Unlocking the potential of technology: best practice principles for SME digitalisation


Barbora Kudzmanaitė
Rūta Gabaliņa
Oleksandra Yevdokymova

How to make digitalisation 'best practice' work for all?

People usually associate the concept of a digitalisation 'best practice' with state-of-the-art solutions and tech giants, like Amazon and Apple. However, this definition fails to acknowledge that not every company will benefit from attempting to implement advanced digital solutions straight away. For some companies such technologies may be too complex and resource-intensive to adopt immediately.

The vast majority of the businesses in Europe are SMEs. Data suggest that when it comes to digitalisation, many of them are only at the beginning of the journey. As a part of the Smart Industrial Remoting study, carried out by PPMI for the European Commission, we are striving to bring to light digitalisation practices that would be relevant for SMEs.

Our research shows that SMEs and non-digitalised companies can benefit from beginning their digitalisation with implementing basic technologies. Starting small can lead to 'quick wins', which help to obtain the skills and motivation needed for more complex digital initiatives in the future.

Therefore, in our study, we use a broader definition of ‘best practice’:

Best practice ­– a characteristic or behaviour that enables a company to digitalise successfully regardless of company size, digitalisation level or technology chosen.

Based on this definition, we explored more than 40 case studies of European companies of various digitalisation levels and size classes. Building on the experience of these businesses in adopting digital technologies, this article presents eight best practice principles for digitalisation.

Click the boxes below to find out more about each principle and how companies have applied it in practice.

You can also explore the principles and case studies in more depth in the Smart Industrial Remoting study Best Practices Collection report.

Best practice principles for digitalisation

Principle 1

Ensuring managerial capacity and leadership

Depending on its attitude towards digitalisation, company management can act as gateways or gatekeepers to new technology adoption. Therefore, ensuring their buy-in is key in kick-starting and successfully implementing digitalisation initiatives. This is especially relevant for SMEs, where the top management and owners play a more central role in decision-making compared to large companies.

Certain managerial practices can accelerate digitalisation. Agility is crucial for leaders to respond to emerging challenges and calibrate plans accordingly. Managers who foster a culture of openness towards change and experimentation are more likely to lead successful digitalisation initiatives.

Our research shows that the following six attitudes and actions can help management accelerate digitalisation in their organisation.

Click below to see how Confetil, Landspeis and Dynamics Technology Hungary Kft implemented these attitudes and behaviours in practice.

Principle 2

Fostering employee and third party buy-in for digitalisation

Lack of employee buy-in is one of the main reasons digital initiatives fail. Examples of why company staff might resist change associated with digitalisation include:

  • Limited awareness about technologies and how they will impact day-to-day work

  • Risk aversion

  • Concern that some employees may be replaced with technology

  • Concern that technology may negatively impact employee emotional well-being

Therefore, it is important to combine digitalisation efforts with effective change management. This starts from defining a case for change. Company leadership must be able to explain why the adoption of a digital technology is necessary, what benefits it will bring and how success will be measured.

Then, management needs to consider the organisations’ readiness and implement an appropriate change management approach, which is characterised by six key elements.  

However, companies, especially SMEs, tend to have a limited amount of time and resources that they can dedicate to change management. Therefore, it is important for companies to adapt the approach to their needs:

  • SMEs – usually characterised by the flexibility and proximity between management and employees – can use internal discussions to communicate the case for change, receive feedback and address concerns

  • Large companies or highly complex initiatives may benefit from more formalised change management programmes

To find out how two companies – Leviatan and Eckerle Automotive Bóly Kft– fostered employee buy-in in their organisations, click below.

Principle 3

Setting strategic objectives for digitalisation

Evidence shows that long-term strategic planning of digitalisation helps to ensure the successful adoption of new technologies. Strategic planning can help companies to:

  • Guide investment decisions and the prioritisation of digitalisation initiatives

  • Align digitalisation initiatives with business objectives

  • Secure funding

  • Foster internal buy-in

  • Persevere even if the benefits digitalisation are not obvious in the short-term

Long-term planning must be balanced against the need to remain flexible in the face of changing business realities. A study from 2020 argued that companies should abandon a linear process of strategy definition and execution in favour of iterative and continuous adjustment.

Strategic planning for digitalisation can be broken down into three main activities:

  • Technology trend monitoring

  • Analysis of gaps and needs

  • Setting of strategic objectives

For SMEs, each activity has specific challenges that require tailored strategies to address them.

To see examples of how three companies performed their needs and set strategic objectives for digitalisation, click below.

