The latest Lloyds Bank UK Business Digital Index examines attitudes of SMEs towards digital technology and how it is changing the way they do business. Nick Williams, MD, Consumer Digital at Lloyds Banking Group, discusses the findings and how Lloyds is helping small businesses to develop their digital skills and get online
Small businesses, particularly sole traders, are seriously lacking basic digital skills according to the latest Lloyds UK Business Digital Index 20161. The findings, published in October 2016, are particularly concerning when businesses increasingly rely on technology and digital visibility to grow in today’s global marketplace.
The report shows the dramatic impact technology can have on small business and charities and yet 38% of small businesses don’t yet have basic digital skills and this increases to 50% for sole traders. Nick Williams, MD, Consumer Digital at Lloyds Banking Group, talks to Financing Growth about the findings, and the implications for businesses today.
How significant are the findings? The findings are very significant for small businesses in the UK. It moves digital away from being a ‘nice to have’ to being essential for future success. It’s evident from the research, both quantifiably and quantitively, that the benefits that digital can bring to organisations – whether sole traders or small businesses with multiple employees – are there for all to be gained. The benefit most often cited is saving time. This is a challenge, particularly for sole traders – as they must invest in time to save time. As a sole trader, you are the managing director, the finance director, the marketing director, the IT director, and also the chief digital officer – all at the same time.
There are also new revenue opportunities that businesses can tap into from different geographies. We have case studies of small businesses where they have been able to extend their reach into different parts of the country because they now have a digital distribution. A butcher near where I live, for instance, has been a market trader for 25-30 years; however, his business was declining. He decided to trade online and he set up a Facebook page and started to reach out to different people. He now distributes his products across the country and his turnover has grown tenfold. The statistics show that future prosperity from those companies is much higher if they are digitally enabled. What we have seen is that only 21% of small businesses are using digital to export. In today’s climate, being able to export across borders is becoming more important. The research shows that there are massive growth opportunities with digitally enabled organisations – in the UK and beyond. The data highlights that the most digitally enabled small businesses are twice as likely to report an increase in turnover than the least digital.
Is it worrying that so many invest little, if nothing, in their technology?
Yes, many businesses have no plans to invest in their digital capabilities, whether that’s technology or the skills required. There are several barriers to increasing your digital capability for small businesses, such as access and connectivity, i.e. the infrastructure in place for you to get online. However, the biggest challenges are around motivation and skill. You can have access to the internet, and be able to use it for simplistic things, but the majority of small businesses are struggling to take the opportunities because they don’t have the skills, either within their organisation or themselves. What holds them back from developing their skills is the time required, and the motivation. There are still large parts of the small business community who don’t see the benefits of having digital skills. The motivational aspect is key – if you can demonstrate what the benefits are, that will be the catalyst to invest more in skills.
Is the age of a business a factor in this?
Younger businesses that have started up over the last three or four years typically have more of a digital mindset. They built their businesses with digital as an inherent part of their organisation. Social media is becoming the strongest way of telling the story of what your organisation is about. For the older, more mature businesses that have been around with different generations of families, or who trade face-to-face (like the butcher on the market stall), the benefits of digital are not immediately obvious to them. We need to raise awareness of the opportunities and benefits that digital brings, including saving time, reducing your costs, and being more efficient. The time you save in efficiency can be spent with your loved ones on a Sunday morning rather than doing your accounts.
So what support does Lloyds and others offer businesses?
As part of Lloyds Banking Group, I sit on the Council for Digital Inclusion with Matthew Hancock MP, Minister of State for Digital and Culture. We look after the ‘task and finish’ group focussing on small businesses. We have completed an audit and review of all the support that is in place for small businesses in this area and found that 50% of it is concentrated in London. It is disjointed and sporadic and therefore difficult to navigate your way to that information online. There needs to be a greater balance in where the support is available across the whole of the UK, and better signposting on where and how to find that support. And there are some great initiatives: for instance, we have been partnering with Google, BT, Hugo Fox, and Reason Digital to run the concept of ‘Google Garage’ (Google created this proposition on the back of the Index). We run half-day workshops for small businesses and charities and we take them through the benefits of, and opportunities to extend their digital capabilities, and to explain social media. We use Google to do that and to share how they can use the online environment, such as Google Analytics, to analyse their business performance better. We have run the workshops in London, Edinburgh, Sunderland, Manchester, Liverpool, and Stevenage, and three are still to be held this year in Cardiff, Birmingham and Chelmsford. The workshops are giving us a great opportunity to talk locally with small businesses and they have gone down incredibly well. Typically, we get 95-100% positive feedback on recommending the course to friends, families and business associates. By definition, these businesses are not online so you can’t reach them online – we have to reach them at a physical location. We ran a pilot in the North East with the Tinder Foundation with small businesses and discovered that small businesses that operate and trade in the same community, though in different industries, can share their skills and knowledge with each other. Because they understand the context of the environment in which their businesses are located, it works incredibly well.
