LLOYDS BANK UK BUSINESS DIGITAL INDEX 2014 - Benchmarking the digital maturity of small and medium-sized enterprises
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LLOYD BANK UK BUSINESS DIGITAL INDEX
2014
LLOYDS BANK
UK BUSINESS DIGITAL INDEX
2014
Benchmarking the
digital maturity of small and
medium-sized enterprises
and charities in the UK
In association with
1
In association with In partnership with
IN THIS REPORT
4 FOREWORD
• LLOYDS BANK
• Go ON UK
7 EXECUTIVE SUMMARY
10 INTRODUCING THE LLOYDS BANK
UK BUSINESS DIGITAL INDEX
14 RESEARCH APPROACH, METHODOLOGY
AND SAMPLE
16 FINDINGS
• DIGITAL SKILLS AND TRAINING
• ATTITUDES TO DIGITAL
• USE OF DIGITAL
• DIGITAL DEMOGRAPHICS:
VARIATIONS BY INDUSTRY, REGION,
SIZE AND AGE
• THE LINK TO SUCCESS
34 SPOTLIGHT ON NORTH-EAST ENGLAND
37 CONCLUSION
40 APPENDIX
3
LLOYDS BANK UK BUSINESS DIGITAL INDEX
2014
FOREWORD
As Eric Schmidt and Jared Cohen said Although the UK is one of the most digital
in their book, The New Digital Age, the places in Europe, it’s clear we still have some
internet is among the few things that way to go to meet our digital aspirations.
humans have built that they don’t fully Beyond being connected, there is a
understand. This continues to be true. The fundamental need for better exploitation of
internet is evolving – we hear daily about the possibilities of web-based applications
new ways it can empower us, improve our and education about the benefits.
lives and make the world a better place.
Attitudes to growth and technology play
MIGUEL-ÁNGEL However, although online access a clear part in businesses and charities
RODRÍGUEZ-SOLA undoubtedly provides great opportunity, turning to digital to help them thrive. We
it is not evenly taken up. For example, half saw a strong positive correlation between
the organisations we spoke to have no businesses and charities that had more
Group Director
website at all and of those who do, only confidence in the UK economy and their
Digital, Marketing & about a third are using it to do more than own business, and their digital maturity –
Customer Development present their products and services or basic these organisations also saw digital as a way
company information. to grow their organisation.
Lloyds Bank is a very proud founder partner In contrast, almost 30% of organisations
of Go ON UK and our association has directly we spoke to said that being online was
led to the creation of this index which, for not relevant to their business. Just over a
the first time, allows us to measure the third said they were already doing all they
level of digital maturity of SMEs* in the UK could online.
and to demonstrate progress and areas
I am convinced that this index will help us
for improvement.
all to understand how small businesses
The index will help thought leaders and and charities in the UK are using the digital
organisations in the UK understand more medium and how we can support them.
about the national digital landscape, I’d like to take this opportunity to thank our
identify where the goals, set by Go ON UK, delivery partners, Accenture, who have
are being met and where the challenges are played a crucial role in making the index a
being most sharply felt. reality and have dedicated many hours to
driving the analysis.
The report, carried out with 1,988 of our
Lloyds customers, examines how businesses As supporters of Go ON UK we are always
and charities in the UK are exploiting looking to improve the digital services we
digital channels to manage and grow their offer to our own customers, helping them
organisations. The new index provides a better manage their businesses and lives.
way of benchmarking digital maturity within We want customers and the community
businesses and charities across the UK, to share in the benefits of the internet and
tracked on an annual basis. ultimately create prosperity for the UK. We
hope you enjoy reading the report and find
Our index will evolve over time and
the content useful and insightful.
I personally look forward to seeing the
way the UK is responding to the digital
challenges called out in this report.
* SME is defined as a business with 0–249
employees – BIS, 2013.
4LLOYDS BANK UK BUSINESS DIGITAL INDEX
2014
In March 1989, Tim Berners-Lee, then a The main barrier is about the perceived
physicist at CERN, submitted a proposal benefits of digital. 39% of organisations
for an information management system reported that they had no interest in doing
to his boss. “Vague, but exciting”, was the more online, or it was irrelevant to them.
feedback he received.
SMEs and charities who choose not to
Twenty five years later, that system – the expand their digital offer will, over time, be
world wide web – has fundamentally left behind. It is vital, for them and for the
transformed the way we communicate, economic health of the country, that they
work, innovate and live. are supported to make the most of the
MARTHA LANE FOX opportunities offered by the web.
The UK is one of the world's strongest
internet economies. The digital economy Go ON UK is focused on closing the digital
Chair accounts for over 8% of GDP – greater than skills gap. We want to make sure everyone
education or construction – and is forecast – individuals, businesses, charities – can
Go ON UK
to rise to over 12% by 20161. get connected and make the web work for
them. We are at an early stage of the web's
We are world leaders in e-commerce. British
development and the pace of change will
internet users made 129m visits to retail
only increase. As Tim Berners-Lee said:
websites on Boxing Day 2013, up by 15% in
"The web as I envisaged it – we have not
one year – the biggest online shopping day
seen it yet. The future is still so much bigger
to date2. And over half of these visits were
than the past."
made on mobile devices3.
Thanks to Lloyds Bank for their continued
London is a significant digital hub, with
commitment as a founder partner of
businesses in this sector growing at a rate
Go ON UK, and to both Lloyds Bank and
of 17% between 2009-2012, compared
Accenture for their work in producing
to 6% in other industries 4. But it's not just
this report.
the South-East – recent work shows there
are strong digital clusters in Manchester,
Middlesbrough and Aberdeen5.
But this report shows that the transformative
power of digital is not being fully exploited
by SMEs and charities in the UK. Just 18%
of firms and charities allow customers
to purchase products, services or make
donations from their website.
Yet a third of the least digitally mature
organisations claim they have the skills they
need to make their business more digital.
So why aren't they? Only 2% say
connectivity is the main obstacle to doing
1. B
CG – The Internet Economy, March 2013
more online.
2. Experian, December 2013
3. IBM, December 2013
4. Tech City, Annual Report, December 2013
5. Niesr & Growth Intelligence – Measuring
the UK’s digital economy with big data.
