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Small and medium business organisations (commonly referred to as SMEs) are the backbone of the European economy, yet little is understood about how these firms are adopting digital technologies, and deploying them to build competitive advantage. This is problematic because digital technologies can support intelligence gathering, cost reduction and audience extension for SMEs. However, they can also significantly hamper the performance of those firms that lack the technical and marketing expertise, or the enhanced capabilities and leadership qualities, to adapt to the associated changes and to optimise opportunities for the firm. This study set out to address the gap in the literature on SMEs’ use of digital technologies, by investigating the preparedness levels of SMEs for the digital economy. To achieve this goal, the research team reviewed the literature on SMEs’ technology adoption and innovation, and subsequently developed an online survey. The questions were derived from academic and business literature, and further informed by earlier interviews with a selection of SMEs in each participating country. The survey ran in four different countries (Ireland, Italy, Spain and the UK), and across five different industry sectors (agriculture, manufacturing, tourism/leisure, retail, and professional services) over the Spring and Summer of 2016. Furthermore, the study included the three different types of SMEs, in accordance with the European Commission’s classification. This report summarises the findings gleaned from the 357 complete responses to the survey.
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European SME Digitalisation Study 2016 Page 1
European SME digitalisation Study
Executive Summary Report for project participants
By
Sarah Quintona, Ana Isabel Canhotob, Rebecca Perac, Tribikram Budhathokid, Sebastian Molinilloe
aMarketing Department, Business Faculty, Oxford Brookes University, Wheatley Campus, Oxford
OX33 1HX, England, sequinton@brookes.ac.uk
bMarketing Department, Business Faculty, Oxford Brookes University, Wheatley Campus, Oxford
OX33 1HX, England, adomingos-canhoto@brookes.ac.uk
cDipartimento di Studi per l’Economia e l’Impresa, Università del Piemonte Orientale, Novara, via E.
Perrone 18 - CAP 28100, Italy, rebecca.pera@uniupo.it
dBusiness and Economics Department, Business Faculty, Oxford Brookes University, Wheatley
Campus, Oxford OX33 1HX, England, tbudhathoki@brookes.ac.uk
eBusiness Management Department, Faculty of Economics and Business Administration, Malaga
University, Campus El Ejido, 29013 Malaga, Spain, smolinillo@uma.es
with assistance from
Etain Kidney and Anthony Buckley, The Dublin Institute of Technology, Dublin, Ireland.
This project has been funded by Oxford Brookes Univers i ty, Smal l Grants Scheme Round 8, research ethics
license L14100.
European SME Digitalisation Study 2016 Page 2
Table of contents
1. Study background.................................................................................................................. 3
2. Overview of participating organisations .............................................................................. 5
3. State of digital adoption ....................................................................................................... 7
4. Sources of value vs. perceived barriers and risks .............................................................. 10
5. Organisational use............................................................................................................... 14
6. The role of individual and organisational attitudes and capabilities................................ 15
7. Concluding comments ......................................................................................................... 17
European SME Digitalisation Study 2016 Page 3
1. STUDY BA C KG ROUND
Small and medium bus i ness organisations (commonly referred to as SMEs) are the backbone of the
European economy, yet l i ttle is understood about how these firms are a dopting digital technologies, and
deploying them to build competitive advantage. This i s problematic because digital technol ogi es can s upport
intelligence gathering, cos t reduction and audience extension for SMEs. However, they can also significantly
hamper the performance of those firms that lack the technical and ma rketing expertise, or the enhanced
capabilities and leadership qualiti es , to adapt to the as sociated cha nges and to optimise opportuni ties for the
firm.
This study s et out to address the gap i n the literature on SMEs’ use of di gital technologi es , by
investigating the preparedness l evels of SMEs for the digital economy. To achieve this goal, the research team
reviewed the literature on SMEs’ technol ogy adoption and innovation, and subsequently developed an online
survey. The questions were derived from academic and busi ness li terature, and further informed by earlier
interviews wi th a s el ection of SMEs in each participating country. The survey ran in four different countries
(Ireland, Italy, Spain and the UK), across five different industry sectors (agriculture, manufacturing,
tourism/leisure, retail , and professional services) over the Spri ng and Summer of 2016. Furth ermore, the study
included the three di fferent types of SMEs, in accordance with the European Commission’s classification (Table
1).
