Digital transformation in SMEs: why relationships matter as much as technology

Digital transformation is essential for organisations to stay competitive in an increasingly digital economy. However, digital transformation is not just a technical challenge - it is a relational one too.

In this blog post, we will share findings from an 18-month research project conducted collaboratively by the University of Leeds and the University of the West of England, funded by the British Academy, exploring digital transformation in SMEs. While adopting digital tools, acquiring technical skills and building technological capabilities are critical steps for embedding digital transformation, our research highlights that building relationships are just as important.

We will also introduce the ADAPT model, a practical framework we designed to help SME practitioners navigate their digital transformation journey.

Why digital transformation is a must for SMEs

SMEs are the backbone of economies worldwide. In the UK alone, SMEs account for 99% of all businesses, employing 61% of the workforce. Digital transformation can help these businesses thrive in today’s fast-changing environment. SMEs with a strong digital presence grow twice as fast, export twice as much, and create twice as many jobs as those without. Whether through an online presence, digital payments, or cybersecurity, digitalisation drives productivity and innovation.

Despite these benefits, many SMEs lag behind larger firms in digital adoption. Even with government initiatives like Skills Bootcamps and AI Upskilling funds, the gap persists. Why? Because digital transformation is not just about individual learning – it is about embedding that learning across the organisation to transform practices, processes, and ways of working.

The relational side of digital transformation

Our study involved 77 SME practitioners who participated in digital upskilling programmes in the Northwest and Southwest of England. Through group reflection sessions and follow-up interviews, we uncovered a critical insight:

Digital transformation is as much about people as it is about technology.

While practitioners gained technical skills and a sense of agency from digital skills programmes, their success in implementing change hinged on how well they navigated relationships within their organisations. Pro-digital practitioners needed to:

• Build trust and gain buy-in from colleagues and stakeholders.

• Address resistance to change by fostering supportive networks.

• Balance new digital tools with existing organisational processes and culture.

To help SME practitioners tackle these challenges, we developed the ADAPT model, a practical guide to making digital transformation work.

The ADAPT Model: A practical framework for SMEs

The ADAPT model focuses on five dimensions: Agency, Destination, Association, Progress, and Tapestry. Let’s break these down:

1. Agency
   Agency is about more than technical competence. It is the confidence and capability to leverage digital skills effectively within your organisation. Driving transformation starts with taking ownership and empowering others.
    
   Recommendations:

• Actively position yourself as a champion of digital change.
• Identify opportunities to embed digital tools into workflows and show how these tools can solve existing challenges or open new opportunities.
• Create an environment where others feel empowered to innovate.
   

2. Destination
   Destination is about articulating a coherent vision to provide strategic direction. A well-defined destination anchors your digital transformation efforts. This would prevent issues such as shifting goalposts or misaligned priorities, and will help your team to maintain momentum and motivation. 
    
   Recommendations:

• Establish a vision for what success looks like. Whether it’s improving customer engagement, streamlining operations, or boosting sales, make your objectives specific and actionable. 
• Set clear, actionable goals that align digital efforts with your organisation’s broader objectives. Transformation should enhance, not distract from, your company’s core mission.
• Establish structured milestones to give focus to your digital transformation efforts and ensure steady progress. 
   

3. Association
   Digital transformation requires strong relationships across your organisation. Building a network of support and collaboration is essential to overcoming resistance and driving change. 
   
   Recommendations:

• Engage with superiors, peers, and subordinates to create a shared commitment to, and build support for, digital transformation.
• Create networks to overcome resistance and foster collaboration.
• Communicate the benefits of digital initiatives to gain buy-in.
   

4. Progress
   Transformation does not happen overnight. Focus on achieving small, incremental wins to build momentum.
    
   Recommendations:

• Celebrate milestones to maintain motivation.
• Commit to regular progress reviews and updates of your digital strategy.
• Reflect on successes and setbacks to learn and adapt. Time for reflection – even brief – enables practitioners to recalibrate and refine their strategies.
   

5. Tapestry
   Think of digital transformation as weaving new technologies into the fabric of your organisation. 
   
   Recommendations:

• Focus on harmonising new tools with existing systems and processes.
• Transformation doesn’t mean abandoning legacy practices entirely. Instead, it involves thoughtful evaluation to determine what adds value and aligns with digital goals.
• Evaluate what to retain and what to change to ensure smooth adoption.

The relational advantage

By focusing on the relational aspects of digital transformation, SMEs can unlock the full potential of their digital initiatives. It is not just about the tools you use but how you integrate them into the broader ecosystem of your organisation.

Our research shows that practitioners who combine technical skills with relational work are better equipped to navigate challenges and drive meaningful change. The ADAPT model provides a practical framework for approaching digital transformation with an attention to the quality of relations – relation with the broader organisational objectives, relation among people, relation with legacy practices.

If you would like to learn more about our research or the ADAPT model, we would love to hear from you. Contact research.lubs@leeds.ac.uk.  

Visit the project webpage for further information.