Digital Transformation of Small and Medium Businesses

Digital Transformation of Small and Medium Businesses

Aizhan Baimukhamedova, Malik Baimukhamedov
Copyright: © 2023 |Pages: 25
DOI: 10.4018/978-1-6684-5727-6.ch002
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This chapter examines the essence and importance of digital transformation in developing small and medium-sized businesses. It is noted that digitalization uses computer technology to reshape business so that all decisions are made based on data. The main objectives of the digital transformation of SMEs are shown. The technologies accelerating digital transformation include the internet of things, artificial intelligence, e-commerce, big data, cloud technology, blockchain, etc. The tasks of managing an organization in the context of digitalization include changing the company's business processes based on advanced digital technologies, maintaining a high level of knowledge of company management and specialists in the field of modern technologies, maintaining a high degree of preparedness for changes and challenges of the external environment. The authors consider the digital transformation of SMEs in the industrial, agricultural, and commercial spheres, as well as e-commerce.
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The Essence and Significance of Digital Transformation in The Development of Small and Medium-sized Businesses

Digital transformation is a restructuring of technologies, business models and processes that provide the formation of new values for customers and employees in a constantly changing business environment in order to develop the digital economy (Aubakirova, 2020). These processes place new demands on small and medium-sized businesses (SMBs), forcing them to adopt elements of digitalization. Their importance to business is clear, as they contribute to scientific and technological progress, and open up opportunities for growth and sustainable competitiveness, affecting the entire production and supply chain. In addition, there is a direct correlation between the digitalization of business and its profitability. The McKinsey Global Institute estimates that productivity in digitized sectors of the economy is significantly higher because of data-driven business models. Therefore, companies around the world prefer digital technologies. Thus, according to experts' forecasts, 30% of companies from the Global 2000 list (the largest public companies in the world in 2020) will allocate at least 10% of revenues to finance their digital strategy.

Technologies accelerating digital transformation include

Internet of Things, artificial intelligence, e-commerce, big data, cloud technology, blockchain, etc. They help expand markets and export potential, often turning SMEs into micro transnational companies. Today, more and more businesses are digitizing their operations, thereby transforming their value chains and becoming more productive, competitive, and profitable.



Digitalization efforts are creating a new society where human capital is actively developing - the knowledge and skills of the future are nurtured from a very young age, business efficiency and speed are increasing through automation and other new technologies, and the dialogue of citizens with their states is becoming simple and open.

The challenges of managing an organization in a digitalized environment include the following:

  • Changing the company's business processes on the basis of advanced digital technologies;

  • Maintaining a high level of knowledge of company management and specialists in the field of modern technologies;

  • Maintaining a high degree of readiness to changes and challenges of the external environment.

In today's environment, organizations should look at their own business in the context of the digital economy. Like it or not, the costs of research, development, consulting services, and employee training will inevitably rise as part of the digitalization of the company. Companies that are not ready for such developments will sooner or later leave the market. On the other hand, digitalization should not be an end. It is necessary to calculate the efficiency of these or those changes to be sure that the key processes at the enterprise will significantly improve because of digital technology implementation.

Companies that have already gone digital are facing the challenge of having to change their approach to organizational management to reflect the new digital reality. Digitalization should not be equated with automation: Automation is primarily the replacement of manual labor with the use of electronic machines. Digitalization is the use of digital computer technology to redesign a business so that all business decisions are based on data. It is not possible to digitalize a single part of a company. Digitalization cuts across the entire company, thereby achieving synergy between each area on a single digital platform. According to a study by the Boston Consulting Group (BCG), reflected in the article “Kazakhstan on its way to the digital economy,” Kazakhstan ranked 50th out of 85 nations in 2016 in terms of the level of digitalization of the economy and is in the nascent digital economy group.

The digital gap between the leading countries and the lagging countries is increasing year by year. The key to maintaining the competitiveness of Kazakhstan's economy is the development of the digital component through the joint efforts of the state and business, including in such sectors as industrial, transport and logistics infrastructure, agriculture, subsoil use, energy, education, and healthcare.

Key Terms in this Chapter

“End-to-End” Digital Technology: Is a part of the technological process for the production of goods, the provision of services and the performance of work, which is a set of processes and methods of searching, collecting, storing, processing, providing and disseminating information that provide services and work performance: improving the efficiency, accuracy or other significant characteristics of the technological process; improving the quality or other significant characteristics of the goods produced, the services provided and the work performed; reduction of costs in the production (supply) of goods, provision of services and performance of work.

Antivirus Tools: Are specialized programs designed to detect computer viruses, unwanted (malicious) programs and restore files infected (modified) by such programs.

Website: Is a place on the Internet, which is determined by the address, has an owner, and consists of web pages. In statistical observation, an organization is considered to have a website if it has at least one page of its own on the Internet, on which information is published and regularly (at least once every six months) updated.

Robotization: Is the use of intelligent robotic systems, the functional features of which are in a sufficiently flexible response to changes in the working area.

Additive Technologies: Are technologies for creating objects by applying successive layers of material. Models made by the additive method can be used at any production stage - both for making prototypes and as finished products themselves.

Global Competitiveness Index: Characterizes the level of competitiveness of countries. Calculated by the World Economic Forum based on 12 parameters.

Cloud Computing: Is an information technology model of providing ubiquitous and convenient access using the Internet to a common set of configurable computing resources (cloud), storage devices, applications and services that can be quickly provided and released from the load with minimal operating costs or virtually no participation of the provider.

