SMEs in the pandemic: it’s time for the world’s economic drivers to innovate

Entrepreneurs and small and medium-sized companies account for the majority of business industry worldwide, and they weren’t prepared for what coronavirus has unleashed. A lack of digitalisation may have put their businesses at risk, but they’ve responded by putting customers’ needs first and engaging with new digital models

Interpreting data and contextualising statistics can be tricky at times, but some figures are so stark they leave little room for doubt – 99.9% of companies in Spain are SMEs, creating 74% of the country’s employment, according to September 2020 data from the country’s Ministry for Industry, Trade and Tourism. Similar figures can be seen at a global level, where these businesses account for more than 90% of all companies, generate between 60% and 70% of employment, and are responsible for 50% of worldwide gross domestic product, states the International Council for Small Business.

SMEs are huge economic drivers, but at the same time they’re the weakest link of the business ecosystem, lacking both the economic weight and infrastructure to respond to unforeseen blows such as that dealt by coronavirus.

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“Over the course of the pandemic they’ve had to deal with months of closures, and many have gone from one day to the next without any income at all”, says Alberto Cano, Director of SMEs at BBVA Spain. In a survey carried out by CEPYME in May, 63% of Spanish SMEs recognised that coronavirus was having a very negative impact on their business. To understand how small and medium-sized businesses are reacting, BBVA Open Innovation held two Open Talks, one nationally, and another worldwide. We take a look at the present and future outlook with the BBVA experts who took part.

Were they ready?

“When COVID19 hit, a lot of them weren’t prepared. The level of progress SMEs had made with digitalisation wasn’t ideal, and the majority weren’t ready, depending on the type of business and sector” explains Montserrat Hidalgo, SMEs Manager at BBVA’s Company Digital Transformation Factory. Hidalgo stresses that “according to CEPYME, just 14% of companies had a digital transformation plan in place prior to the crisis”.

Lots of SMEs and freelancers realised they hadn’t done their homework

Faced with this situation “lots of SMEs and freelancers realised they hadn’t done their homework – they had to make themselves known on platforms beyond the physical and establish alternative communication and sales channels that didn’t require a physical presence”, explained Javier Urizar, Director of Commercial Payment Methods at BBVA Spain and Portugal, during the event. The percentage was ridiculously low, with just 6.5% of Spanish SMEs having systems in place for online purchasing through their website, according to BeeDIGITAL data.

Have they responded to the challenge?

“They’ve been forced to react and adapt their business and customer relationship models to these new circumstances”, says Hidalgo. In terms of how they’ve responded “every SME has had to shift as quickly as possible. Some – the ones starting from a stronger position – have done it in record time, and others have taken the first steps towards distance selling”, states Cano.

BBVA experts agree that overall, SMEs “have realised that digitalisation can help them increase their business revenue and reduce costs. We’re now seeing a hybrid model that entails a shift in business philosophy, and getting there will take time and effort”, Hidalgo points out.

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How has BBVA helped in Spain?

As a corporation with a focus on open innovation, startups and small businesses, BBVA was sure “it needed to be part of the solution, straight away” said Joan Carles Alba, Director of the SME section in Catalonia, during the event. So, “we started up a grants protocol specifically to support SMEs and freelancers, with an instant liquidity facility of €25 billion, and helped bolster digital capacity and remote management”, he outlined.

We’ve helped SMEs find new sales channels, beyond e-commerce

“At BBVA we’ve helped SMEs find new sales channels, beyond e-commerce. We’ve offered training programmes to teach businesses how to sell remotely, with practical and simple solutions – using social networks for example – and have given training on digital marketing”, said Urizar. The aim was to get companies without an infrastructure or website to have the capacity to provide services remotely, and as quickly as possible, to guarantee at least a minimum income over months of closure.

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And its role at a global level?

In Mexico BBVA is working with more than half a million SMEs – the country’s backbone – most notably through its flagship project Banco de Barrio. This is about “a new strategy for branches in the commercial network to become increasingly relevant to SMEs who live within its ecosystem, and is helping them with ad-hoc, personalised financial solutions aligned with their needs” explained  Enrique Fernández, Director of Relationship Models at BBVA México.

100% of the motivation of the teams that were mobilised came from knowing that they were helping SMEs and people to protect their jobs

In the north of the continent, Luis Gascó, Director of SME Section and Product at BBVA USA, recounted how BBVA had helped with its Paycheck Protection Program initiative, so teams could continue working in extreme post-pandemic conditions, helping them through the process of obtaining state credit financing. “The bank has benefited from the programme, but 100% of the motivation of the teams that were mobilised came from knowing that they were helping SMEs and people to protect their jobs”, explained Gascó.

Pymes ante la pandemia: el motor económico del mundo tiene que innovar

Within the world of small businesses, launching a business as a woman and responding to situations like the one we find ourselves in has its own particular casuistry. For this reason, Selin Oz, SME Banking Entrepreneurship Banking Manager at Garanti BBVA in Turkey, explained during the event the “unique focus” of the bank in its support for women entrepreneurs: “Women entrepreneurs need financial support, but they also need help in other areas such as training and market knowledge”, added the expert. The bank is therefore working on four key foundations: financial products, support and motivation, education, and new markets.

So now what?

Now we’re embarking on the new normal, it’s worth asking ourselves whether the situation will revert back to how it was, or whether digitalisation will continue to advance. Experts agree that the lessons learned have been valuable, and that the changes should be consolidated, especially for users.

“The changes in consumer behaviour aren’t going to be unlearned. What has already been proven is that the experience of making mobile payments and getting appointments online without having to leave the house isn’t going to go backwards, people will demand what they’ve already tried”, says Cano.

The situation has also accelerated the speed of digitalisation in specific areas. “The world of ecommerce has advanced three or four years in a single stroke, the doubts and initiatives that have arisen have given it the final push” confirmed Urizar. To keep up the pace, SMEs must uphold their commitment to innovation.

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