become “digitally mature”, companies must also implement a robust digital culture to fully leverage their digital investment and manage the attendant change.
The Business Development Bank of Canada (BDC) is a government financial institution specifically set up to complement private banking services for entrepreneurs. The BDC recently released a report on digital penetration within Canadian SMEs, defined as companies with less than 500 employees. Hoping to encourage these companies to adopt new technologies and make the technological shift to spur growth, the BDC surveyed over 2,000 entrepreneurs on their current digital status. Suffice it to say that there is room for improvement in most of the companies surveyed. Even as technological change has occurred increasingly rapidly since the beginning of the century, and as connectivity, automation and data have acquired strategic importance, most SMEs still show lagging digital maturity.
Digital maturity in Canada. Business Development Bank of Canada
What is digital maturity? Digital maturity is an assessment of a company’s degree of digital transformation. The Massachusetts Institute of Technology (MIT), in cooperation with Capgemini Consulting, has developed a methodology to measure digital maturity. It is based, first of all, on the use of digital tools such as client- and supplier-relationship management systems, data collection and use to inform decisions, digitization and integration of business processes. The second aspect of digital maturity is an organisation’s digital culture, which is its ability to implement changes such as a new strategy or vision, to plan, to support management, to foster an environment that supports risk-taking and innovation, training and continuing education. Digital maturity is described in terms of digital intensity and transformation management. Technocentric companies achieve better financial results than techno-shy ones. One quarter of all companies combining low digital intensity and poor transformation management have seen their income drop over the last few years.
The advantages of digital transformation translate to hard numbers: Canadian companies with the most advanced digital maturity are 62% more likely to grow their sales significantly, 52% more likely to enjoy high profits, and three times more likely to have innovated in their industry. On the flip side, SMEs who did not invest in digital transformation over the last three years are more likely to have seen their sales plummet.
Percentage of digitally advanced companies. Business Development Bank of Canada.
Despite the demonstrated advantages of investing in technology, just 19% of Canadian SMEs are digitally mature, while their United States competitors fare no better, at 18%. But this national average hides huge gaps between provinces: Quebec SMEs are leaders in digital transformation, at 26%, while BC and Atlantic Canada trail far behind, at 15%.
Of course, company size is a factor in high level of digital maturity (19% of Canadian SMEs compared to 34% of large companies). The industrial sector also plays a role: services companies other companies post higher maturity rates than goods-producing companies.
Setting social media presence aside, it appears that only a minority of companies have fully integrated digital technology in their operations. Overall, 57% of SMEs of all sizes display low digital maturity, which means that they do not use tools for digital marketing, operational management or productivity management such as CRM and ERP systems, data storage or analysis tools, or digital design, production and automation tools.
The five steps to digital maturity
The BDC has identified five crucial steps to digital transformation:
The five steps to digital maturity. Business Development Bank of Canada.
1. Define and share your digital vision.
2. Invest in technology.
3. Establish a culture of change.
4. Unleash the power of data.
5. Work for continuous improvement.
Pierre-Olivier Bédard-Maltais, an economist at the BDC, adds the following words of advice:
“Try to increase your digital maturity one step at a time. Most successful businesses start with small projects to build skills, iron out problems and prove return on investment. Even the smallest project can create long-lasting benefits.”
To help Canadian companies become more successful and competitive, the BDC has designed a digital maturity assessment tool that compares your company’s results with those of other similar-sized companies in your industry. It also provides useful consulting services to help SMEs plan for and implement new technologies. Finally, the BDC provides dedicated funding for technological investments.