ReportsSupporting Small Businesses’ Global and Digital Transformations

Supporting Small Businesses’ Global & Digital Transformations

The Role of Government Policy

Introduction

The digital opportunity

Small and medium-sized businesses are engines of economic growth and prosperity for local economies and around the world. Millions of people rely on small businesses for their livelihoods and employment. Globally, they represent 90 percent of enterprises and 50 percent of all jobs.  

Digital transformation is making it easier than ever before for those small businesses to scale, accelerate, reach beyond borders, and find global customers. 

Small businesses like United Kingdom-based Sound Diplomacy rely on on global connectivity. “We are completely cloud-based. We have a [customer relationship management] system called Insightly that we use. We use Intuit QuickBooks. Our entire company operates on Google Drive,” shared Katja Hermes, the founder of the company’s Berlin office. “We work so much together on the same projects. Without that ability to collaborate in real-time, we couldn’t succeed.”

It is clear that the pandemic has increased the demand for more adoption of digital tools and technology among small businesses. Still, challenges remain that can prevent small businesses from accessing and leveraging new technologies, reducing their ability to reap the opportunities that flow from global markets, despite the many benefits that they stand to gain. 

Accelerated digital transformations threaten to leave behind already vulnerable communities if steps are not taken to expand crucial access to digital skills and tools. 

Emi Weir, the founder of Ma Té Sai, an exporter of handmade products from across Lao, witnessed this first-hand. 

“When I was ready to pivot, with my digital plan, I realized that my staff could not,” Weir explained.” Even when we start to train them, it’s very difficult because we have to start from the beginning to establish a basic knowledge of computers.”

When small businesses integrate digital tools into their operations they are better equipped to combat the typical challenges faced in innovating, growing, and going global. Further, more digitally engaged small businesses are 50 percent more likely to grow revenue, eight times more likely to create jobs, seven times more likely to export, and 14 times more likely to be innovating new products and services.

Digitalization saves time and reduces costs by enabling more effective and efficient access to information and communication with staff, partners, and customers. It fosters new global opportunities and is a key component of small businesses ability to sell internationally. 

Lynn-Marie Angus, Co-Founder of Canada-based Sisters Sage, urged governments to step in to help small businesses access digital tools and global markets. She noted that funding for digital tools like advertisements would be especially helpful for underserved businesses. Using affordable avenues to reach consumers and generate brand awareness was a lifeline when the pandemic hit. For the wellness and self-care products brand, a low-cost ad campaign on Facebook and Instagram promoted a 2.6X increase in sales, which equaled out to a 9X return on their advertising investment.

Maíra Flores, the Head of Communications at the Brazil-based Portal Telemedicina is a Brazil-based startup that provides reliable, fast and low-cost healthcare to over 30 million patients using IoT telemetry and an AI-assisted diagnosis platform that runs in the Google Cloud. 

The team uses its platform to help over 500 hospitals and clinics serve thousands of patients in more than 300 cities in Brazil and Africa. “Our main form of contacting them is using online tools. So we stay connected with them using our website, sending emails, messaging applications, and social networks,” Flores notes. 

Thuy Nguyen, the founder of Vietnam-based Bobi Craft and a market leader in wool exports, explained that “we are using more digital tools than ever because the computer is now the only way to reach people. We’ve automated all of our systems for our employees and we now go directly to potential customers through their websites or a business-to-business marketplace platform.”

She also emphasized the importance of prioritizing digital skills building. “I think we need to see support for what businesses are doing. Education would be the first step–businesses and employees need training on how to use tools digitally,” Nguyen said. “I also think we need to see something more tangible. There needs to be skills trainings and then, success stories of businesses that have done it.”

For La’Poon Organic, a digital-first soap company based in Thailand, their first cross-border e-commerce sale opened up numerous global opportunities. The Founder Arunee Promchai is now operating in multiple countries and hiring employees in foreign markets. 

Using an e-commerce platform allows the company to save time and money while concentrating on customer service and product development. Every year since going digital, Promchai’s company has grown at least 15%. She expects that the jump in export sales, which are possible thanks to digital trade, will promote continued growth. 

Digital transformation requires investments and modifications in a company’s operations through the adoption of new resources and the implementation of specific digital skills. 

All companies are somewhere on the road to digital transformation, but many are lagging behind. To close this gap and drive growth, it is crucial for governments to scale up support for small businesses’ access to and use of digital technologies. 

Readiness, resilience, and recovery

During the pandemic, digital tools helped increase small businesses’ resilience and sustainability.

