lloyds bank uk business digital index - Resource Centre

LLOYDS BANK UK BUSINESS DIGITAL INDEX 2015

Benchmarking the digital maturity of small and medium-sized enterprises and charities in the UK In association with


IN THIS REPORT

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FOREWORD Lloyds Bank

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Go ON UK

5 10

FINDINGS Index scores Regional trends Basic digital skills Link between digital maturity, business success and confidence

EXECUTIVE SUMMARY Key findings

Perceptions of the importance of digital Barriers and benefits to increasing digital skills

INTRODUCING THE 2015 LLOYDS BANK UK BUSINESS DIGITAL INDEX

In association with

Trends in the use of digital Digital demographics – organisational size Digital demographics – industry factors

In partnership with

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35 39 40 41

SPOTLIGHT ON CHARITIES KEY CONCLUSIONS CALLS TO ACTION APPENDIX


FOREWORD I am delighted to be publishing the 2015 Lloyds Bank UK Business Digital Index, having observed how the 2014 Index has been read and used as critical insight by so many policymakers and practitioners during the last 12 months. MIGUEL-ÁNGEL RODRÍGUEZ-SOLA Group Director, Group Digital

The Index now includes analysis of how those organisations adopting the power of digital are experiencing higher turnover or funding than their less digital counterparts and remain consistently more confident about the UK and their own business outlook. For these more digitally mature organisations, it is also clear how digital provides access to wider markets by removing geographic boundaries. This is particularly encouraging and will hopefully motivate the 1.8m organisations with low or no digital capability to do more.

One year on, the outlook for UK small businesses is looking brighter. In 2014, Lloyds Banking Group helped over 100,000 new start ups, all of whom have the opportunity to unlock the potential £18.8bn incremental revenue available by becoming digital. The Index aims to provide a crucial measure of how small businesses and charities are adopting digital technologies, and offer greater understanding of why some are not embracing the digital world.

Attitudes and awareness of the benefits of digital are still the greatest barriers to small businesses and charities doing more online with one-quarter still stating digital is not relevant to their organisation. Saving time is a key benefit to organisations who adopt digital, but those who are less digital are missing out through reluctance to appreciate the benefit or invest the time to gain the longer term efficiencies. Quite simply, organisations need to make time to save time.

For the first time we can see progression and what changes have taken place since the Index was published 12 months ago. The Index shows organisations are continuing to take advantage of the digital opportunity with the national average overall maturity increasing by two points to 102, as well as a similar rise in SMEs now holding the right basic digital skills, rising from 75% to 77% since 2014.

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A key challenge is what can be done to help charities adopt digital technology. The Index shows that almost two-thirds of charities are without basic digital skills. These organisations are at the heart of our communities and arguably have the most to gain from lower costs and greater reach to those most in need. This is a significant opportunity and I hope the Index will help to drive further understanding and support of this critical sector. I would like to take this opportunity to thank our partner, Accenture, who has been invaluable in helping to create this report. I would also like to thank all of the national and local organisations and bodies who have adopted insights from the 2014 Index within their strategies and policies. This includes Go ON UK and our fellow Board members, the Department for Business, Innovation and Skills, the Government Digital Service board and stakeholder group, and more recently the Digital High Streets Advisory board. We hope you enjoy reading the report and find the content useful and insightful.


MARTHA LANE FOX Chair Go ON UK

Last year I reflected on the incredible milestone that was 25 years of the worldwide web, the transformative power of the internet, and the UK’s position as one of the world’s leading digital economies. Much of this remains true today, but a year is a long time in digital and there has been further rapid change since the release of the 2014 Index. In particular, we have seen enormous growth in UK online sales. The annual average weekly spending online in 2014 was £718.7 million, an increase of 11.8% when compared with 20131. The demand continues unabated and we need to ensure that UK SMEs are fully able to capitalise on this.

The North East is now showing an above average digital maturity for the UK, a fantastic improvement from last year’s position in the bottom half of the table. Progress in the North West has been equally impressive with a nine point increase in digital maturity, the highest of any region.

This year’s report also highlights that charities are being left behind in this shift towards greater digital maturity. The UK has a proud tradition of giving and charitable work, and we must ensure that charitable organisations alongside other SMEs have the support they need to achieve their digital potential.

These increases in digital maturity are particularly heartening when we look at the value this brings to SMEs; digitally mature companies are one-third more likely to report an increase in their turnover.

I would like to thank Lloyds Banking Group for their support as a Go ON UK Board partner and for their commitment to the annual Digital Business Index as an industry-leading research publication. I would also like to thank the teams at Lloyds Banking Group and Accenture on their exemplary work in producing this report.

But, whilst we should rightly be encouraged by these successes, we still need to focus on the challenges ahead. Perceptions about, and motivations for using digital remain key issues, with a quarter of organisations still believing that doing more online is not relevant to their business. And in an increasingly globalised marketplace, it is staggering that only 13% of organisations are using their website for e-commerce.

What I find especially encouraging in this report is that the greatest rise in digital maturity has been in the regions where Go ON UK has been running programmes. Go ON North East and Go ON North West, launched in October 2013 and June 2014 respectively, have been the catalyst for amazing work undertaken by hundreds of Go ON UK partners and thousands of inspiring digital champions.

www.ons.gov.uk/ons/rel/rsi/retail-sales/december-2014/ sty-overview-of-internet-retail-sales-in-2014.html

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EXECUTIVE SUMMARY Now in its second year, the Lloyds Bank UK Business Digital Index uses detailed analysis of small and medium enterprises (SMEs) and charities to understand how they use and feel about digital technology. First published in 2014, the report showed an average UK Index digital maturity ‘score’ of 100, with organisations scoring either higher or lower than 100, depending on whether they had low, medium or high levels of digital maturity. In the last 12 months, there has been a rise in the UK Index score, to 102. This shows that overall there is a general, but slow and not universal, move to becoming more digital. However, this modest UK-wide increase does not show the full picture, with some regions growing far quicker, such as the North West by nine points and the North East by eight points.

