How to strategically approach digital transformation as an SME? Identify & optimize potential with the ACT method

Digitalization plans for SMEs are a challenge in many cases. There is often a lack of knowledge of one's own digitization needs and a roadmap of what should be tackled. Using the ACT method as an example, we illustrate how SMEs can approach this in a predictable way. Including workshop canvas for download.

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The digital transformation for companies continues continuously. Inevitably. Since the start of the corona pandemic, many companies have already switched to new, digital business processes. Partially born out of necessity, partly already planned for a long time. However, despite often successfully established digital structures, many studies show that it is not recommended to stop digitization in SMEs once standard processes have been established. The motto here is proactive thinking ahead in order to keep up or to further expand your own market position among SMEs.

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Why is digital transformation important?

Why is digitization important for companies? At the start of the COVID 19 pandemic, it was usually clear to many companies where there was an important need for digitization. For example, when it comes to collaboration tools and digitized letter mail. Shortly thereafter, however, there was evidence of digital stagnation again in many companies following the removal of the first digitization hurdles. This entails the risk of overlooking advancing technological developments again. Your own digital expertise on the market is also often overestimated without well-founded self-analysis. According to Rainer Brenner from SpringerProfessional, “Digital Transformation” and “Industry 4.0”, i.e.”Office 4.0”, the relevant buzzwords in the economy. For small and medium-sized companies, on the other hand, they are often terra incognita — unknown country. What is behind these terms and what they mean often remains unclear for SMEs. The statistics listed in the article show that SMEs, unlike large corporations, are often not aware of their own digital backlog. Untapped potential is therefore usually not realized at all. Therefore, the presented by us should Framework for digitizing SMEs also create an understanding of the need to check their own digital maturity level as well as enable you to identify the construction sites in your own company hands-on within a short period of time.

With the so-called ACT method (Analysis, Create, Transform) from the Digital Transformation Competence Center at the Northwestern Switzerland Economic University of Applied Sciences (FHNW), in collaboration with the Swiss Strategy Lab, you can Analyze your own level of digitization for 7 different areas of the company. Adaptation measures can then be derived from the identified areas using the digitization framework. As part of the study, in addition to the development of a framework for digitizing SMEs, the digital SME maturity level in Switzerland was also surveyed by over 1,800 participants from a wide range of industries. This study can also be applied as a clue to the German market.

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Research results of the digitization status of SMEs in Switzerland 🔎❔

• 24% of all SMEs never carry out a market analysis, 24% every 2-3 years or less frequently, 52% at least once a year
• 50% of SMEs have a digital strategy (7% separately and 43% as part of the corporate or IT strategy)
• 56% of all SMEs think that they must further adapt their own business strategies as a result of digital transformation
• 34% of all SMEs feel threatened by competitive digital strategies.
• 44% of all SMEs are dissatisfied with their progress in digitization
  
  Source: FHNW & Strategylab

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A similar picture is emerging in Germany. In a survey by Ernst & Young from 2019, with 1,500 companies, 66% of medium-sized companies stated that digital transformation now plays a medium-sized to very large role in their own business model. A year earlier, the share was still 60 percent. As of 2019, only six percent of companies said that digital technologies play no role at all for their business. This share was more than twice as high in the previous year.

It is important to understand that in most cases, the digital transformation of a company is not a digitization stage that has to be taken once or twice. Digitalization and digital transformation in companies is a continuous process. With the right processes and routines, this can be easily implemented continuously. It is also advisable to plan a digital transformation instead of just reacting to changing market conditions. It is very likely that digitization is based on instinct in many medium-sized companies. This can work well in parts, but makes it more difficult to decide and prioritize the construction sites to be tackled. It is helpful to have a framework to support decisions on the path to digital Office 4.0.

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Why do SMEs strategically approach digitization?

When it comes to finding further starting points for digitization in SMEs, many SMEs often find it difficult. Unlike in other business areas, there is often no clear strategy here. Digitalization in SMEs can therefore often feel like a fog migration.

In addition, there is often not even a lack of awareness that digital change is necessary due to technological progress. There is usually a lack of a clear concept of how a digital corporate transformation can be successfully and goal-oriented. In addition, there is often a lack of experience or time to develop a digital business model, find suitable implementation partners or draft a roadmap.

With the ACT method, we show you how to digital process optimization in companies be able to operate. By using vDifferent areas of action (not departments) Analyze your company, such as Customer Centricity, Process Engineering or Digital Leadership & Culture, optimize internal processes and provide structured support. When purchasing software in SMEs, it is relevant to develop a cross-company digital strategy and to align the selection of technologies accordingly. Instead of just being guided by 2 opposing factors, such as range of functions or price. The combination of all tools should work together in the best possible way for an optimal digital ecosystem. The situation is similar with business processes. These should also be intertwined.

The ACT method is intended to provide digitization assistance for SMEs to make digitization decisions based on identifiable construction sites. The research project was supported by various partners, primarily from Switzerland (Bank WIR, AECS Swisscard, Lenovo, Swiss Export, digitalswitzerland) and by various authors. It has already been presented at several conferences using practical examples as an efficient planning tool.

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How can digital transformation be successfully implemented? The ACT method as a hands-on framework for digital transformation.

The FHNW study on digital transformation included the following 7 fields of action to develop a strategic corporate transformation identified. The fields of action are not based on different areas of the company, but extend to overall cross-departmental areas. This ensures a company-wide approach to action.

