For small- and medium-sized businesses (SMBs), digital transformation is one of the top priorities and one of the top challenges. Successfully crafting your organization’s strategy for the year ahead means bringing your business up to speed.

If anything, the recent pandemic accelerated the adoption of digital transformation, judging by the products and services bought by consumers on lockdown and those forced for possibly the first time to work remotely from home. So, post-pandemic, SMBs quickly realized that this is the way forward, and to achieve digital transformation is to achieve growth.

Advantages of Embracing Digital Change

There are many advantages for SMBs to embrace new digital technologies, here are just six:

  • Improve day-to-day operations
  • Reduce costs
  • Increase revenue
  • Achieve goals with speed
  • Improve customer satisfaction
  • Compete with confidence

However, new findings from an annual survey of SMB professionals, conducted by IONOS, show that the U.S. is lagging behind Europe on digitizing small businesses, and this raises concerns and issues to be addressed sooner rather than later. Researching these differences defines exactly what these SMBs need to drive change and succeed.

I took the opportunity to speak to Patrick Schaudel, Head of IONOS Products. While he admitted that there are no current findings for different industries separately, he offered interesting insights and statistical information that is both useful and sagacious for owners of U.S.-based SMBs in general, that should ultimately drive future growth and competitiveness with European counterparts.

What, in your opinion, are the main barriers to digitalization for small businesses in the U.S.? What has most impacted the new findings?

One explanation for the sharp decline of company-specific websites and email addresses among American SMBs may be the current economic uncertainty and lack of skills to implement digitization initiatives. American SMBs note that cost (60%), lack of time (56%), lack of know-how (52%) and inflation (50%) are major barriers to the digitalization of their business. The lack of interest in digitalization doubled among American SMBs from 25% in 2022 to 51% in 2023.

Economic uncertainty is generally influencing investments in digitalization among American SMBs. Thirty percent report they postponed digitalization expenses that are not necessary in response to the current economic situation, energy crisis and geopolitical threats. Twenty-four percent of American SMBs, the largest value in the survey, plan to invest less heavily in digitalization due to the current economic situation.

Do most SMBs tend to be skeptical about the advantages to digitalization?

The survey results show that the SMBs definitely also see advantages of digitalization for their company — and even more so than in the previous year. More than 70% of the respondents said that they see benefits of digitalization for presence and ease of discovery on the internet (73%), growth (73%), winning new customers (72%), revenue growth (71%) and creating a modern image (71%). 

What are the main differences in digitalization between Europe and the U.S? Or, if you like, what is Europe doing better or right?

The results indicate that, while European and American SMBs consider the main benefits of digitalization to be winning new customers, ease of discovery, increasing revenue and creating a modern image, American SMBs lag slightly in their estimation of its importance. Although SMBs in Spain (88%), Germany (81%), the U.K, (79%) and France (80%) are all around the 80% mark in their estimation of the importance of digitalization, only 75% of American SMBs share that view. It’s unusual for SMBs to have no digitization initiatives in place; across all countries, less than 8% of all companies claimed to work completely without digitalization. 

What do small businesses need to do now to reverse the findings? 

Digitalization makes a huge difference in visibility for businesses in the online space and contributes at large to the future success of the business. That is why SMBs need to put the topic of digitalization (back) on their agenda and get it started now, if they have not yet. 

It is possible to start with small steps. Those who lack expertise should choose simple technical solutions. There are companies who offer advice and help to find the right solution for every need. These include offers for visibility on the internet and simple website builders. New technologies like AI are helpful, too. For example, IONOS is now offering a new text creation feature for its MyWebsite Now website builder, allowing customers to have texts and headlines for their website created by artificial intelligence (AI). The text generator enables small and midsize businesses to save time and resources while creating compelling website content, helping them take control of their online presence. 

So we know what they need to do, but how can SMBs be persuaded to move away from traditional MOs and adopt new technological ways?

We have to help them understand that they will have a hard time surviving in the market if they do not adapt to new technological ways and anchor their business strategy in digitalization; and that it is worth it to develop the expertise and invest some resources, even if it isn’t always easy in the beginning. The gains they realize from digitalization, including improved visibility, growth, new business models and greater resilience to crises, far outweigh the initial outlay. We also have to help them by providing simple, affordable solutions and advice on how to start their digitalization journey.

In Conclusion

So, the key takeaways from these new findings are that small businesses can start small with the right advice and steps forward, but they must be prepared to fully embrace digital transformation if they want to survive.

There’s no reason for any business, large or small, to be left behind as we drive forward at speed and scale to build stronger, successful SMBs and a more impactful customer experience.