Why SMEs are not Adopting Digital Manufacturing?

The term Industry 4.0 refers to the ongoing revolution of the manufacturing industry around the world and so as the fourth industrial revolution. The challenges of Industry 4.0 have been rapidly embraced by large companies in particular and are currently working vigorously on the introduction of the subsequent enabling technologies. The problem of having neither human nor financial resources to thoroughly investigate the potential and risks for introducing Industry 4.0 is often faced by small and medium-sized enterprises (SMEs). Yet, SMEs form the backbone of the economy in most of the countries as they account for the largest share of the gross domestic product and are also important employers.

The necessities, challenges, and opportunities of Industry 4.0 for SMEs need to be examined particularly, thus leading the way for the digital transformation of traditional SMEs into smart factories.

SMEs are a very critical component of a country and its business ecosystem as they play a major role in creating jobs and promoting economic growth, especially in developing countries. It's essential to note that manufacturing sectors and services adopt technology much slower in comparison to other sectors. Still, the digital era that we live in today allows every sector to undergo a major transformation across areas such as marketing, customer engagement, and financial management and sales, by leveraging the power of digital technologies. However, to embrace technology and embark on the path of digital transformation, there are a few digital manufacturing challenges that SMEs must overcome. So, let's have a look at some of these challenges.

Digital Manufacturing Challenges

Lack of Information and Awareness

Few SMEs who aren't aware of what impact digital transformation can have on business enablement and acceleration besides customer retention and loyalty. Thus, the decision to embrace a roadmap for digital transformation is often delayed or not taken at all. Due to a lack of knowledge and exposure to digital, a large majority of the SMEs are ignorant of the true benefits of digital transformation.

However, the participation of global digital-tech giants, government initiatives, and the introduction of mobile has prompted interest in digital adoption.

Lack of Investment Capacity/Insufficient Growth Capital

SMEs include only a few proprietors who bring in restricted capital concerning their equity. They work with margin pressures and cost and focus more on sustenance and sales. Therefore, they often don't seem to have sufficient growth capital and thus digital transformation and technology adoption are often held back.

Where the availability of the internet and corresponding hardware is limited, sourcing the basic components like the internet and connectivity of digital enablement proves to be challenging in such conditions. Even if the SMEs source it somehow, they feel that the starting investment along with the ownership cost is too high. And even though one wishes to give the investment a try, access to financing is quite challenging. While there are different sources of funding, the interest rates on such funding might ward their interest off.

Lack of Expertise

SMEs do not frequently come with innate technology expertise and hence it becomes tough for them to build a digital transformation roadmap all by themselves. The major challenge SMEs face in digital transformation is upskilling or sourcing talent to meet the technical expertise needed to adopt digital technologies. There's a gap between talent expertise and the pace of technology advancement, which creates a vacuum within the business. Due to the aforementioned gap, the SMEs don't want to risk an unfruitful investment with a deferred ROI.

The challenge is just not limited to talent sourcing. When it comes to the upskilling existing talent pool, the SMEs are also risk-averse. They need to invest in development and training and then, take up the challenge of finding the right business processes which facilitate the conversion of training into significant ROI.

Lack of Fit/Adoption

With newer, faster, and more convenient ways, digital technologies keep developing to empower customers. SMEs would have a fear for such a pace of change, and hence the struggle for accepting digital technologies. Besides, it also puts a lot of pressure on their capital for buying the latest smart devices, gaining the services of the best internet and cloud providers, and engaging skilled employees to manage this transformation.

Managing the Data and producing a Back-Up Plan

With digital technologies, the companies are likely to generate and store crucial data - structured as well as unstructured. Whereas for SMEs, it becomes tough to store, analyze, manage, and transform data into insights for business decision making.

Digital transformation implies compartmentalization and conversion of business processes into data. This data is prone to vulnerabilities such as cyber-attacks and data theft. These attacks can cause severe damage to businesses. It might also put the enterprise's name at risk.

Managing the cloud and training the resources, managing the data, the systems needed to handle, make these SMEs hesitant when it comes to embracing digital technologies.

How can these challenges be overcome?

The SMEs can gain huge benefits if they can approach digital transformation with a positive outlook. Usually, SMEs looking for a roadmap or guide that can help them to understand and plan their initial step towards digital transformation.

So how can SMEs adopt Digital Manufacturing?

When it comes to embracing technologies, smaller companies often face financial, skills, and cultural issues. Moreover, employing technology champions who can articulate their benefits is important. Even though the SMEs tend to be the suppliers on whom the large companies depend, they tend to be slower in introducing novel technologies than larger companies. This is an issue with digital technologies. E.g. robots being far more widespread at the top end of the industry.

The companies must ensure they're employing technology champions, those who are well-versed in understanding, and have the skills to articulate the advantages of the technology to their colleagues. Major projects that employ the supply chain can also be a significant way for tier one organizations to spread the word about the prospective of new technologies. SMEs in their overall business strategy will have to make a room for digital transformation. This could include sourcing the right talent/leveraging current talent to become digital-ready, finding the correct digital tools to start with. They must begin by taking minor steps, such as investing in a Customer Relationship Management (CRM), Supply Chain Management (SCM),  or Enterprise resource planning (ERP) to improve their digital exposure and expertise gradually. Then, they can step up and introduce Big Data, Automation, and AI, etc into their business operations.

Rather than scrutinizing it with a risk-averse lens, the main aspect of digital transformation is to look at it as a driver of exponential growth. With a proper security management plan in place, cyber risks can be anticipated and prevented to a large extent, making SMEs much more flexible. It's important to note that the path of digital-business growth is not linear, but exponential. This implies that it'll have a slow start, but once it draws pace, it will speed up growth across strategic business parameters.


To scale, and meet increasing customer demands, SMEs need to embrace technological advancements to become completely agile and flexible. With a strong digital mindset, the SMEs of today can embrace digital transformation effortlessly and become the global multinationals of tomorrow within a few years.