SMEs lag behind large firms when it comes to digital transformation compared. These divides are largely due to their lack of skills to use and embed digital tools in business processes. This chapter provides an assessment of the Republic of Moldova (Moldova)’s SME-specific support to digital skills development, both in terms of training opportunities and targeted measures to tackle obstacles to SMEs’ digital skills development.
Promoting Digital Business Skills in the Republic of Moldova
4. Fostering digital skills development among SMEs
Abstract
SMEs lag in the digital transformation. They usually have lower levels of uptake of digital tools compared to larger firms, preventing them from tapping into the benefits offered by digitalisation in terms of productivity, competitiveness and innovation, and thus risking to widen existing gaps between them and large companies. Such differences in digital adoption can be observed among Moldovan businesses: BEEPS data, for example, reveal that less than half of Moldovan SMEs report having a website, against close to 70% of large firms. In terms of regional comparison, the uptake for all firm sizes in Moldova is below that of Azerbaijan and Georgia (Figure 4.1).
Figure 4.1. Businesses having their own website in EaP countries by enterprise size class
Note: 2020 data for Armenia.
Source: OECD calculations based on (World Bank, 2021[1]).
These digital divides are largely due to SMEs’ lack of skills to use and embed digital tools in business processes (OECD, 2022[2]). Adopting CRM software, for instance, necessitates upskilling and process improvements (Wynn et al., 2016[3]). Skilled workers are a key element for competing in a knowledge-based economy; yet SMEs face numerous barriers in attracting, training and retaining highly skilled employees (OECD, 2019[4]). They have less time and fewer resources to invest in skills development, lack awareness of their needs and information on the support initiatives available. They also bear higher opportunity costs of training: their limited number of employees increases the impact of having a staff member away on training and might prevent them from benefitting from economies of scale in terms of direct costs of trainings and/or searching suitable opportunities. Fresh data from OECD countries highlight the wide gap between large and smaller firms in providing ICT training to employees (OECD, 2022[2]), and country-level information shows how few Moldovan firms invest in staff training because of a lack of means and/or interest (World Bank, 2018[5]).
Developing digital skills for SMEs therefore requires offering 1) relevant training opportunities; and 2) targeted support to help them build capacity to overcome the specific barriers they face.
Creating tailored digital skills training opportunities for SMEs
Policy makers can support SME digitalisation through a wide range of both financial and non-financial tools. The OECD has developed a blueprint to help EaP policy makers accelerate SMEs’ digital transformation, including measures to promote digital skills (OECD, 2021[6]). It highlights, in particular, how comprehensive support programmes should include measures to help SMEs understand their specific needs to go digital, both in terms of technology adoption as well as competences for the digital transformation.
ODA’s experience with programmes to support SME digitalisation is a good starting point
Moldova has made significant efforts to support SME digitalisation in recent years. Since its creation in 2007, ODA has developed and successfully implemented a series of targeted support programmes for SMEs. In response to the COVID-19 crisis, the organisation (still ODIMM at that time) launched in 2020 an initiative to help SMEs in non-IT sectors digitalise, improve their access to markets and transition to more modern and sustainable business models. Moldova was the only EaP country to implement such a comprehensive programme (OECD, 2021[6]).
Financed by public funds and with additional resources from the EU and GIZ, ODA’s support for SME digitalisation encompasses a number of financial and non-financial tools summarised in Table 4.1. In terms of digital skills, ODA offers training and mentoring on 19 topics built around the five areas covered by the self-assessment questionnaire on digital maturity presented in Chapter 3 above – online presence, e-commerce planning, customer service, digitalisation of processes, and transport and logistics. By February 2022, over 500 entrepreneurs had benefitted from this programme.