1. Digital Business Development
   New strategies and business models
2. Customer Centricity
   Focus: Constant customer orientation
3. New Technologies
   Apps, IoT (Internet of Things), Office 4.0, IT Security
4. Data and Cloud
   New insights from data and collaboration platforms
5. Digital Leadership & Culture
   New Approaches in Leadership, Culture, and Work
6. Process Engineering
   Optimized workflows and automations
7. digital marketing
   New marketing platforms and channels

Within the 7 areas of action, the status quo and the current need for action can be identified. As a result, certain areas are less easily overlooked if, as a matter of course, no need for digitization is suspected here. Once you have identified your construction sites, you may be able to address the topic “Digital Transformation Funding” inform.

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The ACT method is also based on 3 time-shifted core phases for strategic SME digitization:

• analysis: analysis of the market situation + expectations of customers, competition, environmental factors, technology trends, digital maturity analysis
• Create: Develop your vision based on your own core competencies, business model and market situation
• Transform: Digital strategy roadmap based on regular evaluation, change management, controlling and continuous adaptation to increase strategic business flexibility

As mentioned above, each phase of the ACT method comprises 7 fields of action for digital transformation with the associated strategic topics. These are divided into 3 stages of progress. In this way, the challenges of digitization for SMEs can be addressed in a targeted manner within the company without large, external consulting costs (without digital consulting). Partial successes can be measured in many areas (production costs, costs of work processes) and can be attributed to the adjustments made. Business models are further optimized through regular evaluation loops. You can also download the business canvas on the ACT method via a digital questionnaire at digital-strategy-check.ch Fill it out for free within a few minutes. All results can then be analyzed and adapted in further meetings. After completing the survey, you have already completed the ACT Method Business Canvas for the most important core business model areas.

How yourself Already implementing digitization in many areas within just a few meetings in SMEs lets, shows the practical example in the graphic below.

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The framework presented shows how digitization in the office can be achieved strategically and predictably in just a few steps. The entire publication with research results, case studies and strategy templates as well as a Workshop canvas The ACT method can be found at www.strategic-transformation.ch be downloaded. On the following pages, you will find further recommendations for applying the ACT method for your company.

Difference between digitization and digital transformation

Digital transformation and digitization are often used as synonyms. What is the difference? Digitalization describes the process of converting analog media into digital formats through technology or software. Examples of digitization include converting record recordings into digital MP3 files or scanning paper and printouts using OCR technology (optical character recognition). The content is read out on paper, interpreted using software and converted into a digital version. This depiction of information in 0 and 1 versions is therefore called digitization.

Digitalization is also often used as a synonym for automation. Digitalization in SMEs makes it possible to simply digitally map processes or automate them. When it comes to automation, the term robotic process automation is often used. Examples include the automatic transfer of billing information from digitized mail to connected accounting tools.

When it comes to digital transformation, business areas and their processes are also considered. However, this understanding goes far beyond pure digitization and adaptation to new digital technologies. Examples of digital transformation in SMEs include new solutions that are being sought or problems that are being reopened with the help of technology and solved more efficiently.

When CAYA digitizes letter mail, a printout is not only simply digitized, but also opens up a variety of other uses. Thanks to a full text search, documents can be searched for keywords. In addition, Add keywords to letters for more efficient document management. For example, an invoice is automatically recognized as such and automatically tagged with it. If you search for the term invoice, all invoices received can be viewed at a glance in seconds.

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Digital transformation of SMEs: suitable environment and positive corporate culture

Digital transformation as an SME happens in all areas of activity of a company. Not just in individual departments. With the presented framework, we focused primarily on the digital office. Of course, other areas of a wide variety of companies are also strongly linked to a digitization advantage, such as customer service, production or even product development. According to the industry medium for digitization morethandigital, it is important to focus primarily on people rather than technology when it comes to digitization. Specifically employees and, above all, customers. A corporate culture that is accordingly open to external influences makes it possible to address problems and suggestions from them in a more targeted manner.

An explicit focus on people and customers can also ensure that there is less internal fighting in the process of your own digital transformation. More focus can be placed on how digital transformation makes companies more efficient and can ultimately also offer a better customer experience. In this case, a common goal is more united and ensures that better experiences for satisfied customers are created in a more targeted manner. According to morethandigital, in particular 6 factors relevant for successful SME digitization.

1. Communicate urgency for change
2. Uncertainty as an opportunity: Develop your own strengths as a roadmap
3. Allow and celebrate a culture of error
4. Bring in new perspectives
5. Listen to customers - customer service, surveys, etc
6. Build strong partnerships (innovative partners)

By the way 📎: In our article on step-by-step, we reveal how you can represent and introduce digitization topics in a company in an argumentative way Process optimization for SMEs. An insight into management philosophies for SMEs can be found in our article on lean management methods.

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sources:
https://digital-magazin.de/unternehmen-digitalisieren-aus-dem-bauch-heraus/https://innovators-guide.ch/2021/08/kmu-strategien-im-digitalen-zeitalter-ungenutzte-potenziale-fuer-die-strategische-transformation/https://www.ey.com/de_de/news/2019/06/digitalisierung-der-zwei-geschwindigkeiten-im-mittelstandhttps://strategylab.net/https://www.springerprofessional.de/transformation/unternehmensfuehrung/wie-kmu-die-digitalisierung-gelingt/16588062https://morethandigital.info/

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