SMB Group’s 2017 U.S. Small and Medium Business Digital Transformation Study reveals that today’s small and medium businesses (SMBs) have tuned into the digital revolution. As noted in Pulse Check: SMBs and Digital Transformation, roughly three-quarters of SMB (including small (1-99 employee), medium (100-999 employee) and upper midmarket (1,000-2,500 employee) businesses) decision-makers agree/strongly agree that digital technology is impacting their businesses and industries.

So, why, when, where and how will SMBs place their digital bets?

Why: Drivers for Digital Transformation

The top reasons that SMBs are investing in digital technology are to attract new customers, improve employee productivity and streamline operations (Figure 1). However, the top-ranking driver varies fairly dramatically based on company size as follows:

  • Small business: attract new customers
  • Medium business: keep up with competitive pressures
  • Upper midmarket: improve employee productivity

Figure 1: Top Drivers to Invest in Digital Technology

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When: Most SMBs Are in the Planning Phase

Survey results indicate that 48% of SMBs are currently planning to engage in activities that will help them adapt and transform their businesses for a digital future. Meanwhile, 36% are already implementing activities to support digital transformation, and 16% have no plans underway.

Phase of digital transformation correlates strongly with company size (Figure 2). Upper mid-market and medium businesses are 2.6 and 1.9 times more likely, respectively, to say they’re currently engaged than small businesses. In addition, younger companies–those that have been in business less than 5 years–are twice as likely to be currently involved in activities to support digital transformation.

Figure 2: Digital Transformation Phase Correlates with Company Size

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Where: Top Investment Areas Include Decision-Making, Customer Experience and Employee Productivity

SMBs are most likely to target their digital dollars to help improve employee productivity, personalize/improve customer experience, and improve decision-making (Figure 3).

Figure 3: Business Goal Priorities for Digital Technology Investment

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Interestingly, younger companies (those in business fewer than 5 years) place higher priority on “add a new sales channel’ and ‘improve decision making’ than older companies, who are more likely to rank “improve employee productivity’ and “improve customer experience’ at the top of the list. 

How: SMB Resources for Digital Transformation

How are SMBs planning to transform these different aspects of their businesses? It depends on the what area you ask them about. For instance, respondents cited “adding a new sales channel” and “improve new employee recruitment” as top areas in which they plan to invest in new solutions. In contrast, they are most likely to augment existing solutions to automate repetitive tasks and improve decision-making.

However, given budget and resource constraints, SMBs will need to plan carefully to get their digital transformation initiatives off the ground, whether they are investing a totally new solution or augmenting an existing one.

On the budgeting front, 58% of SMBs plan to fund their digital transformation initiatives from existing IT budgets, and 34% say they don’t have enough money to adequately fund their goals (Figure 4). Other key obstacles that SMBs will need help to overcome involve integrating new technologies with older ones; lack of goal-setting; lack of IT skills/staff; and determining what solutions will best help them to achieve their goals.

Figure 4: Budgeting and Challenges for Digital Transformation

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Summary and Perspective

SMBs see that change is here, and know that they must adapt their businesses to survive and thrive now and in the future. While most SMBs are just starting to tackle the challenge, their plans are beginning to take shape. However, as their specific goals and targets for digital transformation come into focus, the challenges will also become clearer. SMBs will need education, guidance and support from vendors to jump these hurdles and achieve their digital transformation goals.

For More Information

We designed this study to help technology vendors deepen their understanding of SMB attitudes, appetite, readiness, priorities and requirements for business and digital transformation. Study results provide vendors with essential information to help plan, position and market products and services for SMBs, segmented by company size, age of business, industry, phase of digital transformation and more.

If you’d like to learn more, please get in touch with Lisa Lincoln, who can provide you with a full table of contents, methodology, study pricing and any other information: lisa.lincoln70@smb-gr.com or (508) 734-5658.