Digital transformation: an approach for SMEs

All the hype from Industry 4.0 creates a lot of impetus for SMEs to ask how they can make it work for them. SMEs are focused on doing more with less, and are motivated to respond to any call to ‘reduce the productivity gap’.

Management approaches such as lean manufacturing can achieve a lot with existing plant and machinery, and there are countless case studies that demonstrate what can be achieved with pencils, paper, data analysis training, and persistent leadership that builds a ‘can-do’ culture of continuous improvement.

There is often a sense of frustration from SMEs who can see that they could benefit from a particular technology, yet the cost (either capital or operational) is prohibitive or that they just cannot afford the downtime to implement it.

In such cases, it is not clear for an SME what the route forward for improvement is, and they can get stuck in a rut with no obvious solution.

SMEs are sold a vision from the technology vendors that perhaps seems unattainable; the potential benefits of the technology can only be realised in a cooperative, supportive environment, and this is certainly not quick to build.

So, what SMEs need is a framework that can  explain what stages need to be in place so that their digital transformation ambitions are successful.

This framework should contain three key aspects as follows:

1. Understanding what capability is required. Technological know-how is important, but perhaps of more importance is understanding the business requirement for change first, and using this to drive a set of technological and environmental development requirements. Lean is a good way to both understand the existing situation and also to see where the next benefits will come from, and it is essentially a human-centric approach that yields tangible results.
2. Once the business imperative is understood, we are in a much better position to evaluate what actual technological innovation is required.  A technology vendor might well encourage a large-scale programme of IIoT adoption, but this is exactly the sort of behaviour that makes SMEs sceptical of Industry 4.0, as the upfront costs are often too high. Choosing a process to transform, and the judicious use of simple sensors, localised analytics, and dynamic data visualisation can go a long way to actually realising the benefits that have been identified in the requirements phase.
3. Look for opportunities to scale. This is perhaps the most exciting stage. Now that we have a few processes that have been improved, it is likely that a) we shall start observing other areas of the business that are becoming stretched, and b) we are also beginning to broaden our outlook and see new opportunities for growth that did not exist before, as a realist of more collaborative operational activity. This is where we can now exploit the fact that we not only understand our processes better, but we can also start to think about automation and the intelligent delegation of process monitoring to the machines.

The outputs from each of the above steps tend to provide additional insight that motivates continued development. And perhaps more importantly, each decision to purchase equipment is justified by a specific problem that is to be addressed.

Digital transformation is often described as a ‘top-down’ approach, where executive leadership needs to ‘buy-in’ and support the agenda.

In SMEs the executive is often the workforce, and they need a bottom-up approach to make it work!