Embarking on Digital Transformation needs commitment more than money
In Malaysia today, there are two facts that everyone cannot deny. Firstly, SMEs comprise 98.5 percent of business establishments and contribute over 36 percent of the Gross Domestic Products (GDP), making it the backbone of Malaysian Economy. Secondly, our economy is going through a fast pace of digital transformation creating a new level playing field for SMEs. The key question here is “how well are SMEs coping in this digital age?”
The pace of ICT adoption is the key to gain competitiveness. In recent years, the pace of Industry Revolution 4.0 adoption is the key to survive in the future economy. Less than half of Malaysian SMEs use ICT tools in their business. Only 44 percent are cloud, 35 percent on IOT and just over 54 percent use data analytics. Yet, in my opinion, it is not the tools that matter. It is the level of usage and how it is used to enhance SMEs capabilities and capacity that is more important.
AWARENESS AND UNDERSTANDING DIGITAL TRANSFORMATION
Malaysia’s SMEs can be divided into two big groups – the family businesses who have been in business for generations and the new entrepreneurs who are born in the digital era. Most of the family business SMEs have successfully leveraged on automation to increase productivity in their businesses but have little understanding on the latest cloud, IIOT, AI, and data analytics. They used to hold on to information internally and are secretive and protective of what they know. The new digital technology on the other hand encourages data and information to be shared on the cloud, be analysed, and the use of artificial intelligence for decision making. In my opinion, they are not open to embracing changes due to fear of losing control of their enterprises.
The new entrepreneurs on the other hand have little knowledge of old processes and mechanical technology. Information, data and content are the assets or resources for them to do business. They do not need to unlearn before learning new technological trend. Mobile apps, social media and artificial intelligence are already part of their daily lives.
ADOPTING DIGITAL TECHNOLOGY
Digital transformation is not only about what tools or technology we use, it involves People, Process, Technology and how it relates and contributes to the growth of businesses. Two main factors affecting the level of digital adoption are internal culture and investment.
We need drivers to initiate change. SMEs are mostly driven by the owners. Middle management has little say about how and where should the company be in the future. Many SME owners are still holding on to their legacy and are not willing to move forward with what they are not familiar with. In addition, data is the key to be successful in the digital age. Organising, collating and storing data is not a common practice among SMEs. It adds on to the challenge of leveraging on the digital economy even if they are willing to change.
Cost of doing business has always been the key challenge for SMEs to sustain and grow. In addition to new taxes, compliance and certifications that are being introduced, investment in machineries and recruiting talents are unavoidable to operate and grow the business. Investment in digital technology has the similar fate with branding and marketing – it is always the least priority. Investment into production and sales come first. “Money not Enough!” “Find me The Money!” are two most common grievances among SMEs.
MAXIMISING THE POTENTIAL OF DIGITAL ECONOMY
Business challenges are always there but it should not be an excuse not to be part of the digital economy. It is either “You are in it or You are Out of business!” digital economy is here to stay and will continue to evolve.
SMEs should not be complaining about what they do not have or their challenges. They need to take proactive actions to make it happen. A number of initiatives which SMEs can potentially kickstart to be competitive in this digital age are:
SMEs can certainly benefit from Digital Age. It takes a change of mindset that it is not a cost but an investment for the future. It takes a business approach rather than an IT project. It needs commitment more than money to embark on the journey of Digital Transformation.
By Keng Teck Yap, National Council Member of SME Association of Malaysia and Technical Committee Member in MITI Industry4wrd Readiness Programme
Written for Business Today Magazine, June 2019 Issue