Starting small and flourishing: the digitalisation of SMEs | Josianne Cutajar

Did you know that small and medium-sized enterprises (SMEs) form 99% of all businesses in the European Union? Undeniably, Europe’s economy and societies depend heavily on SMEs. It is no different for Malta. Such enterprises not only integrate technological solutions but, time and over again, have proven to be fertile ground for the development of new and innovative technology. This is why SMEs must be at the heart of Europe’s industrial and digital strategies.

With this in mind, I cannot help but recall an interesting debate during a European Internet Forum event, which I co-hosted a few weeks ago, entitled ‘The role of SMEs in Europe’s digital transformation’.

The debate brought together experts in the field, resulting in an interesting exchange of views of how to reach the full potential of SMEs when it comes to digitalisation. The digital transformation of Europe’s economy as a whole is not only a priority, but will be a key challenge today and for the near future. In order to rectify the situation, the EU is defining Digital Targets for 2030, with a focus on digital infrastructure, digital education and skills, digital transformation and also digital government.

So, the question remains: how can we make Europe fit for the Digital Decade? As we touched upon earlier, the European Commission has set quantitative targets that can be monitored. The proposed Digital Compass will definitely make it easier to follow up in areas that require improvement, though we must focus on making the mentioned goals attainable and operational. Indeed, the EU has earmarked 20% of the Recovery and Resilience Facility funds as resources to be destined to technology-related priorities, which will go a long way in aiding SMEs go digital, with a particular focus on smaller, less innovative firms. As I always emphasise, “Think small first.”

Local economic ecosystems

The drive for innovation must come from the bottom-up. What I mean from this, is that we need to develop systems that identify, nurture and support ideas at the micro level. I cannot stress enough, therefore, the urgency to involve intermediaries, such as education and research institutions, chambers of commerce and even professionals.

Due to their activities being an integral part of the local economic fabric, they could play a pivotal role in addressing the challenges, gaps and also opportunities that exist for SMEs.

Among such challenges we must reduce the ‘information and knowledge gap’, which many SMEs face when it comes to digitalisation. We must effectively link technologically advanced SMEs with enterprises lagging behind.  

The proposed European Digital Innovation Hubs also have an important role to play; they could serve as a means to provide SMEs with the skills, training and assistance required for the adoption of innovative digital solutions. By making these hubs an effective reality, we can help a vast range of SMEs successfully transition, from the small grocer in one of our Gozitan villages to the medium-sized tour operator in Malta.

As an MEP, I am committed to making sure that the digital transition will be transformational, long-lasting and most importantly, beneficial for SMEs.

The EU SME strategy

The Commission released the European SME strategy in March 2020.

Just 24 hours after the SME strategy was unveiled, the WHO declared COVID-19 a pandemic, and a war without rubble ensued. For over a year now, SMEs, amongst others, have faced the most terrible of consequences, including debt, decreased turnover and working capital, as well as vital missed opportunities. In the space of a day, the Commission’s strategy became, for lack of a better word: outdated.

After much research and work, a year later, we have an official position by the European Parliament on the SMEs strategy. I negotiated the report for my political group and though the structural challenges were confirmed, we went on to broaden the horizons, demanding concrete actions, which would help SMEs weather the storm of the pandemic and face the digital transition with a brand new approach.

Since then I have not eased the pressure for the SMEs strategy to be effectively implemented.  

“SMEs are the motor of our economy and will be the engine of our recovery,” said President von der Leyen in the State of the Union address. This is undeniable. It is high time to go beyond the mainstream storytelling and act.

The way forward

Two words come to mind when focusing on the way forward: recovery and resilience. Recovery indicates the first step to be taken. SMEs need to bounce back and recover as quickly as possible. Resilience relates to the way they must recover; new business models must integrate, in all aspects, resilience. It would be useless to rebuild, if we do not rebuild resiliently. SMEs need to be ready for any possible shock in the upcoming decades. 

Recovering will not be easy; however the EU has taken an unprecedented step. As mentioned, the Recovery and Resilience Facility will support SMEs to recover through digitalization. We need to do this cleverly, to ensure a swift recovery.

All sectors have the potential to build back better. The greatest example of this is tourism, one of the hardest hit sectors which is dominated by SMEs. The recovery of tourism, fuelled by the EU and national funding and assistance, can help SMEs implement new digital and sustainable solutions, putting local communities, their well-being and the natural beauty of our islands at the center.

Digital solutions will undoubtedly help tourism, such as the use of contactless technologies and software for crowd management. What is important, however, is that as we move towards a more digitalized economy, we do not lose the human element. Technology might claim some jobs, but there are aspects of human interaction in the workplace that cannot be replaced.

The road ahead will be hard, but surely not impossible. The EU and the Member States are putting in place concrete measures to set the foundation of a successful and resilient recovery. We all need to play our part, being open and flexible to new arrangements. From my part, I know the SME Strategy can be the core of a new vision for SMEs. I am committed to continue striving for the requests it contains to become reality.

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Josianne Cutajar is a Labour MEP • This is a paid post