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Gaps in knowledge, finance, and skills are holding SMEs back

For SMEs, digitalization cannot wait, international diplomat says

Zou Ciyong, Deputy Director-General of the UN Industrial Organization (UNIDO)

Gavin Allen: Is digitalization top-of-mind for SMEs today? 
Zou Ciyong: SMEs should be aware of the opportunities and challenges they are facing, and what kind of support they may need from the government. They cannot address these challenges alone.

Gavin Allen: What are the impediments stopping small businesses from embracing digitalization? 
Zou Ciyong: Many SMEs are fighting for survival. First, they don't understand the trends in digitalization, or the impact it will have on their business. Second, they can’t get loans from banks, because they don't have the necessary collateral. Third, many SMEs lack the skilled labor needed to implement the kinds of digital projects that could transform their business.

Gavin Allen: So, three gaps: knowledge, finance, and skills. What can be done to bridge those gaps? 
Zou Ciyong: Governments should inform SMEs of the potential opportunities offered by digital technologies. They should also provide SMEs with some financing and capacity-building. 

UNIDO and other international organizations are already trying to help in this regard. UNIDO advises governments on how to assess the status of the SME digitalization process and address existing challenges. In partnership with technology providers, we run capacity-building programs to support SMEs by informing them of the kinds of solutions they may want to take advantage of. 

It's also important for the government and technology providers to expand the size of the market. That drives adoption by lowering the cost of applications and solutions. 

Gavin Allen: So that's what policy makers should be doing. Are they doing it?
Zou Ciyong: Not every country is doing it. Different governments have different priorities.

It’s said that 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. 

Gavin Allen: So the problem is a lack of understanding and a lack of resources. 
Zou Ciyong: Yes. But we can tackle the problem step by step. In China, for example, local governments use Huawei Cloud as a platform. They buy space on the Cloud, then offer it to SMEs. This allows smaller companies to enhance their transaction processes and improve overall efficiency. 

We need to expand this kind of partnership. Private tech companies, such as Huawei Cloud, could sell this kind of service to the government at a discounted rate. Governments could use tax revenue to purchase this cloud service, then offer it to SMEs, perhaps with some further incentives. 

Gavin Allen: So we’ve got to get different parties working together. 
Zou Ciyong: Yes. The challenge is resource constraints. Governments have many priorities, and banks can’t necessarily subsidize lending to SMEs. We need to strengthen SMEs as a group, then link them to technology providers that have developed solutions tailored to the needs of that group. 

This really can’t be done on a case-by-case basis. Technology providers have to address the specific concerns of SMEs – and, more specifically, SMES in particular industry sectors. Small hotels, for example, will have different needs from small manufacturers. 

UNIDO has a project to support governments in doing this. It’s a digital readiness assessment, customized for SMEs and broken down into industry domains.  

Gavin Allen: Are you optimistic about the future, or anxious?
Zou Ciyong: It's kind of a mix. I’m optimistic on the technology side. It’s all evolving very fast. And because of this massive application, costs will drop significantly over time. 

Also, governments are recognizing the importance of SMEs and the challenges of digital transformation. They are taking some measures – not at a big scale, but they are working towards this goal. We need to build on that success and encourage others to follow suit.

Gavin Allen: And why are you not optimistic?
Zou Ciyong: First, technology is developing so fast. If you can’t catch up with the trends, the gap will widen further. That's why we can’t waste time. We have to raise awareness, enlist government support, form SME associations, and broaden partnerships between SMEs and technology providers.

That’s the first step. If you start with the first step, the next step won’t be that difficult. 

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