5LLOYDS BANK UK BUSINESS DIGITAL INDEX
2014
6LLOYDS BANK UK BUSINESS DIGITAL INDEX
2014
EXECUTIVE SUMMARY
1.5m
This report is based on detailed analysis ALMOST
of small businesses and charities1,2. It
looks at the use of and attitudes towards
digital technologies, the benefits of using
digital capabilities, and the barriers to
organisations realising those benefits.
We believe this new measure of digital organisations in the UK have a high degree of digital maturity,
maturity will bring three overall benefits. meaning they invest significantly in digital infrastructure,
Firstly, it will help policymakers and training and use advanced digital security techniques.
organisations themselves gain a better
understanding of the digital world in which
1.9m
SMEs and charities are operating. Secondly, OVER
and most importantly, it will help to clarify
what needs to be done to help organisations
that are already on their digital journey,
and those that have yet to appreciate the
potential value of setting out.
Lastly, SMEs can unlock an additional organisations have a medium level of digital maturity – they may
£18.8bn of incremental revenue growth by have a basic social media presence, use simple e-commerce tools
optimising their use of digital technologies3. or carry out some but not all banking transactions online.
By repeating this report annually we will
1.7m
provide valuable comparisons of changes ALMOST
in digital usage, basic online skills and
perceptions over time.
organisations have a very low level of digital understanding
and capability – many make no use of the internet at all and
do not have any web or social media presence.
1. For this report, ‘Charity’ refers to ‘Charities, Clubs and Societies’.
For ease of reading, we refer to ‘charities’ throughout this
report.
2. Clubs and Societies means any organisation, whether
corporate or unincorporated and where the organisation is
unincorporated consists
of two or more persons.
3. B ooz & Co, November 2012.
7LLOYDS BANK UK BUSINESS DIGITAL INDEX
EXECUTIVE SUMMARY
11% KEY FINDINGS
Digital skills and training Digital demographics
and link to success
A third of SMEs and charities don’t have
of respondents say they
the basic online skills as defined by We found that digital maturity by region was
don't use the internet.
Go ON UK and this picture is mostly flat relatively flat but that those regions in most
by region. Furthermore, 75% of SMEs and need of support were Northern Ireland,
charities are not investing in improving Scotland and Yorkshire & Humberside. By
digital skills. Paradoxically however, even sector there was more polarisation with
one third of the least digitally mature SMEs charities emerging as the least digitally
and charities say they have the knowledge mature compared to those operating in the
to make their organisation more digital if arts, education or service sectors.
they wanted to.
Organisations with one employee appear
We know from our research that only to be significantly less digitally mature than
1 in 4 organisations are actively seeking larger organisations, especially important
digital help in the first place. Of those when you consider they make up around
seeking support, most are only looking for three quarters of SMEs in the UK. Perhaps
help with basic functions such as website unsurprisingly, older SMEs and charities
maintenance or design but perhaps most emerged as least digitally mature compared
worryingly 25% don’t know what support to younger organisations.
they need.
We found there was a positive correlation
between those who were most digitally
Attitudes and the use of digital mature and their confidence in both their
own organisation and the UK economy
The primary reason why SMEs and charities as a whole. These organisations also
are not taking practical steps to do more rated themselves as out-performing
online are attitudinal. Almost a third of all their expectations.
SMEs and charities we spoke to said being
online was not relevant for their business
and more believe they are already doing all
they can online.
Our research shows that while connectivity is
obviously a major issue for some organisations,
only 2% cite lack of connectivity as a barrier to
doing more online.
We also found that the internet isn’t being
optimised by organisations. Only half of
SMEs and charities had a website and for
those who do, nearly all provided company
information and over three quarters provided
product or service information. But after
that, more sophisticated functionality is
limited with only 1 in 5 allowing payments/
donations from customers or donors from
their site. 11% said they did not use or had
no access to the internet at all.
*A charity means a body which, in England
and Wales, is defined by section 1(1) of the
Charities Act 2006, in Northern Ireland is
defined by section 1(1) of the Charities Act
(Northern Ireland) 2008 and in Scotland is
defined by section 106 of the Charities and
Trustee Investment (Scotland) Act 2005.
8LLOYDS BANK UK BUSINESS DIGITAL INDEX
EXECUTIVE SUMMARY
CALLS TO ACTION
Taken together, our research findings suggest that while there are many great examples
of how digital is benefiting the UK’s SMEs and charities, there is also much more that can
be done. We have identified four specific calls to action:
01 02
EXPLAINING THE BENEFITS AVOIDING COMPLACENCY
The benefits of digital must be articulated SMEs and charities must be helped to move
more clearly: how can those organisations beyond digital basics: how can those who
who feel digital is ‘irrelevant’ be persuaded say they have ‘done it all’ be convinced that
to look again at the changing needs of their there is always something more they can
customers, donors and clients? do, and that maturity is an ongoing journey
rather than a single step?
03 04
PROVIDING MORE SUPPORT ENCOURAGING INNOVATION
More support must be provided for the The most innovative SMEs and charities
“Disconnected”: how can the 11% of SMEs must be supported in pushing back the digital
and charities that are currently not using boundaries: how can the “Innovators” be
online channels at all be stimulated to encouraged to keep innovating, and share
start doing so? what they have learned from being digitally
mature enterprises in a way that will benefit all?
In our view, each of these challenges can only be tackled through a carefully-targeted
programme of initiatives involving a wide range of stakeholders, with a shared
commitment to:
• delivering better education and communication around the business case for digital
• highlighting the strong benefits and relevance of digital to all SMEs and charities –
regardless of location, size or sector.
In the rest of this report, we will explore the digital maturity index in more detail,
and examine the findings that we believe are of greatest interest.
9LLOYDS BANK UK BUSINESS DIGITAL INDEX
2014
INTRODUCING THE LLOYDS BANK
UK BUSINESS DIGITAL INDEX
EVERY 12 MONTHS The Lloyds Bank UK Business Digital We have mapped each segment based on
Index benchmarks the stage of digital level and intensity of digital activity against
The Index is a new research
development of SMEs and charities the following attributes:
study into the digital maturity
(which include clubs and societies) in the
of UK's SMEs and charities. It will
UK. The index, to be produced annually,
• Proportion of transactions
be repeated annually, enabling conducted online
is calculated using a specially-developed
benchmarking over time.
methodology which is described in the • Proportion of enquiries handled online
next section.
