The SME future: digital transformation and sustainability

I do not believe that any business owner will argue that the last 4 years have been some of their most challenging.

Businesses have faced an unprecedented pandemic, the UK leaving the EU and the single market, supply chain pressures, rising inflation and interest which have not been experienced since the mid 1990’s, yet when you speak to the average UK business owner they are optimistic for the future.

The SME business community accounts for over 95% of the UK business community and the above events have placed incredible pressures on entrepreneurs, they have adapted and are agile in an environment of changing trends, customer demands, changing workforce requirements and wellbeing. Following a recent survey of 1,000 SME’s carried out by American Express and Small Business Saturday more than 79% said that they expected to grow their business over the next 12 months, 25% expected to diversify their product range or service and of key interest was that 20% expected to invest in new technology.

Resilience and agility have certainly been key characteristics that are present in many SME businesses but there are further key features that need incorporating into businesses to cater for the challenges of the future. These include a rapid digital transformation which historically has been slow to be incorporated into UK businesses. This has led to falling productivity and competitiveness versus our trading partners, leading to some businesses offshoring production to other countries.

UK businesses embracing digital transformation is key to improve efficiencies and stay more competitive, while remaining client focused and exceeding customer expectations. A good example of this type of transformation can be seen happening in some UK housebuilders who have diversified from the standard arrangement of building from the ground up on site, with high-cost materials and labour, to a flat pack method of housebuilding. Key components are flat pack manufactured in a factory using up to date technology, including computer driven machinery and processes. This technology means there is a seamless communication with supply chains, resulting in “just in time” raw material delivery into the factory, efficient production and output delivered to site at the right time. Using this method gives a massive reduction in build time from 4-6 months with traditional build to just six weeks.

A further consideration of this transformation is the upskilling of the labour force used in the factory, there is a shift from the need for a low paid unskilled worker to skilled digital experts and engineers on vastly improved pay. Getting the right resource has consistently been a struggle for manufacturers in particular, so this transformation adds another level of complexity.

However, increasing digital reliance isn’t without its challenges, it requires cybersecurity protection to be incorporated into business procedures as this threat can stop a business in its tracks, resulting in some cases to business failure. This potential show stopper to many businesses not only results in losses of funds and business interruption due to fraud and ransomware demands but loss of Intellectual Property due to hacking and industrial espionage. Clearly businesses must respond to this threat by adopting rigorous safeguards that include training of users regarding potential threats, cybersecurity insurance and tried and tested disaster recovery plans.

Key data and real time management information will evolve from digital transformation as the complexity and speed of the data available allows business to make informed decisions based on evidence rather than a “gut feeling”. Availability of data allows business to improve productivity by focussing on labour, material and machinery efficiencies allowing for improved margins and therefore more competitive tendering.

The final aspect is the ongoing environmental and sustainability conundrum that has challenged business and wider society for many years. This is a high agenda matter for the younger generation and the wider community as we all become more aware of the impact we have on the environment both individually and as businesses. Many business see ensuring all activities are green driven and sustainable as essential. Carbon emission reporting in financial statements has now become a requirement for many larger businesses. Evidencing green credentials are increasingly a requirement for competitive tenders and membership of green organisations such as B Corp are a key advantage.

The above matters are a regular topic discussed and debated by attendees at our South East Manufacturing Forum which meets quarterly and should you wish to discuss some of the matters above or wish to be included on our invitation list please contact Rodney Sutton.