From the e-commerce platforms that allow effortless cross-border sales to digital marketing strategies that enable companies to find international customers, access to digital tools was critical to providing access to new markets and helping to sustain small businesses’ operations and income.

In the summer of 2020, a survey of small businesses found that companies that actively utilized digital strategies before the pandemic were able to sustain more of their international business during the pandemic than their less digitally-ready counterparts.

Eeling Lew, founder of Hera Bathroom, a sanitary ware manufacturer, began investing in social media soon after the pandemic, the market penetration was fast. Lew shared that paid and free digital tools enabled “the brand slowly gained recognition and our investments turned out to be the greatest decision we made during this whole pandemic.”

Further, small businesses that utilized digital tools intensively and leveraged online sales, payment, delivery, social, and productivity tools were less likely to experience economic hardships and were better prepared to weather financial strains. 

Digital tools became a lifeline — for both small businesses and their customers. 

Digital transformation allows small businesses to continue to recover, find global success and prepare for future challenges.

Barriers to digital adoption

Skills & Capacity: Small businesses often quote internal skills gaps as a barrier to digital transformation. Without a workforce skilled in digital technologies, small businesses cannot identify and adopt the digital solutions needed to adapt operations and advance their competitiveness. 

Diana Han, the founder of Bellary Nature, a digital-native direct-to-consumer brand, shared that “In light of these trends, we are hoping that the policymakers will continue to roll out programs specifically geared towards helping small businesses build their e-commerce capabilities and enhance e-trade readiness.”

Claudia Elizabeth Magdaleno Canizales, the founder of Cherry Pink based in Mexico, suggests that policymakers should leverage the power of digital technologies to create more training opportunities. “I would love to see more programs to train women to create businesses from local, national to international. The digital format today is powerful and easy.”

Financing: Approximately half of formal small businesses do not have access to formal credit. The financing gap is even larger when micro and informal enterprises are taken into account. Further, capital for digital investments, which cannot be used as collateral for a loan, can be even more inaccessible. 

The role of government in enabling small businesses’ global digital transformations

Barriers to the adoption of global digital technologies can be addressed by joint efforts by the public and private sectors. 

For small business support to be effective and lasting, it is imperative that governments directly address the barriers that small businesses are facing and build on best practices from proven initiatives. 

This report offers a collection of select policy innovations and best practices to demonstrate how governments around the world are supporting small businesses’ global digital transformations. It is meant to serve as a resource to help encourage governments to implement programs and initiatives that create and foster opportunities for small businesses to prosper in the digital economy. 

How are governments supporting small businesses’ digital & global transformation?

From technology support initiatives to skills-building to alternative sources of finance, governments around the world are stepping up to prioritize support for small businesses’ digital and global transformation.

Global policymakers have been active in providing small businesses targeted funding and skills support for digital solutions. Mechanisms to encourage digital transformations vary across borders but include:

  • Educational Support
    • Online learning platforms 
    • Digital capacity-building trainings 
  • Financial Support
    • Grants 
    • Loans

Many countries offer training courses and materials to encourage the development of business, digital, and export skills. These initiatives are either developed by the governments themselves to provide the training or the training is provided by the private sector and facilitated by the public sector. These programs can help small businesses transition to new technologies, thus connecting them to new opportunities. 

Looking forward, government’s ability to leverage the momentum in small business innovation and entrepreneurship will be critical to converting them into a broader engine for recovery.

small businessessmall businessessmall businessesAustralia

Financial & educational support

Australian Small Business Advisory Service

Direct grants and advisory services for Australian small businesses

The Digital Solutions, Australian Small Business Advisory Services program works with small businesses to help them get the most out of digital tools. It also offers tailored advice to business owners related to selling online, social media strategies, business software, and data privacy. 

 

Small Business Digital Adaptation Program

Rebates for digital business tools 

This Victorian Government program provides $1200 rebates so small businesses can access a range of digital business tools. In collaboration with private sector suppliers, the government helps small businesses build and upgrade websites, scale cash flow, jumpstart online marketing, and manage business operations. With the program, small businesses can take advantage of free product trials and workshops, choose products from partners like Intuit QuickBooks, Shopify, Square, and Squarespace, and apply for a rebate to cover up to 12 months of access. 

 

Small Business Digital Champions Project

Grants and mentorship

The Digital Champions Project aims to promote the interaction between small digital businesses and Australian innovators and leaders through direct funding.  The program provides —grants in addition to access to private corporate funds from partners and mentoring services. 

