Digitally Empowering Small Businesses

Women microentrepreneurs face numerous obstacles that can hinder the growth of their firms, such as limited access to financing and markets, constrained opportunities to build business skills, and an unequal distribution of caregiving and household responsibilities. However, increasing evidence underscores the transformative potential of digitalization in mitigating these challenges. By incorporating digital tools into their businesses, women can unlock access to alternative financing sources like digital lending platforms, expand their market reach through social media and online marketplaces, and gain more flexibility and control over their work lives through business operations automation.

That was the case for Camila, a woman microentrepreneur from Bogota, Colombia, who runs a textile workshop with her mother and sells directly to passers-by. Camilla participated in the DigitAll program – an initiative led by Fundación Capital with support from Mastercard Center for Inclusive Growth – that enabled the adoption of digital tools for over 68,000 micro and small enterprises (MSEs) in Mexico, Colombia, and Peru. Through the program, Camila enhanced her knowledge of digital solutions. She began regularly posting her products on Instagram and Facebook and engaging with clients over WhatsApp daily. This digital presence yielded a significant impact on her business, fostering customer awareness, even in other countries, with these channels now comprising 11% (and growing) of her total sales.

However, other’s experiences with digital tools looked somewhat different. Some business owners in the program dropped certain digital tools when they didn’t perceive positive outcomes. We came to understand that small businesses' digitalization is a gradual process full of nuances based on the industry and maturity level of the business, the type of digital tools used or introduced, and macroeconomic factors. Thus, measuring the success of digitalization initiatives requires a comprehensive outlook of these features and should not be reduced to dichotomous indicators like adoption or usage rates, which are typical metrics of success for such interventions. After all, if programs like DigitAll fail to ensure the embeddedness of the digital tools fostered, there is little chance of seeing the impacts that the literature attributes to women-led small businesses' digitalization.

To help measure the impact of digitalization programs, Decodis, in partnership with Fundación Capital and Mastercard Center for Inclusive Growth, created the Digital Stickiness Index (DSI): a holistic measure that encompasses the different aspects that define the digitalization journey of small businesses. The index collects the viewpoints of business owners themselves and, thus, captures the degree to which digital tools are embedded into the business (i.e., they become sticky, and therefore, business owners will not abandon them easily).

The Digital Stickiness Index acts as a measure of impact for women-led small businesses

Decodis used the DSI to study the digitalization journey of a sample of 114 businesses in the DigitAll program, with nearly 70% of these firms owned and led by women. To build the DSI, we asked business owners six open-ended questions encompassing the phases of their digitalization journey (see Figure 1). We then weighed and aggregated their responses to obtain the DSI, which spans from 0 to 100 (with 0 being the lowest level of stickiness and 100 the highest).

Figure 1: The Digital Stickiness Index Framework

The DSI is built to provide practical applications. First, it can be measured across types of digital tools. For example, in the DigitAll research, we calculated the DSI for four categories of solutions based on the apps and systems fostered during the program: social media, digital payments, online marketplaces, and business management systems (i.e., for inventory and financial management). This provides insights into which digital tools create the greatest stickiness and, therefore, long-term impact.  

Furthermore, a counter-balancing factor in considering the stickiness of digital tools is the amount of training and cost required to embed them in a small business. Having a tool like the DSI that can estimate the “bang for the buck” of taking on this training expense allows donors, program managers, and investors to assess whether investing in a sticky product is worth the upfront cost of training.

Our research revealed that when online marketplace adopters received training, their overall DSI score increased by five points. Most business owners said they were more comfortable receiving online training than in person, so they had a resource they could watch and re-watch in their own time. With the DSI, there is a quantitative basis on which to assess whether the cost of creating and distributing less expensive online training would be worthwhile to acquire more “sticky” customers.

The Digital Stickiness Index also provides direction to investors, practitioners, and donors seeking to boost women-led small businesses

As professionals committed to enhancing the lives and livelihoods of women microentrepreneurs through digitalization, we continuously seek methods to help us better understand and support their development. The DSI framework is valuable in this pursuit, offering insights that can guide the design of our interventions and investments to achieve maximum impact. Leveraging the DSI allows us to sequence our interventions effectively, prioritizing tools with higher stickiness to optimize impact and resource efficiency for both providers and entrepreneurs.

Outcome-level factors that reveal how digitalization integrates and impacts women-led businesses are a territory that needs further exploration. However, the DSI offers a conceptual framework and evidence to suggest that donors and practitioners involved in the digitalization of women-led businesses could enhance the targeting of their efforts by integrating new dimensions in their definition of programmatic success. In an increasingly digital economy, the stakes are high for women if they continue to be left behind. Thus, we must seek innovative ways to ensure that the long-term impacts of our interventions are achieved – the DSI could serve as a helpful pathway for advancing this endeavor.