Processing Large Amounts of Data: Is a set of approaches, tools, and methods for automatic processing of structured and unstructured information coming from a large number of different, including scattered or loosely coupled, information sources, in volumes that cannot be processed manually in a reasonable time.

Information Protection Means: Specialized software (anti-virus and / or anti-spam filters, electronic signature tools) designed to protect information when using.

Artificial Intelligence: Is a complex of technological solutions that allows you to simulate human cognitive functions (including self-learning and search for solutions without a predetermined algorithm) and to obtain, when performing specific tasks, results comparable, at least, to the results of human intellectual activity.

Sensorics: Technologies that allow interaction with a computer by touching its parts (contact interfaces) or by moving near the computer without touching it (contactless interfaces), and not by changing the position of its mechanical parts (keys, levers, etc.).

Robotics and Sensorics: Are one of the main transforming technologies of the future, which in 5-10 years will be ubiquitous. These technologies, based on machine learning, the Internet of things and wireless communications, are aimed at maximizing the flexibility and efficiency of production, its complete automation and elimination of the “human factor”.

International Digital Economy and Society Index (I-DESI): Is a derivative of the European Digital Economy and Society Index (DESI); aims to measure the progress of countries in the development of the digital economy and society in the following components: Connectivity, Human capital, use of the Internet, Integration of digital technologies, Digital public services.

Advanced Manufacturing Technologies: Technological processes (including machines, apparatus, equipment, and devices) based on microelectronics or computer-controlled and used in the design, manufacture, or processing of products.

Industrial Internet: The concept of building information and communication infrastructures based on connecting industrial devices, equipment, sensors, sensors, process control systems to the information and telecommunication network of the internet.

Big Data: Technologies for collecting, processing, and storing significant arrays of heterogeneous information; are the basis for the development of machine learning and artificial intelligence algorithms, solving analytical problems and optimizing business processes.

Level of Digitalization: Is calculated as the ratio of the installed capacity of electronic exchanges to the total installed capacity of telephone exchanges.

Local Area Network: Connects two or more computers (possibly of different types), as well as printers, scanners, alarm systems (security, fire) and other production equipment or peripheral devices located within one or more neighboring buildings and does not use for this communication facilities of general purpose.

Level of Innovative Activity of Organizations: Is usually defined as the ratio of the number of organizations that carried out technological, organizational, or marketing innovations to the total number of organizations surveyed for a certain period in a country, industry, region, etc.

Platform: Broadly defined as a communication and transactional environment, the participants of which benefit from interacting with each other.

Virtual Reality Technology: Is a technology of non-contact information interaction that realizes the illusion of direct presence in real time in a stereoscopically presented “virtual world” using complex multimedia operating environments.

Ecosystem: Is an economic community that consists of a collection of interconnected organizations and individuals. The economic community produces goods and services of value to the consumer, which are also part of the ecosystem.

Information and Communication Technologies (ICT): Are technologies that use microelectronic means for collecting, storing, processing, searching, transmitting and presenting data, texts, images, and sound.

Virtual Reality: Is a world (objects and subjects) created by technical means, transmitted to a person through his sensations: sight, hearing, smell, touch, etc. Virtual reality imitates both impact and responses to exposure.

Internet of Things: Is a concept of a computer network connecting things (physical objects) equipped with built-in information technologies for interacting with each other or with the external environment without human intervention.

Artificial Intelligence Technologies: Technologies based on the use of artificial intelligence, including computer vision, natural language processing, speech recognition and synthesis, intelligent decision support and promising artificial intelligence methods.

Neurotechnologies: Are technologies that provide monitoring of the activity of the brain of a person or other vertebrates and (or) control over it.

Electronic Commerce: Is a segment of the economy that includes the purchase and sale of goods, works, services, rights to use electronic content using electronic means of communication, primarily the internet.

Electronic Document Management (EDM): Is a document management system in which the entire array of created, transmitted, and stored documents is supported using information and communication technologies on computers united in a network structure, providing for the possibility of forming and maintaining a distributed database.

Digital Platform: represents 1) model of activities (including business activities) of stakeholders on a common platform for functioning in digital markets, 2) platform that supports a set of automated processes and model consumption of digital products (services) by a significant number of consumers, 3) an information system that has become one of the leading solutions in its technological niche (transactional, integration, etc.).

Data Transmission Channels: Are devices and means through which data (information) is transmitted at a distance.

Blockchain: Is a technology that combines several mathematical, cryptographic, and economic principles that support the existence of a ledger distributed among several participants.

Global Cybersecurity Index: Characterizes the level of cybersecurity in the country, organizational measures in the field of cybersecurity, the presence of state educational and scientific institutions, partnerships, cooperation mechanisms, and information exchange systems that contribute to building capacity in the field of information security.

Data: Presentation of information in a form suitable for automatic processing.

New Production Technologies: Include cyber-physical systems, sensor technologies, 3D printing, computer engineering, robotics, qualitatively different production resources (nanotechnology and new materials), etc. Their widespread introduction will optimize production processes, increase the efficiency of resource use, reduce downtime equipment and the cost of its maintenance.

Digital Economy: Is an economic activity in which digital data is a key factor in production, processing large volumes and using the analysis results of which, in comparison with traditional forms of management, can significantly increase the efficiency of various types of production, technologies, equipment, storage, sale, delivery of goods and services.

Quantum Technologies: Are technologies that function by manipulating complex quantum systems at the level of their individual components.

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