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You’ve heard the phrase “digital transformation.” But what is it — and why should you pursue it? The simplest explanation for “why” is that we all live in a digital-first world. A longer explanation is that even smaller businesses need technologies that make them lean and agile, and better able to pursue a larger customer base across a wider area.

It sounds deceptively simple, but there are several pieces to put together, depending on the type of industry you serve. Let’s take a look at some of the major pillars of digital transformation for small business and how you can leverage them to reach for even greater success.

What is digital transformation?

In a word, digital transformation is “necessary.” In 2017, close to half of all medium and small business owners indicated plans to digitally transform their companies. For a start, that makes it an important competitive advantage. There’s no such thing as “future-proofing” a business, but this “digital pivot” is probably as close as you’ll get.

This concept might sound intimidating, but it’s not quite all-or-nothing. Going “digital-first” is an a-la-carte affair. You find your problems first and then you find solutions. You don’t have to buy solutions to problems you don’t actually have. For example — every local business benefits from getting their business listed on Apple and Google Maps. But not every small business needs to implement automated chatbots to answer FAQs during off-hours.

Once you’ve identified the problem you want to address, you can move on to finding an appropriate tool for solving it.

Cloud computing and the internet of things

Cloud computing is one of the most important pieces in small business digital transformation. Before we continue, let’s try to demystify some of the most common terms:

  • Hybrid computing: This is where businesses use multiple cloud services. It’s usually a mixture of a public cloud (for reach) and a private cloud (for security).
  • Fog computing: This is cloud computing performed by a network of “nodes” — usually IoT devices and connected infrastructure. Processing happens closer to where the data-gathering occurs.
  • Edge computing: In edge computing, the process of analyzing captured data happens at the point of origin, rather than first “dialing out” to another server or cloud service.

The goal here is to make all of your operational and mission-critical data more mobile — and ultimately more useful. “The cloud” is the means by which data is gathered from outside sources (such as market trends and keyword usage on search engines), employee workstations, and connected IoT equipment in your business locations — such as freight data loggers, smart climate control for your facility and RFID tags to streamline the shipment handoff process between your company and its partners. Cloud computing, coupled with the IoT, means “downstream” material handling or assembly equipment can send signals “upstream” to slow down or halt operations until a fault is resolved.

Some of this functionality happens on its own, such as having your equipment signal to engineers when a maintenance interval is approaching, or a machine isn’t working quite right. For other functionality, you need a system that makes the data visible and actionable. You need something to analyze it all.

Big data and analytics

Big data and analytical tools are what turn your cloud infrastructure into something useful. For example, consider the benefits of using predictive analytics to understand customer trends and market data better. Doing so helps even modestly sized businesses plan expansions into new markets, stretch their advertising dollar further by targeting customers who may be amenable to making a purchase, and even predicting future customer actions, like additional purchases or the decision to cancel a subscription. In other words, analyzing meaningful data can help reduce customer churn.

Making all of this happen requires interoperability between your company’s multiple systems — between enterprise planning dashboards and industrial control processes in a production facility, for example — and between your partners and vendors.

It’s possible to gather and analyze critical information all the way up and down the modern supply chain to detect bottlenecks, inefficient partners and even machines and equipment that might be past their prime. But it means seeking out APIs and other tools built for maximum compatibility. It also means choosing your partners wisely. You need folks on your side who appreciate the potential of these technologies and are willing to work with you to make your joint operations more efficient.

Automation and artificial intelligence

Automation and AI might represent the pinnacle of the technologies we’ve talked about so far. The Internet of Things gives us eyes and ears all across our businesses and enterprises. Cloud and edge computing are the tools with which we move that data to where it’s most useful. Data analysis takes a set of questions you want answered (“How many customers in [X] region are searching for my products?” “How can I better predict when my dealer-partners will need their inventory topped-off?”) and uses the information you’ve gathered to draw actionable conclusions.

Machine learning is the “man behind the curtain” that makes it all possible. The smarter our technology becomes, and the wider the net we cast for usable data, the more useful our conclusions become.

And then there’s automation.

If you operate a warehouse, you don’t want to have to spin your wheels wondering where to stow incoming freight in your facility. You want a smart inventory system that automates the process of matching products with size-appropriate racking locations and considers first-in-first-out (FIFO) more effectively than if human beings were making each of these decisions.

Let’s think even simpler. If you’re like many small businesses, you send and receive a lot of emails in the course of a week. Intelligent customer relationship management software can fire off convincing automated responses to contact form submissions, respond to bids based on pricing and current market trends and use digitized contracts and other records to make predictions. If you operate an e-commerce presence, the right automated software will also help you capture potential lost sales by following-up on abandoned shopping carts with an email reminder.

The truth is, we’re only getting started with automation in the small business world. This is potentially one of the most transformative technologies out there right now. But it’s also one of the most intimidating — not just in terms of adopting it, but also when it comes to convincing your employees of its merits.

Effective communication (and other critical elements of digital transformation)

As you think about which of these technologies makes the most sense for you, remember that there’s also the matter of addressing your employees’ concerns.

Automation is real — and it’s here, right now. Many employees in the world, including 35 percent of millennial employees, worry that digital transformation, and especially artificial intelligence and automation, will come for their jobs sooner rather than later. That makes the successful navigation of your digital transformation something of a communication problem.

Part of your job is to communicate openly and collaborate with your decision-makers and your workforce about the challenges presented by the modern world and how you plan to leverage technology to meet them. Many, if not most, of the technologies we’ve looked at here will improve your employees’ lives and make their jobs easier — not redundant. Moreover, digital transformation represents just as much of a growth opportunity for team members as it does for the business itself. Cloud databases will make life a lot simpler for your bookkeeping or logistics staff, for example — and that means they can engage in longer-term enterprise planning rather than getting bogged down with busywork. We might just make our work “human” again, even as we work alongside algorithms and smart machines.

Your business requires strong leadership and transparency to make this work. There’s also a good chance some of your employees will require re-training, cross-training, or even a more formal educational track to transition into a new role. We can expect the small business community to court new technologies on a regular basis, well into the future. This isn’t an excuse to thin your workforce — it’s a way to help your people find and seize opportunities to grow their skill sets and achieve subject matter competency with each of these new tools.

In the end, it’s about seizing opportunity.

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