Digiprocess: Current state of digital maturity in SMEs

Project report:

Current state of digital maturity in SMEs DigiProcess provides support for SMEs and industry partners in collaboration and cooperation. This is done by building a digitalization ecosystem for SMEs and industry partners for different business areas like steel, mining, bio, forest, and energy. More info: www.digiprocess.eu

Executive summary

According to our findings, SME Technology providers should: • Develop the digital capabilities of their customer interfaces.

• Collect, analyze and use customer satisfaction data more efficiently.

• Adopt new more advanced applications.

• Make better use of information collected on existing products and services.

• Realize the digitalization potential of their business better.

• Define more precisely the roles related to digitalization in their company and partner networks.

• Evaluate and reward development ideas related to digitalization at regular intervals.

• Create and develop their IT development plans.

• Measure more information on the benefits of digitalization in key business areas.

• Develop activities more effectively based on information collected and analyzed.

INTRODUCTION Digital transform is on its way Digitalization is one of the mega trends forming society and business. Digitalization is not just about making existing manual processes digital (Kääriäinen et al., 2021). Digital transform (DT) has a significant effect on organizations´ possibilities to keep their competitiveness and react to recurring changes. DT refers to the changes in ways of working and business offering caused by adoption of digital technologies in a company.

Companies should rethink their current operations and business models from new perspectives enabled by digital technologies (Kääriäinen et al., 2021). To succeed in digitalization, companies must adopt new technologies and innovate their business models.

It is common to companies not taking of the most of all the possibilities that digital technology has to offer. The DT as a process is not easy task for small companies. To start it is important to evaluate the status of a digital technology and knowledge available. We have used a Digital maturity selfassessment test to analyse the current level of digital readiness and performance of companies.

Virkkala P., Saarela M. & Hänninen K. (2022). Project report: Current state of digital maturity in SMEs

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Project report:

Current state of digital maturity in SMEs DIGITAL MATURTIY FRAMEWORK What is Digital Maturity Framework?

Digital maturity is about enabling an organisation to adapt and thus compete effectively in an increasingly digital environment (Kane et al., 2017). Maturity models can contribute to organisational transformation and the development of competencies in organisations by initiating a change process (Mettler et al., 2010). Maturity models usually include a sequence of levels or stages which form a logical path from an initial state to a final level of maturity (Becker et al., 2009). These levels or stages are used to derive and prioritise improvement measures and control the progress of changes (Iversen et al., 1999).

Maturity models offer organisations a simple but effective tool to measure their capabilities (Leino et al., 2017; Wendler, 2012) and contribute to organisational transformation and the development of competencies in organisations by initiating a change process (Mettler, Rohner, & Winter, 2010). In relation to the digital transformation framework by Parviainen et al. (2017), digital maturity assessment can be used in the positioning and current state analysis phases; it can also be used as a key performance indicator in the implementation phase. Before any development actions can be done business owners need to understand what a level of digital maturity a company is and where it should be.

What was done?

We used Leino et al. (2017) business area classification representing business, people, organization, and technology (Table 1) to create a digital maturity self-evaluation test. The digital maturity self-evaluation test was designed to make visible the current stage of the company’s journey of digital transformation. The purpose of the test is to visualize in a standard manner company’s current stage of digital maturity and how to use results to identify possible development areas.

The created digital maturity framework can be used for conceptualizing viewpoints on the current stage of digitalization. From the point of view of regional development, data draw a baseline for the future vision of regional development. The data offers possibilities for comparing capabilities between companies, as well as comparing within an industry and regions.

After performing the self-evaluation test the result is displayed as a radar pattern (Figure 1). The diagram presents the current state by the six dimensions: strategy, business model, customer interface, organization and processes, people and culture, and information technology. The maturity model consists of five transformation levels: 1) initial, 2) preliminary, 3) defined, 4) managed and 5) excellent. The diagram shows the values of own company and the reference values of all other companies. With the results, companies can identify more easily the most important and urgent development areas to focus on for digital transformation.