Building on this achievement, the government adopted a follow-up Digital Transformation Programme for SMEs in March 2022. It has three main components: i) raising awareness by providing information support to business incubators and other support institutions, ii) stepping up non-refundable financial support, and iii) monitoring and evaluating the effective implementation of beneficiaries’ investment projects. It scales up financial support by providing grants of up to 500 000 lei (approx. EUR 25 500) for small and medium firms, which aim at facilitating e-commerce activities and the purchase of equipment and software, but which should also serve to train staff who will use the purchased digital tools (Government of Moldova, 2022[7]). While this initiative continues to target SMEs in non-IT sectors, another programme will support digitally advanced firms in developing innovations.
Table 4.1. Overview of ODA’s support programmes for SME digitalisation
Note: Information on beneficiaries of the SME digitalisation support tool as of February 2022.
Source: (Ministry of Economy and Infrastructure, 2020[8]), (Government of Moldova, 2022[7]), (Government of Moldova, 2022[9]), fact-finding exercises conducted in Q2 2022.
ODA also plans to incorporate digitalisation as a crosscutting component in all the existing trainings offered to SMEs. For instance, the Efficient Business Management Programme (GEA) has been updated with five modules on business digitalisation (online marketing, online partner identification, cyber security, process digitalisation, personal data protection).
Despite these welcome developments, the range of support to improve SMEs’ digital skills would need to be scaled up. The new Digital Transformation Programme for SMEs puts a strong emphasis on the adoption of digital technologies, while only encompassing a basic support to improve digital skills; and the previous initiative only covered a few topics and reached a limited number of beneficiaries. The latter provides a very good basis on which to build upon by scaling up and broadening training modules. Several topics currently overlooked, and yet very important, could be considered: complementary skills, for instance, are not addressed, despite their relevance for SME managers and entrepreneurs.
The current programmes would also benefit from improvements in terms of monitoring and evaluation: there has not been any assessment of the quality of trainings offered so far. Some key performance indicators had been defined to help monitor and evaluate ODA’s programmes, but these focus on the number of beneficiaries of the different support tools rather than on the concrete impact of measures and skills effectively acquired.
Public-private co-operation enhances digital skills training opportunities
Moldovan SMEs benefit from initiatives carried out by, or in co-operation with, different stakeholders in the country’s digitalisation ecosystem. ODA (formerly ODIMM) has implemented its programmes with the support of associations. ATIC co‑ordinates private sector efforts and created StartUp Moldova, a project contributing to ODA’s digital skills trainings and offering additional services. The recently launched Digital Impact Programme offers mentoring from experts in various fields such as marketing, communication, IT and logistics. Additional trainings and seminars, including for women entrepreneurs, are to be developed in the near future. ATIC itself provided e-commerce education to 850 SMEs in 2021, and plans, via Tekwill, to enhance investments in human capital development to improve digital literacy among professionals and foster adoption of digital innovation in several sectors of the economy.
This successful public-private co-operation is a considerable asset for Moldova, as it strengthens implementation capacity and taps into the expertise of the private sector. Co-operating with business associations also helps designing tools tailored to SMEs’ needs. Although the number of beneficiaries of digital skills trainings is limited, upcoming plans should allow for expansion and for reaching a wider audience.
Tackling obstacles to SMEs’ digital skills development
SMEs face a number of challenges impeding the development of their digital skills and resulting in the skills gap with large firms. As mentioned in Chapter 3, firms, especially smaller ones, often struggle to understand the steps they should take to tap into the potential of digitalisation, and to identify their skills needs (OECD, 2022[2]). More generally, their lack of digital skills is largely due to resource constraints: they often lack awareness of the existing training opportunities (OECD, 2021[10]) and HR capacity to establish a strategy to develop human capital, organise and co-ordinate training, and attract talents (OECD, n.d.[11]). They are also constrained by limited financial means, hampering investments in up-skilling and re-skilling, and lack the time needed for such practices (OECD, 2021[10]).
In addition to offering training opportunities, digital skills policies should therefore take into account these various barriers and target them to help SMEs overcome these challenges.
