Good Practices and Tools for Digitalization of SMEs in theNatural Fiber-based Value Chains

Špela Pecnik, Martina Šestak, Katja Kerman, Patrik Rek, Tina Beranic, Aida KamišalicFaculty of Electrical Engineering and Computer Science, University of Maribor

Koroška cesta 46, Maribor, Slovenia{spela.pecnik,martina.sestak,katja.kerman1,patrik.rek,tina.beranic,aida.kamisalic}@um.si

Abstract. Digitalization has become an importantpart of our daily lives. The benefits of its introductioninto business are reflected in many success stories.On the other hand, it is increasingly recognized thatsmall and medium-sized enterprises (SMEs) play amajor role in contributing to the economy. However,there are various challenges that these companiesface in their digitalization process. In our research,we have identified these existing challenges and goodpractices and analyzed them with SWOT analysis. Theresults showed that many different funding schemesand assistance are available for SMEs. The maindisadvantages of this assistance are the lack of supportduring the application process, the large number ofconditions and the unadjusted funding.

Keywords. digitalization, SME, good practices, tools,SWOT analysis, natural fiber-based value chain

1 IntroductionNowadays, the term digitalization is mentioned andused in a large number of areas. At the same time,the economic and innovational potential of small andmedium-sized enterprises (SMEs) operating in differ-ent industry sectors is recognized increasingly by sev-eral European projects and initiatives. Various re-ports show that they can influence and contribute toa country’s economy significantly in terms of inno-vations, employments, and economic growth (Organ-isation for Economic Co-operation and Development(OECD), 2017). One of the possibilities to enable thesecompanies to develop further, grow, and operate suc-cessfully is the introduction of digitalization in theirbusiness process.

The establishment and usage of digitalization toolsmay accompany some issues and barriers, especiallyin less digitalized companies. Different indicators andmeasures are used to assess the digitalization level ofcountries. One of the most used is the Digital Econ-omy and Society Index (DESI), which measures thelevel of digitalization in six different areas (connec-tivity, digital skills, use of Internet services by citi-zens, integration of digital technology by business, dig-

ital public services, and research and development ofICT) (European Commission, 2019). Existing mea-sures do not provide an insight into the digitaliza-tion level, good practices and tools used within SMEsin the natural fibers‘ domain, so we focused on thisarea as part of this research. The study, which wasconducted within the EU-project Smart SME’s, in-cludes four regions/countries from the Alpine region- Baden-Württemberg region (Germany), Lower Aus-tria, Trentino (Italy) and Slovenia, from which we ob-tained existing tools and good practices and includedthem in the SWOT analysis. A SWOT analysis consistsof four areas that describe the strengths, weaknesses,opportunities, and threats of a possible introduction ofgood practice into wider use among SMEs in the natu-ral fiber value chain (VC). This value chain representsa list of activities performed within SMEs in the se-lected natural fiber domain (e.g. the wood value chainincludes activities such as sawing, milling and produc-tion of wooden products).

In the following section, the related research fromthe area of digitalization in SMEs is presented, fol-lowed by a section on the methodology used in the im-plemented research. Section 4 includes examples ofgood practices of integrating digitalization into compa-nies, and the final section describes the SWOT analysisof the presented good practices in the conclusion of thepaper.

2 Related workSeveral studies have already been published analyzingthe challenges and opportunities that the Industry 4.0revolution can bring to SMEs in different sectors (Matt,Modrák, and Zsifkovits, 2020; Autio, 2017).

Ezzel and Atkinson performed a benchmarkingstudy of countries’ policies and programs aimed at sup-porting manufacturing SMEs in their business growth,as well as research and development activities (Ezelland Atkinson, 2011). Their results provide a de-tailed overview of mechanisms implemented in differ-ent countries, such as technology acceleration fund-ing or programs and practices, connections to and forSMEs, and involvement of support agencies.

Several examples of SWOT analyses from similarfields can be identified. For example, Falcone et al.performed a SWOT analysis of the strategies employedin the Italian forest sector to transition towards a circu-lar bioeconomy (Falcone et al., 2020). The results in-dicate the importance of investments in forest planningtools, supporting entrepreneurship programs and inno-vations within the value chain. As the biggest weak-nesses and threats, the authors identified inconsistentpolicy frameworks, lack of skilled professionals, ex-cessive bureaucracy, and lack of long-term planning bygovernment bodies.

