Needs Analysis
1 - INTRODUCTION
This report, built on an extensive and transnational research, aims to develop a clear and objective overview of the development and introduction of new digital solutions into the work processes of SMEs across Europe.
This process of data collection was conducted autonomously by the 3 partners of the project in their respective countries; thus, the research analyses the state of the digitalization process in Italy, Greece and Portugal from various kind of enterprises operating in different sectors such as touristic agencies, IT companies, marketing companies and more.
Each of research conducted composes of 3 distinct investigations conducted:
The ultimate goal is to find common challenges regarding the obstacles that different SMEs in different countries encounter in their way toward digitalization and recommend the relative common solutions that can be applied in order to ensure a smooth transition to a new digital and more sustainable model of business.
This report, built on an extensive and transnational research, aims to develop a clear and objective overview of the development and introduction of new digital solutions into the work processes of SMEs across Europe.
This process of data collection was conducted autonomously by the 3 partners of the project in their respective countries; thus, the research analyses the state of the digitalization process in Italy, Greece and Portugal from various kind of enterprises operating in different sectors such as touristic agencies, IT companies, marketing companies and more.
Each of research conducted composes of 3 distinct investigations conducted:
- A survey aimed at collecting feedback of SME’s employees on the grade of digitalization achieved by their companies, the obstacles, the risks and the opportunities that this process will take with it. It was proposed to 50 workers from each country, reaching thus a grand total of 150 answers from Italy, Greece and Portugal.
- Interviews which were targeting owners and/or managers of SMEs in the 3 countries involved in the project to assess their will to undertake the digitalization of their companies and their opinion on the technological progress the business sector is experiencing in the last years.
- Focus groups with entrepreneurs and experts in areas related to business management and digitization. The goal of these focus groups was to discuss the ongoing digital transition process. The participants were also informed of the results of the other two research and were asked to comment the data gathered.
The ultimate goal is to find common challenges regarding the obstacles that different SMEs in different countries encounter in their way toward digitalization and recommend the relative common solutions that can be applied in order to ensure a smooth transition to a new digital and more sustainable model of business.
2.1 -The survey
The survey reached roughly 50 people in each of the countries involved in the project; they are specifically workers from micro, small and medium enterprises that are facing the digital transformation and the challenges it takes.
Figure 1: size division of companies participating to the survey.
As we can see in figure 1, slightly more than half of the workers answered the survey work in micro enterprises (51%), while the 33% are from small size enterprises and 15% from medium size enterprises.
While in Greece and Portugal, the answers to the survey follow this pattern however, in Italy the answers came more from small enterprises (50%) more than micro enterprises (30%).
The most represented sectors were the tourism and education sectors which combined, gave 81 answers globally; this identifies these two as very committed sector in reaching a high level of digitalization in their work processes.
In all the countries, the employees indicate the connectivity tools as the most used and developed in their companies; connectivity is referred to tools such as intranet. The other major digital application used in the daily work life of the SMEs in all the interested countries is of course the company’s website.
Moreover, the employees from nearly all the sectors involved in the research agree on the necessity of improving the current digital tools and implement new digital practices into the work processes of their companies; the only notable exception to this trend is given by the IT sector, which may be explained by the already high grade of digitalization achieved naturally by their companies. The areas in which the employees feel more important to embark in a digital evolution are very different depending on the contexts taken into account: if in Italy and Portugal, the answers point to the digital evolution and automation of management and administration through new digital tools connected and integrated in network, in Greece the focus shifts to the creation of new, high-tech product capable of strengthening the position of the companies on the market.
Most of the employees involved in the survey think that there is also the need to improve digital tools capable of assessing the user experience of the products and services produced by their companies in order to improve the quality of their work and gain a better position of their product or service on the market. Great concern is also registered from all sides about the impact that the production processes have on the environment, while there is trust in the new digital solutions to reduce this impact and make the company’s business more sustainable and eco-friendlier.
