A new age of managing business information and business processes began in 1981 with the introduction of the IBM PC (personal computer). As the first desktop computer system designed for an individual (and with the subsequent software that became available) it revolutionized how information was created and processed in business. Computing power was no longer limited to large enterprises but could be acquired and used by small and midsize businesses (SMBs) to improve their productivity and competitiveness. One could say that digital transformation of SMBs began 37 years ago.
Networking, new software, the internet, cloud platforms, mobile applications and other technologies have enabled new digital transformational opportunities each year. SMBs and their solution providers are benefiting more than ever since that journey began almost four decades ago.
State of digital transformation and the SMB
According to a Wells Fargo and Gallup study, over the last two years almost 50 percent of small businesses have invested in upgrading their business systems software. This means SMBs are realizing the need to make sure their businesses are in shape to compete effectively in the increasingly digital driven marketplace. To do so, SMBs are willing to invest about 15 percent of their annual budgets on technology.
Much of the digital transformation initiatives SMBs are undertaking mirror that of larger enterprises. They are investing in expanding their e-commerce presence, making their websites more mobile friendly, creating mobile apps or automating their marketing efforts through marketing automation tools. The objectives are to make their business more competitive by:
• Making it easier for customers to find, order and pay online for their products or services
• Increasing their customer base
• Reducing customer acquisition costs
SMBs are also investing in automating internal business processes. According to the Wells Fargo/Gallup Small Business Index report, SMBs are facing challenges in finding staff and so are turning to technology to improve the productivity of current employees. Digitizing business records and records management has been done by 37 percent of SMBs.
Traditional print and manual process applications are being affected as process automation and the use of scan-to-capture workflow solutions, digital signatures and e-forms are put in place. Even in SMBs, automating paper-intensive manual processes such as accounts receivable (AR), accounts payable (AP) or HR onboarding allows employees to get more done in the same or less time, reduces errors, ensures regulation compliance, improves revenue generation and cash flow, and reduces costs of operations.
Of course, the cloud is also generating much of the digital transformation for SMBs. According to IDC, the SMB mobile workforce represented 57 percent of all mobile workers in the U.S. in 2014 and is expected to be 60 percent of all U.S. mobile workers by 2020 (“U.S. SMB Buyer Behavior Survey: How Cloud IT Has Re-Shaped Spending Priorities”). The internet, cloud and mobile applications are keys to letting mobile workers communicate. Over 90 percent of SMBs use one or more cloud applications with two-thirds of them using collaboration applications in the cloud. The SMB Group reports that cloud-based marketing automation, CRM and workforce/payroll applications are used by over 50 percent of SMBs with 33 percent of SMBs using some form of cloud-based accounting/ERP solution.
SMB market opportunity and vertical markets
Forrester and Gartner are predicting that IT spending will continue to increase as digital transformation efforts continue. Forrester expects a spending increase on technology of 5.1 percent in 2018 and an increase of 4.7 percent in 2019 in business and government.
It’s difficult to know the exact amount spent on technology within SMBs. Yet, if one looks at the number of SMBs in the U.S. and concentrates on vertical markets, a picture of the SMB digital transformation opportunity available to solution providers emerges.
The 2015 U.S. Census reported that under 1 percent of businesses have over 500 employees and could be considered as large businesses or enterprises. Just over 99 percent of all firms are businesses with less than 500 employees. However, three-quarters of those businesses have less than 10 employees and can be categorized as very small businesses or sole proprietorships. For practical planning purposes, the businesses with 10 to 500 employees can be considered small and medium-size businesses — SMB. When defined in that way, the large opportunity in SMB becomes very clear.
The number of SMB companies outnumber large enterprise firms 63:1 and make up 57 percent of those combined business locations in the U.S. Concentrating on large enterprises can be attractive — even seductive. However, not taking time to put good marketing efforts in place to attract SMBs may find solution providers missing up to 57 percent of the business opportunity available in their market.
Let’s break the SMB opportunity down further into the familiar vertical markets of healthcare, legal, finance, education and manufacturing. These represent over 285,000 firms that not only have the normal business processes of AR, AP and HR but also have processes specific to the vertical market that can benefit from digital transformation and automation.