For the first time, the Index shows a strong link between digital maturity and organisational success. There are small but important increases in the digital maturity of the smallest organisations, shifting up two Index points. While the size of the increase is not great, the sheer volume of this sector within the SME market, 78% of the total, means the impact is greatly magnified. Similarly, there are encouraging improvements in basic digital skills, amongst SMEs, with nearly 77% of SMEs now having these basic skills. However, alongside this success, the 2015 report shows some challenges for the charity sector, which is not replicating the improvements made by SMEs and sees even more charities without basic digital skills rising to 58% in 2015.

“ Clear evidence of success but some challenges remain.

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EXECUTIVE SUMMARY

Key findings 1. Progress for the regions most in need One of the most positive findings is around the regional analysis. The 2015 study shows the regional divide has reduced, with less mature regions of the UK closing the gap on London and the South East (see Figure 1), in particular in the North East and North West. While London is now the most digitally mature region, the strongest rise was, in fact, in the least digital regions. These findings suggest that where there has been concentrated regional activity to boost local digital capabilities, such as that undertaken by Go ON UK, there appears to be an impact on the Index. The analysis also shows that the more mature digital regions don't necessarily continue to improve, with a drop in the South East of two points.

REGIONAL SUCCESS

Figure 1: Index score by selected region, 2014 vs. 2015 London

South East

106 110

Up 4pts

108 106

Down 2pts

96

North East

104 91

North West

100 77 80

Northern Ireland

2014 Index Score

2015 Index Score

6

Up 9pts

Up 3pts

100 102

UK Average

Up 8pts

Up 2pts

The North East and North West regions have seen some of the biggest rises in Index scores in 2015.

EXECUTIVE SUMMARY

2. Stronger links between business success and digital maturity

3. I mproved basic digital skills for SMEs but charities need more focus

4. The challenge of charities

New for 2015 is an indicator to show the link between digital maturity and organisational success. The key overall finding is that the most digitally mature organisations are one-third more likely to have seen an increase in their turnover in the last two years than the least digitally mature.

The overall number for all SMEs and charities in the UK without digital skills has reduced slightly from 31% to 30%. This shows that there are now fewer organisations lacking this basic knowledge. A similar level of improvement is generally found across the regions but with the North West still retaining the largest percentage of those lacking basic skills at 37%.

A key challenge identified in the 2015 Index is the continued lack of engagement with digital amongst many charities. Overall, the charities Index score has decreased from 59 to 56 and as an industry sector remains by far the lowest in digital maturity.

This is even more dramatic when looking solely at charities, where the most digitally mature charities are twice as likely to see an increase in funding than those at the other end of the maturity spectrum. This is positive news and builds on the initial indicators found in the 2014 study, linking digital maturity to overall confidence in organisations and the economy.

“ The most digitally mature charities are more than twice as likely as those with the lowest maturity to see an increase in funding.

The real progress is found amongst SMEs, where those without basic digital skills reduced from 25% to 23%. To put it another way, this means that 77% now have basic digital skills. In contrast, charities lacking those skills have actually increased from 55% to 58% since 2014. The overall limited progress in obtaining skills, particularly among charities, perhaps reflects the fact that there is no increase in the amount of investment organisations are making to develop their skills, with more than 75% investing no money at all.

”

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With the number of charities with basic digital skills falling, in contrast with UK and SME-specific trends, attitudes are of key concern.

SCEPTICS Over half of all charities do not believe that having a website would help increase their funding and nearly 70% state the same about social media.

EXECUTIVE SUMMARY

CALLS TO ACTION Encourage regional activity

Move on from entry level skills

Increase digital capabilities of charities

The successes in the North East and North West suggest that the regional model undertaken by organisations such as Go ON UK has had an impact. We need to understand how organisations can do more to support this model across further regions and local areas.

In 2014, one key action was to avoid complacency. This remains an issue a year later. There are fewer organisations with the highest levels of digital maturity and more within the medium maturity segment than a year ago.

Charities are a specific sector to address, educate and motivate to improve their digital skills. There are clear opportunities to help charities increase their understanding of how digital can benefit them, and to support with greater awareness and access to skills training.

Organisations haven't developed the way they use websites and digital beyond entry level functionality. SMEs and charities should be helped to recognise digital maturity is an ongoing journey and not just a one-off investment.

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EXECUTIVE SUMMARY

77% of SMEs now have basic digital skills

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INTRODUCING THE 2015 LLOYDS BANK UK BUSINESS DIGITAL INDEX

1.85m ALMOST

The Lloyds Bank UK Business Digital Index benchmarks the stage of digital development of SMEs1 and charities in the UK. Produced annually and now in its second year, the Index is calculated using a unique methodology, combining primary research survey data from 2,000 Lloyds Bank and Bank of Scotland SME customers, and Lloyds Banking Group customer data.

Low

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.

Applying this methodology, we created the 2014 Index with an average digital maturity ‘benchmark’ score of 100. All SMEs and charities were then placed on a scale, from low to high, depending on their own digital maturity.

2.35m NEARLY

Within this scale, there are individual segments that have a set of specific factors and attributes influencing their approach to digital and overall digital maturity, but for ease of use, we have placed these seven individual segments into low, medium and high categories. For more detail at an individual segment level, please refer to the Appendix.

Medium

organisations have a medium level of digital maturity - they may have a basic social media presence, use simple e-commerce tools or carry out some but not all banking transactions online.

