Digital Transformation of Small and Medium Enterprises in India

DIGITAL
TRANSFORMATION OF
SMALL AND MEDIUM
ENTERPRISES IN INDIA

Contents
LIST OF TABLES.....................................................................................................................2
LIST OF FIGURES....................................................................................................................3
ABSTRACT...............................................................................................................................4
NTRODUCTION.......................................................................................................................5
Chapter-1 Theoretical background of the study.........................................................................6
The technology uses in digital transformation...........................................................................8
Internal factors...................................................................................................................10
Factors that influence digital transformation...........................................................................13
Studies relating to the importance of technology of digital transformation in SME
performance..............................................................................................................................13
Research gap............................................................................................................................15
Chapter-2 Research methodology............................................................................................15
Chapter-3 Analysis, a summary of findings and discussion....................................................20
Chapter-4 Conclusion...............................................................................................................36
LIST OF REFERENCE...........................................................................................................39
APPENDICES............................................................................................................................1
Appendix. 1 Questionnaire.........................................................................................................1
Appendix. 2 Tables................................................................................................................9
LIST OF TABLES

Table 1. Demographic profile of respondents..........................................................................22
Table 2. Association between internal and external attributes and business performance......31
Table 3. Association between internal attributes, external attributes, and business
performance..............................................................................................................................32
Table 4. Effect of internal attributes on business performance................................................33
Table 5. Effect of external attributes on business performance...............................................34
Table 6. Effect of capabilities fit on business performance.....................................................34
Table 7. Effect of resources fit on business performance........................................................35
Table 8. Effect of changes in the business model on business performance...........................35
Table 9. Effect of external capabilities and resources fit on business performance................36
Table 10. Effect of Government regulations on business performance...................................36

LIST OF FIGURES
Figure 1. Demographic profile of respondents........................................................................23
Figure 2. Drivers induce the adoption of digital transformation..............................................24
Figure 3. Technology do you use for digital transformation...................................................25
Figure 4. Benefits derive from digital transformation.............................................................25
Figure 5. Capabilities fit...........................................................................................................26
Figure 6. Resource fit...............................................................................................................27
Figure 7. Changes in business model.......................................................................................28
Figure 8. External capabilities and resource fit........................................................................29
Figure 9. Government regulations............................................................................................30
Figure 10. Business performance.............................................................................................31

ABSTRACT
The objective of the study is to find out the relationship between digital transformation factors
and SME performance. To answer the research objective, the researcher conducts the study
among SME entrepreneurs in South India. Our results showed thatexternal attributes and internal
attributes except capabilities fit had a strong relationship with business performance. Overall,
both attributes had a positive association with business performance. Also, it is unsurprising to
find that external attributes have more impact than internal attributes on business performance.
To sum up the analysis, external capabilities and resources fit had a more impact than other
attributes on business performance.

NTRODUCTION
Digitization is emerging as a buzzword in the business world. Companies face
tremendous pressure from the external environment to transform their business model at
different paces with different results. Technological transformation integrates on improving
operational process and accelerates customer experience to a great extent. Successful
business transformation relies on management. SME abbreviated as small and medium-size
enterprise, small in size, and the owners are the managers. Digitalization is not creating a new
business but redefining the traditional industry to utilize existing assets’ resources in a new
way. SMEs are the backbone of the Indian economy, contributing a lot to economic and
household aspects (Singh 2017). But in recent years, there has been tremendous industry
evolution in the business environment. Such a revolution paves the way to technological
advancement and introducing automation in the competitive business environment. The main
intention of the change is to make a sustainable development for the organization.
Digital transformation refers to changes in job and income creation strategies. Besides, a
flexible management model helps to meet changing demands, meet competition. It is a
process of redefining the business in digitizing the operation and formulating extended supply
chain relationships; practical use of the internet in design, manufacturing, marketing, selling,
presenting, and data-based management model (Schallmoet al. 2020). The main objective is
to increase the firm’s capabilities, and its process rises to a great extent. Some of the digital
transformation pillars are big data, the Internet of things, AI, and chatbots that help SME
enhance their competitiveness in the global market. Many companies in India have faced
tremendous pressure from the external environment to transform their business model at
different paces with different results. Still, it is not easy for them as there is no complete
overview about the changes and digitizing their work. Many studies have endorsed a
significant digital transformation impact on the organization’s performance (Bughin et al.
2019; Ślusarczyk 2018). Thus, the study focuses on identifying the relationship between
digital transformation and SME performance. Besides, it measures the impact of digital
transformation on SME performance in India. In the end, the study will provide insights into
the SME to realize the importance of digital transformation. Besides, it helps identify the
attributes that induce digital transformation and how it impacts SME performance. companies
will improve their performance by reading this article and implementing the solutions
provided by this article

The study aim is to find out the factors that influence digital transformation among
SMEs in India. The objective of the study is to find out the relationship between digital
transformation factors and SME performance. Also, it evaluates how digital transformation
attributes influence SME performance in India.
 What are the factors that influence digital transformation in SMEs?
 What is the relationship existing between digital transformation attributes and SME
performance?
 How much impact does digital transformation factors had on SME performance?
Chapter-1 Theoretical background of the study

Digital transformation
Significant advancements in new digital technologies like social networks, mobile,
and big data induce the companies to virtually conduct the transaction (Fitzgeraldet al. 2014;
Rosset al. 2016). All industries are involved in conducting the activities through digital
technologies primarily to explore and explore the benefits. Industries engaged in the
transformation of key business operations and influence products, processes, organization
structures. The action, in turn, induces the companies to establish the management practices
in governing complex transformation (Matt et al. 2015). Overall, society is facing a rapid
and radical change due to digital technology’s maturation and their pervasivepenetration of
all markets (Ebert, Duarte 2016). This is primarily to meet the increased demand from
customers. Companies face tough competition due to globalization and pressure from the
external environment to go digital before others (Westermanet al. 2011). The primary reason
behind this is seeking to survive for an extended period and gain a competitive advantage
(Bharadwaj 2000). Recently, born-digital pioneers have grown into powerful giants, and the
companies who are doing conventional way of doing business are under severe threat
(Sebastianet al. 2017). To meet the constraints, companies are making an effort to overcome
the challenges through digital transformation (Zinder, Yunatova 2016). To have a successful
transformation, the organization must develop a wide range of capabilities that vary
depending on business or organization requirements.
Digital technology plays an integral role in operating business and organization
effectiveness, redefining the business to remain competitive in the market (Carcaryet al.
2016).Digital transformation is of implementing digital technologies innovatively. It has a
significant extent on its shape and operations (Mattet al. 2015). It is alsoreferring as a
systematic approach, highly complex, and companywide endeavor (Hesset al. 2020). It
changes the way of doing business. It is also keen on how individuals and organizations, and
groups operate, communicate, and create values through information technology (Onay
2018). Digital transformation is keen on accelerating the harmony between business
functions in improvingproducts, services, and business models (Hesset al. 2020). Drivers of
digital transformation are defined as the factors supporting and significantly influencingan
organization (Morakanyaneet al. 2017). Wade’s report, technologies like social media, the
internet of things, big data and its tools and applications, platform for communication, and
collaboration applications significantly affect digital transformation (Wade 2015). Thus, the
above-stated tools and technologies are the primary attributes of digital transformation.
However, Kaneet al. (2015) have pointed out in the study that applying digital technologies is