Digital transformation of business models in SMEs
Authors:   , van Tonder Chanté 
Published: September 2023

Small and medium-sized enterprises (SMEs) are regarded as the backbone of most economies worldwide. They are key role players in job creation, economic growth and poverty alleviation. SMEs face many challenges such as resource constraints; a lack of skills, innovation, digital skills and finances; and continuous changes in the business environment. One such change is the Fourth Industrial Revolution, also referred to as Industry 4.0. SMEs lag in the adoption of digital technologies and are still using conventional methods as part of their business models, which poses a threat to their survival and competitiveness. Industry 4.0 comprises many constructs, including digitalisation and digital transformation. While digitalisation and digital transformation require a business to make changes to its business model, and business model innovation (BMI) offers such an opportunity, no study has combined the BMI process with digital transformation to determine if SMEs are digitally transforming their business models. The overall aim of the study was to determine the degree to which South African and Dutch SMEs are digitally transforming their business models. To achieve the overall objective, the study aimed to (1) review existing literature in the field of digitalisation, digital transformation, and business model innovation, (2) review the current state of the use of digitalisation and business model innovation in South African and Dutch SMEs, (3) develop a conceptual model to assess if South African and Dutch SMEs are achieving business model innovation through digital transformation and determine how this affects their overall business performance and (4) assess whether South African and Dutch SMEs are achieving business model innovation through digital transformation and determine the impact this has on their overall business performance. This study followed a five-stage approach. The first stage consisted of a preliminary literature review to explore current research and debates on digitalisation, digital transformation and BMI, with a particular focus on SMEs. In the second stage, a narrative review was conducted to examine the literature with the aim of identifying and analysing the constructs underlying the three concepts of digitalisation, digital transformation and BMI. The third stage was a Delphi study conducted with South African and Dutch SMEs and scholarly experts in the closely related fields of entrepreneurship, technology, business management and innovation to identify the main and sub-factors that enable digital transformation for BMI in SMEs. The fourth stage was a systematic review to identify the dimensions that are included in digital maturity models and to determine ways in which BMI is achieved. The last stage consisted of developing and empirically testing a research model based on the results of stages 3 and 4. The findings of the aforementioned studies led to the development of a research model. This research model was developed and empirically tested on South African and Dutch SMEs. The results indicate that BMI through digital transformation has a positive impact on the overall business performance of SMEs. In addition, the flexibility of the organisational structure and strategic renewal acts as moderator between the relationship of BMI through digital transformation and business performance. The proposed framework that resulted from this study guides SME owners and managers in ways to achieve BMI through identifying potential areas to integrate digital technologies, which is unique in its nature. This study is also one of the first to conduct an empirical research study to assess the degree to which South African and Dutch SMEs are digitally transforming their business models. SME owners and managers can therefore use the measuring instrument to assess the degree to which their business model has been digitally transformed. The instrument could also highlight areas of concern and for improvement.