SMBs that invest in technology fare much better off

The study shows that the most technologically advanced companies, regardless of sector, are the most likely to show strong growth. (Photo: 123RF)

The gap is widening between SMEs taking the technological turn and those adopting the status quo, finds a study by the Business Development Bank of Canada (BDC), published on Tuesday.

To complete: our quick survey on the digital transformation of businesses in Quebec in 2022

In light of the responses to a survey of 1,500 SMEs, the federal institution’s chief economist, Pierre Cléroux, is “surprised” to see that a third (33%) of respondents qualified as technologically “laggards” saw their turnover stagnate or decrease in 2021. In comparison, this proportion is only 4% on average for the “advanced” profile.

“What we see is a gap that is being created between SMEs that invest in technology, which are taking a larger share of the market, he summarizes in an interview. The study clearly shows that the latecomers are rushing in.”

The BDC uses the concept of “digital maturity” to assess the stage of technological development of an SME using a series of questions. This stage of maturity is determined using six axes, including data analysis and digitization of business processes.

The study shows that the most technologically advanced companies, regardless of sector, are the most likely to show strong growth. In fact, more than half of companies (52%) with an advanced profile saw revenue growth of more than 10%. This proportion is only 7% for latecomers, the least advanced profile among the four identified.

More SMEs to invest

The “good news” from the study is that more Canadian SMEs are investing in digital technologies than the last time the BDC asked the question in 2018, Cléroux said.

Nearly 91% of Canadian SMEs invested in technology in 2021. They spent an average of almost $120,000 on it. “A lot of companies invested in technology during the pandemic and that’s what we wanted to see,” rejoices the economist.

However, still too many companies are not sufficiently advanced in their digital transformation, he warns. Only 5% of companies use technology effectively, that is, they “check all six boxes” on the BDC analysis grid. “There is still a long way to go.”

For example, the survey shows that 60% of SMEs have a website and only 34% analyze their customer data.

Interestingly, SMEs owned by Aboriginal owners are the most represented among technologically advanced companies. This is the case for 15% of them, against an average of 5%. This community even performs better than young people under 35 (8%).

The brake on costs and cybersecurity

The biggest barrier to digital investments is their cost, according to 42% of respondents. However, the perception that it is necessary to have well-stocked coffers to take the technological turn is “less and less true”, underlines the economist.

He gives the example of cloud computing technology services, which require a monthly subscription rather than a large initial investment. “That’s not a good reason. The reality is that it costs less.”

The fears of 32% of SMEs about cybersecurity, perceived as an obstacle to investment, are however well founded, recognizes Mr. Cléroux. There are 18% of respondents who admitted to having been the subject of an attack in 2021. On average, the damage amounts to almost $50,000 per attack.

Employee training could be a way to reduce this risk, but only 55% of SMEs train their staff in cybersecurity.

Before investing, the economist suggests that entrepreneurs plan their digital transformation well. “Make a plan with people who can advise you. To maximize your investments in technology, the strategy is different from one company to another.

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