The extent of digital and technological change has been so vast that businesses now have a wealth of data and digital capability available to them. In 2011 it was estimated that if the UK had exploited all of these capabilities there would have been a œ63 billion uplift in total GDP. With SMEs making up 49% of private sector GDP in the UK, the value added from SME engagement with digital technologies could be huge. So why do so many SMEs fail to operate in the digital economy?
One reason is education. Equipping the workforce with the skills needed to succeed in a digital economy starts at a grass roots level in schools and colleges. To maximise the digital potential of the workforce, these skills then need to be reinforced throughout university and constantly refreshed in the workplace. Current limitations across each level of this educational lifecycle have restricted the digital talent pool currently on offer to SMEs.
Education in the benefits of digital would also do a lot to support the loosening of ‘corporate rigidity’ within business. Many SMEs rely on tried and tested business models that will increasingly become irrelevant in the digital age. Amazon, Apple and Google are digital giants for a good reason – their operating models are responsive to customer demands in the digital world. Understandably, employing digital capability can seem like an impossible feat for SMEs, given the modular technologies, testing and governance that is often required with their deployment.
Implementing this capability requires investment and for SMEs this often means that digital capabilities are de-prioritised given more pressing short term liquidity and cash flow priorities. SMEs are also nervous about whether digital spend can keep up with the constant evolution of technological change.
Resolving these challenges requires support from the government who should play a much more active role in creating an environment for SMEs to flourish. STEM subjects need to take a more prominent role in the educational curriculum to ensure that training in digital is started early so that future generations can offer the labour market the much needed digital skills to succeed. More immediately, the government should work with banks to ensure accessible financing opportunities are available for those smaller firms choosing to invest in digital capability.
Large firms also have a role to play in supporting SMEs in the UK. Mentoring of SMEs and employee ‘swaps’ can disseminate valuable knowledge from corporate powerhouses to smaller firms, but they can also prove mutually beneficial through cross fertilisation of skills and ideas.
With the pace of digital change showing no sign of slowing and customer expectations of businesses and their digital capability increasing, SMEs must keep pace with continual change in order to survive. If both the government and big business fail to play their part in this, then the future competitiveness of the UK economy will be compromised.
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This research was published by the Lords Select Digital Skills Committee. We joined other digital leaders to discuss this topic, providing written evidence to the committee.
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