• Sophistication of digital infrastructure
1,988 SMEs AND Applying this methodology, we have
• Implementation of online
CHARITIES formulated the Index referencing a 2014
security measures
digital maturity ‘benchmark’ score of 100.
The research is based on an analysis
of Lloyds’ customer data and a
As Figure 1 shows, our analysis reveals • Use of digital channels for advertising
comprehensive survey of 1,988
a wide spectrum of benchmark scores
ranging from ‘low’ to ‘medium’ to ‘high’
• Usage of digital channels
small businesses, charities, clubs for communication
digital maturity, with SMEs and charities
and societies.
spread across seven distinct segments • Dedicated resource driving
from ‘disconnected’ at the lower end to digital development.
‘innovators’ at the top.
7 SEGMENTS Importantly, the Index segments identified
Each segment is clearly-defined and has contain different mixes of digital attributes
The initial study has revealed
a set of specific factors and attributes as they move from left to right; simply
seven distinct segments of digital
influencing its approach to digital and doing ‘more’ of something is not necessarily
maturity across all industries.
overall digital maturity. enough to achieve a higher digital maturity
score. Instead it is a question of achieving
The chart also shows that the seven the right mix of activities to progress up
segments are relatively evenly distributed the scale.
across the population, each accounting for
between 12% and 17% of the SMEs and For example, mid-scale “Starters”, with an
charities surveyed. average digital index score of 102 are active
on social media, do proportionally more
The numbers in brackets represent internet banking and typically have a larger
the total number of SMEs and charities in budget to support digitisation. However,
the UK1, 2, extrapolated from our research3. to grow to become “Advanced Users”
At a glance, we can see that only 29% of they would need to demonstrate use of
SMEs and charities in the UK are in the high innovations such as cloud-based services.
digital maturity segment. A full definition In focusing on the quality rather than the
of each segment is included at the end of quantity of activity, we believe the index
this section. presents a more robust, deeper picture.
1. Source, Department of Innovation & skills (BIS) – 2013.
2. S ource, UK Charity Commission – 2013 (England and Wales),
Office of the Scottish Charity Regulator (Scotland) and The
Charity Commission for Northern Ireland (Northern Ireland).
3. T
able doesn’t include the number of clubs or societies in the UK
as data for these organisations doesn’t exist unless they are a
registered charity.
10LLOYDS BANK UK BUSINESS DIGITAL INDEX
INTRODUCTION
FIGURE 1
Seven discrete segments of digital maturity and their index scores.
200
UK Digital Business Index 2014 - 100 157 161
180
160
100 Population : 100
140 116
Digital Index Score
102
120 90
100
61
80
60 28
40
20
0
Disconnected Basic Adopters Passive Users Starters Established Users Advanced Users Innovators
(16%, 816,000) (17%, 867,000) (13%, 663,000) (12%, 612,000) (13%, 663,000) (16%, 816,000) (13%, 663,000)
Digital maturity score Low maturity Medium maturity Higher maturity
11LLOYDS BANK UK BUSINESS DIGITAL INDEX
INTRODUCTION
100
UK’s digital index score
12LLOYDS BANK UK BUSINESS DIGITAL INDEX
INTRODUCTION
DEFINITION OF SEGMENTS
Here are the different digital maturity segments and their corresponding traits.
01 02
DISCONNECTED BASIC ADOPTERS
• No/minimal use of internet • Basic enterprise website
• Very low on internet banking transactions. • Low digital infrastructure.
03 04 05
PASSIVE USERS STARTERS ESTABLISHED USERS
• Intermittent use of digital channels • Presence in social media • High usage of e-commerce platforms
to accept payments • Large volume of internet • Spends on ICT training and development
• Signs up to social media, banking transactions • Social media presence.
internet banking but use is sporadic. • Use third party digital expertise
• Large budget allocation
for digitisation.
06 07
ADVANCED USERS INNOVATORS
• Usage of cloud and/or online accounting • Significant spend in digital security
• Seek external support for increasing • High spend for digital infrastructure
digital innovation. and training.
13LLOYDS BANK UK BUSINESS DIGITAL INDEX
2014
RESEARCH APPROACH,
METHODOLOGY AND SAMPLE
The Lloyds Bank SME Digital Maturity • Maintaining a social media presence
1,988
Index is calculated using a two-stage (e.g. use of Facebook or Twitter to interact
process: with customers or donors)
• An analytics-driven review of anonymised • Positive attitudes towards being
internal Lloyds Banking Group data to more digital
gain an oversight of the online banking
activities of customers at an aggregate
• Positive outlook for current and/or future
Survey of Lloyds Bank success of the organisation in question.
level, as a proxy for the UK’s SME and
customers charity population as a whole. Within this approach, we have allocated
different weightings to various digital
• An in-depth, questionnaire-led survey of activities to reflect their relative
1,988 Lloyds Bank customers1 to reach
contributions to overall digital maturity.
a rounded view of their digital activities
These weightings are shown in Figure 2.
and perceptions. This data was also fully
The percentages are generated by taking
anonymised prior to analysis.
account of all these weighted variables,
There are many possible definitions of what drawing data from both transactional and
‘digital’ actually means. For the purposes survey sources.
of the Index, we have agreed on a set of
About 33% of the overall score is generated
factors we believe best describe ‘digital’,
from Lloyds Bank’s own transactional
and intend to carry this definition forward in
data, and the remainder from the survey
future versions of the report. Applying this
responses. In subsequent editions of
definition, the Index methodology involves
the Index, we will track variances to this
an assessment of the digital maturity and
benchmark to illustrate and track the
positioning of SMEs and charities across a
progress of digital maturity across the
wide range of dimensions, including:
UK population of SMEs and charities.
• Communicating online
• Having access to and using
digital technologies
• Using digital internally to drive greater
efficiency (e.g. online training tools)
• Robust online security, to protect
customers, donors and the
organisations themselves
• Running a website where customers
and donors can find information
• Using online banking tools
• Possessing a range of basic online skills
(as defined by Go ON UK – see definition
on page 19)
1. T
he survey was carried out in September 2013
with Lloyds Bank and Bank of Scotland customers.
