In today’s volatile, uncertain and complex business environment, digital transformation is no longer a nice to have, but a necessity that is crucial to the survival of a business.
A simple Google search on this subject yields more than 400 million results, with benefits ranging from improved productivity and efficiency to increased resilience and adaptability.
But what does it really mean? Where does one start?
These are pertinent questions, especially for small and medium-sized enterprises (SMEs) which, compared to their larger corporate siblings, have limited financial resources and skills needed to implement these solutions.
The digital transformation journey can be both daunting and complex. In a climate where many SMEs are trying to navigate a constrained and challenging post-pandemic business environment, the benefits of digital transformation offer some much needed respite.
What is the difference between digitization, digitalization and digital transformation?
It is important to distinguish between these concepts as they are often used interchangeably and can be confusing.
Let’s use the example of a security company that records footage of people entering a shopping mall and stores the video in VHS format. Digitization is converting the VHS video into digital format and storing it on a hard drive. Digitalization is uploading the digital video onto a video streaming service that allows multiple security guards to view the footage simultaneously. And digital transformation is using facial recognition to analyse the people that entered the shopping mall to solve a crime that occurred at the mall. The security company could also sell this footage to other law enforcement agencies or insurance companies, converting what would have been cold data into a new source of revenue.
While digitization is part of digital transformation, it is important to note that digital transformation is about a fundamental shift that results in value creation. It is about leveraging technology in all aspects of the business’ operations to fundamentally change the way it operates and delivers value to its customers. It is about rethinking and re-imagining business processes, business cultures and customer experiences to respond to changing business and market conditions.
There are two main aspects of digital transformation: it can be externally focused and aimed at improving customer interactions and outcomes, or it can be internally focused on making work easier, more engaging and more efficient for employees.
SMEs need to act quickly to future proof their businesses and make them more resilient
In the context of a tough post-pandemic business environment and in a sector where liquidity and cash flow are perennial challenges, the ability to quickly adapt to this new normal can be the difference between survival and absolute disaster.
Beyond navigating financial and operational pressures, SMEs also face substantive challenges such as business continuity and weak demand for their products and services.
The crisis is forcing SMEs to fundamentally rethink their business models, in particular how they manage remote work and interact with suppliers and customers while managing widespread uncertainty.
Technology can empower SMEs to make credible decisions and better adapt to a dynamic and unpredictable business environment. In times of heightened uncertainty, such as what we are currently experiencing, one standout technology for SMEs is Enterprise Resource Planning, commonly referred to as ERP.
Technology enabling resilience to disruption
The common misconception that technology is only accessible to large companies with big budgets is misplaced. SMEs can also leverage technology to drive better efficiencies, innovation and growth. In fact, compared to larger companies, SMEs are well placed to take advantage of technology. Because of their size, SMEs are more agile and are able to make decisions faster and respond to changing market conditions quicker.
In the context of SMEs, digital transformation is often misunderstood, and its benefits shrouded in mystery, despite the endless applications of technology that can deliver direct business value. In particular, the cloud removes many of the barriers to digital transformation by enabling SMEs to pay for services as they consume them and to easily integrate new services as and when they need them. This reduces the total cost of ownership and removes the need for costly upfront investments.
Connect the Dots
The purpose of implementing an ERP solution is to provide an end-to-end information management system that connects the right information, to the right people, at the right time. It helps companies manage the countless processes that make the business function effectively, such as finance, human resources, supply chain, procurement, and customer relationship management to name a few.
An ERP solution enables the smooth flow of information across the business and gives decision-makers a real-time view of the overall health of the business, with potential risks and weak spots more easily identified.
Unfortunately, some still see ERP solutions as costly, difficult to implement and with high entry barriers for SMEs. Sadly, this ignores the enormous progress made by technology providers to level the playing field by developing enterprise-grade ERP solutions for the SME market. These solutions that are born in the cloud, and take advantage the faster time-to-value that the cloud makes possible, reducing implementation times from months to weeks.
Here are five benefits that SMEs can expect from implementing an ERP solution:
An integrated business management approach
An ERP system streamlines, automates and integrates multiple sources of disparate information and business processes. This supports planning efforts by, for example, matching raw material purchases to accurate sales forecasts to minimize wastage in the supply chain.
Greater transparency, efficiency and cost-savings
ERP solutions enable SMEs to store information once and without duplication. This removes inefficiencies and enables the entire organisation to work off a single source of truth. Without an ERP system, valuable insights, such as production information used to calculate profitability may be stored in multiple silos leading to inefficiencies and potential wastage.
Decisions powered by predictive analytics and business insights
Many technology pundits have dubbed data as “the new oil”. The notion is predicated on the fact that raw oil isn’t as valuable as the final products that are produced once its processed. In the same way, data isn’t as valuable as the insights that are generated once it is analysed. ERP enables SMEs to analyse data and extract valuable insights that inform decision-making, enabling them to quickly adapt to changing market conditions.
Improved compliance, governance and data security
If data is indeed the new oil, then organisations need to take reasonable steps to safeguard it, both from a security and governance perspective. SMEs striving to comply with the POPI Act or Europe’s GDPR, for example, can leverage their ERP solution to ensure sound governance by maintaining the correct levels of access to data for various stakeholders within the business.
Accessibility of business-critical information
Cloud-based ERP systems enable business leaders to access business critical information from anywhere and at any time. In our current state of disruption, having the ability to tap into a real-time view of the total health of the business is invaluable to decision-making. The ability to securely access information about the company’s operations from any device, anywhere and at any time is also an important component of business continuity.
Dumisani Moyo is Head of Mid-Market SA for SAP Africa