Table 1. European Commission’s criteria for the classification of SMEs
Category
Number of employees
Yearly turnover
Micro
fewer than 10 people
less than 2m
Small
between 10 and 50 people
between 2m and 10m
Medium
between 50 and 250 employees
between 10m and 50m
This report summarises the findings gleaned from the 357 compl ete responses to the survey. Section
2 presents an overview of the organisations that participated in this study, noting that the survey collated
responses from a wide range of organisations whi ch largely reflect the economic dri vers of the participating
countries. Section 3 describes the state of digital adoption amongst the participants, and distinguishes
between the most widely adopted digital products and the most popula r uses of digital technology in a
business context. Section 4 then moves on to cons i der how European SMEs are deriving value from adopting
digital technology, as well as i dentifying the key barriers faced, and the main risks restraining digitalisati on of
these organisa tions. Subsequently, section 5 considers whether digi tal technology is most relevant for the
marketing or th e non- ma rketing functions of SMEs. Lastly, section 6 identifies the role of individual vs .
organisational attitudes and capabilities in succeeding in the di gital environment.
European SME Digitalisation Study 2016 Page 4
This s tudy would not have been pos sible without the financial support of Oxford Brookes University,
which awa rded us a research gra nt (Oxford Brookes University, small grants scheme round 8, research ethics
license L14100), a nd the interest and support of other organisations including the Confederation of Bri tish
Industry (CBI) small firms group, and the Confederazione Italiana della Piccola e Media Industria Privata
((CONFAPI).
European SME Digitalisation Study 2016 Page 5
2. OVERV I EW OF PARTICIPATI N G ORG AN ISATI ON S
The survey gathered responses from a wide range of partici pating organisations (Table 2).
Table 2. Overview of participating organisations
Categories
% of
responses
Industry Sector
4.1
35.3
40.5
16.6
3.5
In exis tence for
16.6
12.5
12.5
12.2
46.3
Annual sales revenues
55.5
30.6
13.9
Number of employees
44.5
38.6
16.9
Italy recorded a very high proportion of respondents from the manufacturi ng sector and from firms
which have been in existence for more than 20 years. In contrast, the UK and I reland saw a hi gh percentage of
respondents from firms i n the services sector and from firms which have been in existence for 5 years or less.
In addition, Spain had the hi ghest percentage of responses from micro-firms, both i n terms of annual sales
revenue and in terms of number of employees.
European SME Digitalisation Study 2016 Page 6
Generally, the parti cipants in this study tended to have do mestic markets, with two thirds of the
respondents reporting that i nternational sales accounted for 10% or less of the total sal es of their firms (Figure
1). Ireland’s respondents were the most internationalised i n our sample, with 1 in every 5 respondents
reporting that 60% or more of their fi rms’ total sales were generated outside of their bas e countries.
Figure 1. Degree of internationalisation
The profile of the respondents broadly reflected the characteristics of the participating countries. This
offers reassurance that the fi ndings from the study are representative of the overall reality of SME
digitalisation in the four European countri es studied.
0
10
20
30
40
50
60
70
80
All countries Ireland Italy Spain UK
% of s ales generated outside of base
country
Country
10% or less 10-30% 31-60% more than 60%
European SME Digitalisation Study 2016 Page 7
3. STATE OF DIG ITAL ADOPTI ON
E-mail, desktop access to the internet, having a webpage, and mobi le access to the Internet, were the
most popul ar formats of di gi tal technology used by the S MEs i n this study, though penetration rates varied
si gni fi cantly across the countries studied (Figure 2).
Figure 2. Most popular formats of digital technology
It was s urprising to note that, nearl y thirty years after the i nvention of the worl d wide web and the
subsequent popula risation of the Internet, not all SMEs used e-mail. Furthermore, the UK was the only country
where all respondents said that their fi rms ha d c omputers wi th internet connection. Whether this was because
these S MEs relied on other means of accessing the internet (e.g., personal computer, or smartphone), or
because they did not use these most basic of digital products, i t is not cl ear. However, it do es indicate a
potential vulnerability in terms of the preparedness levels of SMEs for the di gital economy.