14LLOYDS BANK UK BUSINESS DIGITAL INDEX
RESEARCH APPROACH, METHODOLOGY AND SAMPLE
FIGURE 2
Relative weightings attributed to different digital variables.
Approach towards digital
development - in-house team
Usage of digital channels Online transactions
for communication
6%
17%
8%
Usage of digital
channels for advertising
15%
Online enquiries
16%
16%
22%
Security mechanism
Digital infrastructure
NOTE: for the purposes of this analysis, all firms are
said to have at least one employee, equivalent to the
“zero employee” classification for sole traders used
by the Department of Business, Innovation and Skills
(BIS) and Office of National Statistics (ONS).
15LLOYDS BANK UK BUSINESS DIGITAL INDEX
2014
FINDINGS
Digital skills and training
OVERALL 3/4 SMEs Digitally mature SMEs and charities are 67% of all SMEs and charities – and 80% of
AND CHARITIES more confident in their skills – and have digitally mature respondents – say they have
better access to the technology they need. access to the technology they need to make
are not allocating any budget
their enterprises more digital, while only 2%
to developing digital skills. As Figure 3 shows, two-thirds of the most
pointed to connectivity being an obstacle to
digitally mature SMEs and charities agree
doing more online. Cost and security were
they have the necessary knowledge and
also rarely mentioned as barriers.
25% OF SMEs experience to become even more digital.
AND CHARITIES As figure 8 (see page 22) demonstrates, a Of those surveyed, some 11% told us they
lack of knowledge and skills is not seen as simply did not use the internet, mirroring the
who are reaching out for support
a major barrier to entry, with one in three wider attitudes we note in the next section
remain unsure on what type of
of even the least digitally mature claiming (see Fig 8), around the lack of interest in
help they need.
to have the skills to progress. If these least digital, belief in the relevance of digital, and
digitally mature SMEs and charities really do willingness of SMEs and charities to engage
have the necessary skills to do more digitally, with digital.
DIGITAL SUPPORT the question is why they haven’t done
There is a strong reliance on so – pointing to a need for education on the
friends, family, online searching benefits of digital.
and most often IT consultants
for digital support.
FIGURE 3
'I have the knowledge and experience I need to make my business more digital.'
(Percentage of respondents who answered ‘agree’ or ‘strongly agree’).
36% 54% 67%
Least digitally mature Digitally mature Most digitally mature
16LLOYDS BANK UK BUSINESS DIGITAL INDEX
FINDINGS
1 in 4
Case study : Black Voices ONLY
Black Voices is a music group based in Birmingham, that has travelled the world
performing during its 25 years. Carol Pemberton, music director of Black Voices, said:
“We’ve had a website for as long as I can remember and we couldn’t have managed without
it, but we’ve learned most of our digital skills through trial and error. Working with young
people has the added benefit of there always being a whizz-kid on hand who can help with SMEs and charities surveyed are
technological issues! reaching out for digital support
When we were previously funded by the Arts Council we did receive online training in the first place.
through them, but there is still a lot that could be done to provide support and skills
training for small organisations and community groups.”
We’ve had a website for as long as I can remember and
we couldn’t have managed without it, but we’ve learned
most of our digital skills through trial and error.
CAROL PEMBERTON
17LLOYDS BANK UK BUSINESS DIGITAL INDEX
FINDINGS
Our analysis also reveals issues around Those who do spend money on advice and
digital advice and training in every digital training tend to buy it externally. Looking at
maturity segment. Overall 75% are not where respondents go to access the digital
allocating any budget to developing digital advice and support they need, as Figure 5
skills. As Figure 4 shows, SMEs and charities shows, there is a strong reliance on friends,
looking for support want training in the relatives, online searching and, most often,
basics, but 25% remain unsure what type through paid IT consultants.
they need. So there’s a clear requirement for
education on what skills SMEs and charities
need to make the most of digital.
FIGURE 4
Website design 28%
‘What types of digital advice and training
would you wish to be able to access?’ Website maintenance 24%
Key needs Other needs General internet use 19%
Social media use 18%
Back-office/administration 16%
Security 16%
Other 12%
Receiving or making online payments 11%
Integration of systems 10%
Media buying 8%
NOTE: asked of 492 respondents using any
form of external digital advice or support. Don't know 25%
FIGURE 5
‘Where do you go to get advice and training Consultant (e.g. IT, marketing professional) 35%
on how to use technology and the web?’ Friend/relative/colleague 34%
Search online 28%
IT supplier or business support company 25%
Local business network (e.g. Chamber of Commerce) 9%
Recruit someone with the right skills 6%
Peers (e.g. similar organisation to my own) 5%
GOV.UK (formerly "BusinessLink") 5%
Go Green Initiative 2%
Bank 2%
Other 3%
NOTE: asked of 492 respondents using any Don't know 2%
form of external digital advice or support.
Responses were not mutually exclusive.
18LLOYDS BANK UK BUSINESS DIGITAL INDEX
FINDINGS
24%
ONLY What does this tell us? Of concern should back up online content with printed materials,
be the fact that only one-in-four SMEs and access to low-cost digital training through
charities surveyed (492 out of 1,988) are schools, colleges and community centres, as
reaching out for digital advice and support in well as through the Chambers of Commerce
the first place. Then, despite the abundance and wider Government channels.
of training and support materials accessible
This is particularly important when
online and free-of-charge, fewer than one-in-
considering the level of digital skills amongst
of all SMEs and charities surveyed three of this subset felt comfortable finding
SMEs and charities. Go ON UK outlines four
are seeking digital support. their own answers, preferring to rely on paid
key themes to define “Basic online skills”
consultants to deliver what was needed.
for both SMEs and charities.