While the digital transition is perceived as a very important, even fundamental passage, to stay competitive and to improve the management and products/services of the companies, it is also clear that huge investments are needed in order to fully embrace this transformation. In particular:
Figure 2: percentage of SMEs planning to develop digital solutions and services in the future.
2.2 Interviews
The interviews were conducted autonomously in each involved countries to 3 enterprises each. The partners conducted 10-question interviews in order to assess the level of digitalization reached by SMEs, their plans to improve this, the challenges they face and the obstacles they will need to overcome when it comes to digitalization and what they expect this process will improve in their work life and in the products/services they produce.
The interviews were conducted principally with SMEs involved in the touristic sector (travel agencies, accommodation companies etc…), with the presence of other companies operating in the IT, training, retail and marketing sector.
Figure 3. Sector of the SMEs involved in the interviews.
Despite the different level of digitalization amongst the interviewed SMEs, the majority of the interviewees claim to have a moderately good level of digital sophistication, with the exception of the IT companies from Italy. And even though these SMEs have different level of commitment towards digitalization, the challenges they face are almost always the same and can be summarized in the following categories:
According to the answers collected during the interviews, the MSMEs don’t always have a clear vision of what they want to gain by digitalizing their operations and so, they may be reluctant to undertake the transformation.
However, the SMEs that have a more clear vision of their goals state that digital transformation is expected to enhance managerial work processes, to expand their business through the reach of more potential clients and develop a more customer-centric approach based on the collection of feedbacks and use data.
2.3 - Focus Groups
Figure 4. Roles of participating figures
The third and last research conducted by the NextGen Business consortium is a focus group aimed to experts on digital transformation and management. This was done through a mix of online and in-person sessions in which the project’s partners presented NextGen Business, the challenges it wants to face, the issues it wants to tackle, its goals, its methodology and its expected results and impact. Every partner conducted a focus group autonomously in their country and context.
The participants were asked to give an opinion on the ongoing digitalization of business models and processes, and on the role the companies can have in it in order not only to survive it but as well to exploit it.
The participants stated that the companies in all the countries taken into account are developing their digital transformation, with various levels of progression.
However, they notice that not always the SMEs have a clear vision of which improvements the digitalization can bring to them and how this improvement can be reached; this leads sometimes to a lack of complete understanding of the importance of digitalization. This sometimes leads to hesitations when it comes to invest in the new digital solutions: the resources are in fact limited and the fear of making a bad investment can be a serious obstacle to the implementation of these new digital solutions.
This process is a very complex one and needs a constant commitment and a significant amount of resources (both in terms of finance and manpower) in order to update the infrastructure to a minimum level of quality, capable of allowing the SMEs to bear the weight of the new tools needed.
Same importance is held by the skills. Digitalize the work of a company means also creating a need for new specialized skills, which will be crucial to ensure a smooth transition to the new business model. Sometimes, the enterprise experience a resistance of the employees to the new work processes; this is due not only to the disorientation linked with the use of new platforms and tools, but also to the great amount of possible tools that can be used.
According to basically all the experts involved in the focus groups, this issue can be tackled by:
Another considerable challenge to the process of digitalization of SMEs is the development and implementation of adequate infrastructures needed to ensure the data protection and the cybersecurity of the tools used. These infrastructures can be expensive to develop and this sometimes slows their full implementation.
All the experts participating in the focus groups agrees that the Covid-19 pandemic outbreak made clear how important the digitalization can be important to surpass moments of market crisis. Moreover, Covid-19 pandemic has become itself a considerable obstacle, impacting the SMEs activities in a hard way, resulting in a shortage of economic resources needed to start the digital transformation.
To face all these challenges is important that a common endeavor is made by all the parties involved in this process: policymakers, SMEs, Employees and education systems; they should define their roles in supporting the digital transformation.
Finally, all the participants expressed their admirations for the NextGen Business projects, its goals and the proposed methodology, showing interest in being kept updated on its progresses and results.
