The Digital Adoption Divide

Not enough micro, small and medium enterprises are using technology and digital solutions in their operations.

Admittedly, the COVID-19 period was a disruptor that caused rapid migration by some; however, the extent of the adoption is not as widespread as needed to make MSMEs more competitive.

Digital adoption refers to the process of integrating new digital tools and systems to enhance work processes and meet organisational goals. This involves using technologies such as software, hardware and online platforms to optimise operations, improve communication, drive and foster innovation. However, digital adoption is not just about using technology, it requires users to become familiar with digital products, understand their capabilities, and integrate them effectively into their workflows.

Recent research done by the Cave Hill School of Business, University of the West Indies, shows moderate information and communications technology use among local firms, with e-commerce in its early stages. The research showed that about 41 per cent  of businesses had some kind of online sales. However, these sales only accounted for six per cent – 33 per cent  of total revenue. While mobile use was widespread at 99 per cent, social media use was 53 per cent and use of websites was 56 per cent; an 85 per cent increase over 2023. The report also indicated that 57 per cent of businesses utilised digital media for marketing on platforms such as Google Ads, Facebook or Instagram, with a median of 35 per cent  of the advertising budget being allocated to these platforms.

The survey revealed moderate levels of digitalisation among firms. However, as investments in MSMEs’ digital development increases, there is significant potential for growth.

The COVID-19 pandemic brought about a wave of unexpected and disruptive changes to daily life for individuals and businesses. Measures implemented to stop the spread of the virus lead to deserted stores, schools and office buildings. There was an obvious decline in face-to-face interactions, in most cases, these interactions moved to digital platforms. While some MSMEs were able to pivot by adopting digital marketing, e-commerce, and payment systems, others faced difficulties.

A study by the Center for Financial Inclusion (CFI), noted that while MSMEs increasingly used low-stakes digital tools like social media and digital communication during the pandemic, high-stakes digital tools such as online payment platforms were less commonly adopted, especially among women entrepreneurs. Despite these challenges, those MSMEs that embraced digital tools experienced tangible benefits, including reduced fraud (through mobile money systems) and improved customer engagement.

Low Stakes

Low Stakes digital tools are cost-effective and require minimal resource commitment. This makes them accessible for businesses with limited budgets or those simply exploring their digital options.  Examples include tools to communicate with customers like WhatsApp or tools to market the business through social media such as Facebook or Instagram.

High Stakes

High stakes adoption involves more significant investments and often requires formal business registration and financial commitment, typically a higher level of complexity. Examples include delivery platforms, setting up e-commerce or operating an online store.

The CFI report highlighted several challenges faced by MSMEs in digital adoption, including:

Financial Constraints

Many MSMEs struggle to make significant investments in digital technology due to high upfront costs. Limited capital often results in low prioritisation of digital transformation.

Digital Literacy

Many business owners and employees lack the necessary skills and knowledge to fully utilise digital tools. This gap in digital literacy can delay adoption and reduce the effectiveness of digital investments.

Infrastructure Issues

In regions with limited internet access or unreliable electricity, adopting digital tools can be a daunting challenge.

Cultural Resistance

Organisational culture can be a major barrier. Employees may resist change, and the lack of a supportive culture can lead to slow or failed adoption efforts.

Inconsistent Use of High-Stakes Tools

While many MSMEs have adopted basic digital tools, the usage of more complex systems, such as digital payment platforms and e-commerce solutions, remains inconsistent. Many small firms return to traditional methods of doing business due to perceived risks or lack of understanding.

A cost effective and efficient e-commerce framework has been a challenge for some time due to the inability of commercial banks to put this regime in place.

For MSMEs, digital adoption is crucial for staying competitive in an increasingly digital world. According to walkme.com the following steps are important in the digital adoption process.

Strategy

A clear strategy ensures digital tools align with business goals, helping employees understand how digital transformation will impact their work.

Culture

Successful digital adoption requires a cultural shift where employees feel supported and are motivated to embrace new technology.

Behaviour

New technologies often demand changes in workplace behavior. Regular training and support are essential to ensure smooth adoption.

Process

Efficient integration of digital tools requires a streamlined process from management to execution, ensuring optimal results.

Skills

Team member skills must be upgraded to handle new technologies. With proper training, business owners can become more adept at using digital tools, reducing the learning curve.

Software

Intuitive and powerful software is central to digital transformation, allowing MSMEs to improve work efficiency and achieve better results.

A well-structured digital adoption strategy leads to several benefits, including enhanced customer satisfaction, streamlined workflows and increased productivity, and positive returns on technology investments. It goes without saying that more must be done to sensitise business owners to these benefits and to facilitate access to resources and training to enable greater uptick of small businesses in the adoption of digital solutions.

The Small Business Association of Barbados (www.sba.bb) is the non-profit representative body for micro, small and medium enterprises (MSMEs).