This indicates a clear opportunity to drive
more self-sufficiency and confidence
around dealing with digital amongst the
UK’s small businesses and charities, and
perhaps a need for a multi-channel approach
to provision. Consequently, it’s important to
COMMUNICATE FIND THINGS
The ability to send and receive emails The use of search engines
or maintain a social media account
basic
online skills
TRANSACT PROVIDE INFORMATION
The ability to make and receive payment/ The ability to build and maintain
donations online and manage finances a website, and optimise for
online including internet banking different devices
19LLOYDS BANK UK BUSINESS DIGITAL INDEX
FINDINGS
BASIC ONLINE SKILLS
1 in 3
ONLY Figure 6 shows that against these criteria, Clearly, to make gains in the area of digital
most SMEs and charities have a good training, skills and advice, it will be important
level of basic digital communication skills. to link relevant content and accessible
However, the challenge is particularly acute channels to these areas of specific need.
for the charities sector, where only two in
In this way, support can be properly
five organisations have basic digital skills in
targeted to raise the combined level of
the dimensions of “find things” and “provide
charities are able to 'transact'. digital maturity of both the SME and
information”, while fewer than one-in-three
charity sectors.
are able to “transact”. Looking at the level
of skills across the UK, we also saw a fairly
even distribution with no real evidence of
national ‘black spots’ when it came to having
the skills needed to be a more digital small
business or charity.
FIGURE 6
Level of basic online digital skills as defined by Go ON UK (total population vs charities).
87%
75%
67%
64%
58%
39% 39%
28%
Communicate Find things Provide Transact
information
Charities Combined SMEs & charities
When you compare digital skills regionally a East Midlands (35%) and then Yorkshire
different pattern emerges. Initially it appears & Humberside (34%). London is leading
to follow the regional view shown on page 29 the way across the board but still a quarter
with those in the South being more digitally of the population in the capital is without
enabled but the pattern is more complex in basic online skills. More detail on the way
the Midlands and the North. basic online skills are distributed across the
UK and by digital maturity segment can be
On the whole, the region with the most
found in Table A1 in the appendix.
SMEs or charities without basic online
skills is the North-West (38%) followed by
20LLOYDS BANK UK BUSINESS DIGITAL INDEX
FINDINGS
31%
FIGURE 7
Average percentage of SMEs and charities
without basic online skills by region.
UK average
30%
Scotland
32%
North-East
32%
Northern Ireland 34%
Yorkshire
38% & Humberside
North-West 35%
31% East Midlands
West Midlands
30%
33%
East England
Wales
25%
London
29%
30% South-East
South-West
21LLOYDS BANK UK BUSINESS DIGITAL INDEX
FINDINGS
Attitudes to digital
29% OF SMEs Most respondents see digital as either ‘solved’ Those SMEs and charities who see
AND CHARITIES or ‘irrelevant’. As Figure 8 shows, over one-third further digital progress as ‘irrelevant’ are
of SMEs and charities surveyed believe they predominantly smaller SMEs and charities of
say that being online is not relevant
are doing “everything they can” online. 29% 5 employees or less, which have been trading
for their business or charity.
say being online simply isn’t relevant for their for 10 years or more. In terms of industry, the
business or charity. largest group regarding digital as irrelevant
are charities, 25% of whom take this view.
INCREASED DIGITAL These findings further underline that the main
MATURITY barrier to increased digital maturity lies not A further breakdown of those who believe the
in skills and infrastructure but in mindset and internet is not relevant for them can be found
The main barrier to increased
attitudes, especially in particular segments. in Table A2 in the appendix.
digital maturity lies not in skills
and infrastructure but in mindset
and attitudes.
FIGURE 8
'Which, if any, of the following reasons, has stopped your company doing more online?'
Nothing – we are doing all we can online 35%
Being online is not relevant for our business 29%
No time to set up and go online 14%
Lack of staff digital/online skills 11%
Just not interested in going online 10%
Not worth the investment 7%
Too expensive 6%
Other priorities for investment 6%
Concerns about information/security/fraud 5%
Cost of investment unknown 3%
Other 2%
Poor connectivity 2%
Interestingly, the profile of SMEs and the UK and time savings. Further potential
charities that believe they are ‘doing all they benefits such as global reach, lower
can’ is remarkably similar to those rating costs and enhanced revenues are hardly
digital as ‘irrelevant’. Once again they are mentioned. While connectivity is clearly
predominately smaller SMEs and charities a big issue for those without it, overall the
of 10 years’ or more standing, and include a majority of SMEs and charities do not cite
disproportionate number of charities (20%). connectivity as an issue.
Yet digitally mature SMEs and charities say More detail on SMEs and charities that
they are already realising major benefits – believe they are ‘doing all they can’ can be
primarily wider reach and exposure across found in Table A3 in the appendix.
22LLOYDS BANK UK BUSINESS DIGITAL INDEX
FINDINGS
The findings around attitude again point to partners to communicate the message that
the need to make the case for digital more digital helps SMEs and charities to thrive.
clearly. Figure 9 shows that digitally mature Tables A4, A5 and A6 in the appendix show
SMEs and charities are more positive about in more detail where those making use of
their own digital resources and the resulting online provision are finding the most benefit
benefits. But with only 50% of high maturity and how this is expressed by digital maturity
respondents believing digital organisations segment. This shows that the main benefit is
are more successful, there is more work to found in reaching a wider customer base and
be done by all stakeholders, including the saving time.
Government, Go ON UK and its founder
FIGURE 9
'Thinking about your attitudes towards being a more digital-based business,
to what extent do you agree with the following statements?'
(Percentage of respondents who answered ‘agree’ or ‘strongly agree’).
80%
I know where to get info about becoming more digital 68%
53%
80%
I have access to the tech I need to become more digital 67%
52%
63%
A website would help me increase revenues 40%
19%
50%
Digital organisations are more successful 39%
26%
35%
Social media would help me to increase revenues 22%
11%
NOTE: The percentage is the number of
respondents who answered 'agree' or
'strongly disagree' to the question. High maturity Population Low maturity
Case study : Richard Denny Global
Richard Denny Global is a business-to-business skills training company based in ...we’ve been putting a lot
Moreton-in-Marsh, Gloucestershire. It was founded by business growth specialist,
inspirational business speaker and author Richard Denny. of work into developing
Judith Harker, Managing Director of Richard Denny Global, said: “Most of our business our digital skills, which is
currently comes from referrals by satisfied customers, but we’ve been putting a lot of a great way of generating
work into developing our digital skills, including our website and email marketing, which
is a great way of generating new business."
new business.
