New paper “Digital strategy aligning in SMEs: A dynamic capabilities perspective”

Several years ago, Sarah Quinton, Rebecca Pera, Sebastián Molinillo, Lyndon Simkin and I set out to investigate how small and business organisation (SMEs) adopt digital technology, and how they adapt their strategy to succeed in the digital environment. While there is a significant body of work on digitalisation, it tends to focus on large organisations, and the findings may not be directly transferable to their smaller counterparts.

Why do we need to look at SMEs specifically?

On the one hand, SMEs tend to have limited financial resources, which prevents the acquisition of information, the adoption of new processes, and the renewal of operating resources. Moreover, they often rely on third-parties for IT competences, which may reduce flexibility. However, SMEs also tend to be more flexible than large ones, which gives them an advantage in terms of discovery and idea generation. Their smaller size and flatter structures also enable SMEs to be agile and engage in opportunistic behaviour. In turn, their limited resources may encourage SMEs to embrace open innovation. Thus, SMEs face a set of specific structural circumstances meaning that they may follow a path different from large companies, when adopting and adapting to digital technology. 

We studied 43 SMEs, from 4 European countries and 5 sectors:

We identified five phases of digital aligning (i.e., five different combinations of levels of sophistication of digital technology use and of intentional and integrated use of technology), ranging from reluctant engagement with digital technology to the embrace of its transformative power.

We then analysed the behaviours associated with each of those phases:

I mentioned earlier that SMEs are different from large companies. So, how do our findings compare with previous research on digitalisation?

In common with large companies, in SMEs different phases of digital strategic alignment are associated with the deployment of specific capabilities; and this deployment is commonly influenced by social actors’ perceptions and behaviours.

However, in SMEs this subjective assessment tends to be done by the firm’s leader, rather than the groups or departments leading technology deployment. Individuals assumed a critical role in SME strategizing, both in promoting digitalisation and in resisting it.

While the lack of financial resources and technical expertise created barriers to purchasing and implementing digital assets; the flexibility and agility that characterise SMEs, and their rapid decision making, were an asset. 

Another key difference we found was that many SMEs pursued a digital strategy by adopting localised, incremental changes, whereas large companies tend to do so by embracing fundamental changes across the whole firm.

The paper is available here; and a free, pre-print version is available here.

Let me know what you think of this work. And, if you are a business manager that needs help with their marketing strategy, don’t hesitate to contact me.