Economist Robert Solow famously posed the question that if technology is so ubiquitous, why doesn’t it show up in productivity statistics? The paradox is particularly acute in the UK with its enduring productivity gap. The surprising answer is that business technology adoption in the UK, especially among SMEs, is low.
But there are signs of a real change. Coronavirus and the disruption of lockdown have forced massive shifts in business behaviour. New research from Be the Business finds that Britain’s smaller firms underwent three years’ worth of innovation in just three months of the lockdown period. Attitudes are shifting, with two in three SMEs believing that technology can improve business performance and 60 per cent of medium businesses willing to invest in technology post-coronavirus. Be the Business believes the UK are in an emerging technology moment where, if action is taken now, SMEs can be helped and shifted to a higher growth trajectory.
Be The Business partnered with McKinsey & Company to conduct the largest ever in-depth study of the UK SME technology market, exploring both the demand and supply sides through polling, interviews and our new Be The Business Tech Adoption Lab methodology. We found significant barriers to both demand and supply that must be addressed if the UK is to seize its technology moment.
The barriers SMEs face to adopting technology
- A market and products built for large enterprise, not SME customers, makes it hard for smaller businesses to use
- Adopting technology looks too hard and too costly for many SMEs, particularly at a time of stretched finances
- Switching systems or products is high risk with fear of downtime, loss of data and extra costs
- Lack of leadership skills to identify, scope and manage technology projects
- Employee resistance to adopting new systems
The barriers to technology providers serving the SME market
- The economics of product development for SME sector
- High costs of customer acquisition
- Creating a self-service model at scale for SMEs
The barriers to both buying and selling business technology create a market failure. The UK could wait for the market to correct and overcome these barriers but, if that is done, the UK will miss the moment.
Accelerating technology adoption will take action from government, suppliers and the business support ecosystem
- SMEs need better and independent resources to guide them through their options. A “moneysaving expert” for business technology adoption
- Business owners and leaders need training (only big firms have CTOs) to build their skills and capabilities in buying and implementing technology for their business
- Tech suppliers need to develop products suited to specific use cases of small businesses, working sector by sector to identify and develop the services business are looking for
- Switching between systems should be easier through industry self-regulation and agreement around common standards and data portability
- Government should incentivise tech adoption, whether through research and development (R&D) credits or another instrument to help with affordability
- In its reform of the business ecosystem, the government can put technology adoption and the diffusion of technology through every sector at the heart of its programme
Be The Business is already playing its part, through our Be the Business Digital platform, our CTO-on demand, Mentoring for Growth programmes, and our work training SME leaders. We are committed to working with partners, business and government to accelerate, extend and scale this work to meet the urgency of the moment.
Webinar: Transforming SME productivity through tech adoption
Hear from the experts and discover why 2020 can be the year that changes our trajectory on tech, empowering UK businesses to better navigate new and existing challenges.