Why Most SMEs Aren’t Recovering Investment From Digital Transformation

By Dr Marcos Kauffman

As seen in Business Insider

Dr Marcos Kauffman is Director at the Institute of Advanced Manufacturing and Engineering (AME), which is part of the Coventry University Institute for Future Transport and Cities (IFTC). Marcos has more than a decade of digital and commercial experience within the aerospace and automotive manufacturing industries; including a director-level role focusing on innovation and digital transformation.

Ahead of speaking at a Midlands Business Insider roundtable event – titled “The New Manufacturer: How SMEs are adopting digital tech” – Marcos explores the route that SMEs – especially those in manufacturing – should take when adopting new digital technology; and reveals why information data is becoming critical to manufacturers’ growth.

Digital technology is viewed by businesses as a key tool in helping them to diversify and grow their company, but if the right approach isn’t taken, it can have the opposite effect.

A recent study from Accenture found that 86% of companies that began investing in technology actually failed to grow above the industry average. This is not surprising as research conducted by the World Economic Forum (WEF) showed that despite the estimated investment of $1.2 trillion on digital transformation efforts in 2019, only 13% of leaders say that their organisations are ready for the digital age.

This is a particularly concerning set of statistics at a time when the Coronavirus pandemic is likely to prompt many financially-vulnerable SMEs to explore investing in digital technology, anticipating that they will see quick results. So, why are so many businesses – including SMEs – getting it wrong when adopting digital technology?

Fail to prepare, prepare to fail

Most businesses begin their digital journey by thinking about technology first, usually because they’ve seen it working well in another business setting. Unfortunately, one firm’s digital best practice won’t always apply to others. As a result, companies begin using digital technology with a vague strategy at best, which has a minimal impact on their bottom line.

Rather than taking a technology-driven approach, SMEs should be adopting a value-driven approach, and start by thinking about what principles they want to add to their existing business model, before looking to invest. By taking this tack, some businesses may find that integrating digital technology may even pose a risk to their company.

Digital technology should be used to enhance a company’s existing unique selling points, rather than investing in parts of a business that have no bearing on attracting customers.

A value-driven approach is easier said than done, because for a business to understand what the potential of digital technology is, business leaders need to understand the impact this will have within their wider supply chain. If, for example, a tier one manufacturer invests in technology, how is that going to affect their relationship with the Original Equipment Manufacturer (OEM) that they sell their products to, and the ability to leverage their position within their own marketplace and supply chain?

Collaboration is key

human shaking hand with robot

The relationship between industry and academia can play a powerful role in helping SMEs to maximise the use of digital technologies in incremental stages.

Unipart Manufacturing’s working collaboration with Coventry University’s AME is helping to train up the next generation of manufacturing professionals on real life projects so they are prepared for modern-day requirements from industry, and this partnership has spawned an effective example of a value-driven approach in action.

In a recent collaboration funded by the Advanced Propulsion Centre, Unipart Manufacturing’s partners and customers worked together to convert an existing petrol vehicle (Aston Martin Rapide) into an electric vehicle. A joint venture – known as Hyperbat – was launched with Williams Advanced Engineering which involved designing a new battery pack and facility, while an AME team worked with Unipart to develop manufacturing and digital systems for the venture.

The Hyperbat project partners’ value-driven approach helped them to identify the type of future customers, likely volumes and complexity of future products.

A data-driven future

Intangible assets such as data are going to play a critical future role for manufacturers – particularly within automotive – when it comes to improving products and service offerings.

The AME research group has discovered that there are many new revenue streams that can be created by collecting and integrating data across the life cycle of a product.

For example, with electric vehicle batteries, understanding the data linked to the lifetime of a battery is critical to designing and manufacturing longer-life batteries; as well as being able to reuse batteries packs for a second life on other products.

Patience is a virtue

Small businesses constitute 40–60% of GDP in most countries, yet only 20% of European SMEs are digitalised according to the WEF. Innovative partnerships between SMEs, tech companies, universities and governments can help de-risk and accelerate digital transformation for small businesses.

While technological change is increasing at pace, SMEs should resist the urge to rush, and instead take a rational, considered view of what is going to have the most impact for their own business. Early adoption of digital technology doesn’t always have to be about immediate implementation and short-term results, but more about starting a diligent, and incremental process that will yield results for years to come.

Get in touch with Marcos to find out more about the AME and the Institute for Future Transport and Cities.



Tomas Allum