23LLOYDS BANK UK BUSINESS DIGITAL INDEX
FINDINGS
Use of digital
ONLY 50% OF SMEs Our research provides clear evidence that Only 50% of all SMEs and charities said they
AND CHARITIES SMEs and charities are taking advantage had a website at all but others are making
of the ‘digital basics’. use of digital in other ways. Figure 10
have a website.
below shows that over 80% are using digital
Many SMEs and charities that have a
channels for communication, two thirds
website are just scratching the surface of
are using them for information research
11% OF RESPONDENTS digital potential (see Figure 11, on page
and over half are using internet banking.
25). While almost all offer basic company
said they did not use the internet. Interestingly, around a third are allowing
information, and three-quarters enable
payments/donations from customers via
viewing of products and services, virtually
digital means e.g. through use of internet
none offer the advanced features that
POLARISATION banking but only 18% through their website.
today’s customers expect.
There is polarisation between those 11% do not use the internet or have no access.
who receive the vast bulk of payments
or donations digitally, and others that
receive the majority of funds via
physical means. FIGURE 10
How SMEs and charities are using any form of digital channel (i.e. not just website).
ONLY 18% OF SMEs
AND CHARITIES Communicate with suppliers /customers 81%
Search for information 67%
allow customers to purchase
products, services or make donations Internet banking 55%
from their website. Run a unique company/charity website 50%
Use Government services (e.g. HMRC) 50%
Make payments to suppliers 44%
Provide online information /advertising 43%
Take payments from customers 32%
Make sales/take orders 26%
Online accounting software 16%
Cloud-based IT systems 16%
Do not use internet/no access 11%
Digital training tools 9%
Digital recruitment 6%
Receive charitable donations 3%
24LLOYDS BANK UK BUSINESS DIGITAL INDEX
FINDINGS
The opportunity created by the unrealised
potential of digital is especially clear in
online payments and donations. As Figure
11 shows, only 18% of SMEs and charities
allow customers and donors to purchase
products/services through their website.
FIGURE 11
Features and functionality supported by respondent’s websites (n=1,095).
Websites are limited
Basic company information 98% to basic information
View products/services 77% with limited provision of
Security to prevent hacking 38%
advanced functionality.
Interactive visual display of products 20%
Purchase products/services 18%
Secure online gateway 13%
Multi-currency payments 6%
Foreign language support 6%
HR, recruitment & employee comms 6%
Internal admin pages 4%
Manufacturing planning & scheduling 3%
Note: asked of organisations with a website
(n=1,095) Basic functions Advanced functions
25LLOYDS BANK UK BUSINESS DIGITAL INDEX
FINDINGS
Figure 12 shows polarisation between those – it will often move quickly to migrate all
who receive the vast bulk of payments or its incoming payments (or where possible,
donations digitally, and others that receive donations) online. Those most in favour of
the majority of funds via physical means. receiving payments and donations online
This suggests that once a firm gets a taste include SMEs and charities less than two
of the benefits – especially increased speed years old and businesses in construction
of receiving payments and donations and and manufacturing.
greater customer/donor convenience
29%
FIGURE 12
Proportion of payments or donations received online (where SME or charity allows payment
via a digital channel).
35
of SMEs and charities take 30
% of SMEs & charities
between 0 and 20% of their 25
payments/donations online. 20
15
10
5
0
0 - 20 20 - 40 40 - 60 60 - 80 80 - 100
% online
% payments or donations received online
47%
FIGURE 13
Proportion of donations received online (where charity allows donation via a digital channel).
50
40
% of charities
of charities take between 0 and 20% 30
of their donations online.
20
10
0
0 - 20 20 - 40 40 - 60 60 - 80 80 - 100
% online
% donations received online
As a final observation, we should reiterate that Clubs, Charities and Societies still appear to
remain far less likely to take donations digitally – almost half (47%) take between 0 and 20%
of their donations online (see Fig 13).
26LLOYD BANK UK BUSINESS DIGITAL INDEX
2014
ONLINE TRANSACTIONS
Those most in favour of receiving payments and
donations online include SMEs and charities less than
two years old and businesses in construction
and manufacturing.
27LLOYDS BANK UK BUSINESS DIGITAL INDEX
FINDINGS
Digital demographics: variations
by industry, region, size and age
ALMOST 60% Our analysis reveals striking differences (see Figure 14). In contrast, charities are the
OF CHARITIES between industries in terms of their digital least digitally mature type of business. More
maturity, with sectors such as administration detail about how digital maturity is split by
have "low maturity." Charities
and support services, education, and arts industry sector can be seen in Table A7 in
emerge as the least digitally
and recreation emerging as leaders the appendix.
mature type of business.
LOCATION FIGURE 14
is much less of a factor than
Digital maturity index scores for SMEs and charities, split by industry segment.
industry sector in determining
maturity.
Administrative and support service activities 129
Education 124
1 EMPLOYEE Arts & recreation 121
SMEs and charities with only 1 Finance & insurance products 109
employee are significantly less
Accommodation & food service 108
digitally mature than their
Transportation and storage 107
larger counterparts.
Information & communication 106
Wholesale, retail, repair 104
CLEARER PATTERN Construction 104
on age with longer established Real estate 104 Population : 100
SMEs and charities tending to be
Manufacturing 93
less mature.
Agriculture, forestry, fishing 93
Health & social work 89
Others 78
Charities 59
28LLOYDS BANK UK BUSINESS DIGITAL INDEX
FINDINGS
FIGURE 15
Digital maturity index scores for SMEs and charities, split by region.
Location is much less of a
South-East 108
factor than industry sector
South-West 107 in determining maturity.
London 106
East England 103
West Midlands 103 Population : 100
East Midlands 99
Wales 97
North-East 96
North-West 91
Yorkshire & Humberside 90
Scotland 86
Northern Ireland 77
Higher maturity Medium maturity Low maturity
Table A8 in the appendix shows in more detail how digital maturity falls within the different
UK regions and in particular how many of each of the 7 segments are included in each region.
