Digitization: Unlocking New Zealand’s Economic Potential
Digitization has the potential to revolutionize how businesses operate, creating opportunities for increased productivity, innovation, and sustainability. New research by Xero suggests that a 20% increase in the number of businesses adopting cloud-based digital tools could add $7.8 billion to the New Zealand economy annually. This article explores the benefits of digitization for small businesses and suggests ways to overcome the barriers to implementation.
Benefits of Digitization for Small Businesses
Adopting digital tools can transform the way small businesses operate, enabling them to work smarter, not harder. Here are a few benefits of digitization for small businesses:
1. Increased Efficiency: Digitization streamlines the operational and administrative processes of businesses, reducing human error, and improving efficiency. For instance, retailers can use digital inventory management systems to reduce the time spent on manual inventory by up to 85%.
2. Better Customer Experience: Consumers expect seamless and personalized experiences from businesses. Digital tools such as CRM systems, email marketing campaigns, social media platforms, and chatbots help businesses reach, engage, and retain customers effectively.
3. Improved Insight and Decision-making: Digitization allows businesses to collect, analyze, and leverage data insights to make informed decisions, optimize performance, and drive growth.
4. Enhanced Sustainability: Digitization enables businesses to reduce their environmental footprint by going paperless, optimizing supply chains, reducing energy consumption, and minimizing waste.
Barriers to Digitization
Despite the significant benefits of digitization, many businesses still face several challenges when it comes to adopting digital tools. Here are a few barriers to digitization:
1. Cost: Businesses may be hesitant to invest in digital tools because of the associated costs. However, research by NZIER suggests that the payback period for businesses is less than two to three years, with a continuous positive return on investment.
2. Lack of Digital Skills: Many small business owners lack the technical expertise and digital literacy required to implement and manage digital tools effectively.
3. Resistance to Change: Resistance to change is a common deterrent to digitization, especially among businesses that have been operating the same way for years.
4. Decision Paralysis: With numerous digital tools and solutions available, businesses may feel overwhelmed and unsure about where to start.
Ways To Overcome Barriers to Digitization
Fortunately, there are numerous solutions available to help businesses overcome the barriers to digitization. Here are a few ways to overcome those barriers:
1. Seek Help and Guidance: Small businesses can seek help from digital experts and consultants on the best digital solutions that align with their business goals and requirements. Alternatively, businesses can consult their accountants or bookkeepers for advice on the digital tools that could benefit their businesses.
2. Upskill Employees: Businesses should invest in continuous training and development programs to equip employees with the necessary digital skills to operate and manage the adopted digital tools effectively.
3. Start Small: Rather than embarking on a full-scale digitization program, businesses can start small by implementing a single app or tool that addresses a specific pain point in their operations.
4. Government Investment: The government can invest in digital literacy programs, provide subsidies, grants, and tax incentives to incentivize the adoption of digital tools, and establish a Chief Technology Officer to guide small businesses on digitalization best practices.
Conclusion
Digitization is a game-changer for small businesses in New Zealand, unlocking new opportunities for growth, productivity, innovation, and sustainability. While there may be some barriers to adoption, businesses can seek help from digital experts, upskill employees, start small, and advocate for government investment in digitalization programs. With the right tools, strategies, and support, small businesses in New Zealand can embrace the digital age and transform the way they do business.
Summary
Digitization has the potential to revolutionize the way small businesses operate, creating opportunities for increased productivity, innovation, and sustainability. Research by Xero suggests that a 20% increase in the number of businesses adopting cloud-based digital tools could add $7.8 billion to the New Zealand economy annually. Although businesses face barriers to digitization, including cost, lack of skills, resistance to change, and decision paralysis, there are ways to overcome these barriers. Seeking help, upskilling employees, starting small, and advocating for government investment can facilitate the adoption of digital tools. Digitization is a game-changer for small businesses in New Zealand, unlocking new opportunities for growth, productivity, innovation, and sustainability.