Cus tom er int erface

5 4 Str ategy

3

Bus ines s mod elo r plan

2 1

Info rmat ion techno lo gy

Organis ation and pr ocess es

People and cultur e

Figure 1: Digital maturity radar pattern

Virkkala P., Saarela M. & Hänninen K. (2022). Project report: Current state of digital maturity in SMEs

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Current state of digital maturity in SMEs

Business area Strategy

Business model or plan

Description A strategy is an organisation’s plan for pursuing its mission and achieving its objectives.

A business model is an architectural-level description of an organisation and its business functions; it describes the value proposition, key customer segments and the ways to reach customers and manage customer relationships, defines the key functions and resources needed to implement them, identifies key partners, understands the cost structure and determine the earnings logic.

Customer interface

A customer interface refers to those activities involving customers, such as marketing, sales, delivery and customer service.

Organisation and processes

The traditional structure diagram of an organisation describes the tasks of the members of the organisation, the division of labour and the reporting relationships. Processes consist of a series of operations related to one another or that are interactive. Each operation involves tasks, roles, responsibilities, timelines and deliverables. In digitalization, processes are primarily concerned with the processing of information and data in digital form.

People and culture

The term ‘people’ refers to human resources; people are understood as either an individual or a group, and they affect the performance of the organisation. Culture refers to the importance of attitude and behaviour in an organisation’s performance.

Information technology

Information technology (ICT) broadly refers to digital editing, transmission, storage, searching and presentation of data or information.

IT covers the use of any computers, storage, networking and other physical devices, as well as infrastructure and processes to create, process, store, secure and exchange all forms of digital data.

Table 1. Maturity model business area classification (Leino et al., 2017)

Virkkala P., Saarela M. & Hänninen K. (2022). Project report: Current state of digital maturity in SMEs

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Current state of digital maturity in SMEs RESULTS: Tecnology providers vs. other companies Comparing technology providers maturity to other SMEs maturity Maturity survey results of analyzed technology provider SMEs (n=14) were compared to results of SMEs which don´t provide technology for industry (n=40) (Figure 2).

Customer interface

5

Maturity levels 1: Initial 2: Preliminary 3: Defined 4: Managed 5: Excellent

4 Strategy

3 2

2,93

Business model or plan

2,54 1,90

2,15

3,13 2,51

1 2,22

Legends = Technology providers (n=14) = Other companies (n=40)

2,53 3,11

3,24

Information technology

3,11 3,82

Organisation and processes

People and culture Figure 2: Technology solution providers maturity averages & other companies maturity averages

Figure 2 analyze • Technology providers' maturity is higher than other companies' maturity in every business area.

• Customer interface is the weakest business area for both technology providers and other companies.

• People and culture is the strongest business area for both technology providers and other companies.

• Biggest difference between technology and other companies was in information technology.

• Smallest difference between technology and other companies was in organization and processes.

Virkkala P., Saarela M. & Hänninen K. (2022). Project report: Current state of digital maturity in SMEs

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Current state of digital maturity in SMEs RESULTS: Question specific averages of technology providers in each business area Customer interface

Q1: How digitalization opportunities have been used in marketing, mapping the market and customer needs, and customer communication?

• Score: 2,50 ≈ 3 -> Digital channels are used widely and systematically.

Q2: Does the organization use digital services in customer engagement • Score: 2,71 ≈ 3 -> Organization uses systematically digital services to engage the customer.

Q3: How the opportunities of digitalization have been used in monitoring of customer satisfaction/customer behaviour?

• Score: 2,07 ≈ 2 -> Customer satisfaction is monitored by using digital services.

Q4: Which digital tools are used when the organization is dealing with the customer?

• Score: 2,35 ≈ 2 -> Customer can make order/reservation/give feedback and/or get electronic bill through digital system.

Q5: How widely customer can currently take part in development, production or delivery of product/service digitally to get customer-specific modifying/personalization?

