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SMEs poised to reap tech and agility advantage in wake of Covid-19

The UK’s small and medium-sized businesses have, in some respects, reacted more nimbly to Covid-19 than larger organisations. As a result, they have put themselves in a better position to take advantage of growth opportunities

The Covid-19 pandemic has created huge challenges for businesses across sectors and of all sizes. Organisations large and small have had to adapt and adjust to unprecedented conditions, moving at speed to pivot their operations and leverage technology to meet new types of demand.

But the experience hasn’t been uniform for all – and indeed, data that we have released from this year’s Harvey Nash/KPMG CIO survey shows that it has been the UK’s small and medium-sized businesses (SMEs) that have, in many key respects, reacted more nimbly. As a result, they have put themselves in a better position to take advantage of growth opportunities in 2021 and beyond.

One of the immediate challenges of the pandemic was to move workforces to a remote model – and UK SMEs were much better positioned to do this, with more than four in 10 reporting that all their key workers could work effectively remotely even before the pandemic, while not many of the larger corporates were in this position.

SMEs are also less affected by tech skills shortages – about one-third fewer small businesses than larger corporates report that shortages are holding them back from keeping up with the pace of change.

These two factors – remote working and skills – now play directly into each other, giving SMEs a further relative advantage. With the previously important corporate lures of plush offices and attractive facilities now much less relevant, the playing field for talent is much more level.

Agility and responsiveness are two key advantages that many smaller businesses have naturally. They may typically be relatively young organisations, with uncluttered processes and modern technology stacks. By contrast, larger businesses often suffer from multiple legacy IT systems built up over time that slow down processes and decision-making.

We see the results of this in our CIO survey, with twice as many SMEs as larger corporates in the UK saying they have the agility to effectively scale up good ideas and stop poor ones quickly. Being generally so close to their markets and alert to changing signals, they also feel better able to make longer-term planning decisions.

This is most marked in the investment sector where, despite current uncertainties, nearly half of smaller players (44%) feel confident about having an accurate view of the future.

Of course, it is not all one-way traffic. SMEs in certain sectors – hospitality and leisure, for example – are likely to have suffered just as much as bigger players as demand shut down. Those small businesses without digital outlets have found the going hard, especially as they are likely to operate with thin cash reserves.

The degree of government support and financing available makes a huge difference – and in the UK, SMEs (and all businesses) have received significant support.

Now, as a growing list of vaccine breakthroughs offers hopes for the future, those small businesses that have weathered the storm could be well placed to capitalise on new opportunities. Our survey already showed that SMEs were almost three times as likely as larger corporates to plan to increase technology investment and twice as likely to recruit more tech professionals into their business – and with greater optimism returning, these intentions may now be even more pronounced.

In terms of technology investment, the priority areas for small businesses are likely to be focused around a greater use of artificial intelligence (AI) and machine learning, so they can do more with less and drive efficiency still further – a route to scale and grow. Another focus is likely to be on increasing the digital windows through which their products and services are available, taking them to new markets and customer segments.

For larger corporates, I expect an even greater emphasis on AI and machine learning – to remove repeatable tasks in order to boost efficiency and free up staff for more compelling roles based on insights from what the data is telling them. Investment in technology that improves the customer experience will also be key – enabling them to move seamlessly between channels and deliver more personalised experiences and solutions.

Technology, and the agility it brings, has come to the fore on a worldwide scale in 2020. This will continue through 2021, and SMEs could be prime beneficiaries.

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