29LLOYDS BANK UK BUSINESS DIGITAL INDEX
FINDINGS
Organisations with only one employee are by far the least digitally mature. This is particularly
important when you consider this group makes up around 75% of the SMEs in the UK1. If this
group could be improved, it would dramatically affect the level of digital maturity for the UK
as a whole. In Figure 17, analysis by the age of organisations reveals that longer-established
SMEs and charities tend to be less mature.
75%
AROUND FIGURE 16
Digital maturity index scores for SMEs and charities, split by number of employees2.
114 116
108 106
103
89
of SMEs in the UK have only
one employee and are by far
the least digitally mature.
75% 17.4% 4% 3% 0.4% 0.2%
1 2-5 6-9 10 - 49 50 - 99 100 - 249
NOTE: The % represent the percentage of those organisations in the UK as a whole, e.g. SMEs with only 1 employee make up
FIGURE 17
Digital maturity index scores for SMEs and charities, split by age.
109 113 109
107
93
1. S ource, Department of Innovation
& skills (BIS) - 2013
2. T
he percentage size of organisations,
according to number of employees, only
pertains to SMEs, not charities, clubs or Less than 1-2 3-4 5-9 10 years
societies as this data is not available. one year years years years or more
30LLOYDS BANK UK BUSINESS DIGITAL INDEX
FINDINGS
One possible interpretation is that There may also be an argument to say that
younger organisations are more likely to older SMEs and charities are less mature
be outsourcing their technology, and may because management teams have not COMMON PRACTICE
find it easier to update infrastructure than needed to engage with the digital
those who have adopted in-house solutions. revolution happening around them.
Conversely, their older counterparts But for newer SMEs and charities, digital is For newer SMEs and charities,
are perhaps more likely to have more almost a hygiene factor, and reflects the digital is almost a hygiene factor,
legacy systems and complex networks, social context in which modern founders and reflects the social context in
making updating technology more costly operate, at least at a basic level (e.g. social which modern founders operate.
and challenging. media being an accepted/expected
method of communicating).
31LLOYDS BANK UK BUSINESS DIGITAL INDEX
FINDINGS
The link to success
POSITIVE CORRELATION Our study confirms that those with high Digitally mature SMEs and charities also
digital maturity are more likely to have rate their own performance against
between the most digitally mature
strong growth aspirations and to believe expectations more highly. Almost two-thirds
SMEs and charities and those who
that digital technology is important to – 64% – of the digitally mature segments
have more confidence in their own
their future success. rate themselves as “above” or “significantly
enterprise and the UK economy as
above” performance expectations, against
a whole. If this view was shared by more SMEs, it
59% of those surveyed overall. And while
would help unlock the potential £18.8 billion
68% declare themselves “confident” or
in incremental revenue, predicted by Booz
“very confident” in their future prospects,
80% OF SMEs & Co (November 2012) by harnessing
this proportion rises to 76% among digitally
AND CHARITIES digital technology.
mature respondents.
in the most digitally mature Some 80% of SMEs and charities in
Interestingly, digital maturity also correlates
segments believe that digital plays the most digitally mature segments
with higher confidence in the UK economy,
an important role in helping achieve believe that digital plays an important role
pointing to a ‘halo effect’ from digital
their strategic objectives. in helping achieve their strategic objectives
capabilities. Some 41% of the most digitally
– with 64% citing growth as an important
mature SMEs and charities rate themselves
part of their strategy.
as “confident” or “very confident” on the
ALMOST 2/3
prospects for the UK economy, against
64% of the digitally mature 34% overall.
segments rate themselves as
“above” or “significantly above”
performance expectations.
32LLOYDS BANK UK BUSINESS DIGITAL INDEX
FINDINGS
41%
of the most digitally mature SMEs
and charities rate themselves as
"confident" or "very confident" on
the prospects for the UK economy.
33LLOYDS BANK UK BUSINESS DIGITAL INDEX
2014
SPOTLIGHT ON
NORTH-EAST ENGLAND
32% We have provided a focus on the North-East
of England because this supports the recent
Go ON UK regional rollout in that region. Our
survey sample includes SMEs and charities
A deeper analysis reveals a stronger focus
among North-East SMEs and charities on
the digital benefits of back-office efficiency
and better customer service experience
based in the North-East. As a group, they – advantages highlighted by twice the
of SMEs and charities in the have a stronger focus on manufacturing, proportion in the North-East compared to
North-East don't have basic construction and charities than the UK- UK-wide. However, asked why they do not
online skills. wide average, and nearly two-thirds have have a website or use social media, North-
been trading for more than 10 years. While East SMEs and charities are twice as likely to
this profile might be expected to give the mention cost and security issues, and almost
region a low digital maturity score, in fact it three times as likely to cite a lack of skills.
comes out with 96, only slightly below the
Also, while they are slightly below average
benchmark of 100.
on having company websites and using
This performance reflects the fact social media, North-East SMEs and charities
that North-East SMEs and charities are are 50% more likely to be registered with
generally more positive about digital online directories.
opportunities and investment, and more
This may be further evidence of a skills
confident in their skills and access to
challenge, since it suggests SMEs and
technology. So there is an opportunity to
charities would rather use a third-party index
capitalise on this positive attitude to drive
service than apply digital tools themselves
higher maturity in the region.
to market their products and services.
Our findings include:
50% 59% 23%
of North-East SMEs and charities rate rate digital as “important” or are considering increasing their
themselves as “skilled” or “very skilled” “very important” to their strategies, level of overall digital investment
in digital (UK average of 44%) against a UK average of 55% (UK average of 20%)
34LLOYDS BANK UK BUSINESS DIGITAL INDEX
SPOTLIGHT ON NORTH-EAST ENGLAND
A comparison by industry segment (see Figure 18) underlines how SMEs and charities in the
North-East are punching above their sector weight in digital maturity. Several North-East
segments score well ahead of their UK-wide average, reinforcing the opportunity to build
on the momentum already achieved.
FIGURE 18
Digital maturity index scores in the North-East and UK-wide, split by industry segment.