Healthcare presents the largest opportunity in regards to the number of vertical SMB firms. As can be expected, these are primarily doctor offices, walk-in clinics, dentists, chiropractors, etc. However, there are approximately 21,000 nursing and residential homes and services that can also be approached. Most hospitals employ more than 500 workers but there are a few that can be considered SMB size. All of these are faced with patient privacy and information security concerns due to HIPAA regulations and EHR initiatives. With the baby boomer generation moving into its senior years and the longer life expectancies of following generations, the healthcare segment will be a continuing source of business opportunity for digital transformation.
The manufacturing vertical has used lean principles to reduce waste and improve productivity on the plant floor for quite some time. These principles are now being moved into the office. Manufacturing firms have a variety of documents and information that must be managed. Product plans and drawings, production schedules, regulatory documents and warranty processes are just a few. Lean processes are being implemented to manage the documents, information and business processes to make these firms more competitive, provide better customer experiences and to be more profitable.
Finance/insurance and legal vertical markets are embracing business process digital transformation to better handle the vast amount of data they manage. Automating business processes and workflows helps remove errors, speed transactions, and improve customer and client satisfaction as well as help meet the stringent regulations these firms must follow.
Forty-two percent of elementary and secondary schools, colleges and universities employ 10 to 500 employees and fall into the SMB category. Digital transformation in education means using technology inside and outside the classroom to improve student outcomes. Educational institutions also use digital means to better manage student information systems, student records and better meet learning accountability standards. Improving and automating the processes around managing student information, meeting privacy regulations, and evaluating students helps schools free up instructor and administration time to concentrate on the students themselves. Operating under ever-tighter budget constraints means cost reduction is also an objective that educational institutions can better achieve through digital transformation.
These SMB vertical markets represent 46.5 million employees in the U.S. with each location averaging from 17 to 60 employees. Using digital transformation solutions in the office to automate processes can have a significant positive impact on the productivity, competitiveness and security of the firm.
Marketing to the digitally transforming SMBs
In approaching and marketing to the digitally transforming SMB, there are some important things to keep in mind.
A survey from the SMB Group notes that the technology decision-maker in SMBs is the business owner or president about 75 to 78 percent of the time. The IT department makes the decision about 25 percent of the time and is most involved in the solution evaluation stage.
According to a 2017 Lavidge study, tech buyers of companies $1M – $10M in size reported that the top four technology claims they prefer to hear are:
2. Ease of use
4. Easy integration
Interestingly, high ROI was 12th on the list. This seems to indicate that while return on investment is always important at the decision stage to justify the expense, there are many other claims that are more attractive and more effective in generating interest for an SMB tech buyer to meet and speak with a solution provider.
A RAINGroup study states that whether the SMB tech buyer is just looking for new ideas or is actively involved in searching for a solution, the information they want to receive during that research is:
• Research data and information relevant to their business.
• Insights on how the solutions solve their business problems.
• Best practices based on the provider’s area of expertise.
• Information on market trends or emerging business issues.
• Client case studies and success stories.
They do not want to hear about the seller’s business. Providers must make sure to provide information, white papers, research data, and client success stories in a manner that informs the SMB tech buyer rather than sell to them at this point of their journey.
From that same study good guidance is given for when a meeting is finally arranged:
• Make sure to focus on the value that can be delivered and not on the product or service itself.
• Collaborate with the customer to make them an equal part of the solution — don’t make it a one-sided sales pitch.
• Educate them, help them see new perspectives or ideas that they may not have thought of or were not aware of.
• Use experience with other customers in their industry to give insight that can help them – what their peers are doing, what best practices are happening.
Doing these things will build trust and a closeness that will be valuable when presenting your recommendations to solve their digital transformation problems.
When it gets down to the decision-making process, remember that price is not always king. SMB tech buyers expect fair pricing information but they also expect to get customer reviews, meetings that are face-to-face with vendors, and that presentations are sharp and crisply relevant to their objectives. They will speak to and ask for advice from colleagues and friends so solution providers must ensure the integrity of their reputation meets or exceeds the claims made through the sales process.
An SMB Group study shows over 35 percent of SMBs currently have some form of digital transformation strategy and plans underway. Almost 50 percent of them say they are planning to begin their digital transformation initiatives over the next 12-24 months. This means the fire is hot and the solution providers that act now to become trusted advisors and help SMBs maximize the returns on current plans or work with the SMBs just entering their digital transformation will have a clear advantage over those that wait.
This article originally appeared in the July 2018 issue of The Imaging Channel.
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