Report shows benefits of investing in digital technology

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This article was published 10/05/2022 (997 days ago), so information in it may no longer be current.

Praise Okwumabua, the owner of Freshair Boutique on Academy Road, never really believed e-commerce or a more active online presence would make a difference for her hair salon business.

Her husband was urging her for some time to do more online, but she said she just kept making excuses.

But when the pandemic hit, she launched a basic e-commerce platform and during the second shutdown she was amazed at the revenue it generated.

Okwumabua is the case study for the benefits of investing in digital technology in a new report out today by the Business Development Bank of Canada (BDC) called “Seize the Technological Advantage: Why Digitally Mature Companies Perform Better”.

BDC promotes itself as the bank for entrepreneurs.

In recent years, it has produced research studies on how small and medium-sized enterprises (SMEs) can improve productivity and ways to adapt to labour shortages.

Investing in digital technologies can address those issues and more and the new report produces the data that shows in no uncertain terms the benefits of investing in technology and the poor performance of companies that do not invest in digital technology.

Although 91 per cent of SMEs did invest in digital in 2021, according to Pierre Cleroux, BDC’s chief economist, there’s still many who have not — 40 per cent still do not even have a website — and many that need to invest more or better.

“It is a call to action” Cleroux said in an interview.

The study breaks businesses into four categories of relative digital investing from latecomers to advanced and using a digital maturity score first created by the Massachusetts Institute of Technology BDC can assign a score ranking four different ways to use technology as well as training and strategy.

The main challenges of digitization were cost, concerns about cybersecurity, the worry that benefits will not be incurred and the overall challenges of digital integration.

Not surprisingly, smaller businesses are less likely to make an investment, but the study shows that smaller businesses are not immune from the impact of technology.

“The reason we did the study is to raise awareness and to show that if you are not investing enough, you should really wake up,” said Cleroux.

Perhaps most concerning is that there is now direct evidence that a gap is building.

“Not only are businesses that invest performing better, but the ones who are not investing are in trouble,” he said.

About one third of the respondents to the survey who did not invest in digital in 2021 did not make a profit. Those businesses also have more difficulty getting financing.

“We have been saying this for a while. If you don’t invest you are going to lag,” he said. “If you don’t invest you won’t be around in the next five years.”

More than 50 per cent of companies with the most advanced digital investment profile saw revenue increase by more than 10 per cent while only seven per cent of the latecomers saw that kind of revenue growth.

Okwumabua said the expense was not onerous and neither is the time commitment. She had been producing a weekly blog and basic online scheduling, but she and some of her nine stylists started posting more content on Instagram and she noticed a marked improvement in engagement.

“The real issue for people (who do not invest in digital) is that they are not comfortable, they don’t understand,” she said. “I didn’t get it. I didn’t spend a lot of time on line, but honestly it is not that hard.”

From a cost perspective many technology developments have driven prices down and the report notes that software and cloud services charge monthly fees that can be adjusted and increased incrementally.

Cleroux said he was surprised to learn from the research that 18 per cent of SME’s suffered some form of cyber attack last year costing businesses an average of about $50,000.

While that is an area that Cleroux said professional advice makes sense and it so happens the release of the report coincides with some new programs providing businesses with financial assistance to get that help.

The federal government recently launched a program called Canada Digital Adoption Program that pays 90 per cent of the costs up to $15,000 for a digital adviser to develop a digital adoption program.

As well, BDC also has a new loan program offering no interest on a loan of up to $100,000 to facilitate a digital adoption plan. To be eligible for the loan, a company has to have a plan in place.

martin.cash@freepress.mb.ca