• Low = ‘Disconnected’ + ‘Basic Adopters’ • Medium = ‘Passive Users’ + ‘Starters’ + ‘Established Users’ • High = ‘Advanced Users’ + ‘Innovators’

1.2m ALMOST

Overall there are more SMEs and charities in 2015 - a total of 5.4m vs. 5.1m in 2014. The shape of digital maturity has also slightly changed. There are fewer organisations within the high maturity segment (22% vs. 29%) and more within the medium segment (44% vs. 37%) compared to a year ago.

High

organisations in the UK have a high degree of digital maturity, meaning they invest significantly in digital infrastructure, training and use of advanced digital security techniques.

SME is defined as a business with 0–249 employees – BIS, 2014.

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FINDINGS Index scores At each of the low, medium and high levels of digital maturity, there are some specific trends in the 2015 Index. At the lower level, the Index score of the least digitally mature segment (Disconnected) increased very slightly (from 28 to 29), whereas Basic Adopters saw their scores drop, which explains the overall decrease in the low-maturity group’s Index score from 45 to 43, still well below the UK average of 102. What is encouraging is that even though the overall Index score for this group has slightly decreased, there are also fewer of them within the lowest segment, Disconnected, which may suggest organisations are beginning to move up the spectrum.

Figure 2: Low digital maturity Index scores, 2014 vs. 2015 28

Disconnected

29 61

Basic Adopters

55 45

Low digital maturity segment

43

2014

2015

2014

11

2015

FINDINGS

In the medium segments, the Index scores have increased slightly. We have seen a growth in the size of this group, to nearly half of all organisations. Most of these are found within the ‘Established Users’ who saw the biggest positive maturity swing, gaining three points since 2014. Their population size rose from 663,000 to 1.1m in 12 months. Overall there is a concentration of organisations in the medium maturity segments and this now represents the largest group in the Index, with 44% of the total. Finally, at the upper end of the digital maturity scale, there has been the greatest rise in Index score, from 158 to 164, primarily driven by the Innovators increasing their Index score from 161 to 172, the largest rise in any individual segment. This suggests they are the 'true' innovators with such a gap between their score and that of Advanced Users.

Figure 3: Medium digital maturity Index scores 2014 vs. 2015 90

Passive Users

102

116

Established Users

119 103

155 161

Innovators

102

Medium digital maturity segment

157

Advanced Users

91

Starters

Figure 4: High digital maturity Index scores, 2014 vs. 2015

172 158

High digital maturity segment

164 2014

2015

2014

2015

106 2014

2015

2014

There are now fewer organisations within the high maturity segment, with the biggest reduction found amongst Advanced Users. This may suggest a move towards Established Users, if they have not managed to keep up with advancing digital technologies.

2015

“ Index scores in the medium segments have seen a slight increase, while high maturity segments have seen the greatest increase in Index score.

”

12

FINDINGS

Digital maturity has risen significantly in the North East & North West, suggesting that concentrated regional activity to boost digital capabilities has an impact

13

FINDINGS

Regional trends One of the most positive findings is the significant increases in both the North East and North West’s digital maturity. This indicates that organisations such as Go ON UK, which employ a strategy of gathering local and national partners together at a regional level are having an impact. We can also see that overall, London has taken the lead with the highest Index score. While a simple snapshot of the regional scores for 2015 suggests a north-south divide in UK digital maturity (in Figure 5), we can also see that this divide is beginning to narrow, with the growth in maturity during the past year being concentrated in the less mature regions. The result, as Figure 6 confirms, is that with much of the growth in the North, the UK picture is becoming more balanced. Looking across all regions (Figure 5), London has the highest Index score of 110, four points clear of the South East in second place. However, with less mature regions dominating the growth, it suggests that even in the strongest regions for digital adoption and usage, continued focus and effort may be required to keep digital maturity moving forward. This is most clear in the South East which saw a reduction in its Index score, from 108 to 106 in 2015.

Figure 5: Digital maturity Index scores by region, compared to UK average 102 score, 2015

Figure 6: Changes in digital maturity by region, 2014 vs. 2015

Scotland

Scotland

96

North East

Northern Ireland

104

80

Yorkshire & Humberside

North West

98

100

East Midlands

West Midlands

102

102

East England

98

Wales

101

South East

106

South West

105

London

+8

North East

Northern Ireland

+8

+3


North West

+8

+9

East Midlands

West Midlands

+3

-1

East England

-5

Wales

+4

South East

-2

South West

-2

London

110

Above Average

Average

Below Average

14

+4

Index Down

Index Up

London is the most digitally mature region.

FINDINGS

Figure 7: Average percentage of SMEs and charities without basic digital skills by region, 2015

30% Population Scotland

32%

North East

31%

Northern Ireland

32%


33%

North West

37%

East Midlands

34%

West Midlands

31%

East England

33%

Wales

33%

South East

28%

South West

London

28%

24%

16

FINDINGS

Basic digital skills The 2015 report shows encouraging improvements in the level of basic digital skills amongst SMEs. The number lacking these basic skills, as defined by Go ON UK (see Appendix for full definition), has reduced from 25% in 2014 to 23% a year later. This represents a steady improvement in the last 12 months and means that 77% of SMEs now hold these basic digital skills. In contrast, the results for charities are not as positive. As we can see in Figure 8, 12 months ago 55% of charities had no basic digital skills, whereas a year on, this number has actually risen to 58%. This means close to two-thirds of charities are without basic digital skills. Across the UK, an average total of 30% of SMEs and charities lack basic digital skills. This has changed from 31% in 2014, showing a small improvement in the last 12 months.

