How small businesses can benefit from the digital economy

By Francis Wainaina

The digitalisation of the global economy has fundamentally changed how we do business. While multinational enterprises are innovating their worldwide operations, small businesses are faced with a unique set of challenges – as well as a wealth of opportunities – when it comes to adopting digital platforms and business models.

As industries are being digitalised, optimising business processes is becoming critical to realising efficiencies and creating competitive advantages as consumer behaviour shifts towards digitally enabled platforms. It can be more difficult for small businesses to plan for sudden changes caused by global market trends, industry disruptions, and tech innovations, but small businesses do hold some key advantages over larger enterprises, including prompt decision making, organisational flexibility, and small initial investments.

Despite limitations when it comes to financial resources and economies of scale, small businesses in Africa can innovate and stay ahead when it comes to digital trends.

The benefits of taking small business online

Technology can improve growth and productivity for small businesses, as well as customer experience. Incorporating features like online ordering, appointment making, and live chat can make interactions quick, easy, and convenient. And customers are more loyal to the companies that make things easier for them. Having a website that has these functionalities will often require changes in some business processes, such as coordinating online and physical inventories for retail purposes, but this will prove to be more profitable and sustainable in the long term to meet growing digital demands.

Since the global pandemic, consumers not only want more convenience but also safer ways of doing their shopping. Thus, the adoption of digital payments has been on the rise. In the US, digital options are increasingly influencing where and how consumers shop – especially when it comes to touchless payments and ecommerce stores that offer great customer experiences. This holds true for Africa too, and new forms of alternative credit options like ‘buy now, pay later’ are also increasing sales and customer loyalty. Kenyan point of sale financing platforms, such as Overhere and Aspira, make payments more efficient, inexpensive, and accessible to customers than ever before. M-PESA, one of the world’s most successful mobile money transfer services, has boosted Kenya’s economic development, with estimates showing that 48% of Kenya’s GDP was processed via M-PESA in 2019.

Small businesses can use digital tech to do more than just communicate with and serve their online customers – they can also find other businesses and create partnerships through business-to-business ecommerce. Diversification of suppliers can help businesses source better or more cost-effective goods as well as mitigate out-of-stock risks during periods of high demand like the festive season.

Digital skills will become more important

From customer data platforms and chatbots to Facebook for Business and Google Ads, many innovative digital platforms and services are now available that small businesses can use to grow. With new tools like these being introduced at a rapid pace, there is a dire need for businesses to educate their employees to be able to thrive in an everchanging digital environment. Some basic digital skills every employee should have include, device setup; the effective use of digital communication, social media, and collaboration platforms; cybersecurity; information searching and organisation; backups or cloud data storage; and using online HR and learning resources.

The benefit of bridging the digital gap for employees has a direct effect on the productivity of a business as workers can collaborate more easily, get more done in less time, and use less resources. Digital familiarity also creates a more innovative environment; staff who are familiar with the possibilities that digital provides are more likely to find ways for small businesses to take advantage of these possibilities. Providing regular opportunities for staff to learn and develop their technical skills is essential for creating and improving talent and will enable sustainable development for both businesses and employees.

Connectivity and its role in an increasingly digital business environment

As the digital economy grows, so does the need for fast, reliable, and affordable connectivity for companies and customers. According to the World Bank in the Foresight Africa report, giving Africans universal and affordable Internet coverage could increase GDP by 2% per year. The report also states that fast Internet increases the probability of employment by between 6.9% and 13.2% as it improves productivity, boosts exports, and increases the number of companies that enter the economy. This should put digital infrastructure on the very top of our government’s list of priorities.

By embracing new digital platforms, supporting digital education, and building better digital infrastructure, we can – and we will – uplift Africa to a world-class economy.


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