Boosting the digitalization of SMEs: what can we learn from digital leaders?
Over the last three decades, the CEE region has managed to become a true champion of market openness, in an effort to catch up with Western Europe. While the early boom was driven by the industrial sectors, the era of digital transformation opens new opportunities. Digital transformation places the world in the hands of SMEs.
SMEs are generally considered to be the backbone of the European economy. According to the official statistics published by the European Commission, they employ two thirds of the workforce in private companies and account for more than half of Europe’s GDP. Therefore, they play an indispensable role and add value in every sector of the economy. SMEs are also often known for bringing innovative solutions within the regions in the European countries.
To fully benefit from the digital revolution, SMEs need to be placed in the center of business policy making, in order to assist them in adapting to the new global digital environment. Profound results have already been achieved in several countries. Thus the timing for igniting the process of business digitalization has never been more favorable than now. The main question that remains open is “How do we kick-start?“ Let’s look at how some digital frontrunners are transforming.
Estonia
Estonia usually ranks among the top countries in the DESI charts, with an overall score higher than the EU average. In 2021, it ranked first in the development of digital public services. However, being number one in terms of the numbers of unicorns per capita, or being known as the most advanced digital society in the world, does not automatically mean that the country is a success story when it comes to the digitalization of SMEs. “Success in one sector does not automatically mean success in another, but support and sharing experiences always work,” said Anett Numa, former e-Estonia Advisor. This remains to be a challenge and the topic is widely discussed among Estonian stakeholders.
Estonia, however, actually showcases some solutions on how to support SMEs through digitalization. Generally, we could mention three areas on which Estonia is focusing. These are easily accessible financing; support from universities; and working more with SMEs. Enterprise Estonia is one of the organizations which are very active in supporting businesses financially, creating special products for SMEs and start-ups, organizing workshops to show how to better use technologies or the benefits digital transformation can bring.
Estonian universities also have a massive role to play in the process. The academia and the government are communicating, however, companies need to identify and name their specific needs. As we know, the academic sector often needs a lot of time to implement new processes, but some of the short term solutions are already delivering results. Some companies in Estonia are financing the studies of selected students who have agreed to work for them once they finish their studies.
Finland
Finland is very well known for its digitalization, but also its educational system. The Finnish success is based on long-lasting cooperation between the public sector, the private sector and the academia. Maybe you’ve heard about the city of Oulu, bursting with innovations and opportunities, also known as a pioneering city for digitalization.
Universities in Finland are encouraging students to establish their own businesses in the tech sector once they graduate or even sooner. Twenty years ago, when you asked the graduate of a top Finish university about their ideal career, work in the European Commission would have been the most likely answer. Nowadays, they are much more likely to say they would like to establish their own business, so it is also about fostering the culture of entrepreneurship. In order to boost digital skills in general, they educate teachers on how to improve the digital skills of pupils.
The Federation of Finnish Enterprises (FFE) is an example of how one organization can gather all the information SMEs need to know to digitalize effectively. The FFE provides support in several categories such as raising awareness about the opportunities digital tools and technologies can bring; partnering with organizations from the public and the private sector; producing a series of events, case studies, peer-to-peer learning opportunities for SME owners; organizing webinars on how to use digital tools; publishing online manuals and tutorials which are freely accessible and understandable.
The ecosystem and collaboration between various stakeholders are key in many ways. The ecosystem needs to be sufficiently big and varied, it must care for the people, the planet as well as the profits, and promote a diverse workforce. Diversity within the creative team translates into more diverse products and such products sell better.
Regulation is really important for SMEs, and Finland and Sweden were among the first countries to realize this. 70% of SMEs in Europe are in the countryside. Finland has legislated a mandate for network providers to provide a broadband within the whole country. It means you can communicate from your home or school in the woods. Businesses should have easy access to the internet.
Sweden
The government should be part of all processes related to digital transformation. However, and again, when success is achieved in the government sector, it does not automatically mean that it applies to the private sector as well.