The survey reached roughly 50 people in each of the countries involved in the project; they are specifically workers from micro, small and medium enterprises that are facing the digital transformation and the challenges it takes.
Figure 1: size division of companies participating to the survey.
As we can see in figure 1, slightly more than half of the workers answered the survey work in micro enterprises (51%), while the 33% are from small size enterprises and 15% from medium size enterprises.
While in Greece and Portugal, the answers to the survey follow this pattern however, in Italy the answers came more from small enterprises (50%) more than micro enterprises (30%).
The most represented sectors were the tourism and education sectors which combined, gave 81 answers globally; this identifies these two as very committed sector in reaching a high level of digitalization in their work processes.
In all the countries, the employees indicate the connectivity tools as the most used and developed in their companies; connectivity is referred to tools such as intranet. The other major digital application used in the daily work life of the SMEs in all the interested countries is of course the company’s website.
Moreover, the employees from nearly all the sectors involved in the research agree on the necessity of improving the current digital tools and implement new digital practices into the work processes of their companies; the only notable exception to this trend is given by the IT sector, which may be explained by the already high grade of digitalization achieved naturally by their companies. The areas in which the employees feel more important to embark in a digital evolution are very different depending on the contexts taken into account: if in Italy and Portugal, the answers point to the digital evolution and automation of management and administration through new digital tools connected and integrated in network, in Greece the focus shifts to the creation of new, high-tech product capable of strengthening the position of the companies on the market.
Most of the employees involved in the survey think that there is also the need to improve digital tools capable of assessing the user experience of the products and services produced by their companies in order to improve the quality of their work and gain a better position of their product or service on the market. Great concern is also registered from all sides about the impact that the production processes have on the environment, while there is trust in the new digital solutions to reduce this impact and make the company’s business more sustainable and eco-friendlier.
While the digital transition is perceived as a very important, even fundamental passage, to stay competitive and to improve the management and products/services of the companies, it is also clear that huge investments are needed in order to fully embrace this transformation. In particular:
- It will be important to undertake extensive training of the work force in order to ensure that the implementation of new digital tool would a tur added value and to use them with efficiency and competence.
- The infrastructures need to be updated greatly in order to be capable of running new software and digital tools. Moreover, this modernization will need to take into account also the exigences of data protection and cybersecurity, which are topics taken in great consideration by the employees and the customers themselves.
Figure 2: percentage of SMEs planning to develop digital solutions and services in the future.
2.2 Interviews
The interviews were conducted autonomously in each involved countries to 3 enterprises each. The partners conducted 10-question interviews in order to assess the level of digitalization reached by SMEs, their plans to improve this, the challenges they face and the obstacles they will need to overcome when it comes to digitalization and what they expect this process will improve in their work life and in the products/services they produce.
The interviews were conducted principally with SMEs involved in the touristic sector (travel agencies, accommodation companies etc…), with the presence of other companies operating in the IT, training, retail and marketing sector.
Figure 3. Sector of the SMEs involved in the interviews.
Despite the different level of digitalization amongst the interviewed SMEs, the majority of the interviewees claim to have a moderately good level of digital sophistication, with the exception of the IT companies from Italy. And even though these SMEs have different level of commitment towards digitalization, the challenges they face are almost always the same and can be summarized in the following categories:
- Technological issues: the vast majority of the partners convened that the physical infrastructure the SMEs have at their disposal are not advanced enough to support a “great change” and have to be largely updated or even fully replaced. This of course can be a very expensive process (the resources needed for the digital transformation are in another category) that not all the companies could afford. The right digital tool is crucial not only to make effective improvements of the processes, but also to ensure the protection of the customer’s data and the cybersecurity of the structure.
- Employee resistance and training: employees are the core of any organization and their resistance to the digital transformation can be an obstacle to be reckon with. This aversion to the change of work procedures can be traced back to various factors such as the cultural context, the habit to certain long established procedures and simple lack of motivation to learn to use new digital tools and to apply new digital work paths. This issue can be partially overcome by devoting some resources to the employees training, however, this too, as resulting from the interviews is sometimes perceived as anther pain point for SMEs, alongside with the lack of adequately trained personnel to employ.