SMEs often struggle to identify training and mentoring opportunities
While identifying skills and training needs is a pre-requisite for digital skills development SMEs often find it challenging to navigate the available training opportunities, for they lack the time, awareness and human resources to look into them. They can struggle to navigate between the different digital skills training options, and often need help to understand them and identify the most suitable option(s) (OECD, 2022[2]). As a tool to tackle this challenge, support programmes to SME digitalisation can offer advisory services to complement skills needs assessment tools and direct firms to the solutions most relevant for them (OECD, 2021[6]). ODA’s 2020 digitalisation programme included such instruments, although it is no longer foreseen in the upcoming policy initiatives outlined in Table 4.1.
Moreover, several government-sponsored digitalisation programmes across OECD countries, such as Sweden’s Kickstart initiative, report that reaching companies and incentivising them to participate is one of the major challenges they encounter (OECD, 2021[10]). Improving communication and emphasising the benefits of SME digitalisation programmes and trainings can contribute to mitigating these widespread issues. In the case of Moldova, more could be done to advertise the diversity of trainings offered by different stakeholders, such as Tekwill, raise awareness of the existing opportunities, and thereby increase uptake. Simple tools such as online platforms providing an overview of the support available could help in that regard.
Limited human and financial resources further impede SMEs’ access to digital skills trainings
Limited financial capacity is among the main resource constraints SMEs face. Their lack of financial means is often an obstacle to investment in trainings, either to benefit from external services of experts / consultants, or to build in-house ones. In the case of Moldova, the latest labour market forecast revealed that most employers deem in-house trainings as the best option for employees to acquire additional skills (Figure 4.2). This view is even more prevalent among managers in small firms (Labour Market Observatory, 2022[12]). Yet expenditures on training of staff in IT remain modest, consuming just 0.4% of total IT expenditures.
Figure 4.2. Moldovan firms’ attitude towards in-house training
Note: Figure (a): data stems from the results of the LMO’s 2022 labour market forecasting system. Figure (b): Data on legal entities’ expenditures in training of staff in IT only available for 2020. Data include enterprises with 10 employees or more and public administrations.
Source: (Labour Market Observatory, 2022[12]), National Bureau of Statistics of Moldova.
Most programmes to support SME digitalisation include financial tools to help SMEs overcome this barrier. Subsidising the cost of training is a useful tool to foster skills development: studies have shown that the availability of subsidies for training for small firms is associated with an increase in participation (Stone, 2010[13]). Such an instrument is particularly relevant for SMEs, as it allows flexibility thanks to its ability to target specific needs and circumstances. Extending the scope of ODA’s grants with the new 2022 programme to cover costs of staff training on digital tools is therefore a welcome development.
Finally, policies should take into consideration that the development of digital skills is a life-long process, as the rapid evolution of digital tools requires frequent skills updates and therefore continuous learning. Complementary skills are particularly important in that regard, as they increase the adaptability of managers and employees to new technologies and enhance their ability to learn quickly. More generally, the attitude of managers and entrepreneurs is crucial to fostering long-term investments in skills, building a working environment where employees can learn on the job, and ultimately supporting firm growth.
As a supplement to the instruments already mentioned to develop digital skills, which apply to both managers and employees, additional tools exist to enhance SME managers’ capacity specifically. Coaching, mentoring, peer learning among managers and entrepreneurs, for instance, have proven to be a useful complement to individual support services such as financial help and trainings. Such activities enable knowledge sharing and transfer, as well as economies of scale through the pooling of resources (OECD, 2021[10]). Many European countries have implemented similar measures to develop leadership and management skills, sometimes with a thematic focus, e.g. on digitalisation. However, this area remains rather uncovered by Moldovan policies so far. Upcoming initiatives on digital skills development include the establishment of an international list of experts to link SMEs with mentors, and of a “Virtual Academy”, i.e. an online platform to facilitate interaction with beneficiaries, but there is no plan to foster co-operation between companies themselves. Yet the latter could help lower the costs of up-skilling and re-skilling, promote sharing of good practices, and build learning networks.
References
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