SEVERAL SEGMENTS
129
Administrative and support services
142 Several North-East segments
124 score well ahead of their
Education
123 UK-wide average.
Arts and recreation 121
109
Financial services
176
107
Logistics
46
104
Real estate
88
106
Information & communications
66
104
Wholesale, retail, repair
138
104
Construction
80
108
Hospitality
76
93
Manufacturing
99
89
Health & social work
169
Agriculture, forestry & fishing 93
78
Others
150
Charities 59
59
Population North-East
35LLOYDS BANK UK BUSINESS DIGITAL INDEX
2014
It’s clear that the
main barriers to digital
adoption are around
attitude.
36LLOYDS BANK UK BUSINESS DIGITAL INDEX
2014
CONCLUSION
Our research shows that digital There is little evidence that connectivity
technologies, tools and skills are being is holding back progress, and few SMEs
Any efforts to drive exploited by both small businesses and
charities, but that nearly all SMEs and
and charities cite a lack of skills or funds as
a reason not to do more online. The problem
home the value of digital charities could be doing more to realise seems to be a lack of belief that digital is
need to focus more on the full potential benefits. While basic
digital capabilities are widespread, there
relevant, that more can be done, or that
being more digital drives greater success.
hearts and minds. is a sharp drop-off when it comes to
As policymakers seek to increase the
exploiting the more advanced digital tools
digital maturity of small businesses and
available for use on companies’ websites.
charities in the UK, they must address
these specific challenges.
NEXT STEPS :
CREATING A PROGRAMME TO FOSTER DIGITAL MATURITY
In light of our findings, we believe that four key ‘calls to action’ arise from this report:
01 02
EXPLAINING THE BENEFITS AVOIDING COMPLACENCY
The benefits of digital must be articulated SMEs and charities must be helped to move
more clearly: how can those organisations beyond digital basics: how can those who
who feel digital is ‘irrelevant’ be persuaded say they have ‘done it all’ be convinced that
to look again at the changing needs of their there is always something more they can
customers, donors and clients? do, and that maturity is an ongoing journey
rather than a single step?
03 04
PROVIDING MORE SUPPORT ENCOURAGING INNOVATION
More support must be provided for the The most innovative SMEs and charities
“Disconnected”: how can the 11% of SMEs must be supported in pushing back the digital
and charities that are currently not using boundaries: how can the “Innovators” be
online channels at all be stimulated to encouraged to keep innovating, and share
start doing so? what they have learned from being digitally
mature enterprises in a way that will benefit all?
37LLOYDS BANK UK BUSINESS DIGITAL INDEX
CONCLUSION
In our view, each of these challenges can While we’re eager to act as a catalyst
only be tackled through a carefully-targeted for such a programme, we don’t claim
THE ‘ART OF
programme of initiatives involving a wide to have all the answers ourselves. We
THE POSSIBLE’
range of stakeholders, with a shared would welcome thinking, comment and
commitment to: cooperation from all stakeholders involved
UK’s SMEs and charities in the drive for digital maturity – from SMEs
have an urgent need for a • delivering better education and and charities themselves, or interested
deeper understanding of the communication around the business
parties ranging from Government to
‘art of the possible’ in the case for digital
telecommunication companies, online
digital domain. • highlighting the strong benefits and service providers to trade associations,
relevance of digital to all SMEs and Chambers of Commerce, and more.
charities – regardless of location,
What is clear from our research is that the
size or sector.
UK’s SMEs and charities have an urgent
need for a deeper understanding of the
‘art of the possible’ in the digital domain.
The resulting insights will stimulate progress
across the spectrum of digital maturity –
encouraging digital leaders to revisit their
existing set-up, and non-digital SMEs and
charities to reassess the potential returns
on digital investments.
38LLOYDS BANK UK BUSINESS DIGITAL INDEX
CONCLUSION
We at Lloyds Bank will continue to support
these goals, in association with Go ON UK –
both by monitoring and evaluating progress
on an ongoing basis through this UK Business
Digital Index, and by seeking to work with other
stakeholders to drive that progress further
and faster.
MIGUEL-ÁNGEL RODRÍGUEZ-SOLA
39LLOYDS BANK UK BUSINESS DIGITAL INDEX
2014
APPENDIX
TABLE A1
More detailed view of basic online skills across the UK 'Broad Online Skills – by region and Digital Maturity Segments'.
Regions Find Provide Regions (Average Find Provide
(% Organisations) Communicate things information Transact Digital Index) Communicate things information Transact
South-East 90 69 60 65 South-East 116 123 130 127
South-West 88 68 60 65 South-West 118 126 132 130
London 91 73 66 71 London 116 122 128 123
East England 89 70 59 63 East England 113 119 129 131
West Midlands 87 66 60 61 West Midlands 114 120 128 127
East Midlands 84 63 51 63 East Midlands 116 127 138 127
Wales 83 65 59 62 Wales 111 114 120 120
North-East 79 70 54 70 North-East 113 109 131 116
North-West 84 56 54 54 North-West 104 114 125 121
Yorkshire and Yorkshire and
82 71 52 60 106 109 123 117
Humberside Humberside
Scotland 89 66 63 63 Scotland 94 103 107 109
Northern Northern
88 67 43 73 85 92 113 92
Ireland Ireland
Population 87 67 58 64 Population 111 118 127 123
Digital Maturity Digital Maturity
Segments (% Find Provide Segments (Average Find Provide
Organisations) Communicate things information Transact Digital Index) Communicate things information Transact
Disconnected 25 21 13 18 Disconnected 64 47 67 60
Basic adopters 100 62 29 49 Basic adopters 61 69 87 74
Passive users 100 73 90 58 Passive users 90 99 93 105
Starters 100 62 15 73 Starters 102 104 104 103
Established Established
100 81 92 77 116 117 117 119
users users
Advanced users 100 92 87 95 Advanced users 157 157 160 158
Innovators 100 94 87 95 Innovators 161 161 161 162
Population 87 67 58 64 Population 111 118 127 123
NOTE:
Communicate Find things Provide Information Transact
• communicate with suppliers or customers • information research. • build and maintain websites • online banking (survey)
via email • add search function for product services • make payments (survey)
• build/update social media accounts • ensure website is secure • take payments/donations (survey)
• allow customers to contact business • host website via 3rd party or cloud. • provide secure transacting environment
online, provide feedback (secure online gateway).
• ensure email accounts are secure.
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