The journey to digitalisation is more of a slog than a stroll for SMEs struggling to match the international pace, writes Emily Styles

Digitalisation for business is a buzz word among policy makers, and there are concerns at EU level that Ireland’s government and agencies aren’t up to speed on the issue. Digital transformation requires an enterprise-wide change driven by digital technologies, and to work it has to be supported at company level by changes in culture, leadership, skills and
processes.

Traditional sectors are digitalising unevenly, and many businesses are struggling to evolve quickly enough. For instance, there is a paradigm shift in the activities of manufacturing firms globally, resulting from the adoption of cloud computing, robotics, data analytics, artificial intelligence and virtual reality. In Ireland, however, it is estimated that only one in five manufacturing SMEs are properly engaged in e-business process change.

Recent research carried out by the European Investment Bank provides context for the situation. It found that around 40% of traditional Irish indigenous companies completely lack digital assets, and that Ireland lags behind leading countries in terms of e-business processes and technology adoption. Though one-in-three SMEs sell online, e-commerce enthusiasm fizzles out when SMEs look at e-business technology adoption relating to supply chain management, enterprise resource planning, customer relationship management and more.

“Companies are often working with a budgeting logic instead of an investment logic,” the EIB report states. “Digitalisation is considered as a cost factor and not seen as an opportunity. Not enough companies know how to translate the use of technologies into economic impact, and how to build a new incremental business.”

In Association with

Tech Marketplace

One of the ways suggested by the EIB to improve the situation is to “leverage the supply side” i.e. better facilitate the vendors providing the solutions. The idea would be to create a ‘push-and-pull’ strategy based on creating a tech marketplace for SMEs.

Prodding SMEs on the way to digitalisation requires a comprehensive roadmap from government, the EIB believes. Among the suggestions are assessing SMEs on their digital knowledge and readiness, and then offering grant aid to fund their first moves towards adopting digital technology. This initiative could also include a loan finance mechanism to support larger-scale investments in digital projects.

The EIB’s view is that bank loan officers lack the expertise required to assess digitally-focused business projects. So the EIB report proposes the introduction of an income-contingent loan scheme for firms in non-digital sectors, and digital solutions suppliers. The EIB report adds that new funding options would benefit from supplementary educational initiatives, such as providing guidebooks and learning platforms on digitalisation for entrepreneurs, or dedicated coaching programmes for owner-managers.

Digital Strategy

Other EU countries have developed state-led policies to assists SMEs with their digital journey. In Germany, Digital Bonus Bavaria combines grants with digital loans for a total amount of up to €1m. In Denmark, the SME:Digital initiative leverages the expertise of more advanced companies to support SMEs. In ‘sparring sessions’, smaller firms participate in groups of up to five peer companies that explore the challenges of transformation.

Finland also has a comprehensive national digital strategy. The EIB report concludes that the key lesson learnt from the Finland Digital Framework is the importance of the involvement and coordination of a variety of public institutions.

According to Andrew McDowell (pictured), European Investment Bank vice president: “Enabling business to harness digital technologies is crucial to expand into new markets, develop new products, create jobs and compete globally. The EIB looks forward to supporting implementation of measures outlined by the report and further increasing innovation financing for companies across Ireland.”