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Digitalisation can bring many benefits for New Zealand businesses, including increased productivity, innovation, and better sustainability – and now a new report estimates it could potentially boost the country’s GDP by billions of dollars.
The NZIER research, commissioned by small business platform Xero, found a 20% increase in the number of companies adopting cloud-based digital tools could add $7.8 billion to the economy each year.
Xero Country Manager Bridget Snelling is encouraging every small business in Aotearoa to adopt just one app to help tackle a pain point in their day-to-day operations.
It may not sound like much, but with small enterprises making up 97% of New Zealand’s businesses, she says those small actions can really add up.
“This is a small step that would make a big difference, potentially adding nearly $8 billion to our GDP through enhanced productivity. Small business owners across the country should start by simply talking to their accountants or bookkeepers about what digital tools could benefit their business,” Snelling says.
Working smarter, not harder
Snelling adds there are all kinds of digital tools available to help small businesses, no matter what industry they operate in.
“If I’m a retailer, for example, and I do a manual stocktake, that might take me four hours at the end of each week or fortnight,” she says.
“[But] if I use a digital inventory management system, that might mean I only have to spend half an hour looking at my inventory and doing a digital stocktake.
“Essentially, what we’re aiming for in becoming a more digitally advanced economy is to make sure that every hour we spend working, is doing something only a human can do.”
Previous NZIER research has found Aotearoa is lagging behind the OECD in terms of productivity output.
It revealed New Zealanders would have to work an extra eight hours a week to catch up to the average OECD output. And if they wanted to catch up to top-of-the-table Ireland, they would have to work an extra 10 hours every work day to deliver the equivalent GDP per employee.
“The key message here is we need to work smarter,” Snelling says. “It’s not just head down, do the grunt work. It’s actually about how we do this in a smarter way.”
So, why aren’t more NZ businesses turning to digitalisation?
Snelling says cost and concerns about return on investment are often cited as reasons for businesses not adopting new technology.
While there are costs to digitalisation, the new NZIER research found the payback period for businesses is relatively short, with organisations typically seeing an ongoing positive return on investment in less than two to three years.
But Snelling says certain mindsets can also be a barrier to digitalisation.
For example, some businesses can feel that what they’re already doing is good enough.
“If people have been doing things the same way for many years, being motivated to change can be hard.”
Then there’s the confusion about where to begin if a business does want to digitalise its operations.
“There are so many options out there,” Snelling says. “It’s like that decision paralysis issue: ‘How do I make a decision? How do I know what the right choice is for me?’
“We encourage all small businesses who don’t know where to start to talk to their accountant, or visit Xero’s App Store.”
Pushing for Government investment
Snelling says there needs to be more help offered to businesses wanting to digitalise, and that it was disappointing not to see any investment in that area in the Government’s Budget last month.
“For small businesses to actually take action on digitalisation, it’s going to require more than a little bit of information – it’s going to require some hand holding.”
Snelling says Denmark and Singapore are both good examples of what strong government investment into digitalisation can do for an economy, and the NZIER research looked at what similar steps New Zealand’s Government could take.
Its short-term recommendations included the development of a New Zealand Productivity Solutions Grant, which Snelling says would help break down the cost barrier for small businesses.
The NZIER report also recommended setting up a chief technology officer-as-a-service to help small businesses identify and implement the digitalisation that best suits them.
Snelling says Singapore’s SMEs Go Digital programme makes tech adoption much easier for small businesses.
In the longer term, the NZIER report says the Government needs to support the digitalisation of businesses through things like actively investing in digital literacy across society, and promoting and subsidising the continued learning of digital skills in the workforce and education.
“An investment in small business is actually a huge investment in the whole of our economy,” Snelling says.
“It’s important that we drive this digitalisation because we know the economic benefits will be huge.”
This content was sponsored by Xero, a global small business platform that offers cloud-based accounting software and other digital tools. You can find the full NZIER report about digitalisation here.
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