Digital Transformation Strategies for Small and Medium Enterprises in Emerging Economies

Abstract

Small and medium enterprises form the heart of emerging economies, forming the bulk of economic activities and employment within such economies but the integration of advanced technologies among such enterprises is inconsistent. This research paper outlines a framework that describes the different reasons behind the inconsistency in digital transformation within emerging economy small and medium enterprises and how the transformation process leads to the conversion of resource constraints to sustained competitive advantage. The framework draws from three major ideas from the current literature. First, adoption of technologies within developing country small and medium enterprises has been limited to basic information technologies whereas cloud computing and artificial intelligence have not been adopted to any significant level. Secondly, constraints to transformation in terms of inadequate financing, poor digital skills, inadequate manpower and other technical limitations are more institutional and organisational in nature as opposed to being technological and depend on the environmental conditions including the activities of government, private and community-based institutions. Thirdly, there is evidence that digital strategy and digital skills act as the mediator in transformation and its impact on sustained competitive advantage in emerging markets firms. The framework arranges these insights into six strategies that interact: adoption sequencing consistent with ecosystems, development of digital capability with a focus on learning and integration, digital strategy formation as a separate managerial activity, digital culture building, transformation based on resources in organisational, human, financial, technological and social realms, and policy engagement. A multiple-method validation approach is proposed, along with measurable indicators for each of the strategies. The paper shifts the focus of digital transformation from an issue of technology procurement to one of capability building and strategy formation, and explains when and how resource-starved companies can leapfrog.