Digital Transformation Opportunities for SMEs

Digital transformation became the escape valve for many SMEs during the pandemic. While actions were already being taken to incorporate businesses into an environment that enabled the use digitalization as a means of business improvement, the healthcare situation sped up the process. According to the study Voice and attitudes of SMEs towards technology, conducted by Microsoft in 2022, companies that expedited their digital transformation fared better than those that stayed behind, reporting growth through technological centrality. In fact, two-thirds of SMEs surveyed for the study (2,000 globally) said they raised their IT budgets by 2023, with a focus primarily on operational efficiency, marketing, and customer retention.

Furthermore, EY presented in 2022 the Digital Maturity Index (IMD), a measurement instrument that helps understand the process of digital transformation in companies, considering different factors, such as strategy and innovation, customer experience, operators and supply chain, administrative areas, information and technology, risks and cybersecurity, as well as culture and organization. In the case of Latin America, the average maturity level stood at 61.16 on a 100-point scale, which is interpreted as “in development of digital capabilities,” meaning that, although progress has been made in the transformation process, there are still many gaps to be addressed.

In addition to this empirical evidence, digital tools are changing rapidly, which is forcing companies to change and update their management models. This will only be achieved a capacity-building system is established that allows them to migrate to a process of staggered digital transformation in the different business areas, from customer relations to operation efficiency of supply chains. The challenge is to turn digitalization into a key tool for creating competitive and/or comparative advantages.

Therefore, CAF is promoting projects within the framework of the digital economy, understood as the development of digital technologies implemented in productive sectors. One example is the roadmap of production chains developed in 2022 in Ecuador, which produced a diagnosis of digital transformation and work plans for the textile and clothing and logistics sectors. In turn, we began in 2023 to lead a digital transformation pilot program for SMEs, which seeks to develop digital skills to 40 companies in the tourism sector in Costa Rica, Dominican Republic, Barbados and Jamaica, to help them address digital transformation efficiently and use digitalization to adapt sustainable business models as a vehicle to boost their productivity and competitiveness.

Digital transformation is a path towards creating opportunities for SMEs, but we must generate strategies in the ecosystem to help them build skills and use digitalization as a key piece in everyday business. CAF will continue to articulate different stakeholders to attain this goal, as well as leading projects that support the digital economy.