Figure 8: Percentage without basic digital skills, SMEs vs. charities, 2014 vs. 2015

Just as with the overall UK results, the regional picture shows a similar improvement amongst SMEs but far less so with charities.

25%

SMEs

For example, in the North East, only 24% of SMEs now lack basic digital skills, in comparison to 53% of charities (see Figure 9 on p18). The contrast is even more stark in the North West, with just 29% of SMEs lacking basic skills, versus 61% of charities.

23% 55%

Charities

58% 2014

DIGITAL SKILLS FOR SMEs The number of SMEs without basic digital skills has reduced over the course of the last 12 months, with 77% now holding these skills.

17

2015

Charities without basic digital skills 2014 st

Charities without basic digital skills 2015

* Regional data for NI charities unavailable due to lack of contactable representative customer sample.

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Figure 9: SMEs and charities without digital skills, by region, 2014 vs. 2015

FINDINGS

58%

£

23%

58% of charities are without basic digital skills compared to 23% of SMEs

19

FINDINGS

The number of organisations who agree they have access to technology to make their businesses or charities more digital has remained stable this year at 60%. There has been some improvement, however, in those stating they have the right knowledge and experience to become more digital, rising from 52% in 2014 to 56%. Amongst the least digitally mature segment, the improvement has been greater, increasing from 36% to 43% in 12 months.

One indicator found in this year’s study that may help to explain the limited improvement in basic digital skills, particularly amongst charities, is the continued absence of investment by organisations in developing their digital skills. More than three-quarters of all SMEs and charities are not putting any budget into improving their digital skills (see Figure 10). This is even higher than in 2014.

75% 77%

Figure 10: P ercentage of budget to be invested in digital skills, 2014 vs. 2015

2014

2% 3%

1-2%

3% 4%

0%

5% 3%

7% 7%

2015

3-5%

6-10%

11%+

20

FINDINGS

32%

35%

34%

Figure 11: 'Where do you go to get advice on how to use technology and the web?', 2014 vs. 2015

2014

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2015

lie pp Su IT nd Fr ie

However, for those who do seek help and advice, the vast majority will turn to an IT supplier, friends or family, or a paid consultant. As shown in Figure 11, these three account for nearly all the sources of support. Interestingly, searching online has dropped significantly from 28% last year to only 6% this year – so it would appear that face-to-face, often paid-for and perhaps local support may be preferred for many, despite the continued availability of free online help. It may be that organisations initially look online to see where they can then find local, face-to-face support.

FINDINGS

Link between digital maturity, business success and confidence In the 2014 report, we looked at the link between digital maturity and organisations’ overall confidence in both the UK economy and their own business. This showed a strong correlation between the two points. This year the research included additional questions, using organisations’ turnover as a further indicator to see if there was a greater link between levels of digital maturity and actual organisational success. Organisations were asked if their turnover (or funding) had increased or decreased in the last two years. The results show clearly that the most digitally mature firms report a stronger turnover, pointing to a link between digital maturity and financial success. For SMEs, more digitally mature companies are one-third more likely than those with low digital maturity to report an increase in their turnover (see Figure 12). For charities, the gap is far wider (see Figure 13), with the most digitally mature being more than twice as likely to report an increase.

Figure 12: Percentage of low and high digital maturity SMEs reporting an increase in turnover in the past two years

44%

Figure 13: Percentage of low and high digital maturity charities reporting an increase in funding in the past two years

42%

High maturity segment

High maturity SMEs are one-third more likely to see an increase in turnover

High maturity segment

32%

17%

Low maturity segment

Low maturity segment

22

High maturity charities are more than twice as likely to see an increase in funding

FINDINGS

The most digitally mature SMEs are a third more likely to report an increase in turnover in the past two years than low digitally mature SMEs

23

FINDINGS

As in 2014, we have looked at levels of confidence, in the overall UK economy as well as their own organisation. The highermaturity firms are positive about the UK economy as a whole, and fewer of them are pessimistic, as shown in Figure 14a. In contrast, lower-maturity organisations have less confidence. In 2014, 29% of them were confident in the economy, whereas in 2015 this is now just 24%. This represents a decline in confidence of almost one-fifth. However, self-confidence is rising for all organisations, regardless of their digital maturity. As shown in Figure 14b, 82% of high maturity companies and even 69% of those with low maturity state they’re ‘very confident’ or ‘confident’ in their business' prospects, both of which mark an increase since 2014 from 76% and 60% respectively.

“

Figure 14a & 14b: H ow confident are you about the short-to-medium term prospects for the UK economy and your organisation?

UK economy

Own organisation 82% More highly digital firms are consistently more confident about the UK and own outlook...

69% 41%

24%

-8

-9

-4

-26

Self-confidence is rising for all organisations.

Low maturity

”

Positive

High maturity

Low maturity

Negative

Positive

Note: 'Positive' = 'Confident' and 'Very confident' responses 'Negative' = 'Not confident' and 'Not at all confident' responses

24

High maturity Negative

...and also less pessimistic

FINDINGS

Perceptions of the importance of digital The 2015 Index suggests that perceptions of how important digital is for an organisation are beginning to move – but this does depend on whether the organisation has high or low digital capability. The study suggests there is a polarisation of views between the high and low digital maturity segments. As Figure 15 shows, firms with low digital maturity are often less positive than they were last year about the link to success, the value of operating a website, and the role digital plays in the general success of their organisations. In contrast, firms with high digital maturity are even more convinced of the value digital can add to their business. They are more positive not only about the link to success and the value of operating a website, but also about the importance of digital to delivering their strategy. These results suggest that the less digitally mature groups still don’t understand the benefits of being online and therefore aren’t as clear and as positive about how this can help their organisations to grow.

