By Ross Pearson, below, Head of Small Enterprise Sales, Virgin Media O2 Business
When you need to drive big growth, many look immediately to big businesses, but new research from Virgin Media O2 Business and Cebr reveals the untapped economic potential in SMEs.
It pays to be a leader
The research, covering the period 2021 to 2023, shows a gap between companies who are actively investing in tech, dubbed ‘digital leaders’, and those who are falling behind, ‘digital followers’.
For leaders planning for 2025 and beyond, recognising the opportunities being created through effective digital investment represents a major opportunity for growth.
Digital leaders, who are outspending followers by almost 4%*, have reaped the benefits of their investment in tech, seeing an average increase in productivity of 18% in the three year reporting period. In fact, they outperformed digital followers across every economic metric.
The gap between leaders and followers is particularly stark in the SME space, with SME digital leaders posting turnover increases five times greater than their follower counterparts in the reporting period.
Driving growth through digital
Those businesses who don’t invest in technology are missing out on a huge economic opportunity. Our research found that if all organisations had invested in tech at the same rate as digital leaders, it would have generated an £111billion uplift in UK turnover in the period. Perhaps most surprisingly, £61.4billion of that uplift would have come from SMEs, outweighing the contribution made by big corporations by £5billion.
To prevent future missed opportunities of this scale, the mindsets of business decision makers on digital needs to change. SMEs in particular should be encouraged to test and learn how digital tools can create new efficiencies and growth opportunities in their organisation.
If all UK businesses had taken a leadership approach to digital investment, this would also have generated a huge increase in employment growth of around 676,000 new jobs, with 281,000 of those being created in SMEs.
Actual employment figures for the period bear out the fact that digital investment has a transformative positive impact on job creation in the SME ecosystem: between 2021 and 2023, SME digital leaders outgrew followers by a factor of 4.
The knock-on benefits of this are vast, driving growth for the economy and positive change in society. In a recent study, the University of Glasgow found that being in paid employment had a far greater influence on mental health than poverty and income, with job loss leading to a 16% increase in the likelihood of psychological distress.
Seizing the opportunity
Despite being well set-up to innovate, SMEs are 3% less likely to report that they have a strong digital culture when compared to larger organisations. And of those SMEs that do feel they’re doing digital well, 75% were found to be under-investing and under-using their available tech.
Within these companies, usage rates of tools for automating operations, digital first engagement with stakeholders and integrated machine learning were particularly low. This presents an opportunity to do more digitally to support employee and customer needs, deliver on business goals and draw those benefits out to the wider community.
With evidence demonstrating that just a 4% uplift in digital investment can provide an average 11.9% increase in revenue and a 6.5% increase in job creation, now is the time to seize the opportunity.
Investing in your people
It’s clear that with the right digital investment, SMEs can be powerful drivers of economic growth. But it’s not just about getting the latest gadgets. To fully realise the value of digital, SMEs need a plan for smooth adoption and ongoing digital skills training for staff to get the most out of new technology.
SMEs that get this right can attract and retain talent with improved employee satisfaction, as processes become less cumbersome and new solutions offer greater flexibility. They could even out-pace bigger firms who can be slow to replace outdated legacy systems.
With the right workplace culture, digitally savvy SMEs can increasingly expect to challenge their big business competitors for candidates at the top end of the talent pool.
Lean on digital experts
With so much reward to play for, you can’t afford not to step up and build a strong digital culture for your company. But it can be a challenge to know where to start, especially when budgets are tight and there are so many options to consider.
Finding the right partner to help you navigate this, who can identify areas for improvement and advise on the best solutions for your specific business needs, is crucial.
So the only question left to ask is, are you ready to be a digital leader in 2025?
Data points in this article are sourced from ‘The economic and social benefits of digitalisation’ report produced by the Centre for Economics and Business Research (Cebr) for Virgin Media O2 Business, September 2024, unless otherwise stated.
* Outspending on digital investment by 4% as a percentage of the organisation’s total costs
