SMEs must prioritize digital skills

SMEs represent 99% of all businesses in the EU. And digital technology is one of two pillars supporting Europe’s transition to a globally competitive, climate-neutral economy.

That transition will create 20 million ICT-related jobs, making talent and skills a prerequisite for the region’s sustainable, long-term digital transformation.  

But more than 70% of businesses point to a lack of staff with adequate digital skills as an obstacle to investment. At the same time, the Digital Economy and Society Index (DESI) shows that four out of 10 Europeans lack basic digital skills.

Given this context, it is important to understand the factors that might keep Europe from reaching its goals.

The first step is the hardest

Last November, I surveyed more than 4,000 SME employees in five European countries.The study categorized SMEs based on their levels of digitalization (Low, Average, High). Employees were then asked to rank their own skills.

Perhaps not surprisingly, those in highly digitalized SMEs ranked their digital skills as being 18% higher than those working in SMEs whose digitalization levels were low. The findings in the data suggest that moving from “low to average is harder than moving from average to high and that, even for SMEs merely aiming to lift their digitalization level to the average, available talent is scarce.

As workplaces become increasingly digital, however, a shortage of skills is only part of the challenge. Our survey clearly shows that job profiles in SMEs with a high level of digitalization look very different from those in the bottom tier.

A new digital divide?

The more digitalized the workplace, the greater the variation in skills – including non-digital skills with an 11% difference between low and highly digitalized workplaces. This includes important psychological factors for employees, such as the freedom and sense of empowerment to make decisions by themselves, which accounted for a 7% gap between low and highly digitalized companies. The biggest gap we found was a 20% difference in the need and value placed on individual problem-solving abilities when comparing successful job performance between low and highly digitalized companies.

Given that SMEs are defined as companies with up to 250 employees and a maximum turnover (revenue) of 50m euros (US$54.4m), the resources needed to drive change, e.g., through upskilling, may present challenges for many businesses.

But the study shows that digitalization can drive fundamental change at SMEs, for example by changing their corporate culture. Managers in highly digitalized SMEs were judged to be 26% more transparent with their employees, leading to a 30% higher rate of acceptance of managers’ decisions and authority.

Most crucially, the data suggests that respondents working in highly digitalized companies are 32% more optimistic about their occupational futures.

Digitalization not only brightens employees’ career prospects, it also helps build an overall sense of confidence in the companies where they work. For those reasons, it is critical that companies provide ongoing training to advance the digital skills of their people.