Digitalisation, the key to competitiveness for SMEs

“Digitalization has revolutionized the way small and medium-sized enterprises (SMEs) operate, providing them with numerous advantages and has profoundly transformed their reach and efficiency,” says Germán Oronoz, CEO of POM Standard, a web design startup. First of all, “digitalization helps businesses improve their visibility. Having an online presence allows SMEs to reach a wider audience, breaking through the geographical barriers that traditionally limited their market.” Based on his experience with clients, Oronoz is aware that “digitalisation makes it easier for companies to collect and analyze data, which helps them understand their customers better and make more informed decisions based on accurate and up-to-date information.

SMEs represent over 75% of a country’s business fabric. As a result, digitalization is key for them to be more competitive in an increasingly global market. In addition to product development, other essential pillars of this transformation include the digitalization of internal processes, the Go-to-Market model (bringing a product or service to market effectively), financing and support from administrations. “Small and medium-sized entrepreneurs must have a clear understanding of the return on investment in digitalization, both in terms of increased sales and improved margins,” says César Tello, Managing Director of the Spanish Association for the Digital Economy (Adigital).

Despite the challenges these companies face in their digital transformation, this transition is crucial in a market where process efficiency, data analysis, user experience, and innovation in products and services are becoming increasingly important. “Technology has a multiplier effect on small and medium-sized businesses because, when it is used effectively, it helps them reach wider audiences, optimize resources, and manage their operations more effectively,” says Sébastien Pellion, Global Head of Impact & Sustainability at Glovo. According to Pellion “since the start of the pandemic, many SMEs have had to go online to survive because technology helps them expand their customer base beyond their physical location, understand what kind of users are interested in their products or services, and manage processes such as billing, human resources, and inventory more quickly and efficiently. It should be noted that 70% of SMEs in the OECD (Organization for Economic Cooperation and Development) environment have picked up the pace of their digitalization since the onset of the pandemic, according to the latest available OECD report.

Italy is one of the countries that have taken up the challenge of digitizing SMEs. According to the Digital Economy and Society Index (DISE), most Italian SMEs have at least a basic level of digital intensity (60%, well above the EU average of 55%).

In 2021, Italy took steps to further advance digitalization through the implementation of new initiatives and strategic plans, particularly the National Recovery and Resilience Plan. The Italian Plan is the largest in Europe, with a total budget of €191.5 billion, of which €48 billion (25.1%) are allocated to the digital transition. “This ambitious reform plan will make Italy a fairer country, more competitive, and sustainable,” stated Mario Draghi, former Italian President, when the budget was approved.

The objective of this plan is to consolidate the national network of technology transfer centers. Italy plans to provide advanced digital technology services to 4,500 SMEs before making a final and more significant investment.

Innovation Catalyst

The CEO of POM Standard agrees. “Digitalization is not only a tool to improve efficiency and visibility. It is also a catalyst for innovation and growth that gives SMEs a chance to compete in a globalized market. Websites or e-commerce are essential these days. Every company needs an online portal, which is like their “home” on the Internet, regardless of the sector in which they operate”, adds Oronoz. The sectors that have made the most progress in this process are retail (online shops are now a must for retailers to compete in the market) and professional services sector, including law firms, consultancies and marketing agencies. Online shops are now a must for retailers to compete in the market. Hospitality and tourism companies have also increased their demand for services, as they “seek platforms that allow for easy booking and intuitive browsing, and they want to show their menu, facilities, and services in a way that’s attractive to customers.

Sébastien Pellion from Glovo sums up how technology is positively affecting the small businesses operating on this platform in three key ways. Firstly, it has created more opportunities for these companies to be economically sustainable in the long term: “Going digital means they can survive in today’s society and adapt to the needs of younger generations, who are able to get to know them and consume their services.” Secondly, it has enabled them to reach a broader customer base: “Their business is not just limited to where they have their physical location. They can reach beyond their neighborhood and sometimes even their city. Clients no longer have to visit their physical premises to consume their products, they can order them at home or in the office.” And thirdly, they perform better because the digital world provides a lot of information about business operations: “If analyzed properly, this information enables them to make operational improvements that are based on evidence and data, rather than relying on intuition.”

In sectors such as food (catering and supermarkets) or mass consumption (fashion, pharmacy or technology, to name a few), digitalization is essential for competing with very small margins against e-commerce giants or large national or multinational stores. Going digital helps companies attract clients, raise awareness of their brands and connect with users. “Glovo has become the perfect partner offering them to have a very accessible online presence and a comprehensive set of tools to reach a wider audience and boost their sales. Today we are helping more than 20,000 SMEs in Italy to grow” adds Pellion.

Bridging the digital divide can be a significant challenge for companies that, in many cases, started out before the Internet even existed. This digital divide is exacerbated by not having enough resources, such as staff and the time to manage online sales channels effectively. According to Adigital, due to a lack of resources or digital capabilities, SMEs are currently unable to benefit from changes in marketing processes opened up by digitalization as much as large companies.

However, platforms like Glovo have helped thousands of SMEs to go digital and reach a wider audience without requiring extensive digital skills.

At the end of 2022, Glovo Local programme was launched. This program provides different tools to restaurants and stores. “We have been at the forefront of the delivery industry in Europe, Africa and Asia, with an umbrella program to support SMEs by enabling them to choose the tools and solutions that best suit their needs,” explains Pellion.

Glovo Local also contributes to the development of training sessions and online tutorials, covering different topics, from how to use the application to marketing and finance skills. The program also includes different options for SMEs to deliver their products and manage their operations. For instance, the company uses Glovo Ads to activate marketing channels for smaller businesses – at no cost to them. This way, even businesses with no previous marketing knowledge or experience can run campaigns. It also simplifies access to credit through an agreement with YouLend in Spain, and it provides help in cases of natural disasters or political conflicts, as it did in Italy and Morocco in 2023, thanks to the Crisis Relief Fund. More than 3,000 partners have benefited from the Learning & Development (L&D Learnings) programs which resulted in an increase in the performance of their businesses in terms of sales.