SME BUSINESS EFFICIENCY SURVEY

Transcription

1 SME BUSINESS EFFICIENCY SURVEY 2017

2 Executive Summary In the highly competitive Australian marketplace, small and medium sized businesses need to run as efficiently as possible, in order to remain competitive and grow the business sustainably. Australian SMEs tend to feel that they are being run efficiently, with 81% of organisations stating that, overall, they re running a lean operation. And yet, that statistic only tells part of the story. Australian organisations also often struggle to invest in high level efficiency, and though many of them believe that they are running efficient businesses, the statistics also show that there is a lot more that they could do. This is the third annual OKI SME Business Efficiency Survey, was started in 2015 as a way of tracking the ongoing health of Australian small businesses, from an efficiency point of view. The comprehensive survey not only tracks the general perceptions of efficiency, but also delves deeply into where the efficiencies are coming from, how organisations that embark on efficiency initiatives then invest the savings, the challenges that businesses face in achieving efficiencies, and then general perceptions around the next wave of efficiency. Tracked year-on-year, there is the sense that Australian businesses are becoming increasingly aware of what they can achieve through efficiency investment, but at the same time, the data suggests that businesses are finding themselves unable to invest as much into efficiency as they might like to. Overwhelmingly, the investments that are going into efficiency at the SME end of the Australian business spectrum are focused in on the low hanging fruit - simple, small things that can be done cheaply with IT systems, rather than major projects around automation and the like which would deliver major savings. The data also suggested that the biggest challenge is in resourcing, and businesses finding the ability to initiate the first business efficiency campaign. Once that first campaign has been financed, the data suggests that the savings is split evenly between saving the money, reinvesting in additional efficiencies, or investing the business, showing that an efficiency campaign is an effective way to mitigate financial risk within an SME, or alternatively, an opportunity to find additional scale. And, of course, the more efficient the business, the easier it can resource its ambitions to scale, as an efficient business is less expensive to grow. Page 2

3 Contents EXECUTIVE SUMMARY 2 CONTENTS 3 METHODOLOGY 4 RESULTS 5 DEMOGRAPHICS 5 HOW EFFICIENT ARE SMES? 8 WHAT IS DRIVING INEFFICIENCY IN THE BUSINESS? 10 HOW SMES ARE TAKING ADVANTAGE OF EFFICIENCY 13 INSIGHTS ON AUTOMATION 15 CONCLUSION 17 Page 3

4 Methodology In July 2017, OKI created an online survey, in order to better understand how new technologies are impacting on the efficiency of small to medium businesses in Australia. The survey was ed out to 3,000 of OKI s active Australian business customers, with a narrow focus on the IT decision makers within each organisation. In the majority, it was the business owners and others in high-level management positions that answered the SME Business Efficiency Survey, with responses gathered across a wide cross-section of industries and sectors. This was a branching survey, in that the questions that each respondent saw were determined by the previous answers they had made. Specifically, the survey questions branched depending on whether the decision maker felt like the business was being run efficiently, and whether he/she felt that it was not being run efficiently. The questions asked through the survey are essentially the same as were asked in the 2015 and 2016 OKI SME Business Efficiency Surveys. We felt that the greatest value in the data was in being able to compare trends from one year to the next, and with that in mind, we have maintained the question set across years. Throughout this report we will be making reference to how this year s report compares to the historical data from last year. Page 4

5 RESULTS Demographics The 2017 OKI SME Business Efficiency Survey was sent to 3,000 small and medium business owners and senior decision makers that are existing customers of OKI, across the entirety of Australia. We invited customers across all six states and two territories to participate in the survey, and these businesses operate in a wide range of sectors and employ varying numbers of full time staff. In terms of location, NSW was the most populous, with 30% of responses coming from businesses located in the state. This was followed by Victoria (26%), Queensland (23%), South Australia (8%), Western Australia (8%), and the ACT (3%). Tasmania and the Northern Territory each accounted for 1% of respondents. Finally, a further 1% of respondents selected Other, representing businesses that had key operations overseas, or were headquartered overseas with local branch offices. Overseas locations were New Zealand and/or Papua New Guinea. Compared to 2016 report: The demographics were similar, with 35% of responses from NSW, 26% from Victoria, 25% from Queensland, 6% from South Australia, 4% from Western Australia, and 1% each from the ACT, Northern Territory, and Tasmania. ACT NSW Northern Territory Queensland South Australia Tasmania Victoria Western Australia Other (Please Specify) Graph #1: What state is your business located in? Page 5