In turn, management s oftware, such as products for stock checki ng or accounting, were used by more
than 70% of compani es in Italy, Spain and the UK, though o nly 10% of those in Ireland. Cloud storage products
were popul ar i n the UK (65% of respondents), but l ess so in other countries. In Spain and in the UK, 60% of
SMEs had some form of corporate s ocial media presence. Blogging, onli ne communities and Intranets were
used only by a minority of firms. Hence, there i s significant variance in terms of breadth a nd pen etra tion of
digital products, among the European SMEs participating in this study . While this may not be entirely
surprising given the range of organisati ons considered, i t shows the futility of considering SMEs as a whol e
and, most importantly, of desi gning policy and other intervention i ni tiati ves which do not take into account
the digital divi de i n terms of the formats us ed.
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
All countries Ireland Italy Spain UK
Penetration rate
Country
Email Computer with internet connection Web page Mobile devices/smartphones
European SME Digitalisation Study 2016 Page 8
In terms of the activi ties for which SMEs use digital technol ogy, there was a skew towards performing
operational tasks such as completing various online banking transactions, or finding information. A large
number of firms based in the UK and in Spain also reported using digital technology to ma nage customer
databases and perform other customer relationship management functions, whil e nearly three-quarters of
firms i n Italy reported using di gital technology to manage the rela tionship with suppliers. Figure 3 shows the
most popul ar uses of digital technol ogy in each country.
Figure 3. Top three applications per country
The study also explored the link between the SMEs’ state of digital adoption and the environment in
which they operated. As illustrated in figure 4, the data show that compliance requirements wer e a key
environmental factor i nfluencing the adoption of digi tal technology. Respondents in all countries noted that it
was mandatory for them to use digital technologies to perform c ertain compulsory acti vities such as paying
taxes. In addition, the firms participating in this study placed significant importance on their competitors
actions, for instance by sharing and dis cussing industry and competitor information a cross the firm. Fi rms also
monitored their competitors’ digital activities closely, with many perceiving that thos e competitors which had
adopted di gi tal technologies were perceived fa vourably by others i n the industry and/or by cus tomers. Thi s
environmental factor was parti cularly relevant for respondents from Spain. In addition, adopti on of digital
technology by customers was a significant factor in driving digital adoption by firms in Ireland. SMEs in Spain
were also influenced by the extent to which their suppliers had adopted digital technol ogy. Surprisingl y,
industry-wide initi atives to promote the adoption and us e of digital technol ogy had less influence than other
environmental factors across all the countries questioned.
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
Findinginformationu seful
forthebus iness
Managemen to fbanking
andbankaccoun ts
Customerrelationship
management(CRM e.g.,
databases)
Penetrationrate
Application
Ireland
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
Managemen to fbanking
andbankaccoun ts
Relationshipswith
supp liers
Findinginformationu seful
forthebus iness
Penetrationrate
Application
Italy
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
Managemen to fbanking
andbankaccoun ts
Customerrelationship
management(CRMe.g.,
databases)
Findinginformationu seful
forthebus iness
Penetrationrate
Application
Spain
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
Findinginformationus eful
forthebus iness
Managemen to fbanking
andbankaccoun ts
Brandvisibility/awaren ess
Penetrationrate
Application
UK
European SME Digitalisation Study 2016 Page 9
Figure 4. Key environmental factors
1.0
2.0
3.0
4.0
5.0
Ireland Italy Spain UK
Impact (1 = very l ow; 5 = very high)
Country
Compliance Competitors Customers Suppliers Industry
European SME Digitalisation Study 2016 Page 10
4. S OURCES OF VALU E VS. PERCEIVED BARRIERS A N D RISKS
Participants in this study were very posi tive about the contribution of di gital technol ogy for their
organisations. As per figure 5, i n all countries surveyed, participants were more li kely to perceive benefits than
barriers or risks . However, the s ources of actual and potential value, and the barriers faced, varied between
the different countri es.
Figure 5. Assessment of digital technology
UK was the country most likel y to report benefits from adopting digital technology, foll owed by
Ireland, Spain and I taly. The mai n benefit mentioned across the four countri es studied was the contri bution of
digital technology to i mprove awareness of the firm and its brand name(s). Improving customer satisfaction
was the second benefi t mentioned by respondents in Irel and, Italy and Spain, and the third one in the UK.
Conversely, i mpact on sales was the s econd benefit men tioned by respondents in the UK, and the third one
mentioned in Ireland, Italy and Spain.
