Witnessed through the lens of a technology company, Kiwi SMEs appear to be going through three distinct stages post the Covid-19 lockdown – the 'work from home' stage, the 'do more with less staff' stage and the 're-invent service offerings' stage – but there are fears they may be trying to change too much, too quickly.

Hamish McLachlan, Director of technology company OneHQ, says if anything Covid-19 awakened New Zealand SMEs to the realisation that they had under-invested in technology for years and many companies are now playing catch up.

However, they are at risk of over-complicating their digital transformation.

"Covid-19 is an interesting transformation point because people suddenly needed to work remotely,” says Hamish. 'Those that hadn't invested in technology just couldn't do it because their data was in the server at the office.

'Part of the problem -- and it is a real issue for New Zealand -- is that so many companies are owned by boomers holding out for retirement. People get used to doing things in a certain way and earning a certain income, so why would they add more complexity?

"It isn't helped by the fact that there are so many big international vendors pushing their software solutions, and it's challenging for business owners to know if one particular solution is a good idea or not."

Hamish says there is widespread awareness of the need to transform, but there's a real risk of drastic change brought about by a knee jerk reaction.

"Digital restructuring is best done slowly and incrementally. Economic turmoil means that finding new revenue is hard, so focus on streamlining what you've got and making more out of the revenue that you do have."

Smaller firms traditionally invest less in building efficiencies because they have less money. Sometimes efficiency gain can cost a small business as much as it does a bigger business. While all businesses should be on a journey of constant change, the more effective strategy is to make a small incremental change over the years.

Hamish offers the following advice to SMEs considering digital transformation:

1. Identify your pain points

Rather than radically transforming the business or charging down new avenues or adopting new technologies, first understand what the pain points are and fix those.

"Get the key decision-makers in the business aligned on what the problems are, and address those first," says Hamish. "Examples may be holding too much stock, being tied to cumbersome legacy software or holding on to a site-specific office server."

2. Break it down

"The norm for many technology companies has been to work with clients to address business requirements. We find it far more effective to address the pain points and then break them down into bite-sized projects, based on the benefit to the business.

"For example, rather than replace an entire Enterprise Resource Planning (ERP) solution, an answer may be to plug in add-on to fix a specific issue," says Hamish.

3. Prioritise

During and after lockdown, many companies were focussed on remote working solutions. This was followed by working with less staff following layoffs and more recently the focus is switching to revenue generation with less, but this is reactive.

"Remote working and productivity solutions are hygiene. We find the sweet spot is in helping our clients drive short term change in the technology space. Nobody has to spend large chunks of money to keep driving continuous improvement.

"Start with the pain points that address a business benefit. We usually find most companies only have four or five pain points. If we change the metric there is a direct flow on in better margins, revenues, productivity and cost savings."

4. Engage your staff

"Avoid driving change from the top down. Engaging your workforce at the start gives a better outcome because everybody is a part of the change," says Hamish.

5. Reduce complexity

"Reduce the complexity of your business. This will result in a higher level of engagement from both staff and clients. Start with quick wins and push forward once you start seeing the results of the changes you are making."

The Covid-19 Lockdown was a huge shock that has seen widespread cost reductions and decisions around cashflow. However, that does not mean the business should procrastinate decisions around their operating model, systems, supply chain, inventory management and sales channels.

"These are often areas that can offer significant business performance changes as you start to ramp up sales and production again, so it is worth giving it some attention,” says Hamish.