Smaller and mid-sized businesses are fighting for survival. This is how they could prosper

SMEs play a vital role in the global economy, contributing up to 70% to employment and GDP. However, 67% of SMEs and mid-sized businesses are fighting for survival. This is partly because SMEs face intense short-term business pressures, limited expertise and resource constraints, which hinder their technology adoption.

Over 85% of organizations recognise increased adoption of new technologies and expanding digital access as key drivers of transformation. Digital infrastructure has been identified as a significant driver of long-term financial growth and adaptive capacity for SMEs.

Staying up-to-date with these trends is crucial for SMEs to remain competitive in the evolving digital landscape. While this may involve a significant upfront cost in the medium to long term, investments in digitisation can enable SMEs to gain valuable insights from their data, increase the efficiency of their operations, make cost savings, improve competitiveness and create greater opportunities for scalability and growth potential.

Despite their economic significance, SMEs have experienced a decline in their contribution to GDP. In the US, for example, SME contribution to GDP has fallen nearly 5%, from 48.0% to 43.5% from 1990 to 2014. The absence of technological adoption has been a significant factor in this decline.

SMEs acknowledge the importance of keeping up with technological and innovation demands: approximately 25% of SMEs cite this as a top challenge. Additionally, 64% of SMEs find it challenging to effectively use the data from their systems and 74% struggle to maximise the value of their company’s data investments.

New service-based models offer companies access to and use of various technologies, infrastructure or software as services, without the need to purchase and manage the underlying technologies themselves. These models can offer more cost-effective options and allow SMEs to take advantage of access to new technologies by paying a fee or subscription for the use of these services.

However, SMEs still face barriers, such as limited financial and human resources, inadequate access to essential infrastructure and the absence of long-term vision and strategies regarding data management, privacy protection and cybersecurity. Additionally, the recently published Data Unleashed: Empowering SMEs for Innovation and Success report finds that SMEs face obstacles and constraints around their lack of data policies and clarity on specific roles and responsibilities, extracting value from data, limited IT infrastructure and accessing global markets.

Multistakeholder collaboration enables SMEs to overcome these barriers and build networks with other sectors to access skills and new technologies, share best practices, navigate the regulatory environment for data management, both domestically and internationally, and ensure their data policies are compliant with industry standards. Additionally, partnerships with technology providers and educational institutions could inject valuable and cost-effective tools and capability building. Cross-sector collaboration is essential, as SMEs play a critical role as partners and intermediaries within any supply chain.

The latest Future of Jobs report, which surveyed 803 companies across 27 industries and 45 global economies on job trends, states that digital platforms and apps are the technologies most likely to be adopted by the organizations surveyed and 86% of companies expect to incorporate them into their operations in the next five years. Moreover, the digital transition of SMEs speeds up productivity growth and bridges inequalities among people, firms and locations, as well as reducing human resources, saving time and improving the overall quality of outputs. E-commerce and digital trade are expected to be adopted by 75% of businesses, providing SMEs with new avenues for growth and market access.

The incorporation of technology in trade brings opportunities and challenges for small companies. Understanding and leveraging these advancements can enhance efficiency, expand market reach and foster growth for SMEs.

As the Fourth Industrial Revolution progresses, certain job roles will decline while others, such as AI and machine learning specialists, data analysts/scientists and digital transformation specialists, will grow in demand. This will increase the need for upskilling and reskilling programmes to prepare the workforce to work with these technologies, as well as close the potential skills gap, due to the increased demand for technology-skilled labour.

Policy-makers and business leaders should work together to increase talent availability by providing sufficient funding for reskilling and upskilling, improve school systems (shown to attract skilled talent by a greater fraction of SMEs), change immigration laws on foreign talent, as well as provide flexibility on hiring practices and setting wages through taxes and other incentives. These policies will fill in the skills gap, create new talent and provide SMEs with the opportunity to play a bigger part in the Fourth Industrial Revolution.

By recognising the importance of digitalisation, investing in appropriate infrastructure and fostering a culture of innovation, SMEs can position themselves to thrive. The success stories of initiatives, such as the Centre for the Fourth Industrial Revolution Brazil, and platforms, such as MantaMESH, serve as inspirations for SMEs to adopt digital transformation and unlock their true potential in the digital age.

The Centre for the Fourth Industrial Revolution, Brazil is a Forum-affiliated institution that focuses on harnessing the potential of technology for SMEs in Brazil. By providing access to cutting-edge technologies, fostering collaboration and offering support for innovation, the Centre empowers thousands of SMEs to welcome digital transformation and thrive in the modern business landscape.

MantaMESH is an innovative digital platform that connects SMEs with global supply chains and enhances their competitiveness. By leveraging technology, MantaMESH enables SMEs to overcome traditional barriers to entry, facilitating seamless collaboration and trade opportunities.

Embracing smart digital strategies, sustainability practices and talent development can enhance SMEs' future readiness and ensure their survival in an increasingly competitive environment.