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Calling all SMEs: Your survival is on the line

Editor's note: Wake up and smell the coffee!

By Gavin Allen

The demand to face up to a glaringly obvious reality is a familiar and typically blunt Americanism. But it’s evidently a global sentiment too when it comes to the subject of SME digitalization.

That’s the theme for this edition of Huawei’s Transform thought leadership magazine, which brought together a UN agency executive, a renowned economist, and an IT pioneer.

“Technology is developing so fast,” warned Zou Ciyong, UNIDO’s deputy director-general, when we met at Barcelona’s annual Mobile World Congress. “If you can’t catch up with the trends, the gap will widen further. That's why we can’t waste time.

“It drives me crazy because science has the solutions,” the President of the European Association of Environmental Resource Economists, Prof. Phoebe Koundouri, told me. “The money’s there… Companies that digitalize faster will gain market share.”

As my Huawei colleague Andrew Williamson explains in his article for Transform, if SMEs continue to be “analog laggards in an increasingly digital world,” then they miss out on what the World Bank has described as digital dividends.

“Digital tech allows small businesses to spend less time on administrative processes, giving them more time for value-creating activities such as product development,” Andrew writes.

Digitalized firms grow faster, enjoy greater productivity (increasing by as much as 27% if engaged in e-commerce, according to one Malaysian study), and get broader access to international markets. We’re told digitalization breeds resilience, too.

But if the case for embracing digitalization appears overwhelming, so too are the concerns among some SME bosses wary of making the leap: security, up-front costs, a digital skills shortage, and more.

That may explain why the determined optimism from our range of expert interviewees is mixed with a dose of anxiety.

Zou Ciyong suggests too many countries are ignoring what he describes as the 70-80-90 issue.

“SMEs generate 70% of the tax base that provides government revenue. They generate 80% of the technological innovation, and 90% of all employment. Even so, many countries don’t do much to support SMEs' digitalization.”

For UNIDO, that means governments need to do more to inform SMEs of the potential opportunities offered by digital technologies and provide them with some financing and capacity-building.

Prof. Koundouri agrees: “Governments need to invest the necessary resources, and get people engaged,” she says. “(It requires) a massive investment in the upskilling and reskilling of the SMEs. The bottleneck is the understanding that this is crucial to your continued survival as a business.”

As this edition highlights, the ongoing challenge for SMEs is to anticipate, embrace, and ride those waves of innovation. The risk of ignoring one of them is that it’ll turn out to be the wave that washes them away entirely.

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