6 In terms of company size, this survey remains targeted towards SMEs, and OKI provided the survey predominantly to smaller businesses. Of responses, 70% came from the owner or decision maker at a business with between 1-5 full-time staff, and a further 17% came from organisations with 6-20, 6% came from organisations with 21-50, another 6% from organisations with , and 1% of responses were from organisations with over 200 people. These numbers are approximately in-line with the results from the 2016 survey Graph #2: How many full-time employees do you have? Australia s SME space is a vibrant, innovative, and entrepreneurial one, with small businesses thriving in a vast range of different sectors. For this reason, breaking demographics down by sector is always challenging, as is reflected in this year s survey data where, as with last year s the other category dominated the responses to the question of which vertical the business operates in. A full 25% of businesses operated within businesses outside the norm, ranging from HR, not-for-profit, and tourism, through to consulting, beauty therapy, and logistics and distribution. Of the other sectors, Retail was the largest (11%), followed by IT (9%), Manufacturing (8%), and Financial Services and Construction (7%). Page 6

7 Administrative/Support Services Agriculture/Environmental Construction Creative Industries/Entertainment Education/Training Financial Services IT Manufacturing/Transport Marketing/PR/Advertising Medical/Health Mining/Resources Real Estate/Property Retail Other (Please Specify) Graph #3: What sector does your business operate in? Page 7

8 How Efficient Are SMEs? At the most basic level, the overwhelming majority of Australian SMEs believe that they are running costeffective businesses. This reflects the commercial necessity for Australian businesses to run lean, and the cost of doing business in Australia being significant enough that running cost-effectively is a critical concern. Of those surveyed, 82% of respondents felt that their businesses were, on the whole, running cost-effectively. Compared to 2016 report: This is a significant lift on last year, where 76% of respondents said that they were running cost effective businesses. Yes No Graph #4: Is your business running cost effectively? However, despite the positive sentiment towards the efficiency with which Australian SMEs are being run, much of this efficiency is coming from a recent proactive drive towards efficiency. Over 50% (51%) of SMEs surveyed said that they have implemented new initiatives to improve their cost efficiency over the past year. A further 21% are planning on implementing cost efficiency initiatives within the next year. Just 28% of organisations have neither implemented new cost efficiency initiatives in the last year, and have no intention to in the year ahead. Compared to 2016 report: There is some deviation here when compared to the 2016 report, which found that a larger number of organisations had implemented cost efficiency initiatives in the past year (65%), and that significantly fewer were planning on implementing new cost efficiency initiatives in the year ahead (13%). Page 8

9 This suggests that of those organisations that aren t consistently undertaking efficiency programs, the next year ahead will be one of investment for businesses, looking to modernise their operations, IT, and general business efficiency. The data suggests that for many businesses it has been some time since the last investment in efficiency, with businesses looking to capitalise on the significantly improvements into business efficiency that are now being offered over a number of years ago. Yes No, but we are planning to within the next year No, and we have no future plans to Graph #5: Have you implemented new initiatives to improve cost efficiency over the past year? Page 9

10 What is driving inefficiency in the business? When we look at where businesses are making investments to improve efficiency, there are three key trends that emerge in terms of where businesses see inefficiencies in their organisations; SMEs are making investments in general efficient IT technology, improving their business efficiency through Website/ Apps/ ecommerce, and making investments in Digital Marketing/ Online Advertising. Of businesses that have invested in business efficiency in the past year, 74% made investments in efficient IT, a further 29% invested in Website/ Apps/ ecommerce, and 28% invested in Digital Marketing/ Online Advertising (Note: For this question respondents could pick multiple responses, to reflect that many have made investments in multiple categories). What is noteworthy is that, for all the interest in Big Data, automation, and other advanced IT technologies that are being lauded for the efficiency that they bring into an organisation, Australian SMEs are still overwhelmingly more interested in finding efficiencies in general technology. While 74% have invested in making technology purchases that improve the efficiency of the IT in the organisation, only 18% have invested in automation. Compared to 2016 report: This question was worded slightly different to how it was in the 2016 report, in order to break general IT purchases out from other technology categories. The massive response to the new general IT purchases category shows that, when an SME business is making efficiency investments in any category, technology is often the principle driving factor. General effici... Other (Please S... Automation Website/Apps/... Digital Marketi... Supply chain an Leasing Office/... Operational mat... HR/Staffing co... Graph #6: Where have you made investments to improve efficiency and reduce long-term costs over the past year? Page 10