Figure 15: 'Thinking about your attitudes towards being a more digital-based business, to what extent do you agree with the following statements.' (Percentage of respondents answering 'Agree' or 'Strongly agree')

Low Digital Maturity Segment

High Digital Maturity Segment

2014

2015

2014

2015

A website would increase my revenues

19%

12%

63%

68%

Digital businesses are more successful

27%

25%

50%

67%

Digital plays a role in achieving my objectives

26%

25%

80%

81%

Strategic importance of digital

36%

40%

64%

67%

Case study : Mia-Rose Nursery Schools Mia-Rose Nursery Schools is an independently run nursery group with two centres based in the Forest of Dean. The nursery provides care for children aged two to four and after school clubs for children that attend local primary schools. Paul Cornock, Manager, said: “We have always used digital and online services to help with... online banking or allowing parents to book activity sessions through our website. We also... created a tool for parents that helps them monitor their child's progress at a time where they could relax. This has proved highly successful, with every single parent (more than 70 in total) asking to sign-up to the service.”

25

We believe that we have improved the service to our clients and the feedback we have received so far has been overwhelmingly positive.

FINDINGS

Figure 16: 'What factors prevent you from doing more online?', 2014 vs. 2015

35%

Despite the multiple benefits of being online, it’s clear that many SMEs and charities in the UK are still holding back from becoming more digital. And it remains for attitudinal, rather than practical, reasons.

27%

29%

2014 2015

As Figure 16 shows, 27% of firms still believe they have done everything possible, and 25% see digital as ‘irrelevant’ to them. However, this is not to the same extent as 2014, with fewer organisations reporting these two points as reasons for not doing more online.

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The basics, such as connectivity and cost, continue to be of far less importance to respondents and have not changed significantly since 2014.

5%

So whilst there are not significant shifts, there is enough movement to suggest that organisations may be starting to understand that they should do something to become more digital – they are just not yet finding the time or resources to do so.

9%

10% 11%

11%

14%

Time and skills are rising in importance as hurdles to becoming more digital. In particular, time seems to have become even more precious, moving from 14% to 20% (an actual increase of almost 50%), whilst a lack of people or skills has risen from 11% to 17%.

17%

20%

25%

Barriers and benefits to increasing digital skills

FINDINGS

The perceived benefits of an online presence are also evolving (see Figure 17). The key factors remain ‘wider geographic reach in the UK’ and ‘time savings’, with the proportion of respondents citing ‘time saved’ increasing by one-third.

37% 36%

Figure 17: 'What are the biggest benefits of being online?', 2014 vs. 2015

2014

Time is growing in importance, as both a barrier and also a benefit of being online.

2015

20%

4

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1% 1%

3% 1%

2% 2%

1% 2%

3% 2%

2% 3%

5% 3%

Ot ex No he p e ini r c t t ia ed l b in en t h ef i ef tb ut ut ur Le e ad Le ge ar ne nm ra tio or ea n bo ut cu s to m No er s bu sin W es id e sb rg en eo ef it s gr ap hic co v (G era l o b ge Bu a l) sin es sc os ts av ing

ss

e f ic of ck ba nt

cie ffi ee or M

27

4% 3%

6% 3%

6% e nu ve

re ed as

c re

er rs t te

In

v ic

i ve

ee

m

xp

ar

er

ke

ie n

tin

ce

g

ing av

T im

es Ef fe

ct Be

W

id e

rg

eo

gr

ap

hic

co

ve ra (U ge K)

2%

6% 6%

8% 9%

15%

Organisations need to make time to save time.

FINDINGS

A quarter of organisations see digital as ‘irrelevant’ to them

28

FINDINGS

2014 2015

3% 7%

6% 5%

9% 8%

s u Co pp mm lie u r s ni / c ca u s te to w i m th er s Se ar inf ch o r ing m f at o r io n In te rn et ba Ru nk na ing un iq u ch e c ar om it y p we an bs y / i te se U r v se i ce G s ( o ve e. g r n . H me M nt RC ) M ak ep to a su y m pp en inf lie t or rs m at Pr io n ov /a ide dv o er n li t is n e ing Ta f r o ke m pa cu y m s to e m nt s er s M ak ta e s ke a or les de / rs On lin ea s o cco f t w un ar t e Cl ou dba sy sed s te I T Do m s no tu se / n in t o a er cc n e t es s Di git al tra in to i n g o ls Di git al re cr ui t m en Re t ce i ve ch do ari na tab tio le ns

53% of SMEs and charities have a website – up from 50% in 2014.

11% 11%

16% 12%

USING A WEBSITE

16% 12%

21%

26%

32% 32%

43% 44%

44% 40%

50% 49%

50% 53%

55% 58%

In addition, the number of organisations with their own website has risen from 50% to 53% 12 months later. One-fifth are taking orders or making sales online, which may be via third party sites such as Amazon or eBay, or via email.

Figure 18: How SMEs and charities are using any form of digital channel, not just a website, 2014 vs. 2015

67% 66%

Looking at how organisations are generally using digital, not just on their own websites, there is only marginal improvement in comparison to last year’s report. As Figure 18 shows, more are doing the basics: 84% are now communicating online compared to 81% last year, and 58% are now using internet banking, up from 55% in 2014.

81% 84%

Trends in use of digital

29

FINDINGS

84%

53%

13%

of organisations communicate online

of organisations have a website

of organisations use e-commerce

30

FINDINGS

This is also the general reflection on how organisations continue to use their websites. Last year’s Index pointed to a significant drop-off in website functionality after the provision of basic company information and views of products and services. As Figure 19 shows, the same appears to be happening in 2015, as organisations appear to be reluctant to move away from entry level functionality.

