SMEs that don’t go digital might not survive, experts say

[Shenzhen, China, April 28, 2023] Thought leaders who study small and mid-sized enterprises (SMEs) have issued a blunt warning about the dangers of remaining analog laggards in an increasingly digital world.

A leading economist, a UN agency executive, and a specialist in entrepreneurship with the OECD all agree that smaller firms must digitalize now or risk extinction within a short time. Their remarks appear in the latest edition of Huawei’s Transform magazine.

“Technology is developing so fast,” warned Zou Ciyong, Deputy Director-General of the UN Industrial Development Organization. “If you can’t catch up with the trends, the gap will widen further.”

Zou adds governments must help SMEs, and focus on what he calls “the 70-80-90 issue.”
“SMEs generate 70% of the tax base that provides government revenue, 80% of the technological innovation, and 90% of all employment. Even so, many countries don’t do much to support SMEs’ digitalization.”

Sandrine Kergroach, who studies SME and entrepreneurship performance for the OECD, says smaller firms often lack the skills, awareness, or internal capacity to identify the best solutions for their business. “SMEs lag broadly in adoption of digital technologies,” she notes.

COVID pushed companies to digitalize, including smaller ones: up to 70% of all SMEs increased their use of digital tools in 2020. But despite this uptick, SMEs remain cautious.

“The change has remained limited to certain forms of digitalization, suggesting a forced adaptation rather than a strategic transformation,” observed Kergroach.

“Digitalization is crucial for the financial sustainability – the survival – of any business, big or small”, said Professor Phoebe Koundouri, President of the European Association of Environmental and Resource Economists. “SMEs will benefit from the optimum combination of the right policies, technologies, and financial tools. Governments need to invest the necessary resources and get people engaged.”