Different ideas and approaches behind the Industry4.0 paradigm and their impact on Bulgarian SMEs arepresented by (Moraliyska, Antonova, et al., 2018). ASWOT analysis was performed on Bulgaria’s readinessfor Industry 4.0 focusing on the manufacturing indus-try. According to the analysis, the lack of research anddevelopment funds or dedicated programs for job train-ing, as well as the high competitiveness of the sector,are the most significant weaknesses, while national andEuropean Union policy initiatives and the growing in-ternational market present the most important advan-tages for Bulgarian manufacturing SMEs.

On the other hand, Issa, Lucke and Bauernhanslstudied the effectiveness of approaches introduced inGermany to connect their manufacturing SMEs withspecialized research institutions called "I4.0 test en-vironments" (Issa, Lucke, and Bauernhansl, 2017),which highlighted the information deficit betweenSMEs and test environments as the biggest issue.Based on this finding, the authors proposed an ap-proach to facilitate their collaboration. Their ap-proach includes a competence-based matching mech-anism between SMEs and test environments, fundingschemes initiated by the government, and developingmechanisms for evaluating the success of funded SMEprojects.

3 MethodologyOur research methodology consisted of two steps:

1. Identification and analysis of existing examples ofknowledge transfer on digitalization to SMEs, aswell as identification of good knowledge transferpractices and tools, and

2. Performance of "bottom-up" SWOT analysis onthe identified knowledge transfer practices andtools identified in the first step.

In the first step, existing examples of knowledgetransfer on digitalization to SMEs were analyzed withregard to the four dimensions in which knowledgetransfer is mostly required:

• Skills of the staff - refers to activities, such as work-shops or training for employees, which aim at im-

proving the employees’ skill set in working with dig-ital technologies,

• Methods - refers to different mechanisms and en-deavors for sharing the “know-how” about the digi-talization process to SMEs,

• Technologies and tools - refers to various Informa-tion Technology solutions, such as platforms or web-sites, used to share knowledge on digitalization, and

• New value generation - which refers to innova-tive approaches, such as using Machine Learning orBlockchain technologies, which generate new valueand knowledge for participants.

Based on these four dimensions, existing good prac-tices and tools were also identified for implementingdigitalization in SMEs by region/country.

The collected practices and tools for the digitaliza-tion of SMEs bring various benefits or impose limita-tions when implemented in different countries in theAlpine region. To further study the results of theirimplementation in a given country/region included inour research, and identify both their benefits and draw-backs, an individual SWOT analysis has been per-formed on each practice/tool presented in Section 4.The aim of our approach was to use the insights onthe strengths and weaknesses of the country/region-specific practices/tools to draw more general conclu-sions about their characteristics necessary to perform across-border SWOT analysis of digitalization practicesand tools.

4 Good practices, tools and exam-ples of knowledge transfer withina region/country for the digital-ization of SMEs

A good example of knowledge transfer which weidentified in the Baden-Württemberg region (Ger-many) is The Digitalization Premium Support Project,funded by the Ministry of Economic Affairs, Labour,and Housing of Baden-Württemberg, which supportsSMEs with subsidized loans in introducing new dig-ital solutions and improving information security. Ithas the potential for knowledge transfer in all four di-mensions. It can be used to promote training for em-ployees (help them acquire ICT software and hardwareknowledge), to help introduce new digital solutions inproduction processes, products, and services, and bringknowledge for renewal of strategies and organization,as well as bringing added value to bio-based and othervalue chains. In addition to this example of knowledgetransfer in the Baden-Württemberg region, we identi-fied three other examples shown in Fig. 1. Good prac-tice of successfully digitalized business processes inBaden-Württemberg comes from a carpentry company

Figure 1. Identified good practices, tools (P&T) and examples of knowledge transfer (KT) within the Baden-Württemberg region.

that has largely digitalized its business processes. Thestaff has improved their digital skills and the customerscan now be a part of the manufacturing process. Cus-tomers can choose preferable materials through video,and employees can track their working time through amobile app. Due to the digitalization of all customerand production data, the data can now be accessed atany time.

Fig. 2 shows the identified good practices andknowledge transfer in the Trentino region. There, wefind The Chamber of Commerce, which provides the“Punto Impresa Digitale” service to SMEs. This ser-vice helps to promote the digitalization culture and dis-semination through the creation of a network of organi-zations, and assists enterprises in the digitalization pro-cess through educational events, workshops, and men-toring support. In the same region, several hubs par-ticipate to assess the level of digitalization of partic-ipating SMEs and evaluate possible strategies to op-timize their internal processes. They organize web-conference training, provide advice on the implementa-tion of technologies to increase digitalization, and pro-vide SMEs with vouchers to improve and implementinnovative ideas. A good example from this region isa medium-sized enterprise in the energy sector. Theenterprise has implemented advanced Building Infor-mation Modeling (BIM) using Digital Twins technol-ogy, with the support of the national and local fundingopportunities. After implementing this, the enterprisewas able to avoid project and mounting mistakes duringthe implementation of the product, and furthermore, todecrease the time between the design and the deliveryof the product, increase precision in the offer phase, aswell as reduce waste.