1.0
2.0
3.0
4.0
5.0
Ireland Italy Spain UK
Level (1 = very low; 5 = very hi gh)
Country
Perceived benefits and opportunities Perceived barriers and risks
European SME Digitalisation Study 2016 Page 11
Figure 6. Key benefits
The r espondents a lso felt that using digital technol ogy gave their organisati ons a relative advantage
when it came to promoting products and services via the Internet (Figure 7). This was particularly so for
respondents in Ireland and Spai n. Respondents in Ireland, Spai n and the UK were also likely to see digital
technology as a source of relative advantage in terms of a cquiri ng and retaining customers.
Figure 7. Potential for competitive advantage
1.0
2.0
3.0
4.0
5.0
Ireland Italy Spain UK
Level (1 = very low; 5 = very hi gh)
Country
Sales Profits
Customer satisfaction Awareness of firm and brand name
Competitive advantage Ch anges in general business activity
1.0
2.0
3.0
4.0
5.0
Ireland Italy Spain UK
Level (1 = very low; 5 = very hi gh)
Country
Customer acquisition Cu stomer retention Promotion via internet Promotion via social media
European SME Digitalisation Study 2016 Page 12
Spanish respondents were th e ones most l ikely to mention barriers in the adoption of digital
technologies (Fi gure 8). The main barrier encountered by these SMEs concerned the ti me required to research
and choose between alternative digital technologies on offer. This was cl osely followed by limited fundi ng,
internal or external. The third barrier referred to access to talent with th e necessary digital skills, and the
fourth one to the i ntegration into existing business processes.
Figure 8. Key barriers
Spanish respondents also reported the highest p erceived level of risk associ ated with the adoption of
digital technol ogy, though i t shoul d be noted that even this group reported only mod erated levels of perceived
risk (Figure 9). Specifi cally, respondents from Spain perceived that di gital technology brought moderate risks
for their busi nesses in terms of: dependency ; obsolescence; being exposed to ha cking, viruses and other forms
of external l egal activity; and the need to acqui re new expertise. Dep endency was a moderate concern for
SMEs in Ireland and the UK, too. Obsolescence was a moderate concern for compani es in Italy; a nd external
threats and expertis e gaps were moderate concerns in Italy and the UK. Surpri singly, financial risk was not a
major concern for most companies in this study’s sample, while reputation risk was mentioned by less than
23% of respondents.
1.0
2.0
3.0
4.0
5.0
Ireland Italy Spain UK
Level (1 = very low; 5 = very hi gh)
Country
Funds Specialist knowledge Integration Digital skills Time Perception of value
European SME Digitalisation Study 2016 Page 13
Figure 9. Key risks
1.0
2.0
3.0
4.0
5.0
Ireland Italy Spain UK
Level (1 = very low; 5 = very hi gh)
Country
Reputation Information overload Dependency Obsolescence
External illegal activity Financial risk New expertise Business performance
European SME Digitalisation Study 2016 Page 14
5. ORGANISATIONAL USE
There is a debate in the management literature regardi ng whether digital is primarily a marketing
tool, best suited for engagement with consumers or, instead, whether it can contribute to operations and
other non-marketing functions. Within our s ample, SMEs saw great value in using digital technol ogy in non-
marketing functions (Figure 10).
Figure 10. Type of function
Spai n’s SMEs were particularly positive about the use of digital technology i n sharing information with
suppliers, integrating data across functions within the orga nisation, and searching inventory in real-time.
Integration of data across functions was the non-marketing application of digital technol ogy most val ued by
SMEs i n the other countries studied. This was followed by the ability to form strategic partners hips with
suppliers and/or customers i n the case of Irel and and the UK; and, in the case of Italy, sharing information with
suppliers.
In terms of usi ng digital technol ogy for marketing functi ons , Spain’s SMEs were, once again, more
positive than thei r peers in the other European countries. SMEs i n Spai n and i n the UK were most posi tive
about the role of di gital in collecting information about their customers, be it via direct feedback or via website
anal ytics. Ireland’s SMEs were enthusias tic about usi ng digital technology in procuremen t, e-commerce and
other for ms of order taking. Ital y’s SMEs were the least enthusiasti c in the sa mple about using digital
technology for marketing purpos es.
1.0
2.0
3.0
4.0
5.0
Ireland Italy Spain UK
Use (1 = very low; 5 = very high)
Country
Marketing Non-marketing
European SME Digitalisation Study 2016 Page 15
6. THE ROLE OF INDIV IDUAL AND ORG ANISATI ON AL ATTITUDES AND C A PABILITIES
The last s ection of the survey explored the role of indi vi dual and organisational factors in SMEs’
adoption of digital technol ogy. Personal characteri sti cs are hi ghly consequential for small organisations gi ven
the limited number of staff, so it is i mportant to investigate the role of individual attitudes a nd capabiliti es in
the digital i sation of SMEs.
