Six steps to plan a successful digital transformation


Egidijus Barcevičius
Rūta Gabaliņa
Slobodan Golušin
Barbora Kudzmanaitė
Oleksandra Yevdokymova

Small and medium-sized enterprises (SMEs) stand to gain significant benefits from the adoption of digital technology. Digitalisation can offer opportunities to streamline company processes, reshape business models and access new markets. However, SMEs, especially those with low digital maturity, often encounter challenges in embracing digital technology.

Evidence indicates that such companies might face constraints in terms of resources and expertise needed to initiate their digitalisation journeys. This makes effective planning critical for managing successful digital transformations.

Analysis of digitalisation good practices reveals that establishing both long-term and short-term digitalisation objectives can empower companies to persist through setbacks, secure funding, cultivate stakeholder buy-in, and consequently, effectively implement digital technology.

Recognising the challenges faced by SMEs when digitalising, this article provides actionable guidance tailored to SMEs and companies with limited digital maturity, assisting them in planning successful digital transformations.

This guidance builds upon the insights garnered from the Smart Industrial Remoting study, implemented by PPMI on behalf of the European Commission. The study analysed the challenges companies encounter when integrating digital technologies and put forward practical recommendations for achieving successful digitalisation.

Click the boxes below to find out more about each of the six steps of planning a successful digital transformation.

Step 1

Monitor trends and opportunities

To maintain competitiveness and keep track of the latest developments in the industry, your business will need to monitor the market regularly. Studies suggest that collating information across diverse contexts and markets is a fundamental prerequisite for digital innovation.

Your business can accrue knowledge through various avenues, leveraging both internal and external resources. Pertinent information can be sourced from trade exhibitions, repositories of best practices, newsletters detailing the most recent market trends, as well as through affiliations with diverse clusters and associations.

Even so, smaller companies may find it difficult to build the necessary technical knowledge required to monitor relevant markets. SMEs tend to have less access to thought leadership, research and academia than large companies. SMEs can collaborate with the wider business ecosystem and make use of support mechanisms such as the European Digital Innovation Hub (EDIH) network.

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Step 2

Assess the ‘as-is’ situation, and identify needs

Prior to initiating a digitalisation project, you will need to understand how technologies can transform your business. A vast range of digital solutions exists in the market. Your company’s needs will determine which one(s) are the most relevant for your business.

Evidence suggests that understanding a company’s level of digitalisation and its needs facilitates the adoption of digital technologies. Choosing a technology that fits your company’s profile will help to ensure it will be implemented successfully in the long run.

If your company is at the beginning of its digitalisation journey, an assessment of digitalisation needs is useful for identifying the starting point for digital transformation. To do this, you should take a close look at your business processes, who your customers are and what is happening in the broader market. This will help you decide where to kick off your company’s digital transformation.

Taking stock of the as-is situation also helps to identify potential digitalisation gaps. This assessment will help management to identify inefficiencies in processes, detect potential interoperability issues in cases where legacy systems are in use and see where digital transformation would have the most impact.

While digital technology adoption is relevant in all business areas, digitalisation of some processes may be more urgent than others depending on your industry.

Various resources that can support this process exist, including digitalisation frameworks, maturity models and readiness assessments. Companies can also seek support from EDIHs in conducting their Digital Maturity Assessment (DMA).

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Step 3

Define a digitalisation strategy

Evidence shows that long-term strategic planning is crucial for digitalisation. It helps to guide investment decisions, align initiatives with business objectives, foster buy-in and ensure perseverance even when the benefits of digitalisation are not obvious in the short term. Having a strategic roadmap for digitalisation in place can improve the odds of a digital transformation being successful.

However, SMEs face specific challenges in long-term strategic planning for digitalisation. First, SMEs often digitalise reactively and focus on tactical over long-term strategic benefits. Second, frequent adjustments to the strategy may be needed due to changing circumstances. Third, limited time and financial resources can hinder the development of a strategy.

It is therefore important to balance long-term planning against the need to remain flexible in the face of changing business realities. SMEs can benefit from embracing iteration and flexibility. For example, companies can choose to test and re-calibrate strategies throughout their digital transformations.

