Sharing best practices workshop @Globsec
We had a side event @Globsec 2022, where our speakers shared best practices for digitalization of SME’s.
Estonia usually ranks among top countries in the DESI charts, with the overall score higher than EU average. In 2021, it ranked first in the development of digital public services. Although being number one in number of unicorns per capita, or being known as the most advanced digital society in the world, this not mean automatically that it is a success story when it comes to the digitalization of SMEs, as it is still the challenge and the topic which is discussed among Estonian stakeholders.
Three main solutions which have been mentioned from the perspective of Estonia are:
SMEs digital transformation needs better financing. In Estonia, there are 2 organizations which are very active in this field, also in supporting companies financially in their transformation processes, e.g. Enterprise Estonia. They do even have special products for start-ups and SMEs, they are organizing workshops to show how to use technologies better, what the digitalization brings to them and so on.
Support from universities because that is where digitalization starts, meaning we need to educate the future leaders in the sense that they would understand the company needs. The universities need to do the very first step because that is where everything is kicked off.
Work more with the companies to understand their needs better, allocate more budget for that. There are so many benefits coming from digitalization and not all of these companies understand that.
The government should be part of all these processes. However, when the success happens in the government sector, it does not automatically mean that it applies to the private sector. Sweden is also a good example. In the government sector maybe not everything is so efficiently digitized, but in SMEs and in the private sector the digitalization is fantastic. Universities have a massive role to play, in Estonia, there are several specific Master study programs on the digital chains in companies and so on.
Finland is a very well known for its digitalization, but also educational system. The Finnish success is a long-lasting cooperation between public sector, private sector and academia. One of a great example is a city Oulu, which is one of hubs for Nokia. It suffered greatly when the boom of Apple started, a lot of engineers lost their jobs. However, Nokia provided to many of their engineers a generous compensation who then turned to establishing businesses on their own, which at the end caused the huge transformation in the IT sector and many new companies grew.
The ecosystem and collaboration between various stakeholders is key in many ways. The ecosystem needs to be big enough and various enough. One more group of stakeholders is civil society. The companies need to work with the third sector and NGOs, it is also important in terms of values on the part of customers, the workforce and investors for business solutions who provide more than just a share of the value. You need to care for people, planet and profits – those businesses that will care, those will be winners. Diversity is also important – a more diverse workforce creates more diverse products, especially in the digital sphere and such products sell better.
Where should the financing come from? When the government invests to support companies by allocating more money, they are gonna win in the future because these businesses are gonna start booming. If the company shows they are ready to invest, government should support them. It could be a simple financial support, or maybe a loan or other methods.
Everybody in the EU recognized the wake up call for SMEs and improvement of the system. We are improving the digital infrastructure, the lack of skills and the lack of investment into the educational system is still our disadvantage, we need to improve the access to findings. The EU has a lot of money as well and especially when supporting the companies and SMEs so it shouldn’t be only working on national level. We should define the methods together.
The Finnish or Estonian ecosystems are of huge inspiration to us in the CEE region. In Slovakia, from the perspectives of government, the we see several areas where to improve and help to SMEs to digitalize:
Finances. The Ministry of Economy of the Slovak Republic is planning to distribute the funding of approx. 200mil Euros within these areas: services for SMEs in terms of digital vouchers (5-10k Euros so they they could buy an expertise to gain the knowledge on what they need in terms of digital processes); the rest of the money will be spent through calls, but will be organized in a different way, more on a permanent basis, the calls will be open, money allocated to the calls for several months.
Reform of the education system. We have a lack of not only IT specialist, but in Slovakia, in the upcoming 3 years, we will be affected by a lack of approx. 8000 teachers positions as well.
Building the ecosystem of partnerships. Build long-term partnerships on national, but also on international and European level and to help companies establish international partnerships. Europe a has a project of building networks of European Digital Innovation Hubs which will be centers for providing services and education for SMEs.
Better regulation. The role of a government is clear, to improve the legislation, eliminate legislative burdens and steer the effective implementation of innovation.
The importance of learning. Universities in Finland are encouraging students to establish their own businesses in the tech sector once they graduate or before they graduate. Twenty years ago, when you asked the graduate of a top Finish university what their ideal career would be, they said work in the European Commission. Now, 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 the digital skills we need to educate teachers on how to improve the digital skills of pupils.
Overall, the lack of money and lack of people are a general obstacle in digitalization of SMEs in the CEE region. Legislation can do a lot, you can incentivize the capital coming into startups, but the other one is size of the tickets which is really small. Partnering with the private sector brings more innovations into the ecosystem. When talking about education, it is more about learning than about education. In Slovakia, it will take a long time to see the results of the reform in the educational system. The need for reskilling could be a short-term and quick solution, there are many big companies which are helping companies and entrepreneurs with reskilling, e.g. Google (reskilled around 100k Slovak and 150k Czech Republic within the project Digital Garage), and others. Partnering with those companies could be a way to do efficient upskilling of employers and entrepreneurs.
Generally, we also see that some companies do not want to digitize because they do not understand what digitalization would bring to them and why they should do that and how to utilize the finances they should invest, to show them what works and what does not work on some practical experiences. We should work on awareness of SMEs why they should transform and adapt to digital platforms. The solutions must be simple, easily accessible and understandable.
