Digital transformation: a challenge for national SMEs

By Daniela Sofia Silva (researcher) and Pedro Senna (research assistant), from the Centre for Enterprise Systems Engineering (CESE)

Although the concept of “Industry 4.0” has been around since 2011, the truth is that the topic of Digital Transformation has only became relevant and a matter of debate quite recently, largely due to the difficulties experienced during the COVID-19 pandemic. In fact, Digital Transformation is one of the three structuring dimensions of the Recovery and Resilience Plan (PRR), with a “Company 4.0” component that aims to “strengthen the digitalisation of companies and recover from the delay in the digital transition process”, with a budget of €650M. 

But what does this mean for Portuguese SMEs? 

After working in this area for some years, with an in-house Digital Maturity Assessment Model, the CESE keeps a very close contact with the industrial reality. Within the scope of one of the ongoing projects, which aims precisely to prepare the industries in the Entre Douro and Vouga region for the Digital Transformation, we concluded that only 12.5% of the companies in this region are in the first phase of industry 4.0. At the same time, 48.5% of companies are taking the “first steps” in the digital world, which often means moving from paper to a PDF document. These figures represent the need for an increased effort by companies, and they can be circumvented through investment support mechanisms under the PRR. 

Digital Transformation presents several challenges, which can be identified through the analysis of digital maturity in six dimensions: Culture and People, Strategy, Governance and Business Processes, Technologies and Information Systems, Processes and Operations, Products and Services and Context, Market and Regulation. By and large, most companies don’t have a defined digital strategy, often leading to the isolated implementation of specific technologies, thus neglecting structuring projects. For many of the companies that already have some strategy outlined, the biggest challenges are the lack of skilled professionals and the insufficient knowledge of how to take advantage of the support mechanisms available. But not only that: the lack of involvement of employees in the digital transformation process, the misalignment of information systems with business processes, the reduced automation of production processes and the lack of decision-support tools are just some examples of the many challenges that companies face. These challenges are more complex for SMEs, both in terms of investment and human resources capacity. 

But not everything is bad news: the low level at which companies find themselves enables the faster evolution to higher levels, with the investment outcomes more quickly observable. It is crucial to make companies aware of the need for Digital Transformation to increase productivity and competitiveness levels and improve their resilience. In this sense, institutions like INESC TEC play a fundamental role, guiding companies in a structured Digital Transformation process, which allows them to reach a high level of maturity, making the national business fabric truly competitive.