SMEs can also consider short and simplified formats such as mind maps for their strategies rather than detailed reports. Moreover, to create their digitalisation strategies, companies can seek external support from third parties including the EDIH network.

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Step 4

Select digitalisation initiatives

SMEs often pursue digitalisation in response to direct business needs rather than as part of a long-term plan. The key to successful digitalisation lies in carefully selecting the right initiatives that align with your company's strategic objectives. This involves developing a list of digitalisation projects, prioritising them and determining which ones to implement.

Company case studies show that typically digitalisation begins with isolated ad hoc projects. This is because companies typically view smaller projects as less risky than large-scale transformations. Smaller companies may struggle to undertake multiple digitalisation projects at once due to their risk aversion towards capital or job losses. Over time, however, digitalisation efforts can become better managed, integrated and interconnected across the entire company.

Aversion to undertaking digitalisation projects can be overcome through starting off with 'quick win' initiatives and iteration. Quick wins refer to initiatives with a high likelihood of success that can be implemented simply and within a short timeframe.

For companies with little or no prior experience in digitalisation, starting with quick win opportunities allows them to demonstrate early success to stakeholders and gain buy-in for further digital transformation. In addition, employees can familiarise themselves with new systems and working methods before introducing additional technologies.

Companies can break down large-scale transformations into smaller iterative test-and-learn cycles. This approach involves defining incremental steps that, when combined, lead to significant changes. By initially testing a digital solution on a small scale, businesses can assess its viability and determine if any recalibration is necessary. For SMEs in particular, pilots can help to identify problems or weaknesses at a relatively low cost.

To identify which projects represent quick wins, your business will need to identify, analyse and prioritise potential initiatives based on:

  • Strategic importance: how each initiative can contribute towards the company’s strategic objectives, e.g. in terms of business growth, profitability development opportunities.

  • Ease of implementation: the company’s readiness, time and resources needed, the complexity of the initiative (process, system and technology) and the associated risks.

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Step 5

Plan the digitalisation project

After selecting a set of digitalisation initiatives and creating a high-level roadmap for their implementation, the next step is initiative-level planning.

Initiative-level planning involves outlining specific activities, timelines and deliverables, as well as allocating resources, for each individual digitalisation project.

For large companies and complex transformations, it is important to have detailed plans in place. However, SMEs often take a more flexible approach, adopting digital technologies quickly based on external factors or immediate business needs. The level of detail of your company’s digitalisation plan therefore depends on the complexity and scope of each initiative.

The implementation process is influenced by market conditions, organisational factors and the outcomes of previous transformation steps. We recommend taking an iterative approach to planning, as illustrated in the figure below, which allows continuous assessment and adjustments as needed.

The ability to adapt plans as you go along helps to address challenges and maintain commitment, even in the face of setbacks.

Step 6

Assess financial feasibility and funding opportunities

Financial feasibility can be a significant barrier to pursuing digitalisation. A lack of financial resources was seen as the main obstacle to digitalisation by 43% of respondents to a recent survey conducted by PPMI.

Thus, prior to adopting digital technologies, your business should ensure that the anticipated interventions are financially feasible. Assessing your company’s financial capabilities will also help to choose the most appropriate approach to digitalisation.

Companies can employ different approaches to assess the financial feasibility of a digitalisation project. A summary of approaches companies can take to assess the financial feasibility of a digitalisation initiative is presented below.

Companies can also pursue various approaches to drive down the costs of digitalisation. Examples include:

  • Using non-industrial solutions: low-cost devices or software that have been developed for non-industrial applications, such as the consumer market.

  • Using off-the-shelf or open-source technologies.

  • Involving trainees, apprentices and students in the development of solutions.

  • Sharing the costs of digital tools, infrastructure, maintenance with other companies.

  • Making use of public support programmes for business digitalisation.

Finally, companies can seek funding opportunities to implement more complex projects. Several funding programmes targeted at digitalisation exist at both European and national levels.

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This article is based on the Business Digitalisation Toolbox developed for the Smart Industrial Remoting study. The study was carried out by PPMI for the European Commission and sheds light on the digitalisation of five industries in five different European countries. For more information, see this page.

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