Our research identified three categories of SMEs, based on how they characterized the pre-pandemic importance of digital tools to their business operations, and their actual use of digital tools entering the pandemic. Advanced SMEs place a high importance on digital tools and use many of them, while Uncertain SMEs do not. A third group, Evolving SMEs, is at various stages of transformation between the other two.
Advanced SMEs outperformed their Uncertain counterparts for a range of financial and operational business metrics during the pandemic: sales, revenue, maintaining their customer base, and hiring new employees. They have also been more aggressive in investing in new tools and training during the pandemic. In Germany, we found a roughly average number of both Advanced SMEs (+1% vs. the Europe-wide average), as well as Uncertain SMEs (+2%).
Not all SMEs who use digital tools are the same. On average, sole owner/operators or women-led SMEs had an especially challenging time if Uncertain, but found outsized benefits if they were Advanced. Not all digital tools are equally helpful to European SMEs, either. E-commerce, data analytics, and employee management and collaboration tools conferred more competitive advantage on the SMEs using them.
- Use fewer digital tools, don’t prioritize their importance
- Worse business outcomes such as lower revenue
- Little transformation, innovation, and resilience
Increased deployment of the Digital Safety Net
- Use more digital tools and prioritize their importance
- Better business outcomes such as lower revenue
- Increased transformation, innovation, and resilience
Digitally Driven: Germany – By the Numbers
Germany’s SMEs have a slightly below average propensity to be digitally advanced and a somewhat above average level of concern with issues associated with digital tools.
Pre-Pandemic: 53% of all of Germany’s SMEs felt comfortable using digital tools in their business, -8% compared to the Europe-wide average.
During the Pandemic: While SMEs generally reported revenue losses, Germany’s Advanced SMEs (-20% revenue) significantly outperformed (1.3X) their Uncertain counterparts (-26%).
Advanced SMEs also hired 5.7X more new employees than Uncertain SMEs (1.14 vs. 0.20).
These two differentials are evidence of the Digital Safety Net at work. Finally, 78% of Germany’s SMEs increased digital tool use during the pandemic, 2% below average.
Digital Concerns: German SMEs also have roughly average concerns about adoption of new digital tools. Top concerns are: uncertainty about return on investment (29%, +4% above average); protecting data privacy (26%, +1%); concern about tools working (24%, +3%).
Post-Pandemic Planning: Looking to the future, 47% of Germany’s SMEs (3% below average) plan to use more digital tools after the pandemic.
Digitally Driven: Germany – Impact on Europe
SMEs embracing and utilizing the Digital Safety Net will have benefits far beyond the current pandemic.
The ability for SMEs to adapt, survive, and recover from disruptions, and press their competitive advantage during good times, is both valuable to them and benefits the broader economy. SMEs who do not, however, remain more vulnerable to disruptions and are more at risk of closing. Thus, getting more SMEs to take advantage of the Digital Safety Net is good for them, consumers, and the economy as a whole.
Based on our research and publicly available government data, we asked, what would the economic effect be of transforming just the Uncertain SMEs into Advanced ones (there are roughly 4.5 million Uncertain SMEs in Europe, and about 498k in Germany)?
Roughly, that could generate 262.2€ billion additional sales (0.91% of European total), 67.4€ billion economic value added (0.93% of European total), and 1,740,549 jobs (1.20% of European total employment). In Germany specifically, this is an estimated 38.21€ billion additional sales, 11.39€ billion economic value added, and 225,750 jobs.
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