KfW Business Survey 2020: companies’ digitalisation projects were stagnating before the coronavirus crisis

The trend towards increasing digitalisation in the SME sector was not seen to continue recently. This is evidenced in a current survey conducted between December 2019 and March 2020 by KfW Research together with 19 umbrella, trade and regional organisations. 61% of surveyed companies indicated the desire to implement projects that either apply digital technologies for the first time or improve their application over the next two years. This figure fell by 5 percentage points when compared to the previous year’s survey.

“Digitalisation has finally arrived in the majority of small and medium-sized businesses. The mojority of SMEs are dealing with its opportunities and risks – even though we saw a slight decline before the coronavirus pandemic started instead of a further increase in significance,” commented Dr Fritzi Köhler-Geib, Chief Economist at KfW Group about the results of the survey. “However, I expect that the trend toward increased digitalisation will resume again. Especially the challenges companies faced due to the lockdown as a result of the crisis are bringing about a boost in digitalisation.”

Large companies (over EUR 50 million in annual turnover) are the pioneers of digitalisation: 94% of them have already scheduled implementation of digitalisation projects for the next two years. The smaller a company is, the more seldom it actively pursues digitalisation (over EUR 2.5 to 10 million annual turnover: 60%; up to EUR 1 million turnover: 40%).

In an industry comparison there is a similarly heterogeneous pattern: at 75%, wholesale and foreign trade companies are most likely to have digitalisation plans. The manufacturing industries are in second place with 68% and the service sector is in third place with 60%. In contrast, only 52% of construction companies and 58% of companies in the retail sector want to set up digital projects.

Nine out of ten enterprises planning digitalisation projects are motivated by their desire to take advantage of opportunities. Other reasons for implementing digitalisation projects are general competitive pressure to provide digital offerings (30%), specific customer requirements (31%) and pressure to increase digitalisation within the value chain (24%). These results show that seizing opportunities continues to dominate as a reason for digitalisation. However, when compared to the 2017 survey, general competitive pressure from the market to increase digitalisation (+6 percentage points) and pressure to increase digitalisation in the value chain (+7 percentage points) increased significantly.

This year's “Digitalisation” survey by KfW together with 19 umbrella, trade and regional associations was carried out from December 2019 to the end of March 2020 and was thus conducted before the coronavirus crisis began. A total of 1,114 companies participated. The full analysis is available here at www.kfw.de/KfW-Konzern/KfW-Research/Unternehmensbefragung