- Data protection and Cybersecurity: The new digital tools enhance a wide range of new services to the customers to track their activities with the product/service they purchased and to support them; while this discloses new opportunities, it also makes crucial the treatment of the resulting data an especially their protection. This is a crucial task for every SME that gathers data that has to be dealt with adequate cybersecurity structures and best practices. A company that treats data with responsibility and ensures their protection can gain more trust from its customers.
According to the answers collected during the interviews, the MSMEs don’t always have a clear vision of what they want to gain by digitalizing their operations and so, they may be reluctant to undertake the transformation.
However, the SMEs that have a more clear vision of their goals state that digital transformation is expected to enhance managerial work processes, to expand their business through the reach of more potential clients and develop a more customer-centric approach based on the collection of feedbacks and use data.
2.3 - Focus Groups
Figure 4. Roles of participating figures
The third and last research conducted by the NextGen Business consortium is a focus group aimed to experts on digital transformation and management. This was done through a mix of online and in-person sessions in which the project’s partners presented NextGen Business, the challenges it wants to face, the issues it wants to tackle, its goals, its methodology and its expected results and impact. Every partner conducted a focus group autonomously in their country and context.
The participants were asked to give an opinion on the ongoing digitalization of business models and processes, and on the role the companies can have in it in order not only to survive it but as well to exploit it.
The participants stated that the companies in all the countries taken into account are developing their digital transformation, with various levels of progression.
However, they notice that not always the SMEs have a clear vision of which improvements the digitalization can bring to them and how this improvement can be reached; this leads sometimes to a lack of complete understanding of the importance of digitalization. This sometimes leads to hesitations when it comes to invest in the new digital solutions: the resources are in fact limited and the fear of making a bad investment can be a serious obstacle to the implementation of these new digital solutions.
This process is a very complex one and needs a constant commitment and a significant amount of resources (both in terms of finance and manpower) in order to update the infrastructure to a minimum level of quality, capable of allowing the SMEs to bear the weight of the new tools needed.
Same importance is held by the skills. Digitalize the work of a company means also creating a need for new specialized skills, which will be crucial to ensure a smooth transition to the new business model. Sometimes, the enterprise experience a resistance of the employees to the new work processes; this is due not only to the disorientation linked with the use of new platforms and tools, but also to the great amount of possible tools that can be used.
According to basically all the experts involved in the focus groups, this issue can be tackled by:
- Involving the employees into the digitalization process, making it gradual, taking their advices in consideration during the implementation (when possible and deemed useful), and supporting them into the acceptance of the new tools and processes.
- By developing a plan of trainings and formation that allow the employees to better understand the new digital solutions and to better understand the importance of the digitalization and the improvement it can bring to their work.
Another considerable challenge to the process of digitalization of SMEs is the development and implementation of adequate infrastructures needed to ensure the data protection and the cybersecurity of the tools used. These infrastructures can be expensive to develop and this sometimes slows their full implementation.
All the experts participating in the focus groups agrees that the Covid-19 pandemic outbreak made clear how important the digitalization can be important to surpass moments of market crisis. Moreover, Covid-19 pandemic has become itself a considerable obstacle, impacting the SMEs activities in a hard way, resulting in a shortage of economic resources needed to start the digital transformation.
To face all these challenges is important that a common endeavor is made by all the parties involved in this process: policymakers, SMEs, Employees and education systems; they should define their roles in supporting the digital transformation.
Finally, all the participants expressed their admirations for the NextGen Business projects, its goals and the proposed methodology, showing interest in being kept updated on its progresses and results.
The results of the research conducted by the project partners make a very clear photo of the status of the digital transformation among SMEs in Greece, Portugal and Italy.