Figure 19: Features and functionality supported by respondents' websites, 2014 vs. 2015 2014

2015

98%

Basic company information

99%

77%

View products/services

78%

38%

Security to prevent hacking

32%

20%

Interactive visual display of products

12%

18%

Purchase products/services (e-commerce)

13%

Secure online gateway

13% 9%

Multi-currency payments

6%

5%

Foreign language support

6%

5%

HR, recruitment & employee comms

6%

Internal admin pages

4%

Manufacturing planning & scheduling

3%

2014 Basic functions

2015 Basic functions

8% 9% 3%

Additional functionality

31

Note: Asked of 1,063 respondents who have a website.

FINDINGS

Digital demographics – organisational size

é

Figure 20: D igital maturity Index scores for SMEs, split by number of employees, 2014 vs. 2015

An analysis of the findings by size of organisation reveals no major changes in 2015, with larger organisations generally remaining more digitally mature, and maturity scores across different sized organisations relatively unchanged.

103

108

106

114

116

89

As Figure 20 shows, sole traders (one employee) saw their digital maturity rise by two points. While not necessarily a huge increase, this will have a significant impact given the number of small businesses in the UK and the proportion of sole traders within the SME market – around four million in total. Slightly larger micro businesses of between two and five employees saw a fall of two points, whereas those with six to nine employees rose by three points.

75%

17.4%

4%

3%

0.4%

0.2%

1

2-5

6-9

10 - 49

50 - 99

100 - 249

101

91

Again, these are not huge changes but as sole traders and micro-businesses (two to ten employees) represent 96% of the total SME market, the impact is greatly magnified.

2014

111

105

112

116

78%

12%

5%

4%

4%

0.25%

1

2-5

6-9

10 - 49

50 - 99

100 - 249

2015

NOTE: The % represent the percentage of those organisations in the UK as a whole, e.g. SMEs with only one employee make up 78% of SMEs in the UK.

32

Larger firms are generally more digitally mature, with an Index score of 116.

FINDINGS

2014

104

89 93

94

33

es iti ar

rs he Ot

Ch

so h& alt He

Co

ns

cia

tru

lw

ct

or

k

io n

te ta es al Re

io n co In f o m rm m a u n tio ic a n tio & n Ar t& re c re at io n Ac co m m fo od od a s e tio n rv & Ag i ce r ic s ult ur e, fo re fis str W hin y, ho les g ale , re ta il , re F in pa ir an cia l& ins pr ura Tr od nc an uc e sp ts or ta tio n& s to ra ge M an uf ac tu r in g

at uc Ed

Ad su mi p p n is or tra t s ti er ve v ic & es

59 56

78

93

89

104 97

99

107 101

109 102

104 102

103 103

108

107

119 106

As Figure 21 shows, Admin & support services retained top position this year with an average Index score of 127, down slightly on 2014. The biggest jump was achieved by the Information & communication (ICT) sector, which posted a 13-point rise in 2015, while the sharpest drop was in Construction, whose score fell by 10 points.

121 119

2015

124 124

Sector analysis shows that a consistent set of industries continue to lead the way in terms of digital maturity. However, charities are again significantly far behind as a sector.

Figure 21: Digital maturity Index scores by industry sector, 2014 vs. 2015

129 127

Digital demographics – industry factors

FINDINGS

58% Over half of charities do not believe that having a website would help increase their funding

34


SPOTLIGHT ON CHARITIES One of the clearest findings in 2015 is that in a broadly positive Index, charities remain at the lower end of the digital maturity scale. What’s more, their Index score has reduced in 2015, moving from 59 to 56.

Figure 22: Basic digital skills, SME vs. charity, based on Go ON UK's 2014 definition of four broad skills, 2015

Communicate

71%

Basic digital skills Turning to basic digital skills, we have seen the difference between SMEs and charities is acute. Looking at SMEs on their own, they have an average of 23% without basic digital skills – this is in comparison to an alarming 58% of charities. Whilst there are certainly some charities found within the highest maturity, 17% in total, there are still 58% of charities at the lowest end of the maturity scale.

Find things

76%

41%

Provide information

32%

Transact

24% SME

Charity

58% of charities are lacking basic digital skills.

35

64%

75%

91%

SPOTLIGHT ON CHARITIES

Online payments

Attitudes towards digital

Measuring online payments is a useful barometer to understand the difference between SMEs and charities.

Not only is there a huge proportion of charities unable to complete basic online tasks, but there is a growing number who still do not understand or recognise the value to their own organisation of being more digital.

Figure 23 shows the SMEs and charities which allow payments or donations to be received online. For example, only 21% of SMEs are receiving less than one-fifth of all their payments via a digital channel. Whereas one-third received between 80% and 100% of all their payments in this way. In other words, they are accepting a vast majority of their payments online. In contrast, nearly half of charities still receive less than one-fifth of all their donations online and less than 10% of charities are really embracing online donations with 80%-100% made in this way.

Figure 23: Proportion of payments or donations received online by SMEs or charities, where online payments/donations are allowed, 2014 vs. 2015 21%

0-20%

From an attitudinal perspective, charities are not always progressing. Amongst the least digitally mature charities, the numbers have risen of those not seeing how websites (78% vs. 70% in 2014) or social media (83% vs. 73% in 2014) could help increase their revenues or donations. Fewer of this group state they have access to technology to make their business more digital (36% vs. 31% in 2014) while nearly one half (48%) feel they do not have the knowledge and experience to do so (1% more than in 2014).

8% 8%

20-40%

11% 10%

40-60%

60-80%

11%

80-100%

10%

SME

Nearly half of charities are only receiving one-fifth of their donations online.