 

Canada

 

Digital Main Street Grant Program

Digital transformation plans and funding

Administered by the Government of Canada and the Province of Ontario, this digital “how-to” guide and program aims to help grow small businesses by leveraging digital tools. The initiative includes a Digital Transformation Grant Program that focuses on connecting brick-and-mortar small businesses with digital assessments, online training, and a one-time $2,500 grant to implement their Digital Transformation Plan.

 

Case Study 

Mind Your Bees Wraps 

Mind Your Bees Wraps is a Canada-based company dedicated to eliminating single-use kitchen products. With over 100 retail partners across Canada, the founders Ashley Shortall and Daniel Tremblay were ready to take the next step and start to leverage their e-commerce potential. After working with the Digital Transformation Team and with the Digital Main Street Program, the company was able to increase its daily e-commerce sales, reach more international customers, improve its website, and implement official digital branding guidelines. 

 

European Union

NextGenerationEU

Growing the digital skills and investments 

With NextGenerationEU, the European Union’s EUR 750 billion recovery package from the pandemic, a number of elements are directed towards small businesses. One such mechanism is the Solvency Support Instrument, aiming to mobilize private resources to support affected companies. The plan also includes the reinforcement of InvestEU, the main EU investment program, including a new Strategic Investment Facility to generate investments in boosting the resilience of strategic sectors. 

 

Denmark

Digital Growth Strategy

Grants for digital consultants 

The initiative, “SMV:Digital,” was established under the Danish Government’s Strategy for Digital Growth and aims to promote digitalization and e-commerce among small businesses The program contained grants to small businesses that generated a specified amount of capital for private counseling, courses, and networking, as well as guidance on rules and regulations. Between the start of the program in 2018 and the end of 2020, it had assisted more than 2,400 digital projects at small businessessmall businesses throughout Denmark. In 2022, SMV:Digital will open up for new grant pools— eliminating the capital requirements and making digitization accessible to all Danish small businesses.

 

Case Study 

Zelected Foods

Food wholesaler and exporter, Zelected Foods, used to manually package all of its boxed bread products. With a small team and products being shipped to Germany, Norway, the United Kingdom, and Australia,  fully manual operations were time-consuming and not cost-effective. After receiving an “SMV:Digital” grant of DKK 100,000 to hire a private consultant, co-owner Palle Lorenzen was able to simplify the packing operation by integrating digital technologies and automating the package taping process.

 

Ireland 

Digital Trading Online Voucher

Targeted digital adoption grants for small businesses with little online presence 

This program offers financial assistance of up to EUR 2,500 with 50 percent co-funding from the small businesses. It also provides entrepreneurs with training and advice to help small businesses small businesses start selling online assisting with developing a website, digital marketing, social media for business, and search engine optimization. The approach helps small businesses cut the cost of growing a digital presence. 

Over 2,000 businesses have used the voucher—on average reporting that their sales increase by 20 percent, with an 80 percent jump in sales leads, and 3 in 5 exporting for the first time.  

 

Germany 

Go-Digital

Cost-sharing for digital solutions 

The funding initiative helps small businesses integrate digital solutions into their operations and educates them about the opportunities and challenges of digitalization. Knowledge centers throughout Germany provide small businesses with expert guidance and networking opportunities. This program prioritizes the digitalization of business processes, cybersecurity, IT security, and digital market development, through expertise provided by consultants. 

 

Singapore

SMEs Go Digital Program

One-stop platform for digital learning 

The program gives access to a one-stop platform, for small businesses to perform an assessment of their digital readiness—identifying their digitalization needs and gaps. Through the platform, small businesses can learn about the digital solutions they can adopt, and the relevant grant support available, based on their business profile and needs. More than 80,000 small businesses have adopted digital solutions from the program. 

 

Grow Digital 

Go global with Digital 

Singapore also has an initiative focused on global expansion through digital, Grow Digital, which helps small businesses access training and support to build capacity for cross-border e-commerce by matching with potential overseas clients, optimizing listings on global online marketplaces, and enabling access to cross-border e-payment facilities that alleviate currency risks.

United States

 

State Trade Expansion Program

Digital solutions to increase export activity 

The Small Business Administration’s State Trade Expansion Program (STEP) provides grants to help small businesses launch or expand their export activities.  A STEP grant can aid in optimizing websites for international searches, support website globalization and e-commerce capabilities, calculate total delivery costs, tariffs, and any value-added taxes and provide digital payment options. The eCommerce Innovation Lab can also provide in-depth analysis and reports of small businesses’ website’s international strengths and weaknesses for a small fee.  