It appears clear that the will of SMEs is to undertake the digitalization of their processes and structures, for various reasons, all linked and complementary:
The major challenges and obstacles found by the SMEs during the digitalization of their infrastructures can be summarized with:
Particularly for what concerns the most human part of these challenges, the resistance to the change, they all agree on:
This report, by summarizing the research work undertaken by the project partner’s wants to be a starting point not only for its future actions, but also for future SMEs that will be willing to approach the digital transformation and would like to gather precious information on how develop it, which are the challenges, which the possible solutions, which the benefits of a process that, while sometime scary, will be pivotal for the future of enterprises al across Europe.
- It has collected more that 150 answers to the survey proposed to
- It has conducted several interviews to employees of SMEs in order to assess the level of digitalization reached by their companies.
- Finally, it collected the opinions and suggestions of experts in order to clarify the needs and challenges of the digitalization of SMEs.
It appears clear that the will of SMEs is to undertake the digitalization of their processes and structures, for various reasons, all linked and complementary:
- Remaining competitive: as competitors are developing their digital solutions too, is important for the enterprises to keep the peace of this transformation in order to remain competitive.
- Reach new clients: in a progressively more interconnected economy, is important to monitor the customer’s needs and to extend the number of potential clients; this can be done by ensuring a strong and effective digital presence, supported by a good digital image.
- Collect data: data are, in nowadays society, way to important to not be taken in consideration; they are important in order to better understand the needs of the consumers, the strong and weak points of the products/services produced and the actions needed in order to stay competitive in the marketplace
- Ensure data protection and cybersecurity: The collection of data and their safe storage are a crucial part of the digital transformation. Being a company that treat data responsibly and ensure their protection means to give a very good image.
The major challenges and obstacles found by the SMEs during the digitalization of their infrastructures can be summarized with:
- Aged current infrastructures: their current infrastructure are way to old to be simply modified, requiring instead a very long a complex process of modernization and substitution, which can drain a lot of resources.
- High costs: upgrading the infrastructures can be a very long and expensive process. Not all the SMEs involved in the research seemed either convinced of the investment or in the position to undertake this economic effort due to a lack of financial resources.
- Employees resistance: the introduction of fully new processes, technologies and tools in the normal work life proved destabilizing for the employees of many SMEs involved in this research. They, due to a mix of lack of knowledge, fear of change and need of training, end up feeling these changing to as necessary development for their work, but obstacles that will make their job more difficult.
Particularly for what concerns the most human part of these challenges, the resistance to the change, they all agree on:
- Implementing the changes gradually in order to give time to the employees to adapt to the new tools.
- Making the employees protagonists of this transformation, listening to their opinions on this regard.
- Ensuring a proper training of the workforce in order to make the workers more capable to accept and face the digital transformation.
This report, by summarizing the research work undertaken by the project partner’s wants to be a starting point not only for its future actions, but also for future SMEs that will be willing to approach the digital transformation and would like to gather precious information on how develop it, which are the challenges, which the possible solutions, which the benefits of a process that, while sometime scary, will be pivotal for the future of enterprises al across Europe.
National Context
GREECE
The research conducted in Greece by Akadymos, shows a general high interest toward the technological and digital transformation that is investing the business world.
All the companies involved showed a good intention to further integrate new digital technologies and methodologies into their work process in order to make them more fast, smooth and efficient; this means for the hotels sector, to digitalize the booking process of their services and the communications with their clients, while the training centres aim to digitalize their seminar.
Even more importance is held by the digitalization in the retail sector, where the presence of numerous operators makes it absolutely essential to be competitive in a very saturated sector; this involves the development of e-commerce platforms and digital support services.
The focus group conducted in Greece however, highlighted a certain lack of awareness on how the technological revolution will be able to help the Greek businesses; in particular, the benefits it can deliver appear to be not fully understood by the managers and directors: moreover, a certain lack of skilled personnel.
However, all the participants to the research claim the presence of several existing obstacles to digitalization such as:
PORTUGAL
The research conducted by Poiomar in Portugal gave to the project a clear visual of the situation of the grade of progression of the digital transformation among Portuguese SMEs, especially, but not only in Madeira.
