SMEs on the Path to Industry 5.0

Professor Dr.-Ing. Adrian Pisla explains why SMEs need an environment that lays emphasis on social and technological factors

The Engineering & Management Steinbeis Enterprise – or EMSEC – was founded in March 2023 in Cluj-Napoca, a city in Transylvania in the northwest of Romania. A Steinbeis Transfer Center, the EMSEC has excellent networks in the area, which include the Technical University of Cluj-Napoca, the EAST-WEST Steinbeis Group, which operates in Austria, Azerbaijan, Germany, Romania, and Ukraine, and Steinbeis Network Romania. Steinbeis Entrepreneur Professor Dr.-Ing. Adrian Pisla would like to leverage his field of work to boost the influence of SMEs, particularly in terms of business capabilities, and he appeals for the established PEST analysis to be modified into a STEP analysis. Prof. Pisla summarizes the key concepts and aims of this transformation for TRANSFER magazine.

Share of midcaps and SMEs by EU member state and size of midcap workforce


SMEs are known for their adaptability, creativity, flexibility, success and, last but not least, their ability to advance the interests of society through value creation. They are an active and indispensable part of every society, and one of the most important pillars of support, especially in times of crisis. Challenges we currently face in society highlight two factors that set apart the upper, middle, and lower classes. The first is the paradox of capitalism, and the second is forces of change. Both are closely intertwined in a hierarchy of circularity. The starting point of this paradox lies in the notion of competition and the assertion that competition is the most important factor for affordable, high-quality products, services, and technologies – directly linking capabilities and undertaking with outcomes. This revolves around the fact that every company, in keeping with its definition of success, strives not for partnerships but a monopoly, in keeping with the concept that “big fish eat little fish.” From a broader perspective, this approach to business undertaking has all the hallmarks of the United States, a nation with a diverse population united by the American dream. This contrasts with Europe, which tends to be more socially inclined as a region and is marked by many infrastructure systems aimed at supporting its people.

The role of SMEs as a powerhouse of industry and employment

According to the World Bank, conditions are remarkably similar in all areas of the world. SMEs – which account for roughly 90% of employers in most countries, 99% in the EU, and more than 50% in emerging economies – play an important role in creating employment. In emerging economies, SMEs can account for up to 40% of gross domestic product (GDP), compared with 51% in the EU. Looking to the future, SMEs are a top priority for governments. This is because 600 million jobs need to be created by 2030 in order to accommodate the new global workforce. However, with numerous crises happening at the moment, as well as many other developments in the technology sector and other areas – fundamental transformation is needed to evolve the Mittelstand (SME) into the New Mittelstand. The only question is: how?

PEST becomes STEP – ensuring social factors are center stage

To work this out, first we should consider the current situation, or to be more precise: the four forces of change summarized by the PEST model. The PEST analysis was developed in the 1960s by Harvard professor Francis J. Aguilar. PEST stands for political, economic, social, and technological factors. These are analyzed in order to examine the business environment with the aim of identifying both threats/risks to a business and opportunities. The analysis can also be used to spot potential developments and make informed decisions in a marketplace marked by change.

In 2023, companies are investing a great deal of energy in smart manufacturing, or Industry 4.0, which offers greater long-term security through technological innovation, creates access to more resources, and bolsters business resilience thanks to a wider range of new technology-based products and services. Given this, is it appropriate to continue using the PEST abbreviation, which places P for political first and T for technology last?

Technology is about facts, so it is the only starting point that reflects an aspect of performance that can be measured objectively. It is absolutely crucial that the future of SMEs is subject to discussion, particularly when it comes to simultaneous crises and the surprising tendency for people to seek solutions that require no transformation whatsoever. But this is not about whether we need change – because change will happen; it’s about how we shape change. It is entirely possible that the PEST model will continue to work for Industry 4.0, but a new approach is needed for Industry 5.0: the STEP analysis.

With STEP, the S still stands for social factors and these become the focus, followed by T for technological aspects. Social factors are important to understand how the generations of the last century (the Greatest Generation, the Silent Generation, Baby Boomers, Generation X, Millennials, Gen Z, and the Alpha Generation) have been perceived. The S is also needed to decide how to work together with these generations. The S forms a basis for combating the shortage of skilled workers. And, not least, S is essential because – as the global coronavirus pandemic has just demonstrated – a strong social environment is important to us.



It’s time to act – not wait!

Shifting to STEP is only possible if the right “technology culture” is embraced and believed in. Taking action and the motivation to act are central pillars of Industry 5.0 and the reason why the four factors of change should begin with an S. At the EMSEC Steinbeis Transfer Center, we believe strongly in “falling over and standing up again.” We have made it our mission to support customers in the areas of training and nurturing innovation to allow companies to exploit their full potential to generate business and develop new products and services.

The projects we are currently involved in include:

  • The development of an app for identifying innovation capacities
  • The planning of the Transylvania Business Meeting, bringing together local companies and South Korean business partners
  • The development of a digital matchmaking platform to allow experienced specialists to offer support and mentoring to junior staff
  • Bringing together German, Romanian, and Azerbaijani stakeholders currently working on the future of energy provision


Univ.-Prof. Dr.-Ing. Adrian Pisla (author)
Steinbeis Entrepreneur
Steinbeis Transfer Center EMSEC – Engineering & Management Steinbeis Enterprise in Cluj-Napoca (Romania)

Dorina Raluca Ardelean-Baidoc (author)
PhD student
Technical University Cluj-Napoca

Alina Beatrice Oltean (author)
PhD student
Technical University Cluj-Napoca

European Commission, Directorate­-General for Internal Market, Industry, Entrepreneurship and SMEs, Dachs, B., Siedschlag, I., Yan, W., et al., Study to map, measure and portray the EU mid­cap landscape: final report, Publications Office of the European Union, 2022,