• Score: 3,07 ≈ 3 -> Organization has defined in which scale this makes sense and has taken this into practice.

Business model or plan

Q1: How the organization´s business model or models are described?

• Score: 3,28 ≈ 3 -> Organization has defined its business model clearly.

Q2: How digitalization is considered in the organization´s business model or - models?

• Score: 3,35 ≈ 3 -> Digitalization is considered systematically in the business model.

Q3: Does the organization search new digitalization business models • Score: 3,42 ≈ 3 -> Organization searches systematically new business models based on digitalization.

Q4: Is there evidence that digitalization has a positive effect on the organization´s results?

• Score: 2,42 ≈ 2 -> Small improvement.

Organisation and processes

Q1: How procedures are defined and implemented in the organization?

• Score: 3,00 ≈ 3 -> Procedures have been defined and registered e.g., by function (like sales, economy, and production).

Q2: What is the stage of digitality of information in the organization´s procedures?

• Score: 3,64 ≈ 4 -> Operations have been automated and information moves digitized within the organization. Information is found easily e.g., in the cloud using a computer, tablet and/or phone.

Q3: How digitalization is used to improve efficiency of the organization´s procedures to improve interoperability?

• Score: 3,35 ≈ 3 -> Information moves digitally between multiple functions.

Q4: Do you have roles or responsibilities related to digitalization in your organization?

• Score: 2,42 ≈ 2 -> Occasional tasks related to digitalization are carried out among other tasks, depending on the skills of the entrepreneur or the staff.

Virkkala P., Saarela M. & Hänninen K. (2022). Project report: Current state of digital maturity in SMEs

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Current state of digital maturity in SMEs RESULTS: Question specific averages of technology providers in each business area People and culture

Q1: What is the organization´s willingness to change its activities to meet changing needs, e.g., introduce new digital technology?

• Score: 4,07 ≈ 4 -> Organization has common target state.

Q2: What is the level of digitalization expertise in the organization?

• Score: 4,50 ≈ 5 -> Digitalization skills and their development are central part of developing the competences of the organization and its partners.

Q3: What is the level of digitalization expertise in the organization?

• Score: 4,07 ≈ 4 -> Digitalization skills and their development are central to the development of company-wide skills.

Q4: How the organization encourages people to come up with ideas for digital practices, services, etc.?

• Score: 2,64 ≈ 3 -> Procedures for making and processing ideas/proposals have been defined and communicated.

Information techonology

Q1: How the organization´s IT system (IT architecture) has been implemented? IT- architecture describes the components of an information system, their connections, and their dependencies (hardware, systems, software).

• Score: 3,57 ≈ 4 -> IT architecture has been defined, its unified and it supports business model. Information moves mostly between the system and the organization.

Q2: How IT-compatibility is managed within the organization?

• Score: 3,21 ≈ 3 -> IT-compatibility has been defined between few systems/applications.

Q3: How IT compatibility has been managed with the organization´s partner network?

• Score: 3,28 ≈ 3 -> It is defined according to processes (e.g., electronic invoicing).

Q4: How the IT-development plan is described? How the use of digitalization and new technologies are reflected in it?

Score: 2,35 ≈ 2 -> Need for IT-development roadmap is identified.

Q5: How the organization´s digital information systems and their tools (e.g., ERP, cloud, etc.) are put into practice?

• Score: 3,78 ≈ 4 -> Inside the organization utilization rate for key application is high and there are good basic competences thought the organization to utilize them.

Strategy

Q1: How the organization´s strategy is defined?

• Score: 3,21 ≈ 3 -> Organization has defined its strategy clearly.

Q2: How digitalization is considered in the organization´s strategy?

• Score: 3,14 ≈ 3 -> Digitalization and its use are described in key parts of the strategy.

Q3: Has the organization set strategic goals for the use of digitalization opportunities?