11 When we asked SMEs about the primary challenges preventing their organisation from realising greater efficiencies, a lack of finance to make up-front investments was the most common challenge, with 26% respondents highlighting this problem. It was closely followed by both staff skilling challenges (24%) and technology challenges, such as legacy equipment, and slow Internet preventing the adoption of Cloud-based services (24%). Technology chal... Staff skilling... Lack of finance... Regulatory/leg... We are unaware... Other (please S... Graph #7: What is the primary challenge preventing your organisation from realising greater efficiencies? Having the lack of capital to make investments into efficiency is significant, considering that, when organisations are making investments into efficiency, they re also not investing heavily. According to those surveyed, 59% of organisations spend less than $5,000 per year on efficiency initiatives, and a further 26% spend between $5,001 and $15,000 on efficiency. A total of 6% spend over $50,000 on efficiency strategies, suggesting that for those organisations that can afford it there is a real appetite and sense of urgency for investing heavily on keeping an organisation s costs down, but for the most part constrained budgets limit an organisation s ability to invest as heavily on efficiency as they might like. These constrained budgets lead SME organisations to make what investments they can in areas that they can afford such as general IT purchases, in which greater efficiencies can be achieved through small - or a series of small investments. Page 11

12 Compared to 2016 report: There has not been significant changes in terms of what inhibits an organisation s ability to make investments into efficiency. In last year s report, the lack of finance to make investments was also the top response to this question (at a slightly higher percentage 30%), followed by staff skilling challenges (25.0%). Where there has been a slight shift is in awareness. Last year 14% of respondents said that they were simply unaware of how they could achieve greater efficiencies, but this has dropped to 13%, while technology challenges as an inhibitor is up to 24% from 13%. So there is more awareness among SMEs that there are opportunities to realise better efficiencies in their environments, even if they re not sure how to achieve it, given the technology they have access to. 0-$5,000 $5,001-$15,000 $15,001-$50,000 $50,001-$100,000 $100,001+ Graph #8: How much does your organisation currently spend in a year on technology to increase efficiency? Page 12

13 How SMEs Are Taking Advantage Of Efficiency Finding new efficiencies in the business is seen as an opportunity to mitigate financial risk within the organisation by saving money. The most common use of savings that the investment in new, efficient technology returns to business is in savings, with 35% of SMEs opting to save at least some of the savings from an efficiency campaign. 23%, meanwhile, are reinvesting the savings into finding further efficiencies, using the savings from the initial efficiency campaign to address the challenge that many SMEs are facing in financing efficiency campaigns. The third most common use of the savings is to re-invest it into developing additional products and services - to grow the business, in other words (22%). Note: Many SMEs are using the efficiency savings for multiple purposes in this survey this question allowed respondents to pick multiple options. We are re-investing it into finding further efficiencies We are investing in innovation/gaining competitive advantage We are using it to recruit additional staff We are using it to expand into additional products and services We are using it to fund additional marketing activities We are saving the efficiency savings We have yet to see any savings Other (Please Specify) Graph #9: How are you leveraging the savings that new technology provides to your business? Page 13

14 Where investment is concerned, many SMEs do agree that technology is a key opportunity in finding cost savings. To the question do you consider finding new ways to implement technology into your business to be a key opportunity for competitive advantage? 74% of respondents acknowledged that technology did need to be front of mind when investing in efficiency. Compared to 2016 report: Interestingly, there are fewer business leaders that believe that finding new ways to implement technology into the business is a key opportunity for competitive advantage. In 2016, a full 92% of respondents saw the opportunities there, suggesting that while businesses still see the value in efficiency and new technology investment, it is becoming more frequently a savings opportunity than a competitive advantage one. There is, however, a slightly lower inclination to simply pocket the savings from an efficiency campaign. According to the 2016 survey, 37% of respondents were saving the savings from efficiency campaigns. And, compared to the 23% of organisations that are investing efficiency savings into finding further efficiencies, in 2017 only 16% of business leaders saw that as a priority. Yes No Graph #10: Do you consider finding new ways to implement technology into your business to be a key opportunity for competitive advantage? Page 14