36

16%

33%

9%

Don't know

50%

46%

17%

Charity

SPOTLIGHT ON CHARITIES

Case study : Ashby-de-la-Zouch Museum Whilst many charities are not yet embracing digital technology, Ashby-de-la-Zouch Museum in Leicestershire is a great example of how a website and social media can really benefit a charitable organisation. The museum, run as a charity, explores the history of the town and local area. All the museum’s materials are archived and categorised digitally and the content is featured on its website. The museum has Facebook and Twitter profiles, enabling it to communicate with and attract new visitors, as well as engaging with the local community. Greater use of digital has helped contribute to an increase in footfall, with paying visitor admissions increasing by 12% on the previous year. The platform offers a more engaging experience, which helps attract visitors and drive return visits.

When the children arrive they tend to go straight to the computers. Having a digital element to the museum really helps appeal to a wider age range of visitors and it’s a really good way to keep smaller children engaged and to also educate them. The digital aspect to our displays does increase the enjoyment of the experience, and along with our social media profile, helps improve the number of return visits. MR C BINGLEY, MUSEUM TREASURER

37

12% increase in paying visitor admissions has been enabled by digital in the past year.

DIGITAL SKILLS TRAINING The Government's Digital Inclusion Delivery Board in 2014 tasked a working group of 16 partners to learn about the barriers that stop small businesses and charities getting the most out of the internet. It identified a lack of awareness, motivation and availability of digital skills training for this sector, and the 2015 Index results support this finding.


KEY CONCLUSIONS There are some very encouraging signs within the 2015 Lloyds Bank UK Business Digital Index, with the overall average Index score improving from 100 to 102. Even more encouraging is the improvement seen in the digital capability of SMEs over the last 12 months, most notably in the increase in basic digital skills, up two points to 77% in 2015. This is a positive move forward. What’s more, for the first time, the 2015 Index indicates a clear link between digital maturity and organisational success. So again, once SMEs and charities recognise the benefits of being online and invest the time and money to do so, they will clearly reap the rewards. It is also positive to note that where organisations such as Go ON UK have been working at a regional level, there appears to be an impact on SMEs’ basic digital skills and on regional Index scores overall. This is most clearly demonstrated with the significant increase in digital maturity within the North East and North West regions.

It is clear that for SMEs and charities, time and skills are key and growing enablers of digital skills. Organisations need to make more time to develop their skills, in order to ultimately save themselves time. It is still a barrier for many, as the third most commonly cited reason for not doing more online. Yet it is also one of the key benefits for those already making the most of digital, second only to wider geographic coverage in the priority list of benefits.

77%

However, there is still room for improvement, with the first barriers to doing more online remaining attitudinal, rather than practical. There are still many organisations who believe being online is not relevant to them, or that they are already doing everything they can online.

There are unmistakable opportunities to help charities embrace the world of digital.

One clear area for concern is the charity sector. Charities are not yet embracing the benefits of digital and are in some cases far from moving forward. However, this also represents a key opportunity, as charities are a clearly identifiable sector.

When it comes to asking for help and advice with their technology, the 2015 Index shows that organisations still prefer face-to-face and therefore often local support. The majority are still turning to trusted sources, like friends and family, as well as more formal routes such as IT consultants.

39

of SMEs now have basic digital skills.

“ ”

CALLS TO ACTION Encourage regional activity

Move on from entry level skills

Increase digital capabilities of charities

The successes in the North East and North West suggest that the regional model undertaken by organisations such as Go ON UK has had an impact. We need to understand how organisations can do more to support this model across further regions and local areas.

In 2014, one key action was to avoid complacency. This remains an issue a year later. There are fewer organisations with the highest levels of digital maturity and more within the medium maturity segment than a year ago.

Charities are a specific sector to address, educate and motivate to improve their digital skills. There are clear opportunities to help charities increase their understanding of how digital can benefit them, and to support with greater awareness and access to skills training.

Organisations haven't developed the way they use websites and digital beyond entry level functionality. SMEs and charities should be helped to recognise digital maturity is an ongoing journey and not just a one-off investment.

40


APPENDIX

41

APPENDIX

Appendix 1 - Definition of segments Below are the different digital maturity segments and their corresponding traits.

Low

Medium

High

01

03

06

DISCONNECTED

PASSIVE USERS

ADVANCED USERS

• No/minimal use of internet • Very low on internet banking

• Internet use of digital channels to

• Usage of cloud and/or online accounting

accept payments • Signs up to social media internet banking but use is sporadic.

• Seek external support for

02

04

07

BASIC ADOPTERS

STARTERS

INNOVATORS

transactions.

• Basic enterprise website • Low digital infrastructure.

• Presence in social media • Large volume of internet

banking transactions • Use third party digital expertise • Large budget allocation for digitisation.

05 ESTABLISHED USERS

• High usage of e-commerce platforms • Spends on ICT training and development

• Social media presence. 42

increasing digital innovation.

• Significant spend in digital security • High spend for digital infrastructure and training.

APPENDIX

Appendix 2 - Definition of basic digital skills Go ON UK’s 2014 definition of Basic Online Skills was used as part of the survey for the 2015 Index. The four key themes which define these are shown opposite. Since the survey was undertaken in September 2014, Go ON UK has revised its definition to include additional factors and these are now classified as Basic Digital Skills. The full definition can be found at www.go-on.co.uk/basic-digital-skills

COMMUNICATE

FIND THINGS

The ability to send and receive emails or maintain a social media account

The use of search engines

2014 BASIC DIGITAL SKILLS TRANSACT The ability to make and receive payment/donations online and manage finances online including internet banking

43

PROVIDE INFORMATION The ability to build and maintain a website, and optimise for different devices


Appendix 3 - Research approach, methodology and sample The Lloyds Bank Business Digital Index is calculated using a two-stage process:

• An analytics-driven review of anonymised

internal Lloyds Banking Group data to gain an oversight of the online banking activities of customers at an aggregate level, as a proxy for the UK’s SME and charity population as a whole.