What are the implications for not embracing digital?
Some businesses will continue to prosper because they prosper in the local markets. The real challenge for them is thinking about where their customers are. We are one of the most digitally-savvy nations on the globe. When you look at percentage of GDP spent in retail online e-commerce, we have a higher spend than many other countries and proportionally, we spend more money online. That’s where your customers are. If your customers are online and you are not, you are missing your shop window. The biggest concern I have for businesses that are not online is that they are missing the opportunity to remain engaged and connected with where their customers are going and what they are talking about via social media. That said, there are always parts of society that prefer not to be online, and will continue to run their businesses and interact in a physical environment. The growth is in the online space and they will be missing out on that.
What are the implications for cyber security? This is now a key issue for small businesses. The digital world is progressive and what the Index shows is that you may be digitally mature this year, but if you don’t continue to evolve and invest in your skills and what you are doing, you can fall behind because of the advancements in technology. As organisations become more mature in their digital capabilities, they have to be thoughtful and prudent about the way they protect their businesses online. The Index is starting to show that small businesses are thoughtful about this. If they continue to progress the maturity of their digital capability they now need to invest in the security of their online environment.
What else is Lloyds doing to support businesses?
We now have 22,000 ‘digital champions’ in Lloyds Banking Group. We made a pledge two years ago that we wanted to get to 20,000 digital champions in the company by the end of 2017. A ‘digital champion’ is a volunteering pledge taken by any colleague in the bank who wants to support and help two small businesses, charities or individuals to develop their digital skills and get online every year. We have had an amazing response. We support these colleagues by training them and helping them develop their own skills. It gives them a huge sense of pride in being able to help these organisations develop and progress their businesses, and they can see the real tangible results as they progress. We have also been piloting a programme with Accenture’s Digital Skills Academy called Digital Connect. This matches young people with digital skills to SME customers and recognises that many young people are not in employment, education or training. We provide them with the skills needed to complete apprenticeships. Organisations who need digital support give these young people 10-week placements. Some of these young people have then gone on to full-time internships and apprenticeships with these companies. We have also launched a digital volunteering map in collaboration with digital skills charity, the Tinder Foundation. This is a portal where we match the bank colleagues with digital volunteering opportunities. We’ve found 250 volunteering opportunities registered on the map so that colleagues in the bank can find that opportunity local to where they are. We also offer a comprehensive set of digital guides on the Lloyds website which include useful links including to Google Garage and Google Analytics.
What is the future for SMEs?
The outlook is positive. The Index shows improvement in overall digital maturity, and growing adoption of social media. The key thing for us is to continue the awareness and to drive the motivation for people to want to do it. It’s simple things, like not having your details online for customers to find you. Word of mouth continues to be a strong way of sharing your credentials and your reputation but the ability to have your digital footprint visible for people to see will be of growing importance for all.
Key findings of the UK Business Digital Index:
• 38% of small businesses (50% of sole traders), and 49% of charities lack basic digital skills • 21% of small businesses currently use digital to support overseas trade activities • The most digital small businesses are twice as likely to report an increase in turnover than the least digital • 78% of sole traders invest no money in digital skills • Just 51% of small businesses have a website in 2016 • 69% of small businesses acknowledged that they need to develop cyber security skills
CASE STUDY: Fairy Godmothers’ Pamper Palace
Fairy Godmothers’ Pamper Palace is a one-stop pamper party shop in Greater Manchester hosting celebrations for all ages – ranging from children’s birthday parties and baby showers, to hen parties and prom queen parties. The parties include make-up, nails and hair styling, as well as food and entertainment. The business was launched as a mobile business in 2014 by make-up artist Rebecca Warwick and qualified beauty therapist Jodie Clough, and they moved into their first premises in Stand Lane, Radcliffe, in 2015. They now have four employees. Rebecca credits social media (particularly Facebook) with driving the success of the business from the start. Facebook is the main source of business, with their page having more than 5,000 ‘likes’. The business also uses Facebook for recruitment. Rebecca says: “It’s a great way to find good candidates and to check them out before inviting them to interview.” However, she says customers still want the reassurance of being able to visit the company’s website fairygodmotherspamperpalace.uk, and having a well-designed website gives them the confidence that we are an established and professional business. Having spent £900 on hiring a web designer to build the site, the business went from hosting two to three parties a month, to seven or eight a week. The speed of growth has meant that the business has had to expedite its long-term expansion plans, and is now considering moving to larger premises – and franchising the brand across the country.