In Lower Austria, one of the good examples ofknowledge transfer is the KMU Digital program fromthe Austrian Digitalization Initiative, which helpsSMEs to analyze digital trends, opportunities, and

risks, helps them to determine the status quo in e-commerce and information security, and assists themin obtaining subsidized consulting and assistance inimplanting the digitalization strategy. Another exam-ple from Lower Austria is The House of Digitaliza-tion, which connects SMEs with main IT knowledgeproviders in the region through specific IT seminars,and offers assistance in finding partners. It also offersthe option of crowdsourcing in order to contribute toideas for potential solutions.

An example of good knowledge transfer in Slovenia,also seen in Fig. 3, are the so-called Digital Vouch-ers provided by the Slovenian Enterprise Fund. Vouch-ers are designed to increase the level of digital compe-tences and skills of staff through education and train-ing vouchers. They contribute to the development andimplementation of new technologies and tools, and im-prove innovative project ideas. A detailed descriptionof the vouchers can be found in Section 5.4. A Slove-nian company operating in the wood value chain can beconsidered as a good practice of using existing financ-ing, as it received funding from SPIRIT Slovenia fortwo of their projects. The first project focuses on dig-ital modernization of the company, with the goals ofdeveloping and upgrading e-business elements throughimproved electronic exchange between partners, web-site, and web-shop upgrade, as well as staff training.The second project focuses on the optimization and im-provement of business processes related to business as-pects of wood processing (administration, HR and fi-nances, manufacturing, commerce).

5 SWOT analysis of collected goodpractices

The identified good practices and examples presentedin Section 4 share some common characteristics, even

Figure 2. Identified good practices, tools (P&T) and examples of knowledge transfer (KT) within the Trentinoregion.

Figure 3. Identified good practices, tools (P&T) and examples of knowledge (KT) transfer within Slovenia.

though they are found in different countries/regions.Furthermore, varying benefits and drawbacks can beobserved in their implementation in SMEs. An ini-tial general analysis of all collected practices and toolsindicates that their positive and negative effects arehighly influenced by their origin. Therefore, beforefurther studying the characteristics of the collectedpractices and tools, we grouped them according to theirtype of origin into three categories with the followingcharacteristics:

1. Government-level practices and tools - nationaland/or local government initiatives focusing ondeveloping a support framework for the digital-ization of SMEs through regulations and publicfunding schemes,

2. Research center-level practices and tools - in-centives and programs offered by research insti-tutions, focusing on providing support to SMEsthroughout their digitalization process throughworkshops, consulting services and active projectpartnerships, and

3. Private sector-level practices and tools -projects and activities carried out by the privatesector, with a focus on networking and the dis-semination of the "know-how" regarding the digi-talization of SMEs.

It is important to note that the relationship be-tween the government, research centers and privatesector SMEs is not necessarily mutually exclusive.This means, for instance, that some strengths of thegovernment-level practices (and the government itself)can help in resolving weaknesses and threats, whichappear with practices on the private sector or research& development levels, and vice-versa.

5.1 Government-level practices and toolsUsually, within every country, the national and lo-cal governments are those who have the widest rangeof possibilities to create a favorable environment forSMEs. In generating success and added value, SMEsdepend on the availability of resources necessary fortheir business, which can be in the form of finances,

investments, knowledge networks, or similar resources(Organisation for Economic Co-operation and Devel-opment (OECD), 2017).

Our research on the included Alpine region coun-tries/regions indicates that the national and local gov-ernments are highly supportive of initiatives relatedto the digitalization of SMEs operating in the naturalfiber-based value chain. Specifically, in each analyzedcountry/region, there is at least one agency initiated ei-ther by the national or local government, dedicated asthe "go-to-place" for SMEs included in the digitaliza-tion process. The baseline for each government-leveldigitalization practice and tool is the official nationaldigitalization strategy (Marcut, , 2017), which is, nowa-days, established in most European countries. Basedon this strategy, national and local governments areable to introduce support mechanisms and develop spe-cialized frameworks to help SMEs throughout theirdigitalization efforts.