• An in-depth, questionnaire-led survey of

2,000 Lloyds Bank and Bank of Scotland customers1 to reach a rounded view of their digital activities and perceptions. This data was also fully anonymised prior to analysis.

There are many possible definitions of what ‘digital’ actually means. For the purposes of the Index, we have agreed on a set of factors we believe best describe ‘digital’, and intend to carry this definition forward in future versions of the report.

Applying this definition, the Index methodology involves an assessment of the digital maturity and positioning of SMEs and charities across a wide range of dimensions, including:

Within this approach, we have allocated different weightings to various digital activities to reflect their relative contributions to overall digital maturity. These weightings are shown in Appendix 4. The percentages are generated by taking account of all these weighted variables, drawing data from both transactional and survey sources.

• Communicating online • Having access to and using digital technologies

• Using digital internally to drive greater

About 33% of the overall score is generated from Lloyds Bank’s own transactional data, and the remainder from the survey responses. In subsequent editions of the Index, we will track variances to this benchmark to illustrate and track the progress of digital maturity across the UK population of SMEs and charities.

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 digital skills

2,000 Survey of Lloyds Bank and Bank of Scotland customers

(as defined by Go ON UK – see definition on page 43)

• Maintaining a social media presence

e.g. use of Facebook or Twitter to interact with customers or donors

• Positive attitudes towards being more digital

• Positive outlook for current and/or future success of the organisation in question.

1. T he survey was carried out in September 2014 with Lloyds Bank and Bank of Scotland customers.

44


Appendix 4 - Relative weightings attributed to different digital variables

Approach towards digital development - in-house team

Usage of digital channels for communication

Online transactions

6%

17%

8% Usage of digital channels for advertising

Online enquiries

15% 16%

16% 22%

Security mechanism

Digital infrastructure

45

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).

All SME

46 Charity

as

an

s

ds

ale

t

t

Yo r Th k sh e H ire um an be d r

id l

W

hW es

hE

0%

7% 8% 6%

7% 7% 6%

8% 8% 8%

11%

11%

10% 13%

9%

8%

6%

4%

6%

8% 9% 8%

8% 9% 7%

5% 6% 3%

19%

20%

tM

ut

ut

d

d

lan

lan

ot

re

Sc

nI

0%

So

er

t

st

W es

Ea

on

9% 9% 10%

25%

25%

So

r th

r th

r th

nd

4%

9% 11%

30%

W es

No

No

No

Lo

ds

nd

an

g la

id l

5%

En

M

10%

st

st

15%

Ea

Ea

APPENDIX

Appendix 5 - Organisations who regard digital as irrelevant, by region

50%

45%

40%

35%

APPENDIX

40%

35%

45%

31%

35%

35%

50%

38% 42%

47%

Appendix 6 - O rganisations who regard digital as irrelevant, by size of organisation

30%

21%

25%

0%

1

2 to 5

6 to 9 All

SME

47

10 to 49 Charity

50 to 99

3%

5%

1% 0%

4%

6%

7%

10%

1% 1% 3%

11%

15%

13%

20%

100 to 249

All SME

48 Charity

as

an

s

ds

ale

t

t

Yo r Th k sh e H ire um an be d r

id l

W

hW es

hE

0%

4%

4%

7% 6% 7%

7%

7% 7% 7%

9%

9%

9%

14%

13%

12%

11%

10% 10% 9%

8% 9% 7%

6%

5%

9% 10%

10% 9%

11%

16%

tM

ut

ut

d

d

lan

lan

ot

re

0%

Sc

nI

t

2%

So

er

W es

st

4%

So

r th

r th

Ea

7%

9%

7% 6% 8%

18%

20%

W es

No

No

r th

on

nd

ds

14%

No

nd

g la

an

12%

Lo

En

id l

6%

of

M

8%

st

st

10%

Ea

Ea

APPENDIX

Appendix 7 - Organisations who state they have no time to set up and go online, by region

18%

APPENDIX

43%

50% 45%

43%

Appendix 8 - O rganisations who state they have no time to set up and go online, by employee size

35%

40% 35%

5% 0%

1

2 to 5

6 to 9 All

SME

49

10 to 49 Charity

50 to 99

4%

2% 2% 4%

6

7%

10%

9%

10% 11%

15%

1% 1%

20%

15%

19%

22%

22%

25%

22%

30%

100 to 249

Find out more

££

Go to lloydsbank.com/businessdigitalindex #BizDigitalIndex

Please contact us if you would like this information in an alternative format such as Braille, large print or audio. The Lloyds Banking Group includes companies using brands including Lloyds Bank, Halifax and Bank of Scotland and their associated companies. More information on the Lloyds Banking Group can be found at lloydsbankinggroup.com

Important information Whilst Lloyds Bank has exercised reasonable care in preparing this document and any views or information expressed or presented are based on sources it believes to be accurate and reliable, no representation or warranty, expressed or implied, is made as to the accuracy, reliability or completeness of the information contained herein. This material has been prepared for information purposes only and Lloyds Bank, its directors, officers and employees are not responsible for any consequences arising from any reliance upon such information. If you receive information from us which is inconsistent with other information which you have received from us, you should refer this to your Lloyds Bank Sales representative for clarification.Lloyds Bank plc Registered Office: 25 Gresham Street, London EC2V 7HN. Registered in England and Wales no. 2065. Telephone: 0207 626 1500. Issue date: March 2015

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