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Digitization can bring many benefits to New Zealand businesses, including increased productivity, innovation and better sustainability, and now a new report estimates it could boost the country’s GDP by billions of dollars.
He NZIER researchcommissioned by small business platform Xerofound that a 20% increase in the number of businesses adopting cloud-based digital tools could add $7.8 billion to the economy each year.
Bridget Snelling, Xero Country Manager, is encouraging all small businesses in Aotearoa to adopt a single app to help address a pain point in their daily operations.
It may not sound like much, but with small businesses accounting for 97% of New Zealand business, he says those small actions can really add up.
“This is a small step that would make a world of difference, potentially adding nearly $8 billion to our GDP through increased productivity. Small business owners across the country should start by simply talking to their accountants or bookkeepers about what digital tools might benefit their business,” says Snelling.
Working smarter, not harder
Snelling adds that there are all kinds of digital tools available to help small businesses, no matter what industry they operate in.
“If I’m a retailer, for example, and I do manual inventory, that could take me four hours at the end of every week or fortnight,” he says.
“[But] If I use a digital inventory management system, that might mean I only have to spend half an hour looking at my inventory and doing a digital inventory.
“Essentially what we’re looking for as we become a more digitally advanced economy is to make sure that every hour we spend working is something that only a human being can do.”
Previous NZIER research found that Aotearoa lags behind the OECD in terms of productive output.
It revealed that New Zealanders would have to work an additional eight hours a week to reach the OECD average output. And if they wanted to catch up with Ireland, which is at the top of the table, they would have to work an additional 10 hours each working day to generate the equivalent GDP per employee.
“The key message here is that we need to work smarter,” says Snelling. “It’s not just about doing the dirty work. It’s really about how we do this in a smarter way.”
So why aren’t more New Zealand businesses turning to digitization?
Snelling says that cost and ROI concerns are often cited as reasons companies don’t adopt new technologies.
While digitization has costs, new research from NZIER found that the payback period for businesses is relatively short, with organizations typically seeing a continuous positive return on investment in less than two to three years.
But Snelling says certain mindsets can also be a barrier to going digital.
For example, some companies may feel that what they are already doing is good enough.
“If people have been doing things the same way for many years, motivating themselves to change can be difficult.”
Then there’s the confusion about where to start if a business wants to digitize its operations.
“There are so many options out there,” says Snelling. “It’s like that decision paralysis problem: ‘How do I make a decision? How do I know which is the right choice for me?’
“We encourage all small businesses that don’t know where to start to talk to their accountant or visit Xero App Store.”
Boosting government investment
Snelling says more help should be offered to businesses that want to go digital and it was disappointing not to see any investment in that area in the government budget last month.
“For small businesses to really take action on going digital, it’s going to take more than a little bit of information, it’s going to take some help.”
Snelling says that Denmark and Singapore are good examples of what strong government investment in digitization can do for an economy, and NZIER’s research looked at what similar steps the New Zealand government could take.
His short-term recommendations included developing a New Zealand productivity solutions grant, which Snelling said would help break the cost barrier for small businesses.
The NZIER report also recommended establishing a chief technology-as-a-service to help small businesses identify and implement the digitalization that works best for them.
Snelling says Singapore’s SME Go Digital program makes technology adoption much easier for small businesses.
In the longer term, the NZIER report says government must support the digitization of businesses through things like actively investing in digital literacy across society and promoting and subsidizing continuous learning of digital skills in the workforce and education. .
“An investment in a small business is actually a large investment in our entire economy,” says Snelling.
“It is important that we push this digitization forward because we know that the economic benefits will be enormous.”
This content was sponsored by Xero, a global platform for small businesses that offers cloud-based accounting software and other digital tools. You can find the full NZIER report on digitization here.
https://www.1news.co.nz/2023/06/04/small-businesses-going-digital-could-add-billions-to-economy/
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