Advancing the Digital Transformation of Armenian Businesses

Annex A. Designing sector-specific digitalisation plans: an exemplary approach

To ensure that policy interventions are relevant, targeted, and impactful, it is important to analyse and understand the distinct characteristics, challenges, and opportunities that characterise SMEs in different industries on their digitalisation journey. Chapter 2 presented an illustration of a potential sectoral assessment of Armenian SMEs, along with the study’s results. Notably, the study identified specific challenges that constrain the digital transformation of SMEs in selected sectors, as well as across sectors, and assessed level of digital maturity in the covered industries.

Once the sectoral analysis is completed and the unique challenges and needs of businesses within each sector are identified, the government can proceed by i) performing an impact-based prioritisation assessment to select priority industries to target, and ii) developing sector-specific digitalisation plans, encompassing targeted support measures to effectively address the identified challenges.

Impact-based prioritisation

In the framework of our exemplifying study, we conducted an impact-based prioritisation assessment to identify key sectors for targeted intervention and to design tailored support measures. This analysis relied on a comprehensive array of data sources, encompassing national statistics, policy documents, and firsthand insights acquired during the SMEs group consultations. The assessment considered the following elements:

• Contribution to value added generated by SMEs in a given sector, as a percentage of total value added;

• Export potential of a given sector;

• Contribution to employment of SMEs in a given sector, as percentage of total employment;

• Digital maturity stage of the industry (as identified in the first part of the study in Chapter 2);

• Government prioritisation, as deducted from the main policy documents; and

• Concentration of SMEs in the given sector.

Each of the six indicators across various sectors underwent categorisation into low, medium, and high categories, based on a predetermined scale. Each category was assigned a score of 1, 2, or 3, respectively. Subsequently, a weighted average was calculated to derive the final score, with weights reflecting the relative impact of each indicator on the final score. Finally, this computed score was used to determine priority level allocated to each sector (Figure A A.1).

Figure A A.1. Impact-based prioritisation model

Source: OECD analysis

Table A A.1 presents the outcomes of the impact-based evaluation, identifying wholesale and retail trade and constructions as the industries with highest priority.

Impact-based prioritisation model Impact-based prioritisation model Impact-based prioritisation model Impact-based prioritisation model

Table A A.1. Sectoral priority levels

	Priority	SME concentration	Digital maturity stage	Value added by SMEs % in GVA	Export potential	Employment in SMEs % in total employment	Government prioritization
Wholesale and retail trade	High	51.8%	Level 3	21.2%	Low	21.8%	Non-priority
Construction	High	3.4%	Level 2	10.2%	Low	5.8%	Non-priority
Manufacturing	Medium	11.9%	Level 2	11.2%	High	14.4%	Priority
Accommodation and food service activities	Medium	5.6%	Level 3	3.3%	High	7.2%	Non-priority
Information and communication	Medium	7.3%	Level 4	7.0%	High	6.7%	Priority
Professional, administrative and support service activities	Low	9.9%	Level 4	3.9%	High	1.9%	Priority
Real estate activities	Low	2.4	Level 3	2.4%	Low	7.4%	Non-priority

Source: OECD analysis.

Sector-specific digitalisation plans

As seen in Chapter 2, different sectors of economic activity demonstrate varying levels of maturity regarding the digital transformation of the SMEs. These differences encompass both technology adoption levels and the presence of practices that contribute to the digital culture within companies. While SMEs engaged in service-oriented activities such as professional and administrative support, accommodation and food services, real estate, and IT-related activities have integrated digital technologies into their operations, SMEs in more traditional sectors like manufacturing, trade, and construction show relatively lower technology adoption rates.

To steer digital progress within each sector, comprehensive support programs should be designed and implemented. Notably, the programmes should identify specific support initiatives and instruments to be deployed by the government and other stakeholders to address the different needs of SMEs within the prioritised sectors. The ultimate objective is to guide SMEs from their present stage of maturity towards more advanced phases. The roadmaps must outline priorities in terms of technologies and practices that should be promoted considering the current stage of digital maturity in the sector. Apart from defining tailored support initiatives and instruments, the programs should also outline timelines, responsible entities, and anticipated outcomes. Based on the results of the current study, (Table A A.2) outlines recommended technologies for adoption and practices for promotion to propel the digitalization efforts within each of the assessed sectors.

Table A A.2. Digitalisation plans by sector

Sector	Advancement	Prioritized technologies	Practices to be promoted
Manufacturing	Level 3 → Level 4	Widespread adoption of CRM and SCM systems Promote the utilisation of cloud-based services Apply data analytics software	Increase the motivation of executives to invest in digital initiatives Promote the practices of engaging external expertise and outsourcing employee training for digital skills Strengthen data management and security practices Foster data-driven decision making, especially in sales and strategic governance
Construction	Level 2 → Level 3	Introduction of ERP software solutions, specifically to streamline HR and project management process Adopting CRM and SCM systems	Increase the awareness about digital solutions and their benefits Incentivise investments in digitalisation efforts Focus on enhancing digital skills of the workforce
Wholesale and retail trade	Level 2 → Level 3	Widespread adoption of CRM systems to streamline sales and marketing processes Promote HRM and other ERP solutions Increase the utilisation of cloud-based services	Increase the awareness about digital solutions and their benefits Engage workforce in digital skill development training Promote data driven decision making, especially in sales and marketing
Professional, administrative and support service activities	Level 4 → Level 5	Foster the utilisation of data analytics tools Assist efforts in finding applications for emerging technologies	Promote data-driven decision making Increased focus on cybersecurity practices
Accommodation and food service activities	Level 3 → Level 4	CRM and other specialised software such as queue management and automatic reservation systems in food service providers Widespread use of CRM system and specialised property management software for accommodation service providers Apply data analytics software	Increase the motivation of executives to invest in digital initiatives Promote external training practices for staff Foster data-driven decision making
Information and communication	Level 4 → Level 5	Promote the adoption of big data analytics tools Foster the introduction of emerging technologies into day-to-day operations	Promote data-driven decision making Increased focus on cybersecurity practices
Real estate activities	Level 3 → Level 4	Widespread adoption of CRM systems across the sector Promote the utilisation of HRM and other resource planning software Increase the utilisation of cloud-based services Apply data analytics solutions	Increase the motivation of executives to invest in digital initiatives Promote external training practices for staff

Source: OECD analysis.