4 Reasons Why Digital Transformation Is Table Stakes for Small Businesses
Small businesses are adapting to digital transformation to remain relevant in a changing economic landscape.
The Covid-19 pandemic accelerated digital transformation in small businesses across the country. Digital transformation became table stakes for business survival during the pandemic and business success after it.
Small businesses are rising to the challenge and adopting the digital-first approach. They are making the leap into digitalization to respond to evolving consumer behavior and expectations, adapting to new working norms, putting data to work to drive performance and building business resiliency.
1. Respond to evolving consumer behavior and expectations
The pandemic changed the way consumers shopped. Last year, U.S. retail ecommerce sales grew more than 33% and reached $799.18 billion. Data from consulting firm McKinsey puts the surge in ecommerce volume into context, noting that the rate of ecommerce penetration in the U.S. grew by 10 years in a 90-day period in 2020.
Post-pandemic ecommerce is expected to remain elevated as consumers continue to grow accustomed to the convenience of online shopping. To remain relevant, small businesses will need to adapt to meet customers where they are.
Digital payment is another area that was reshaped by the pandemic. At the height of the pandemic, concerns about spreading the virus made consumers and employees reluctant to handle cash or credit cards. That led to the rise of contactless-payment solutions that allow customers to pay from their phones or with tap-digital options.
A recent VISA survey found that 85% of consumers expect digital options when they shop in-person. Tapping a credit or debit card is the top contactless option consumers expect (62%), followed by mobile-payment apps (41%), and, lastly, paying with a mobile wallet (37%).
Customer-loyalty programs are also going digital to help businesses attract consumers back into stores. As consumers spend more time online, small businesses are using digital-loyalty solutions to boost customer engagement, incentivize shopping, reach new customers and build brand awareness.
As they are building out a digital ecosystem to respond to evolving consumer preferences, small businesses are also digitizing back-office functions such as accounting to efficiently manage their finances.
2. Adapt to new working norms
Pandemic-driven changes to working norms are affecting the way businesses operate. Remote work, which surged during the pandemic, looks like it is here to stay. Analyst firm IDC projects that “the U.S. mobile worker population will grow at a steady rate over the next four years, increasing from 78.5 million in 2020 to 93.5 million mobile workers in 2024.” By the end of the forecast period, IDC expects mobile workers will account for nearly 60% of the total U.S. workforce.”
To support a distributed workforce, businesses are integrating digital tools with cloud technology that allows real-time access to data from anywhere. This drives productivity and keeps businesses running efficiently wherever the work is done. A Cisco 2020 small-business digital-maturity study found that 36% of small businesses are planning to invest in solutions that can help their employees work remotely.
For example, small businesses are adapting accounting functions to new working norms, using cloud-based applications to digitize accounting tasks and keep finances on track as work moves away from the office. These applications provide a robust toolkit to help business owners stay on top of their bookkeeping and accounting, all in one place.
To further streamline their finances, many business owners partner with online bookkeepers and accountants. This saves them time and stress and allows them to focus on what they love — running their business.
3. Put data to work to drive performance
Digital transformation provides access to data and insights that can help maximize business performance. This allows companies to mine data to understand customer buying habits, boost customer acquisition and retention, drive product and service innovations and automate business processes.
These insights are helping small businesses maximize business performance. According to McKinsey, data, combined with analytics, can yield 15% to 20% growth in revenue.
Financial data is particularly important for driving business performance and strategy. To capture this data, small businesses are digitizing accounting functions. Cloud-based accounting platforms that connect to bank account and credit card transactions can track expenses and cash flow. This provides business owners with visibility into their numbers and informs business strategy.
4. Build business resiliency
Digitalization allows small businesses to navigate uncertainty and maintain resilience as market conditions evolve.
The previously referenced Cisco small-business digital-maturity study found that when it comes to recovery during and after the pandemic, small businesses that are in the mature stages of their digitalization journey “have the highest ratio of recovering, are able to respond faster to changing market conditions, and are growing their revenue at higher rates.”
Cloud technology is a key enabler of digital transformation and is crucial for the long-term success of small businesses.
Deloitte notes that “to survive and thrive in an uncertain and rapidly changing world, organizations will need to innovate at speed, keep pace with technological and industry change, and cultivate greater resilience. These are among the leading reasons, particularly in the private sector, that leaders are investing in digital transformation.”
Digitalization is essential to the new ways of doing business, making digital transformation table stakes for remaining competitive and relevant. Small businesses are rising to the challenges of today’s digital economy, digitizing nearly every aspect of their operations.
Entrepreneur Leadership Network Writer