Principle 4

Securing the skills needed

Sufficient digital know-how is one of the most important enablers of digitalisation. However, our previous research shows that many of the obstacles companies face when attempting to digitalise are skills related. SMEs are particularly vulnerable to skills and human resource shortages.

To secure the necessary skills, companies can choose from three options:

  • Existing in-house capabilities or hiring employees with the necessary competences

  • Upskilling and reskilling employees

  • Engaging external expertise

For SMEs, each option carries specific challenges that require tailored strategies to address them.

To see how two companies – De Trog from Belgium and Katty Fashion from Romania – addressed skills challenges, click below.

Principle 5

Ensuring that the foreseen digital intervention is feasible

Prior to any initiative, a company needs to secure the necessary financial and human resources. However, the costs and benefits of digital interventions can be difficult to quantify. Yet, doing so helps companies choose the best approach and plan the necessary actions.  

To begin with, a company needs to explore digital solutions available on the market and compare their costs. Having chosen a solution, it needs to consider various types of costs, including upfront and recurring costs.

Our research suggests that SMEs often struggle to find the time and resources to perform these calculations. As a result, some companies decide to skip extensive financial planning. A common alternative is applying the ALARA principle – introducing solutions at a price ‘as low as reasonably achievable’. However, digitalisation can entail various hidden, irregular and long-term costs. Therefore, SMEs should exercise caution when deciding to skip calculations altogether.

To see how three retail, construction and agrifood companies ensured the feasibility of digitalisation solutions, click below.

Principle 6

Implementation planning

Companies usually do not digitalise for the sake of digitalising – they do it to achieve broader strategic objectives.  Digitalisation often starts as an isolated ad hoc project. With time, digitalisation efforts become better managed, integrated and interconnected across the company. Whether digitalisation is small- or large-scale, it is crucial to align digitalisation plans with the company’s long-term needs.

SMEs rarely develop and follow detailed digitalisation plans. Instead, they leverage their flexibility to adopt digital technologies rapidly and on the go. But lack of planning can make smaller companies even more vulnerable to future challenges.

Strategic roadmapping helps SMEs deal with complex transformations and ensures transparency around activities, timelines, deliverables and resources. Strategic roadmapping can have several iterative stages that allow a business to continuously evaluate and recalibrate digitalisation plans.

In fact, research suggests that companies which allocate more resources to experimentation perform better than their peers. By testing a digital solution on a small scale first, businesses can assess how viable it is and whether recalibration is needed. For SMEs especially experiments can help detect problems or weaknesses at a low cost.

Click below to see examples of how three companies used an iterative approach to introduce new technologies.

Principle 7

Taking advantage of the wider ecosystem and collaboration

Companies do not operate in a vacuum. Leveraging cooperation with other players in their value chain and beyond can help smaller companies accelerate digitalisation. Moreover, research shows that external support and advice is what most SMEs lack. It can provide them with guidance on the available solutions and how to adopt them.

SMEs can seek different types of support from the ecosystem:

  • Technical support and expertise

  • Access to testing facilities

  • Mentoring

  • Matchmaking with technology providers and cooperation with them to develop and test technologies

  • Support for technology piloting

  • Skills development support

  • Experience sharing

  • Data sharing

  • Funding and cost sharing

There is a large variety of actors that companies can cooperate with to boost digitalisation, from public sector organisations to other businesses in the value chain.

To find out how Protex Group and Fiber Network WUG took advantage of collaboration with the broader ecosystem, click below.

Principle 8

Choosing a solution and a technology provider that fit company needs

To be aligned with SMEs’ needs, solutions must be accessible, simple, unobtrusive and scalable. However, many technologies fail to meet these criteria. On the one hand, commercially available options can be over-engineered, complex, expensive to implement or lead to vendor lock-in. On the other hand, SMEs may lack the time, resources or competences to develop solutions internally.

However, companies in our study also found creative ways to lower the costs and complexity associated with 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

‘Digitalisation on a shoestring’ as it is sometimes referred to can be an important first step towards digital transformation. These quick win projects decrease initial costs and human resource needs, increase stakeholder confidence and are less likely to disturb business operations. The experience gained then allows a business to implement larger digital initiatives or more advanced technologies in the future.

For examples of how companies in our study implemented ‘quick win’ initiatives, click below.

This article is a part of the study titled ‘Smart Industrial Remoting: remote working in non-digitalised industries’. The study is 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.

If you have questions for the team or wish to join our mailing list, you can reach us at digital_industry@ppmi.lt.

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