15 Insights On Automation Automation has been identified as a major opportunity for businesses to leverage technology for competitive advantage, and to realise better efficiencies within organisations, either by making some jobs redundant, or by liberating staff from menial tasks in order to concentrate on real value creation for the business. However, automation is expensive to implement well, and many Australian SMEs are wary of attempting it. As part of this year s survey, we asked for respondents to share their thoughts on the question Is automation the only solution to efficiency in the business and why/why not? Below are some of the common themes that respondents wrote: Automation helps reduce the need for more staff to produce the same job. The original cost might be large but on the long run it is more effective than hiring more staff who prove to be an ongoing cost. No. Staff training and positive attitudes are key to the growth in efficiency in addition to any automation. Another factor in realising any gain in efficiency is the sense comradeship and teamwork amongst the staff and management. No, automation is not the only solution to efficiency in the business. There are multiple solutions including staff willingness to embrace technology and change, management willingness to engage consultants and seek advice, and of course stakeholders willingness to invest in people and systems. Automation has its place within businesses especially in manufacturing and certain tasks within the front end of businesses. The greatest efficiency is created with training staff and working with the technologies provided. But at the same time not destructing the human contact with its customers! Without customers there is no business. Yes automation is critical to achieving higher productivity. The more tasks and processes that can be automated, the more labour hours can be directed towards increased customer service and high value activities. Automation is not the only solution to efficiency in business but is often an enabler. Hiring and training the right staff is also important, Not all automation will result in efficiency. The automation needs to be right for the business - smart automation is essential. No-automation is costly and is less effective in small businesses. Absolutely not. It is an important solution, but human processes and relationships are also key. Efficiency is not only about time and dollars, as investing in relationships and partnerships is vital. The greatest efficiencies don t happen in isolation, but as a whole. Automation can be an effective tool in a business but it needs to be applied in an appropriate manner. Complete automation takes out human creativity and satisfaction - two key areas for ongoing success in a business. Sometimes, although automation may be efficient, it sucks the life out of what would otherwise be a gratifying career. Page 15

16 Automation technologies enable you to free up valuable time spent on redundant processes and help focus your attention on growing your business. A wide-variety of automation tools are available to enhance a small business s digital presence and marketing campaigns. These business automation tools can make a business reach a success by leveraging , social media and web services. A combination of efficient staff and efficient equipment is the combination for an efficient profitable business. For business that rely on repeatable processes, automation is valuable, if they can confidently identify the necessary steps that lend themselves to automation. Automation isn t the only solution but it certainly one area where the dividends are tangible immediately. Long-term I view procedural and administrative improvements will benefit my business in reducing risk and increasing the quality of service for clients. Like everything in life and in business a holistic approach is required. Page 16

17 Conclusion Australian SMEs generally believe that they re running efficiently. But, those same organisations realise that there is much more that could be done, given the resourcing and opportunity to make it happen. The bulk of efficiencies that Australian organisations are finding are in general IT hardware, Internet connection, printers and other similar technologies. 74% of businesses made investments in finding efficiencies here; a far higher percentage than looking for any other efficiencies within the organisation, and more than double the percentage of organisations that are investing in high-end efficiency technology, such as automation. This is partly because there is a resistance to automation among Australian SMEs. In some cases it s because the business itself exists in an industry sector where automation doesn t really apply it s useful to remember that Australian SMEs are an incredibly diverse bunch. But, equally, it s because the budgets for efficiency programs among Australian SMEs tend to be very low. Almost two-thirds (59%) of Australian organisations spend less than $5,000 per year on efficiency initiatives, and a full three-quarters (75%) spend less than $15,000 on efficiency projects. At that scale, general IT efficiency projects are manageable and affordable, but higher-end projects are out of reach, meaning that though Australian organisations could benefit from automation, Big Data, and other new technology concepts, financing them is simply unrealistic. 26% of organisations reported that financing was a regular inhibitor to efficiency campaigns. However, when a efficiency program is executed on, businesses use the money saved to benefit the organisation in three significant ways: saving the money saved, helping to mitigate against financial risk in the business (35%), reinvesting the savings into finding further efficiencies for the organisation (23%), and using the money to grow the business by developing new products and services (22%). This characterises the Australian spirit in entrepreneurship and the desire to build sustainable businesses, It also shows that there s an earnest desire among Australian businesses to continue finding new efficiencies even for the majority of SMEs that believe that they are running efficiently. The OKI SME Business Efficiency Survey, 2017, shows that for all the talk that s been happening in the Australian business community about running lean and efficiently, business leaders and entrepreneurs are still on the lookout for greater opportunities, particularly if those opportunities can be more strategic in nature; if a business can find a way to finance a project to not only achieve efficiency, but also enhance the business, then this will be far preferable than simply saving some money on equipment purchases, which most businesses are already comfortably on top of. Page 17