Promoting digital growth for SMEs

The European Commission’s 2014-2020 Action Plan sets the foundations for smart, sustainable, inclusive growth – and positions entrepreneurship as the driver of economic growth and job creation to stimulate recovery. The EC also recognizes the need to create an environment in which businesses of all sizes, from start ups to ambitious, growing SMEs, can thrive, with greater cohesion in unleashing new business opportunities in the digital age. It recommends that Member States foster innovative business models and strengthen competency and skills, to promote digital inclusion for growth among Europe’s SMEs.

The digital age is not new. Yet according to an Ofcom report1 published late last year, SMEs, in the UK appear to have barely tapped the huge potential of superfast broadband to increase productivity growth. Perhaps surprising as, for companies of all sizes, the benefits can be wide-ranging, from increased management efficiencies and more effective supply chain management, to reducing the costs of communications and transactions, and increasing levels of engagement with customers and prospects.

In March last year, a report published by Boston Consulting2 predicted an online economy capable of more than 10 per cent growth every year, to achieve an estimated contribution of $4.2 trillion to the total GDP of the G-20 by 2016. And countries with the highest contribution to GDP correlate with a strong internet supply ecosystem  – that’s a McKinsey analysis – with Sweden and the UK leading the field in Europe.

But is this supply side being balanced by demand? The Ofcom report has highlighted surprisingly low take up on existing broadband services overall by SMEs in the UK, especially in traditional industries. Even in areas where superfast broadband is available, adoption remains very low, at just 7.4 per cent.

According to Ofcom in November 2012, UK superfast connectivity is polarised, with 84 per cent of urban premises and 65 per cent in semi-urban areas having access to SFBB – and just 19 per cent accessibility to superfast services in rural areas. This is getting better, but take-up is still low, so why are UK SMEs holding back?

Many SFBB offerings for SMEs are often re-branded residential services with no clear differentiation. This was highlighted by Benoît Felten, CEO and co-founder of leading telecoms consultancy Diffraction Analysis last year, when he opined, “The potentially lucrative small business market remains largely untapped, with lacklustre offers unlikely to encourage migration to SFBB.”

This is especially true of ADSL. Its asynchronous specification means that uploads – sending those big CAD files, those cloud backups, or those edited videos – are capped at 2Mbps while downloads are superfast 30Mbps. And one small VOIP telephone system will soon gobble up 2Mbps for outbound phone calls. That imbalance rules out ADSL for many firms, but ADSL is often the only affordable SFBB product.

The government’s ‘Superfast’ initiative is working collaboratively with private sector Internet Service Providers (ISPs) to address this disparity in the supply of infrastructure, and ensure that rural areas are better served. At YTKO Group, we ensure that there’s full understanding on both sides of what’s suitable – and what’s needed. Our Connecting Devon and Somerset project provides advice, events, mentoring and technical workshops, funded by local councils and Broadband UK. Connecting Devon and Somerset (CDS) delivers a lot more than demand stimulation, and acts as a knowledge hub for business users seeking upgraded services in the region.

Targeting digital growth

Starting this year, the EC’s Entrepreneurship Action Plan is targeting five key actions to ‘unleash new business opportunities in the digital age’ and promote digital inclusion and growth among SMEs in Europe. These include raising awareness of the benefits of ICT through a Europe-wide information campaign – something we are already seeing through the development and gradual rollout of the government’s ‘Superfast’ initiative here in the UK – and the launch of specific initiatives for web entrepreneurs, such as the creation of a ‘Start-up Europe Partnership’, to unlock expertise, mentoring, technology and services and a ‘Web Entrepreneurs Leaders Club’.

For many SMEs, however, the crux of the matter is having access to the skills and shared experience that can fast-track their understanding of how ‘digital’ fits into their business model to unlock growth, reduce cost and create new opportunities.

There are few innovative, targeted demand stimulation programmes – YTKO Group’s being an exception – that understand that all SMEs are NOT the same. Funders and suppliers rely heavily on mainstream marketing communications channels  – the usual suspects of local press and social media. For the hard-pressed boss, these communications are often too generic and too superficial, with nothing new to offer. Businesses need to be hooked into engagement with superfast programmes, which must demonstrate understanding and focus upon the actual needs and wants – the pain points – for differing SMEs today and in the future.

Many superfast programmes sell features not benefits, repeating the mistakes of PC marketing from the 1990s: has nothing been learned? But contracting with a firm like YTKO Group, that not only ‘knows IT’ and has a track record of effectively marketing IT to SMEs, but can also deliver education and support, is not an objective for all funders.

These SME uptake and adoption issues are recognized at policy level. But while Europe strives for cohesion across strategies for growth that include the digital economy, a plethora of information – not always without its contradictions – and access to the right mix of skills and competency continue to be a challenge for SMEs on the ground.

Best practice: approaches so far

Initial superfast broadband pilots have produced some guidance to practical approaches for demand stimulation. YTKO Group’s involvement in this space has produced an alliance with Cornwall SFBB launch strategy team – and of course, our user interaction with businesses in Devon and Somerset creates a two-way dialogue with this important group.

Key findings are:

Since the start of 2013, YTKO Group’s CDS team has engaged with more than 100 business users, who have told us that their first area of interest is in achieving web-based marketing skills within their businesses, including social media, web marketing and search engine optimisation. This is closely followed by finding out more about cloud computing, to reduce capital expenditure by accessing software as a service on a per user basis, and exploring the potential for online collaboration and information-sharing to support green policies and reduce travel costs.

The ‘offer’ is to change the way a business is working for the better, and if there is a reluctance to change, which is understandable in these challenging times, the approach has to be one of positive encouragement. Interaction and engagement should be supported by examples and expertise, by the ability to successfully communicate the power and potential of harnessing broadband to the business – and always, with an understanding of the specific challenges faced by different SMEs.

Next Steps

Stephen Oliver and our Connecting Devon and Somerset team constantly update a priority list of the specific issues facing SMEs that can be successfully addressed by effective use of the internet – and not just superfast broadband, but existing connectivity too.

YTKO Group welcomes the opportunity to discuss its findings with SFBB project funders, to help direct and focus their programme activities and budgets. To find out more about how YTKO Group’s SFBB team can help support business growth through broadband strategies for economic development in your area, please contact Stephen Oliver by email or by calling 01392 911013

1 Ofcom and Operators, 2012; 2 Boston Consulting, The Internet Economy in the G-20