• Score: 2,78 ≈ 3 -> Organization has set goals for the use of digitalization opportunities in all key parts of the strategy.

Q4: Does the organization recognize the benefits of digitalization?

• Score: 2,57 ≈ 3 -> Organization has measured knowledge about the benefits of digitalization.

Virkkala P., Saarela M. & Hänninen K. (2022). Project report: Current state of digital maturity in SMEs

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Current state of digital maturity in SMEs RECOMMENDATIONS: What Technology provider SMEs should do to improve?

Customer interface recomendations

Technology providers should develop the digital capability of their customer interfaces. This can be done by monitoring the development of customer satisfaction with more systematic indicators and by making better use of the results of customer satisfaction analysis in the development of operations.

Technology providers should also adopt new, more advanced systems that allow customers to track the progress of their technology orders online and make better use of information collected by technology providers for existing products and services.

Business model or plan recomendations

Technology providers should address the potential of digitalization for their business better in their business models.

Organisation and processes recomendations

Technology providers should define more precisely digitalization related roles in their companies and partner networks.

People and culture recomendations

Technology providers should start evaluating and rewarding development ideas related to digitalization at regular intervals and make better use of the expertise of their staff in digital development projects. The benefits of digital development projects should serve as a basis for staff performance rewards.

Information techonology recomendations

Technology providers should create and improve IT development plans. In their IT development plans, technology providers should record at least the first key “digital steps” to improve IT capabilities. Once this is done, the IT development plan should be extended to cover all key business areas and activities.

Strategy recomendations

Technology providers should gather more information about the benefits of digitalization in their key areas and activities, and develop activities more effectively based on it through further analysis.

REFERENCES Kääriäinen, J., Pussinen, P., Saari, L., Kuusisto, O., Saarela, M., & Hänninen, K. (2021). Applying the positioning phase of the digital transformation model in practice for SMEs: toward systematic development of digitalization. International Journal of Information Systems and Project Management, 8(4), 24-43.

Becker, J., Knackstedt, R. and Pöppelbuß, J. (2009), "Developing Maturity Models for IT Management – A Procedure Model and its Application". Business & Information Systems Engineering (BISE), Vol. 1, No. 3, 213-222.

Iversen, J., Nielsen, P. A. and Norbjerg, J. (1999), "Situated assessment of problems in software development". Database for Advances in Information Systems, Vol. 30, No. 2, 66-81.

Kane, G. C., Palmer, D., Nguyen-Phillips, A., Kiron, D., & Buckley, N. (2017). Achieving digital maturity. MIT Sloan Management Review, 59(1).

Leino, S.-P., Kuusisto, O., Paasi, J., & Tihinen, M. (2017). VTT model of digimaturity. In J. Paasi (Ed.), Towards a new era in manufacturing. Final report of VTT’s For Industry spearhead programme (pp. 41–46), Espoo, Finland: VTT. http://www.vtt.fi/inf/pdf/technology/2017/T288.pdf.

Mettler, T., Rohner, P., & Winter, R. (2010). Towards a classification of maturity models in information systems. In A. D'Atri, M. De Marco, A.M. Braccini, & F. Cabiddu (Ed.), Management of the interconnected world (pp. 333–340). Heidelberg: Physica-Verlag HD. Parviainen, P., Tihinen, M., Kääriäinen, J., & Teppola, S. (2017). Tackling the digitalization challenge: How to benefit from digitalization in practice. International Journal of Information Systems and Project Management, 5(1), 63–77. 2017. https://doi.org/10.12821/ijispm050104.

Wendler, R. (2012). The maturity of maturity model research: A systematic mapping study. Information and Software Technology, 54(12), 1317–1339.

Statement: This project report is based on project material eg. event publications and blogs previously published on Digiprocess –project website. To learn more about process industry I4.0 trends, challenges and opportunities, visit www.digiprocess.eu

Virkkala P., Saarela M. & Hänninen K. (2022). Project report: Current state of digital maturity in SMEs

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