Besides funding schemes and dedicated policies,governments and their agencies can also develop mech-anisms and organize events for informing SMEs andraising their awareness about the resources and optionsavailable to help them carry out the digitalization pro-cess since the lack of such information is often one ofthe strongest inhibitors of SMEs’ digitalization. Somecommon examples of such government-level practicesand tools identified in general, as well as through ourresearch, are:

• Dedicated agencies that offer access to direct fund-ing schemes and projects financed exclusively bynational/local public funds (e.g. Digitalization Pre-mium in Baden-Württemberg),

• Digitalization-oriented projects (co-)financed by theEuropean Structural and Investments Fund (or anyother European dedicated agency),

• Vouchers for helping SMEs in their digitalization un-dertakings (e.g. digital vouchers in Slovenia).

Fig. 4 presents the results of the SWOT analysisperformed on the identified government-level practicesand tools from all four involved countries. The analysisshows that government-level practices and tools createa number of digitalization possibilities for SMEs, es-pecially regarding the funding of their digitalization-oriented projects. By using government funding op-portunities, SMEs can enjoy different benefits, suchas increased market share/recognition, income, inno-vative products, and so on. Government-issued poli-cies can help SMEs as a guideline to accessing avail-able resources and steps necessary in their digitaliza-tion efforts (Autio, 2017). They can also present ahurdle if they require too much administrative effortfrom SMEs. It is often the case that SMEs perceivegovernment policies as inattentive to the actual marketdevelopments and their business needs, which results

in SMEs not taking advantage of the potential oppor-tunities offered by government initiatives (Minh andHjortsø, 2015).

One of the strongest backbones of the government-level practices is the higher transparency and precisedefinition of terms and conditions for all participants,required since they are based mostly on public funding.However, it is important to be careful when specifyingthese conditions, as they are sometimes too restrictivefor smaller SMEs, which is especially the case for thenatural fiber-based SMEs. In these cases, the exhaus-tive preparation of documents necessary to apply forgovernment-funded projects often generates additionaladministrative costs with questionable cost-efficiency,and without any assurance that, in the end, a givenSME will receive the funding.

In general, one of the biggest threats to government-level practices and tools is the insufficient knowledgesupport for SMEs, as government agencies often investlimited efforts into informing SMEs about the fundingopportunities and precise conditions, how to apply forfunding, which is a possible pitfall, and this can resultin a number of incorrect applications caused simply bytheir misunderstanding of the procedural steps. In ad-dition, public funds are available to a wider range ofnational/local SMEs with the same goals. This createsan increased competition between SMEs but also de-creases the chances of receiving the funds, which mightdiscourage some SMEs from applying or indulging intheir digitalization projects in the first place.

5.2 Research center-level practices andtools

Research centers represent an environment in whichthe knowledge and interests of universities and SMEsare brought together to generate new value for both par-ties. In recent years, an increasing number of coun-tries have recognized the potential of research centersin overcoming challenges arising in both academia andindustry. A number of research centers and innova-tion hubs can be found in the countries and regionsof the Alpine region included in this research, suchas the Kompetenzzentrum Stuttgart Mittelsland in Ger-many, House of Digitalization in Lower Austria, orthe InnoRenew CoE in Slovenia. As a mediator, re-search centers enable SMEs to access the knowledgeand research practices of universities, while enablinguniversities to bring their research ideas to the marketand implement them in practice through partnershipswith SMEs. Such organizations support SMEs in theirdigitalization efforts free-of-charge by providing finan-cial, marketing, and operational information throughdiscussion platforms, workshops, consulting services,partnerships in applying for funds, and similar. Vari-ous events organized and carried out by research cen-ters bring the most opportunities for SMEs to improvetheir employees’ digital skills, which is an important

Figure 4. SWOT analysis of government-level practices and tools for Alpine region countries.

Figure 5. SWOT analysis of research center-level practices and tools for Alpine region countries.

starting point in successful digitalization projects.As shown in Fig. 5, research centers achieve their

greatest advantage in creating networking opportuni-ties for SMEs (especially those in the rural areas),which can then lead to new innovations (Minh andHjortsø, 2015). By building networks of contacts withthe necessary domain expertise, SMEs can reduce therisks and costs (administrative or any other) of theirdigitalization process greatly. The intermediary roleof research centers helps SMEs to build their knowl-edge networks, as well as provide them with the neces-sary information related to available funding schemesand market information. In this way, research centersdisseminate the knowledge necessary to SMEs, thusreducing their costs for researching the required in-formation on their own (Kirkels and Duysters, 2010).Through such direct interaction with researchers andexperts, SMEs can receive the valuable knowledge nec-essary for innovations and further improvements en-abled through the digitalization (Collier, Gray, andAhn, 2011).

