NEW RESEARCH | How digitalization helps small businesses take control of new markets

Small and medium-sized enterprises (SMEs) are often described as resource-poor and reactive when entering new markets. But new research shows that digitally-driven small businesses can be much more proactive than previously thought.

– We have long seen small businesses as reactive. But digitalization has changed the playing field. They can even take a market-driving role, shaping customer behavior and competing with big players internationally, says Uyen Vu, Stockholm School of Economics.

In her doctoral thesis, she has examined how SMEs combine two key strategic activities: exploitation – streamlining and optimizing what they already do well – and exploration – exploring new opportunities.

From defense to offense

The thesis is based on studies of Swedish and Vietnamese digitally driven small firms. Two survey studies examine how market-driven (customer-oriented) and market-driven (proactive, formative) orientations affect the international success of small firms. A third study goes in-depth through interviews with business leaders in seven small firms. And the results are clear:

– Digital technologies make it possible to move from defensive strategies to proactive competitive positions. Using data, customer insights and digital tools, small businesses can build unique customer experiences, identify customer segments regardless of country, and take a more active role in product and service development.

In several of the Vietnamese tech companies interviewed in the study – with customers in Europe, the United States, Australia and Japan – the companies made the leap from outsourced suppliers to strategic development partners.

– Customers appreciated that the companies didn’t just deliver to order, but came up with their own ideas. It changed the whole relationship, says Uyen Vu.

The Body Shop – an example of how easily momentum is lost

She also describes how the inspiration for her thesis came partly from everyday observations, for example of the well-known chain Body Shop. Despite its iconic brand position, the company lost digital competitiveness during the COVID-19 pandemic as others became stronger in e-commerce experience. The contrast with the nimble smaller companies became a key driver of the research:

– I saw how small businesses that prioritized digital customer experience and were willing to experiment did better over time.

Key to surviving in rapid change

A central conclusion of the thesis is that SMEs that manage both exploitation and exploration in parallel do best in a global market. But unlike large companies, they can use their smallness as an advantage.

– They are faster, more creative and less constrained by previous structures.

Uyen Vu also emphasizes that the customer relationship acts as a compass that helps companies avoid strategic traps such as “superstitious learning” – that is, assuming that what worked in the past will also work in the future.

Contact uyen.vu@hhs.se

More about the thesis
Uyen Vu will defend her thesis on December 17 at the Stockholm School of Economics. Title: Achieving Marketing Ambidexterity for International Performance: Insights from digitally driven SMEs.