 

Case Study

SEPCO

SEPCO, a United States-based fluid sealing manufacturer, has used the STEP grant program as a foundation for its export strategy. CEO Chris Wilder shared that the team has used the grant to conduct market research, attend trade missions, and improve and implement global marketing strategies. 

 

Policy Recommendations

Digital transformations can drive prosperity, innovation, and opportunity around the world. By leveraging this opportunity and providing targeted support, governments can empower small business success and global engagement in the digital age. 

The small business stories and government programs featured in this report demonstrate the importance of using digital trade and e-commerce to reach customers, enabling them to succeed in a time of ongoing uncertainties.

Prioritizing digital skills, access & inclusion

Digital technologies have made it easier than ever before to participate in digital trade. Still, there are small businesses, especially those from underserved communities, that have limited access to and use of digital tools. Governments should serve as a driver in expanding access to digital technologies, supporting digital skills building, and prioritizing the inclusion of underserved communities in the digital economy. Policymakers should: 

Expand government financial support to help small businesses adopt digital tools.

Policymakers should consider best practices and new opportunities to establish designated funds to offset the cost of small businesses digital transformation. This includes financing to help small businesses adopt digital tools, seeking expert digital consultants, and conducting trainings for their workforce.

Develop digital skills training and capacity-building programs.

Governments can support small businesses with the implementation of structured programs to advance the development of high-quality skills, advance expertise in key sectors, improve inclusion, and encourage small businesses to invest in digital tools and skills. In partnership with the private sector, policymakers should develop frameworks to enhance small businesses’ access to digital tools and support capacity building on the use of exporting technologies, enabling small businesses to reach their full digital potential.

Foster long-term networks and ecosystems.

Being connected and embedded in support networks is essential for small businesses’ skills development. Governments should prioritize efforts to develop sustainable networks of small businesses, mentors, and government officials rather than one-off events to encourage knowledge-sharing, guidance, and education. 

Promote stakeholder cooperation and collaboration.

Such an effort should engage various stakeholders including traditionally underserved groups, the private sector, and civil society to share best practices, industry solutions, and innovations for promoting digital inclusion. As one example, the Global Innovation Forum has partnered with the U.S. Department of Commerce in the United States to accelerate the Startup Global Initiative. Through Startup Global, GIF and the Commerce Department have worked to elevate the experience of women and minority-owned businesses in digitally-enabled global markets and to help them understand the public and private sector resources available to help them succeed. 

Nurture and prioritize digital skills development within government.

Government officials can only provide effective advice if they possess the necessary digital skills and are empowered to engage small businesses.  The United States, for example, has established a Digital Attache program, which empowers Commercial Officers to promote and defend the digital interests of U.S. companies, including small businesses. The United States also maintains interagency training programs that prioritize digital skills development.  

Encouraging the use of technology solutions within government.

Governments also have a role to play in fostering the appropriate use of digital technologies throughout their systems.  Mature technologies such as Application Programming Interfaces (APIs), electronic receipt capture tools, electronic signatures, and e-payments can facilitate compliance and minimize burdens on small businesses.  Governments should evaluate and pilot initiatives utilizing frontier technologies such as blockchain and Artificial Intelligence, which hold promise for improving security, trust and speed for shipping, payments and supply-chain traceability.

Addressing the needs and challenges of underserved business owners

Governments also have the opportunity to contribute to a more sustainable, inclusive global economy by maximizing support for women and minority-owned businesses. Policymakers should: 

Prioritize the inclusion of women entrepreneurs in trade promotion programs, consultations, and communities.

Women and minority entrepreneurs are significantly underrepresented as clients of government trade promotion organizations and as speakers at International Organizations. Governments should place emphasis on the participation of women-owned businesses and advisors in international conferences and panel discussions, including by adopting — and compelling International Organizations to adhere to — gender parity pledges.

Explore the use of trade agreements and initiatives to improve equity and support the global journeys of underserved business owners.

Governments, including Canada, Chile, and New Zealand, are beginning to use trade agreements to set best practices and commitments for supporting women and regulating with respect to gender. Governments could go further, using digital economy agreements and platforms like the Indo-Pacific Economic Partnership and U.S.-EU Trade and Technology Council to develop digital initiatives to expand access to capital, networking, and resources for women and minority-owned businesses.