Digital transformation in small and medium-sized enterprises (SME)

Author: Kathrin Jungwirth | Last update: Thursday, January 27, 2022 | Reading time: 10 min.

Artificial intelligence, cloud computing, Industry 4.0, eCommerce, RFID, blockchain, Internet of Things (IoT) - these are just a few of the trends that are increasingly impacting companies across all industries. Including small and medium-sized enterprises (SMEs). In this context, it is often wondered whether small and medium-sized enterprises (SMEs) are at a disadvantage or an advantage compared to large corporations when it comes to digitalization.

However, what exactly is digitalization?

What are the benefits and challenges of the digital transformation, especially for SMEs? We will answer these and other questions in the following article. 

Content

1. Introduction: Digital transformation in SMEs
2. Exampels for digital transformation in small to mid-size companies
3. Successfully manage digital transformation ins SMEs with project management software

1. Introduction: Digital transformation in SMEs

Digital technologies are regarded as the key to economic success these days:

• new business models are developed
• new customers and target groups are acquired
• and existing customers are retained for the long term.

Besides to small to mid-sized companies, this of course affects all other organizations as well. But the digital transformation offers a great opportunity for SMEs in particular. Small and medium-sized enterprises create more than half of all jobs in Germany and make a significant contribution to economic strength. Around 35 percent of the total turnover of companies in Germany is generated by SMEs. (Wirtschaftsmotor Mittelstand - Zahlen und Fakten zu den deutschen KMU, Bundesminidsterium für Wirtschaft und Energie 2018).

1.1. Digitalization topics

Basically, digital transformation does not stop at any company or industry. Still, the topics that organizations are dealing with here can be divided into three main categories:

• IT security
• Digital market development: This field mainly involves developing and establishing new digital business models. In addition, topics such as online sales or online marketing also belong to this area.
• Digitalization of business processes or digitalization of everyday work: In this area of digitalization, existing business processes are digitalized. This often results in entire change projects, as the processes are restructured and optimized.

1.2 Opportunities and challenges of digital transformation in SMEs

Challenges

The customer

Digital transformation is not only changing business processes and models, it is also changing customers: they are increasingly becoming well-informed and networked players in the market, who are assuming an increasingly strong position. Customized and individual solutions are no longer a rarity and are offered at more and more affordable prices. The digital transformation is therefore also increasing the demands of the target group, because digital technologies can now be used to do almost anything. Only those organizations that manage to meet the growing demands of their target groups in the long term will succeed and remain competitive.

The human factor

As a result of the development and use of new technologies, digital transformation not only affects the processes in organizations as well as the target groups, but of course also the employees. Digitalized and connected companies are changing and, as a result, some tasks are being eliminated, while new areas of responsibility are evolving at the same time. The challenge for companies here is to deal not only with the technical issues, but also with the very important human factor! Employees must be prepared for the change. This includes providing them with expertise and the necessary skills, as well as involving them in all change processes that will affect them.

Opportunities

Whether it's a traditional cheese factory in the countryside, an internationally operating supplier for industrial companies, or a small craft business: digitalization affects everyone. Digital technologies are a real opportunity for small and medium-sized organizations. With technological innovations, SMEs can differentiate themselves from large corporations and maintain or increase their competitiveness in this way. So-called "hidden champions" can now be found in many industries. - These are SMEs that rise above their competitors due to their innovative strength and thus often dominate the global market in their segment. 

Maintaining and increasing competitiveness

The most important opportunity that the digital transformation brings for small to medium-sized companies is to differentiate themselves from large competitors through innovation. SMEs are characterized by less hierarchical and more open structures and are therefore more agile and flexible than large corporations. Thus, the corporate structure in SMEs often offers the opportunity to react faster and more flexible to new requirements and trends. This gives them the opportunity to bring innovations, new products or even new business models to market more quickly. This approach has already shown in the past that even smaller companies can become hidden champions in their industry. 

Saving time, costs & resources

According to the "Digital Workplace" study, technological progress has already simplified many tasks. For example, the amount of work required for administrative tasks has been reduced by around one day from 2016 to 2018. The use of digital technologies such as document storage, signatures and communication via chat and collaboration platforms can therefore definitely save time. This time can be invested in other activities and projects.

Active participation and additional training as an employer advantage

Digitalization is not only changing competition, but also the way companies work. It is up to the management to decide whether this change will be a curse or a blessing for employees. With the continuing digitalization and automation of work processes mainly repetitive, mechanical work is being taken over by machines or algorithms. This has the advantage that the physically demanding tasks no longer have to be shouldered by the workforce, allowing them to protect their health and concentrate on more creative activities. On the other hand, there is a risk that countless positions are cut. If the management actively involves employees in the process of digitalization and offers opportunities for further training and education, people will find it easier to adapt to the new circumstances. For smaller companies, this active involvement is many times easier than for large corporations and thus offers real benefits for existing and potential employees.

2. Examples for digital transformation in small to mid-size companies

2.1 Case study: digitalization in software development

InLoox CEO Dr. Andreas Tremel provides insights into the digitization process in the development department at InLoox:

"Even as a project management software manufacturer, we have a longer digitalization journey behind us. If we take a look back to the beginnings of InLoox - i.e. almost 20 years ago - you can't even imagine the processes back then. At that time, errors and bugs in the software were still documented with screenshots and were then been printed out and put on the desk of the responsible developer. Of course, this pile quickly became much too high and confusing, and the first shift to digital was then made with the Outlook task list. This was a first step to improve the process and to structure the existing information. However, we quickly reached our limits with this as well. Of course, it wasn't just us who faced this problem, but the entire software development industry. That's why the first solution approaches gradually developed until entire work frameworks were added. Those were tailored to link process management with the development environment. Meanwhile, we are working with Microsoft Azure DevOps, an agile working framework that perhaps would not have emerged at all without the previous steps and challenges."

