SMEs integrating digital technologies: report

The shift to industry 4.0 is underway, but it needs to pick up speed

May 12, 2018
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MONTREAL—The 9th edition of the STIQ Baromètre industriel québécois (Quebec Industrial Barometer) reveals that nearly 76 percent of manufacturing SMEs (small and medium enterprises) have integrated or plan to integrate digital technologies. Companies that have begun transitioning to Industry 4.0 reported strong revenue growth, are more likely to sell internationally, are more competitive and have increased their headcount.

The manufacturing sector in general experienced considerable growth in 2017. According to the Barometer survey, conducted among 500 companies with 10 to 500 employees, 67 percent of the companies surveyed disclosed significant revenue growth in 2017 as compared to 2016, whereas a mere 8 percent reported a decline in their revenue. Since the survey was first introduced, the difference between these two figures has never been as pronounced.

Similarly, 40 percent of companies stated a sharp increase in their headcount, whereas only 7 percent reported a decrease. Since last year, the gap has grown between companies that are hiring and those that are firing.

The STIQ study identifies many issues facing Quebec manufacturing SMEs. The most worrying issues are related to staff recruitment, as it has never been so high and impacts 82 percent of respondents. The challenge of succession is also major for 73 percent of SMEs. The situation is critical to the point of jeopardizing the very growth of certain companies.

Although sales are strong, it is another story for new business development. In 2017, just 34 percent of survey respondents reported that more than 10 percent of their sales were generated by new customers. This percentage has been decreasing in recent years.

Once again this year, SME investments in equipment have stagnated, while investment in Research and Development (R&D) has receded, with just 13 percent of respondents reporting that they invested more than 5 percent of their earnings in 2017.

The diagnosis has long been known: Quebec manufacturing SMEs do not invest enough, affecting their productivity and their competitiveness. And yet investing pays off! Companies investing heavily in equipment, in R&D and in ICT (Information and Communications Technologies) are experiencing significant growth in revenues, sales outside Quebec and hiring.

As regards to innovation, the performance of our SMEs is relatively good, but it could be better: one-quarter of them take no, or very few, innovative actions. Once again, the Barometer results show companies that innovate are much more competitive and achieve better results than those that take no innovative action.

SMEs play an undeniable role in the longevity and prosperity of the Quebec manufacturing sector. Many are models of success, as they have capitalized on their employees, on innovation, on investments and on leading technologies to meet their customers’ expectations. Let’s bet that they’ll inspire many more…