Digitalising SMEs on a shoestring

While large companies readily adopt digital technologies, small and medium-sized enterprises (SMEs) struggle to access the same solutions and are less open to embracing the digital wave.

This was one of the key findings of researchers at Cambridge University's engineering department. They also observed that SMEs often lack the funds, skills and confidence to implement digital transformations even though they make up around 90 per cent of businesses worldwide. In response, the researchers obtained a grant to explore ways to help SMEs bridge the digital divide.

Collaborating with IfM Engage, they developed Shoestring - a programme offering SMEs affordable, accessible digital solutions using off-the-shelf technology to boost operational and financial performance. The EBRD has partnered with IfM Engage to test this initiative with two Egyptian manufacturing SMEs and is now exploring opportunities to scale it nationwide.

Peter Templeton, Executive Director at IfM Engage, explained: "As the Internet of Things and digitalisation started to gain ground, there seemed to be three broad concerns which influenced SMEs' willingness to invest in new technologies. One was financial, as the word 'digitalisation' signalled to them a big investment relative to what they could afford. The second concern was a lack of confidence in the expertise to apply the technology, and thirdly, they weren't convinced of the value they would derive from this investment."

IfM Engage develops ways to use readily available technologies - sometimes open-source, such as consumer devices and low-cost sensors - and began applying these to SMEs' operations.

El Negma's pasta al dente

El Negma has been producing pasta in Egypt since the early 20th century, when it introduced this ultimate comfort food to the country. This family-run business has thrived for generations and today is managed by Hazem el Sawa, the founder's grandson. Hazem explains how know-how passed on through generations has enabled the business to thrive, despite the old machinery.

"As a medium-sized enterprise, we can't always afford the newest technology," he says. "Our machines are older models dating back to the '80s and '90s that we purchased from Europe and refurbished."

But a heatwave in Egypt last year threatened El Negma's production flow. A few of the company's clients returned batches of pasta, complaining about the quality.

"We ran tests on the samples and recognized that the heat of the water going into the production varied throughout the day," Hazem explains. "It was fine during the night, but during the day it rose above 30°C, which is what caused the pasta to go bad."

Although the production facility had a monitoring device, it was located on top of the plant's roof, which it made it difficult for staff to monitor the temperature of the water feed.

Hazem sought help from the EBRD office in Egypt, which introduced the Shoestring programme.

The Shoestring team installed a low-cost temperature sensor to monitor the production line, resulting in immediate benefits.

"Unfortunately, 'digitalisation' is a big word for a small business, which is often discouraged by its cost implications. But the Shoestring programme is perfect for medium-sized companies. It didn't require a huge up-front investment and the benefits were instant," Hazem says.

"We are now digitalising other areas of our business and are implementing additional Shoestring solutions to save time, energy and produce higher quality pasta."

Peter, who oversaw the project with El Negma, recalls: "It was inspiring to witness the enthusiasm across the entire organisation. From the chief executive to the technical support staff, everyone was excited about the new technologies and eager to apply these innovative methods."

The ABCs of digitalisation

Back in Cairo, ABC has been a family-run business for almost 30 years, supplying retail stores with all the fittings and interior design elements that contribute to Egypt's retail shopping experience.

When Hollie Marcos took over ABC from her father, it was still largely paper-based. While it was high-tech in many respects, management, operations, quality control and all other processes that accompanied production and distribution relied on manual filing systems.

Since then, Hollie has taken aim at increasing the company's productivity and boosting sales and exports by digitising all its systems through new technologies. ABC now has about 50 employees.

"When you work for a smaller company, it's reasonable to hire a few people to watch the production line. But as you start to expand, you require better systems for monitoring sales and pricing," Hollie says. "It's not easy to do as a solo business owner."

Support from the Shoestring programme helped Hollie adopt new technologies, such as barcoding, across her business, enabling her to better track production with software.

"The retail landscape in Egypt has changed significantly since the pandemic," she explains. "Larger shopping centres have largely replaced mom-and-pop stores, which has altered how we conduct business. We've had to pivot towards producing custom-made products for stores, requiring much more intensive project management on our part. Fortunately, our ongoing collaborations with major brands like Puma have helped us weather these challenging times."

Peter Templeton emphasised that the programme's success lies in building confidence across organisations, from production line workers to business leaders. As SMEs apply these solutions, they begin to see tangible benefits in production yield, energy costs and sustainability.

"Typically, businesses start to use a whole series of Shoestring applications, and afterwards recognise the need for an integrated approach,' he explains. "That means success for us, because it means they will have gone beyond the basic functionalities of Shoestring."

The EBRD is now exploring opportunities to scale the Shoestring programme nationwide, potentially helping more Egyptian SMEs bridge the digital divide and enhance their competitiveness in the modern business landscape.

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