3 Ways Digital Transformation Can Help SMBs Reduce Costs (and How To Get it Right)

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There’s no shortage of business literature advocating for digital transformation. But a shift towards digitally-enabled efficient processes has never been more important than it is now.

The harsh economic climate has seen companies across the globe experiencing layoffs at an unprecedented scale. While this is understandably concerning for many, it does bring to light the necessity to streamline workflows and implement strategic cost management.

This is where digital transformation comes in. Advancements in the business and tech world combined with the challenging environment mean small-to-medium businesses (SMBs) must not have a stronger focus on digital transformation as a cost-saving operation.

Here, we’ll answer questions like how technology can reduce costs in a business and whether those potential cost savings are worth the hassle.

The short answer to the second question is usually yes. But new tech acquisition for cost-saving needs to be progressive. SMBs who get it right can enable growth 26% faster than digitally shy competitors according to Deloitte.

If you’re considering digital transformation investments, what we’ll cover here should help ensure those investments are made with strategic “save to thrive” thinking that goes beyond a “save to survive” mindset.

To set the context for the three ways digital transformation helps SMEs reduce costs, let’s approach the topic by touching on the proven impact of making those cost reductions in the right way.

What Are the Proven Business Cost Management Benefits of Digital Transformation for SMEs?

To further put into context the gap between digitally mature versus digitally naive businesses, the joint Deloitte and Google study we mentioned above also found that digitally minded SMBs deliver 21% higher gross profits.

This profit-pace increase breaks down into three key business pillars where digital projects must target cost-savings with conscious sensitivity to how digitalization in one area will impact the other two: Management, Operations, and Strategy.

Way #1: Digital transformation can bring cost savings to management

With a practical, researched approach, SMB leadership teams investing in digital transformation can capture cost-saving benefits by:

• Reducing stubborn project costs like phone call costs such as hardware, installation, and maintenance. Switching from traditional hardware telephony, for example, to zero-hardware cloud-based softphones can also help reduce calling costs and make certain workflows either redundant or autonomous.

• Eliminating daily sales and support team admin: Once heavy management costs have been reduced, automating manual tasks like CRM admin can further reduce management costs by reducing the burden on best-practice training.

• Improve performance accountability: This means being able to assess team performance accurately in real-time. To achieve this, performance tracking analytics can be a powerful and practical option.

To add further management cost savings, cloud-based technologies like Aircall are designed to allow nontechnical Managers to work autonomously without major IT interventions. This is particularly attractive for SMBs with a strong focus on resource efficiency.

Way #2: Digital transformation can bring cost savings to operations

The digital transformation cost savings in management workflows ripple out from cost-savings benefits felt in operations.

Here’s how:

• Process auditing: How long are operations and IT spending on phone-systems configuration, maintenance, and reporting? Sit down with process owners and audit how much each workflow is costing.

• Cloud process migration: Once you’ve audited operations processes, decide which can and should be streamlined through cloud migration. In other words, which online services and technologies are proven to make those processes more cost-efficient?

• Process optimization: Okay, you’ve moved problem processes into the cloud to reduce excess operational costs. Now it’s time to further optimize by refining your new digital workflows for further cost savings.

The net impact of process auditing, cloud migration, and optimization should ripple outward, empowering managers with greater independence and teams with productive efficiency.

We tested the business cost management benefits of replacing traditional telephony with Aircall’s zero-hardware cloud-phone telephony.

What we found was that SMB teams reduced maintenance and calling costs by $1,300 per user, with overall savings totaling $219.3K.

Way #3: Finally, digital transformation brings cost savings to strategy… but only if you get the first two right

Okay, so we’ve covered how digital transformation brings cost-saving benefits to management and operations workflows. But for these cost-cutting perks to mean something valuable across the business long-term, they also need to be felt at strategic levels. This is where many SMEs attempting sustainable digital change fall down. When cost-saving incentives are implemented locally—without being tied to top-down strategy—then the benefits almost always lack business-wide impact.

That’s when cost management fatigue starts to paralyze collaboration and decision-making. The more digital projects fail due to a lack of strategic direction, the harder it is to align business leaders around new, proposed digital change incentives.

The fix for this is simple—at least on paper. But it takes active collaboration between business leaders across management, operations, and strategy.

When considering new digital technologies:

• Meet with peers in those departments. Try to map out exactly how the cost-saving benefits management and ops workflows will translate to strategic gains.

• Have a game plan for exactly which bad costs will be targeted to free up finances for reinvestment into positive, strategic costs. For example, product development for expanding your offering into new markets and becoming more competitive.

Let’s imagine you want to replace high-maintenance telephony hardware with a zero-hardware virtual phone solution.

We commissioned Forrester Consulting to determine the business impact of Aircall, and here is what it found in terms of cost-savings:

In year 1: $72,403
In year 2: $91,783In year 3: $103,258

If you captured these cost-savings in Management and Operations, how would you reinvest these savings strategically? A new customer strategy? Team training? R&D? Product development?

Having these answers ahead of making investments in new digital technologies is the key to feeling the benefits of digital transformation cost saving in the long run.

Your Ultimate Goal: Reaching Digital Maturity

Ultimately, digital transformation for SMBs comes down to one goal: reaching digital maturity. On that journey, the shared mindset in your executive teams should focus on two things: better serving existing clients and acquiring new customers.

It all sounds great, in theory, but you need to walk before you run. When digital maturity comes, you’ll know because all your key business drivers will be digitized. Until that moment, advocating for digital change with a customer-centric mindset will help achieve buy-in from C-level peers.

Once everyone is on board, SMBs can start along the path to digital maturity, creating distance from digitally shy competitors in the process.

In a benchmark insights survey, Deloitte found that digitally mature businesses are more likely to achieve targets for among other goals:

• Customer satisfaction

• Product quality

• Long-term financial performance

• Gross margin

As Deloitte’s insights survey nearly puts it:

“Digital transformation is about both doing old things better, faster, and cheaper and doing new things that weren’t possible before. In some ways, cost savings and efficiency are the low-hanging fruit of digital transformation.” — Deloitte

Ultimately, this is why digital transformation is important for SMBs. Breaking away from competition to rub shoulders with bigger players means moving the dial in these key areas. And cultivating a “save to thrive” mindset—focused on becoming digitally mature—is the most sustainable route SMBs can take to grow.

Final Word: Three Horizons to Reduce Base Costs

If there’s one takeaway here for ambitious SMBs and C-level teams, it’s this. Gaining control of everyday running costs is the gateway to freeing up finance that can be better invested in growth. And digitally transforming daily management, operations, and strategy help spread cost control evenly across the business.

If you’re reading this as an SMB business leader trying to advocate digital change, presenting the case for rational, sustainable transformation with these three “R’s”:

1. Reduce

2. Replace

3. Rethink

Reduce short-term costs: Every little bit helps

Start by investing in digital projects aimed at making short-term cost reductions that won’t substantially change management, strategic, or operational models.

Replace: Out with the old, in with the new

Next, once you’ve proven the short-term cost reductions of digital transformation, target medium-term cost reductions that swap out legacy technology costs for lower-priced digital alternatives.

Rethink: Time to target the big cost-savings

By now on your path to digital maturity, you should have already witnessed progressive short and medium cost-savings. It’s time to go after the big savings. This will involve strategic changes that reimagine what “efficiency” can mean. Not just in the day-to-day, but in long-term cost reductions that question technology architecture, processes, and even broader operating models.

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Published on October 24, 2022.