Unlocking the Hidden Power of Digital Transformation for Small Businesses

By Rieva Lesonski

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Digital transformation is a hot topic today, but what does it mean for small businesses? Eric Lamarre, Kate Smaje and Rodney Zemmel, senior partners at global management consulting firm McKinsey, will publish a book in June that addresses how companies “can build and flex their strength by harnessing the power of AI, improving the customer experience and driving profitability through a constantly evolving transformation process”.

They were recently interviewed for McKinsey’s “author talks” series. And while much of what they address is geared towards large businesses, small business owners can learn a lot about “harnessing the power of digital transformation.”

Smaje says they wrote the book after watching their clients “struggle with what it really takes to make a digital transformation work” because the “how” is really hard.

The role of AI in digital transformation

Zemmel told “Author Talks” that everyone talks about. generative AI right now, and companies need to think about how they’re going to “get value out of it…and capture that value for their business.”

That advice also applies to small businesses. It’s crucial to figure out what AI can do for your business and not worry about how others use it. Of course, you need to monitor the activities of your competitors and understand the best practices in your industry. But you need to implement AI in a way that makes sense for your business, and no, that doesn’t mean laying off your staff and replacing them with AI tools. Smaje says that “you have to think about where the human being is in the cycle of this in a much more fundamental way.”

And like any marketing technique you implement, Zemmel says you need to measure, adopt and scale your AI practices.

Digital transformation is an ongoing process

Digitally transforming your company is not a short-term commitment. As Smaje says, “Something that bothers me about the term digital transformation is that it has the connotation that at some point I am finished. [But] I don’t think you’re ever done. This is a trip; it’s a muscle you’re constantly building to get better.”

Business leaders must be technology leaders

To truly transform your business, Zemmel says that technology must be “fully integrated” into your business and that “business leaders must be technology leaders.”

Distinguish between companies with an “old IT culture” and a new digital one. Companies, he explains, need to create a “digital culture” with a key focus on be digital, do not digital.

“Doing new things”

When asked what the most important part of an AI and digital transformation is, Zemmel says companies need to focus on “where the money is and how are you going to reimagine the business to really create value.” It’s not, he says, “taking a bunch of processes and making them better.” Instead, he needs to think, “This is how we’re going to make more money as a company by doing new things.”

But that’s not enough, according to Smaje, who says: “Even if you know where the value is, [it doesn’t] It doesn’t matter unless you actually have a way to deliver it.” She says everyone spends “so much time on the what, ‘What are we going to do?’, that they miss the fact that someone eventually has to use that technology “.

In a separate article for McKinsey, the three senior partners wrote: “Digital is not a destination; it is a permanent state of operation based on learning and adapting faster than the competition. But that can only happen if CEOs act as digital gatekeepers to their business transformation.”

How your small business can be digital

That may sound easy for the large companies that McKinsey typically serves, but small businesses need to become digital businesses, too. In a blog on its site, Salesforce acknowledges that “with the small business ownership lawsuits, you may be wondering if you have the capacity to take on a digital transformation.” But he adds that optimizing your digital presence “isn’t as daunting as you may think” and is essential for small businesses to reach customers and foster growth.

according to a Survey on the digital transformation of small businessessmall businesses engaged in digital transformation experienced eight times higher revenue growth than those without digital efforts.

Before going digital, it is essential to understand exactly what a digital transformation means. Salesforce explains:

• Digitization was “the shift from analog to digital, such as turning paper records into digital scans.”
• Digitization introduced “new and efficient tools into older business models” such as “introducing record-keeping software to your business.”
• Digital transformation is “leveraging technology to disrupt your business model, reinvent your company image, and engage customers.”

Driving digital transformation in your small business

If you’re ready to embark on a digital transformation, here are some tips from Salesforce:

Think about your company. What could go better? Do an internal assessment of your biggest gaps and where you want to see change. And be sure to involve everyone in the company in the evaluation. There are plenty of free assessment tools you can find online to “help you identify your current level of digitization, benchmark your digital maturity against that of your peers, and uncover any potential for improvement.”

Prioritize your plan. After the assessment, discuss the biggest challenges your business is facing with your team and how technology can help solve them. It could be as simple as adding a chat tool to your site to improve customer service.

Analyze your data. According to Salesforce, data analytics is “the practice of examining large and diverse data sets from different sources to obtain insights that help your business make decisions.” For a small business, that data might come from a website, a Facebook page or Instagram account, an email campaign, or even your sales receipts.

Data analytics helps you understand how customers find you, what they buy or don’t buy, how and when they buy, from which device they buy, etc. You can then identify customer patterns and customize your marketing and sales practices to fit them. For example, if you know when your customers shop online, you can get their attention by locating social media to post at that time.

Consider outside help. Does this still seem like too much for you? Consider hiring a consultant to help you review and understand the data, or make sure you invest in the right technology.

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The benefits of a digital transformation

While the digital transformation of your business sounds like a lot of work, there are numerous benefits, including:

• Boost efficiency and productivity: Digital tools and technologies streamline business processes, automate repetitive tasks and, as mentioned above, provide real-time data and analytics. This improves operational efficiency and allows employees to focus on revenue-generating activities, resulting in higher productivity.
• Extend your market reach: Digital platforms and online marketplaces allow you to reach a broader customer base outside of your local market.
• Save money: Adopting digital solutions can help you reduce operating costs. Automating manual processes can reduce your overhead (you’ll need fewer employees). Using cloud-based services is less expensive than investing in expensive hardware and software. And digital marketing, particularly social media, is often much less expensive than traditional advertising methods.
• Become more agile and flexible: Digital technologies allow you to quickly respond to market demands, implement change, and experiment with new ideas.
• Improve collaboration and communication: Digital communication and collaboration tools for tasks like video conferencing and project management are especially important if your business is virtual or hybrid.

Your digital transformation is an endless journey

Once you’ve started your digital transformation, remember that McKinsey Senior Partners wrote: “Digital is not a destination.” It’s more of a never-ending journey. Embracing digital transformation and embracing innovative technologies allows you to deliver superior customer experiences that build customer loyalty and enable you to expand and grow.

Yes, there will be challenges along the way, but the potential benefits make it worth it.

About the Author

Rieva Lesonsky is CEO of GrowBiz Media and SmallCurrentBusiness.com and has been covering small business and entrepreneurship for over 30 years. Learn more about business trends by signing up for it free currents Newsletter.