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6 reasons why small and medium businesses should invest in digital transformation in 2022

Updated: Feb 25, 2022

The pandemic has coerced small and medium businesses (SMBs) to adopt digital practices into their workflows. Now, as the world returns to “normal,” should your business too?

6 reasons why SMBs should invest in digital transformation and future-proof themselves.

With the COVID-19 pandemic, businesses had to radically adapt to alternative methods, mostly digitalization, to survive. Today, 65% of decision-makers agree that the business must digitize in the coming years or face “doom”. Hence, it is not surprising that 70% of companies either have a digital transformation strategy or are on the roadmap to one. Digital investments when aligned with business strategy and visions help improve overall efficiency, decrease costs and increase revenues. In fact, digitally mature organizations not only faced the pandemic resiliently but also earned higher net revenues than the industry average.

What is digital transformation?

Digital transformation, in simple terms, is the creation of a digital version of a comparable identity. It includes business processes, operations, transactions as well as stakeholder experiences. It is multi-faceted. Digital transformation involves the integration of continuous change and innovation into the organizational culture. According to salesforce, “Digital transformation is the process of using digital technologies to create new — or modify existing — business processes, culture, and customer experiences to meet changing business and market requirements.”

How can digital transformation benefit small and medium businesses?

1. Digital Transformation provides a competitive advantage to small and medium businesses

Digital transformation provides small and medium enterprises with a competitive edge. It helps streamline processes and ensure quality. From finding extraordinary talent to completely unexpected customer segments – new digital strategies and practices open doors to new perspectives. It makes the business leaner and likely to survive trials than its digitally challenged counterparts. Digital transformation is the only way to future proof a business.

2. Global Markets could be tapped into with the use of digital business transformation

Digital transformation takes small local businesses to a global stage. It opens a new customer base that was untapped before. Social media and e-commerce platforms have massively increased customer reach. Product differentiation can be achieved with the digitalization of the customer journey. Digital transformation reduces the costs linked with transport and border operations, increases the transferability of services and lowers hidden costs by repairing fractured supply chain issues.

3. Digital transformation promotes data culture within the organization

Businesses are increasingly leveraging data-driven decision making with the help of digital transformations. As cloud-based data solutions are becoming increasingly and easily available, small businesses do not have to make decisions based on gut instinct and assumptions anymore. Valuable data insights help track relevant KPIs efficiently and have a major bearing on improving customer experience. This data helps in identifying weaknesses and tackling threats before they present themselves.

4. Digital transformation is cost-effective for small and medium businesses

Leading small businesses enjoy multiple times (8x) more gains than businesses in earlier stages of digital transformation. New digital technologies can reduce operational costs by 20-30 % through enhanced capital and labour deployment. Digital transformations, therefore, are cost-effective in the long run. SMBs usually stick to the digitalization of administrative and marketing functions due to the heavy infrastructural and developmental costs. However, the eventual loss in revenue due to poor customer experience and inadequate employee collaboration that businesses must endure owing to the lack of digital tools is costlier. For SMBs, Agile methodologies are a powerful umbrella to navigate through the uncertainty of custom solution building.

5. Digital innovation improves customer experience

Improved customer experience is one of the leading factors compelling organizations to digitally transform themselves. SMBs need to digitally transform themselves because the consumer already has. The end-user experience is central to the sustainability of businesses. Engaging users, tracking analytics, free access to information, ensuring feedback mechanisms and seamless internal communications are all factors in the consumer’s decision-making process that can be positively influenced with a digital transformation strategy.

6. Digital strategy framework helps build knowledge networks within the organization

The process of digital transformation empowers all stakeholders of the business with information. It helps employees streamline tasks with the help of digital tools. By introducing digital technologies small business leaders go a long way in increasing employee productivity, ensuring team collaboration and improving internal and external communication. A system of sharing information transparently ensures compliance to quality standards.

So, where are SMBs in the digital transformation journey?

There has been a drastic shift in SMBs with a 15% increase YoY in investments related to digital transformation efforts after the pandemic. However, the core of this transformation was led by crisis and not the desire to lead digital transformation innovations. The benefits of digital transformations have disproportionately helped larger businesses. The market leaders by size occupy 60-35% of all digital revenues. This trend continues downwards, with small firms being less digitized than medium firms.

Still, 26% SMBs remain completely untouched by the digitalization of any type. One of the major factors contributing to this is the fact that most advanced digital solutions are often designed keeping in mind large scale enterprises. The effects of the digital gap are often reflected through socioeconomic factors as well, with 56% of small firms in Singapore stating that digitalization is too expensive for them. Another example would be that female-led SMEs in the UK are 20% more likely to opt-out of digital solutions.

Some critical issues faced by small businesses on the digital transformation roadmap are:

  • Shortage of digital skills and talent

  • Lack of budget

  • Lack of necessary technologies

  • Lack of digital mindset

  • Lack of a proper digital roadmap

Female led businesses are unlikely to complete the digital transformation process.


A quick fix by Small and Medium Enterprises has helped them sail through the pandemic. However, the transition for these firms is not yet complete and comes bearing quite a few risks. These small and medium companies need expert advice and guidance to select the right digital systems, build interactive digital platforms, develop the right protection and security, and fully customize and understand the potential of these new tools. The problems of every business are distinctive and should be dealt with exclusively.

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