The research showed a very heterogeneous situation, with the presence of various levels of digitalization.
The Portuguese SMEs have already started the transformation and look very interested in develop new product/services, data driven business models and new work processes. According to the research conducted by Poiomar, these are the main challenges faced by Portuguese companies when it comes to digitalization:
This makes easier for the Portuguese SMEs to develop their digital potential. Most companies already collect and analyse data from their customers, indicating and adopt new digitally driven business models, such as experience and on-demand models, which are greatly expanding among SMEs in Portugal.
ITALY
The Italian SMEs are already undertaking their digital transformation. However, the results achieved are very heterogenous and are sometimes jeopardized by technological and cultural factors. In particular:
GREECE
The research conducted in Greece by Akadymos, shows a general high interest toward the technological and digital transformation that is investing the business world.
All the companies involved showed a good intention to further integrate new digital technologies and methodologies into their work process in order to make them more fast, smooth and efficient; this means for the hotels sector, to digitalize the booking process of their services and the communications with their clients, while the training centres aim to digitalize their seminar.
Even more importance is held by the digitalization in the retail sector, where the presence of numerous operators makes it absolutely essential to be competitive in a very saturated sector; this involves the development of e-commerce platforms and digital support services.
The focus group conducted in Greece however, highlighted a certain lack of awareness on how the technological revolution will be able to help the Greek businesses; in particular, the benefits it can deliver appear to be not fully understood by the managers and directors: moreover, a certain lack of skilled personnel.
However, all the participants to the research claim the presence of several existing obstacles to digitalization such as:
- Inadequate digital infrastructures to implement digital tools.
- Staff resistance to the change of processes and work habits
- Shortage of digitally trained staff
- Need for continuous training of the staff to stay updated.
- Data protection and cybersecurity issues
- Updating the infrastructure in order to have a state-of-the-art network of digital tools.
- Involving the workforce in the digitalization process through dedicated training and involvement in the decision making.
- Investing deeply in data protection and cybersecurity: this will also allow to build a trusty relation with the clients, which will feel safer while using digital tools
PORTUGAL
The research conducted by Poiomar in Portugal gave to the project a clear visual of the situation of the grade of progression of the digital transformation among Portuguese SMEs, especially, but not only in Madeira.
The research showed a very heterogeneous situation, with the presence of various levels of digitalization.
The Portuguese SMEs have already started the transformation and look very interested in develop new product/services, data driven business models and new work processes. According to the research conducted by Poiomar, these are the main challenges faced by Portuguese companies when it comes to digitalization:
- Shortage of digital skills capable of facing the process of digital transformation
- Resistance to the change from the Employees
- High cost of training and infrastructures
This makes easier for the Portuguese SMEs to develop their digital potential. Most companies already collect and analyse data from their customers, indicating and adopt new digitally driven business models, such as experience and on-demand models, which are greatly expanding among SMEs in Portugal.
ITALY
The Italian SMEs are already undertaking their digital transformation. However, the results achieved are very heterogenous and are sometimes jeopardized by technological and cultural factors. In particular:
- Employees resistance: is possibly the biggest challenge and it comes from cultural factors. What’s most concerning is that the Italian SMEs are not very committed in finding solutions to these problems out of the concession of some degree of remote working.
- Outdated infrastructures: this, while not always true (the 2 IT companies involved in the interview claim to have good infrastructures), it is worth noticing that this digital divide is a major obstacle on the path of digitalization for Italian SMEs.
- Digital skills of the employees: they are critical for the digital evolution of the company. While some companies prioritize them through formations, other look like not having a clear strategy for addressing this issue.
- Develop a better strategy to surpass the resistance of their employees by finding solutions that will allow them to accept the digital transformation.
- Invest heavily in the updating of their infrastructures in order to fully embrace the possibilities enhanced by the digital transformation.
- Invest in an organic plan of continuous formation that will allow the employees to better understand the digital transformation and the advantages in could bring.