2.2 Further examples of digitalization projects in SMEs

A wide range of different projects can be associated with digital transformation, and their relevance varies from industry to industry. To give you a more precise idea of possible digitalization projects, see the following selection of examples:

• Digital business models
• Intelligent assistance systems and sensor networks
• Digitization of order management in the production process
• Digital monitoring of machines and data acquisition
• Digital marketing
• 3D capture and printing in manufacturing
• Optimization of websites and online stores
• Digital enterprise resource planning
• Conversion of production technologies
• Digitizing business processes, such as digitizing accounting systems, staff scheduling, shift planning, vacation planning, time tracking, etc.
• Establishing an online store
• Connected machines that intelligently control the production process
• Electronic invoices and signatures
• Digital document management
• Mobile time tracking
• Improving IT security measures in the company
• Introducing software solutions to make processes more transparent and efficient (e.g. ERP software, CRM software, project management software)

3. Successfully manage digital transformation in SME with project management

As the digital transformation continues, the entire business environment is becoming more interconnected than ever before. This not only changes fundamental workflows and processes, but also increases the demands on higher-level skills such as project management. Even in small and medium-sized businesses, modern project management plays a key role in the success of the company and must continuously evolve in line with new requirements. Project management software is not only essential for professionalizing project management, but also for successfully implementing digitization projects. 

3.1 All project management tasks on a single platform 

The project management software from InLoox helps you to coordinate your digitalization projects as effectively and transparently as possible. InLoox supports you not only as online project management software with InLoox Web App, but also with the client seamlessly integrated into Outlook and a convenient mobile app. This gives you access to your projects and all relevant information anytime and anywhere. As a central platform for your digitization projects, InLoox combines idea generation, task, document, budget, time, communication and resource management in one. All the information you and your team need for daily work and strategic projects merges here centrally. The data is available in real time and can also be used offline.

Intuitive task management

Keep track of your personal and all project-related tasks with the InLoox global task list. If all tasks are entered and maintained in a disciplined way, time-consuming duplicate work can be avoided. This way, every employee can see at a glance what the others are working on and what needs to be completed by when. Team members independently report back on their own processing, and project managers avoid long feedback and update loops within the team.

The Kanban board is a convenient way of coordinating tasks within projects. The different status columns are customizable and you can set up the board according to your processes and needs. With the help of the well-organized cards, which you move by drag-and-drop, information about the task, such as the current status, the person responsible, the estimated effort and related documents and notes are captured at a glance. This saves time that you can invest in your digitization strategy.

Manage documents centrally and edit them online

In order to store additional information about your projects or individual tasks in one place, we recommend using InLoox's document management. Here, you can store documents either as a personal document (without project reference) or with a direct link to a specific task or project. This way, all documents are organized in context and all team members can quickly and easily find the documents they are looking for. The current version is thus also accessible to everyone, while maintenance requires minimum effort and maximum benefit. In addition, documents can also be edited directly online in the browser with InLoox Web App and the changes are saved in InLoox.

Project planning with Gantt charts for successful digitalization projects

The key to project success is profound project planning. In InLoox, you can create project plans as well-structured Gantt charts. In this way, you gain a graphical overview of the chronological progress of your digitization project. The permanent overview and scheduling of all activities in the project ensures a quick response and thus a smooth process. You can break down each project into individual phases and integrate tasks and milestones into your planning. In addition, the project group feature allows you to link multiple projects in a project plan, giving you a multi-project view. With the publish feature, you can publish important elements of one project plan to the project plan of another project, creating dependencies between different projects. In this way, interdependent digitization projects can be interlinked and you can maintain an overview at any time.

Further InLoox features for organizing digital transformation processes

InLoox enables the planning, controlling and coordination of digitization projects in SMEs centrally on one platform. Users would no longer have to manage multiple systems simultaneously but can complete all tasks on one familiar user interface. The following features are available in addition to those already mentioned and will help you to make your digitization projects a success:

• Resource overview and capacity planning: find out at a glance how busy team members, rooms or machines are and where capacities are free. Outlook calendar appointments can also be taken into account here.
• Project time tracking: Document all project-related time requirements without additional effort. Key data from Outlook can also be transferred here, e.g. tasks or appointments.
• Project communication: In many companies, Microsoft Outlook together with Microsoft Teams is already the communication center number one. With InLoox, these two Microsoft tools also become the center of your project communication.
• Budgeting: Calculate your projects with InLoox and continuously compare expenses and revenues.
• Mind maps: Create, visualize and organize initial project ideas and concepts using the mind-mapping feature in InLoox. Afterwards, you can transfer the contents to project planning or convert them into tasks with just one click.

You can find a detailed overview of the features of InLoox here: 

Features A to Z

3.2 Multiple integrations supporting your project success

The project management software InLoox is based on Microsoft technologies and is therefore closely integrated with the Microsoft landscape. Based on its Microsoft Gold partnership, InLoox is continuously expanding its integration potential. This way, InLoox can be easily and comfortably integrated into your existing systems.

A selection of our integration options:

• Microsoft Office and Microsoft 365 (formerly Office 365).
• Microsoft Outlook
• Microsoft SharePoint
• MS Project
• Teams
• Power BI
• Exchange Server
• Azure

In addition, InLoox offers an open Application Programming Interface (API) that enables data exchange between InLoox and other systems such as SAP, ERP, CRM, Salesforce and others.

Apps and integrations