Successful Digital Transformations are the difference between winners and losers in SME segment too

Summary

Cisco’s ‘2020 Small Business Digital Transformation’ report examined the state and impact of Digital Transformations on SMEs in the US, UK, Germany, France, Canada, Brazil, Mexico and Chile and found the same type of divergence between enterprise ‘winners’ and ‘losers’ due to the state and success of their digital transformation strategies that Cyberhedge finds in larger companies.

Key findings include:

  • 72% of SMEs are accelerating their digitalization to address Covid‑19 challenges
  • Revenue at ‘Digital Native’ companies (4% of surveyed companies) is increasing 8x faster than revenue at ‘Digital Indifferent’ companies (26% of group). Those companies between these two extremes—‘Digital Challengers’ (20% of group) and ‘Digital Observers’ (50% of group)—are also experiencing 6x and 4x greater revenue growth respectively than the ‘Digitally Indifferent’ companies
  • Nearly half of respondents expect digital to account for greater than 30% of sales in 2021
  • 86% strongly agree that ‘technology is changing the industry’
  • The study estimates that further digital transformation of SMEs in these countries could increase GDP growth by $2.3Tr (5.6% of GDP) by 2024
  • ‘Cloud Solutions’ is the #1 technology priority for every category of SME in the study. ‘Security’ is the #2 priority for ‘Digital Native’ and ‘Digital Challenger’, and the #3 priority for ‘Digital Observer’ and ‘Digital Indifferent’ (‘Purchasing/upgrading IT infrastructure’ is their #2 priority)
  • The top 3 Technology Investments are Cloud (12% of average budget across the 8 markets studied), Upgrade IT software (10%) and Security (10%). For US based SME’s, this breakdown is 13% Security, 11% Cloud and 10% IT

Report

Analysis

The results of this survey—especially the revenue breakdown which shows a perfectly upward sloping correlation between the degree of digital transformation and revenue growth—tell the same story that Cyberhedge analysis finds across listed companies globally. Those companies farther along with successful digital transformations experience greater revenue growth and stock market outperformance than companies in their sector that lag in digital transformation and securing that transformation or what we call ‘cyber governance’.

SMEs face a very similar overall environment as large corporations—a rapidly digitizing market and the critical need to secure their digital operations. But the reality of smaller staffing and budgets bring different challenges. This is a challenge not only for them, but for national leaders as well. As the survey details suggest, successful digital transformations in SMEs lead to a significant increase in overall GDP growth.

Considering that SMEs account for the majority of employment in most countries, there are important social and political implications that make encouraging digital transformations and helping improve cybersecurity and governance at these companies a key governmental priority.

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What are the Cyberhedge Cyber Governance Indices?

These first ever benchmarks prove good cyber governance matters to shareholder value. They measure stock market performance of companies with good and with bad cyber governance scores. Scores are based on Cyberhedge’s proprietary cyber governance rating methodology. Market performance is tracked by an independent firm. The results show that companies with good cyber governance outperform their peers in US, UK, and EU markets.

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