Digital service provider: pay attention to the value proposition offered by your service to the industry!

Results revealed contradictions in the expectations and needs of small suppliers and industrial contractors.

The research article Value propositions of micro- and small enterprises in digital transformation of the global process industry, approved in autumn 2021 by the University of Oulu Micro-Entrepreneurship Centre MicroENTRE, studied the procurement cooperation between small suppliers of digital services and digital procurement in the process industry. This article highlights the areas for development related to cooperation as identified by research.

The study interviewed six large international companies in the process industry and 13 small Finnish companies that offer digital services for the digital needs of the industry. The interviews were analysed using Osterwalder’s value proposition canvas to assess how the digital services offered by small companies match the expectations and needs of digital procurement in the process industry.

The examination showed similarities and differences between the small suppliers and contractors in the process industry. Both parties felt, for example, that the main role of small suppliers in industrial procurement of digital goods is to offer and deliver niche services for industrial needs, and that the role of small suppliers in procurement mainly focuses on the piloting phase of digital services in the industry.

Industrial procurement experts saw risks in the cooperation. Many industrial companies have experiences of small suppliers not being able to deliver the service as originally promised. The risks related to the vitality, selection of supplies and scalability of small suppliers were also often highlighted. Industrial contractors considered the services offered jointly by two or more small suppliers more attractive, as the risks associated with the procurement may thus be significantly reduced.

From the perspective of industrial contractors, small suppliers’ contract skills, sales skills and experiences in industrial sectors are often inadequate. This leads to tenders whose actual customer-specific value for the industrial contractor’s processes and business remains unclear. Many small suppliers, in turn, felt that industrial contractors are not up to date with their digital procurement needs – their expectations are often unrealistic.

The results revealed contradictions in the expectations and needs of small suppliers and industrial contractors. Based on the results, there are some areas for development: small suppliers should, for example, present the added value that their digital service brings to the industrial contractors more clearly than at present. To this end, small businesses should better understand the needs, processes and technologies of the industry in question. When a small supplier invests in these areas, its credibility in the eyes of industrial contractors increases, and the mutual uncertainty factors associated with the procurement process decrease.

Author: Peetu Virkkala, Project Researcher, MSc (Tech), University of Oulu Kerttu Saalasti Institute, MicroENTRE Centre