The findi ngs show that both the organisa tion’s capabilities and culture a re seen as very important in
the firm’s digital journey (Figure 11). In other words, attitudes and behaviours like actively learning from other
sectors, trying novel ways of doing things, or having a stated desire for di gitalisation, may create the conditions
for considering di gital technology. However, for di gitalisation to take hold, there i s also the need for
organisations to know how (and be able) to derive value from the technology in aspects such as improved
market awareness , personalisation of products and communication, innova tion, or internationalisation.
Figure 11. Role of organisational attitudes and capabilities
Perhaps more i nteresti ng, however, i s the importance of individuals’ a ttitudes vs. capabilities in the
SME’s adoption of digital technology (Figure 12). Across all countries studied, individual attitudes were
deemed to be more influential than individual capabiliti es , as evi denced by the fact that the former scored
between 3.4 (medium i mportance) a nd 4 (high i mportance) in all of the countri es studied, whereas the l atter
scored between 2.2 and 2.5 (low i mportance). I n terms of which attitudes are most significant, the data show
that being achievement oriented was deemed a key factor i n all countries studied. Creativity was also a
signi ficant factor in Ireland, Italy and Spain, while being competitive by nature was a key trait i n SME managers
in the UK. It is interesting to note that characteristics which are sai d to i nfluence a person’s use of technol ogy
for pers onal purposes (e.g., age, educa tion, and previous experi ence), did not emerge as determini ng these
SMEs’ use of digital technology.
1.0
2.0
3.0
4.0
5.0
Ireland Italy Spain UK
Use (1 = very low; 5 = very high)
Country
Organisational attitudes Organisational capabilities
European SME Digitalisation Study 2016 Page 16
Figure 12. Role of individual attitudes and characteristics
1.0
2.0
3.0
4.0
5.0
Ireland Italy Spain UK
Importance (1 = very l ow; 5 = very hi gh)
Country
Individual attitudes Individual characteristics
European SME Digitalisation Study 2016 Page 17
7. C ONCLUDI N G COMMENTS
This research proj ect set out to investigate the preparedness levels of SMEs for the digital economy,
by mappi ng how micro, small and medium fi rms, in Europe, are adopting digital technologies, and
understanding how these technologies may be deployed to build competiti ve advantage.
Overall, there was a very positive a ttitude towards the potential of digital technol ogy for SMEs, even
when the organisations are not yet abl e to capitalise some of those potential benefits. One example of this gap
is the role of di gi tal technology in opening international markets, which contrasts wi th the l argely domestic
nature of the markets served by the SMEs that participated i n this study.
It was also interesting to see the empha sis on non -marketing uses of di gital technol ogy, showing that
this technol ogy is not a fad but, rather, an intrinsic part of how organisations run their day to day activities. It is
this embeddedn ess of digital technol ogy and, thus, i ts role in the fi rms operations and their competitiveness,
that makes it even more i mportant to unders tand what prevents organisations from adopting this technology
more widely and more broadly. Our study identified key barri ers and risks in each country, whilst also showing
a broad range of products and uses.
The rol e of the p ersonal element also emerged as a key factor in the preparedness of European SM Es
for the digital economy. This was seen in the importance of having a digital champion wi th the right attitude to
build and/or leverage on the organis ations culture and capabilities. It was also seen in terms of available
resources with the time and expertis e to learn a bout, and choose between, alternative digital technol ogies on
offer.
The findi ngs indicate that there are core si milarities across SMEs , irrespecti ve of size, country or
industry sector. Overa ll there is much to be optimistic about, a realisation exists of the value and importance
of digital technol ogi es in assisting firms with their s uccess. Whilst minor differences were apparent in the areas
such as the implemen ta tion a nd use of specific digital tools, there was strong evidence of adoption,
embedding and appreciation of the va l ue that digital technologies were and could bring to the firms including
beyond that of the marketing function.
For further details and or questions relating to this report please emai l either Dr Sara h Quinton
sequi nton@brookes.ac.uk or Dr Ana Canhoto adomingos-canhoto@brookes.ac.uk
29th September 2016
DOI: 10.13140/RG.2.2.12414.18249
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