The result of bringing SMEs and universities to-gether may not always be as successful as expected,

mainly because of the differences in their interests and"cultures". Being research-oriented, the universitiesare more focused on performing scientific research fortheir own purposes, which can take years and/or requiremany adaptations before it can be implemented in prac-tice by SMEs because it does not meet SMEs’ needs(Cannarella and Piccioni, 2005). Also, the practicesidentified in our research show that some national/localgovernment policies and strategies may inevitably af-fect the activities of research centers and innovationhubs (for example, national digitalization strategies fo-cusing on only certain industries and areas in a giventime period). Being co-financed (or entirely financed)by national or local governments can also present a sig-nificant risk to the operations of research centers.

5.3 Private sector-level practices and toolsLastly, within the analysis, we identified one exampleof good practices and tools provided to SMEs by a pri-vate enterprise. This was a start-up company Farm-Blick from Baden-Württemberg, presented in Section4. In addition to providing SMEs with direct access

Figure 6. SWOT analysis of private sector-level practices and tools for Alpine region countries.

Figure 7. SWOT analysis of Digital vouchers in Slovenia.

to targeted solutions, such collaborations could lead toother opportunities, such as better market visibility, andimplementing modern business models. Furthermore,they provide an opportunity for formalized cooperationbetween SMEs, although such formal cooperation wasnot identified in our analysis. Other strengths, weak-nesses, opportunities, and threats posed by such a formof cooperation are presented in Fig. 6.

Despite the potential for cooperation between SMEsand private companies, our research reveals that suchsolutions are not common among the analyzed SMEsin the Alpine region. Most SMEs operate with limitedresources, investing mainly into day-to-day business,and are often dependent on public funding, revealingthe major downside of private sector-level practices andtools. Furthermore, the efforts for digitalization mightbe too specific and focused on a subset of processes,weakening the digitalization efforts of SMEs.

5.4 An example of SWOT analysis

An example of knowledge transfer in Slovenia, digi-tal vouchers were analyzed using SWOT analysis, asshown in Fig. 7. The analysis shows that their strengthsare in the field of the possibility of obtaining funding,in the detailed requirements for their acquisition, in thepossibility of connecting with experts and profession-als, and so on. They also show opportunities in thefield of exact goals, and are aimed at enabling compa-nies to be more competent and have larger incoming inthe future. One of their weaknesses is that they are notachievable for companies of all dimensions. Especiallysmall companies may have a problem, for example, incomplying with the requirement that 20 % of workersmust be included in the training, and, as a threat, thereis a possibility that funding will not be obtained due toincomplete or inaccurate applications.

6 ConclusionAs part of the research, we analyzed existing goodpractices and tools used for the process of digitaliza-tion of SMEs in the Alpine region and performed aSWOT analysis. We found that in all involved coun-tries/regions (Baden-Württemberg, Trentino, LowerAustria, and Slovenia) are examples of knowledgetransfer in the form of support projects, programs, ini-tiatives, vouchers, institutes, and hubs. We furtheridentified small and medium-sized enterprises in theseareas, which represent good practices for the introduc-tion of digitalization and have already benefited fromthe offered support from the before mentioned sources.We divided these collected good practices and toolsinto three levels (Government-level, research center-level, and private sector-level), depending on the fieldfrom which the practice originates. The results of thesurvey suggest that the national and local governmentsare highly supportive of initiatives related to the digi-talization of SMEs operating in the natural fiber-basedvalue chain. One of the most important advantages isthe possibility for SMEs to obtain various funding andadvice from different institutions and experts, while amajor drawback is their inadequacy to different sizesand areas of operation of companies and complex pro-cedures/conditions for obtaining assistance. Duringthe research, we identified one example of good prac-tices and tools provided to SMEs by a private enter-prise. That suggests that such solutions are not com-mon among the analyzed SMEs. Most of them operatewith limited resources, investing mainly in day-to-daybusiness, and use mostly only public funding. Never-theless, the strong relationship between these levels canhelp resolve some barriers in the digitalization process.

AcknowledgmentsThe analysis included in this paper was performedwithin the Smart SME’s Project, co-financed by the Eu-ropean Parliament through the Alpine Region Prepara-tory Action Fund (ARPAF II). The authors would liketo express their appreciation to the project partners(Schweizerische Arbeitsgemeinschaft für die Bergge-biete (SAB), BIOPRO Baden-Württemberg GmbH,Department for Economic Development, Research andLabour of the Autonomous Province of Trento, HubInnovazione Trentino, Ecoplus. The Business Agencyof Lower Austria and Anteja ECG) for their valuablecontribution.

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