Sweden is also a good country to showcase its success. Although there is still room for further digitalization in the state sector, the level of digitalization of SMEs and the private sector is fantastic.
According to Tomas Sokolnicki, the Swedish digital ecosystem is built upon five key strengths:
Test beds – these are physical or virtual environments where businesses, academia and other organizations can collaborate and develop, test, introduce and verify new products, services processes or solutions, so they contribute to the smart future societies. Some examples of test beds for digitalization are CRATE, Data Factory by AI Sweden or Makerskola.
Digital infrastructure – secure and resilient digital infrastructure is a key for sustainable digital growth. As DESI 2021 shows, 81% of Swedish households are covered by a very high capacity network compared to the EU average of 59%. Moreover, Sweden aims to be the best in the world and take full advantage of the opportunities afforded by digitalization by 2025. The existing digital infrastructure provides industry with the indispensable conditions for effective cooperation, increased competitiveness as well as increased efficiency gains.
Connectivity – digital infrastructure goes hand in hand with connectivity and the country has four times as many connected devices per person than any other country.
Employment in the ICT sector - as reported by Statistics Sweden, more than a quarter of million people work directly with ICT companies and it continues to grow year on year. Moreover, the startup ecosystem is producing a number of global tech brands.
Digital skills – Under the section on human capital in the DESI 2021, Sweden ranks second out of 27 EU countries and scores remarkably above the EU average. The share of ICT specialists is the highest in the EU and reaches 7,5%, of which 21% are female. We could list skills in AI, automation, e-commerce, cybersecurity or cloud delivery among the Swedish strengths.
Denmark
Denmark is the current leader of DESI 2021. With almost all interactions with the Danish authorities taking place online and the majority of transactions cashless, the country is among the most digitalized globally. We can even describe it as digital by default. Moreover, according to the 2022 Green, Digital and Competitive SME Index, Denmark ranks second out of 27 EU countries on SME Competitiveness Rank (closely behind the Netherlands), it ranks third on SME Digitalization Rank (behind Finland and Sweden) or second on E-commerce rank (behind Ireland). The country also leads when it comes to the digital public sector. When we try to find out what is behind its success, the most frequent argument is trust.
The Danish government introduced the digital key as a key pillar of the digital transformation. Every Danish citizen has an Easy-ID, a secure digital key which can be used to access platforms across both the public and the private sector, including a wide range of services online. Having such a tool provides more effective public-private cooperation and proves the significant level of trust among the whole ecosystem.
When we look into Danish history, the country introduced a central database of every person residing in Denmark already in 1968. In 2001, the country established digital signature for online communication between authorities, businesses and citizens. In 2004, the mandatory easy account was introduced to give authorities and employers an easy way to handle payments to citizens. In 2007, the above-mentioned Easy-ID was set up, as well as the Borger.dk portal, which presents public information and more than 2000 self-services to citizens. Since 2011, digital post has become mandatory for both businesses and citizens. Lastly, in 2021, the Digital Visitor Centre was inaugurated for promoting Danish digital solutions.
Digital transformation is one of the key drivers of productivity growth. Therefore, an increase of digitally advanced SMEs should be one of the key priorities for governments. The need for digitalization should be actively discussed and encouraged and the communication between state authorities and SMEs should be driven through electronic tools that enable users to collaborate or interact digitally.
The League for Digital Boost is a Central European initiative founded and led by the Slovak Alliance for Innovation Economy (SAPIE). The initiative aims to mobilize key players in the field of digitalization of SMEs in the CEE countries to highlight the critical challenges of this topic and propose solutions for policymakers and businesses in the region in order to increase the digital transformation of SMEs. The main ambitions of the League are to connect public, private and non-governmental actors, to raise awareness about the importance of SMEs digitalization, to link business needs with policy-making in the region, and to encourage and facilitate the sharing of good practices.
