Digital Transformation for SMEs – different set of challenges

IDC’s research director, Pranabesh Nath, recently shared about the organisation’s journey towards becoming digitally native, while also pointing out that digital transformation for the smaller- to medium enterprises (SMEs), can be quite different from the journey for large enterprises.

“The context behind SMEs is also changing quite a lot,” he said, sharing the examples of government incentives to promote SME development and the digital free trade zone which opens sales channels for SMEs to grow their businesses. Pranabesh also observed that in Malaysia, a majority of SMEs are service-oriented or in the manufacturing sector.

The IDC forecast is that 20-percent of Malaysia’s GDP would be digitised by 2021. What this means is a GDP that is driven by digitally enhanced offerings, operations and relationships in every industry, according to the research company.

Pranabesh further explained ‘digitally enhanced’ as being products and services that have digital components, for example Coca-Cola cans with QR code and pure digital services for consumers.

The research director had shared these statistics during a Sage briefing in KL by Sage’s VP and MD, Robin Chao.

Digitally native

IDC defined digital native enterprises as being digitally immersed and being able to scale its operations and innovate at a pace that is an order of magnitude greater than traditional businesses.

Other defining elements of the digital native enterprise are its customer-centricity and empowered workforce, as well as technology and data that fuel more efficient operations, new revenue streams and customer loyalty.

It’s safe to conclude, that a lack of these elements, as well as absence of a digital mindset would result in an enterprise becoming digitally stuck.

Just having a DX strategy isn’t enough, as there has to be a DX-model organisational approach in place to support the strategy. An IDC DX MaturityScape benchmark in APAC revealed that 65-percent of organisations have a strategy, but 91-percent of this figure didn’t have organisational support.

Pranabesh also shared IDC’s 4 phases of DX model organisations – DX special projects which are still in the phase of defining digital transformation for the enterprise; the DX office which is establishing priorities and governance; the embedded business unit which wants to achieve an organisation-wide implementation; and the digital business unit which is able to create digital offerings.

Sage, an integrated business software provider claims to be able to help companies transform by providing strategic tools for businesses to easily and readily utilise.

For example, the mobility feature of its ERP software was a deciding factor for a food industry company, to select Sage’s solution, because it allowed immediate invoicing through mobile devices.


Chao observed that 95-percent of Malaysian SMEs are only selling locally. He also shared research by the Federation of Malaysian Manufacturers (FMM) and Malaysian Institute of Economic Research (MIER), that only 12-percent are fully aware of Industry 4.0.

Nineteen-percent of local manufacturers surveyed, are not aware at all.

Clearly, industries that can benefit the most from technologies are not aware of offerings out there, or are still unclear about the benefits that technology like artificial intelligence (AI), Internet of Things, or cloud, can bring to their businesses.

It’s not for lack of effort on the government’s part. There are initiatives in place like the DFTZ as well as smart manufacturing grants for companies to take advantage of.

But first basic technologies to adopt, like Internet connectivity is still a challenge outside of urban areas. How is cloud, IoT and AI supposed to happen without the most basic enabler of all – connectivity?

Pranabesh did note that technology adoption among SMEs have been faster in the past 2 to 3 years. This could be due to more pervasive Internet connectivity nationwide thanks to Malaysia’s high speed broadband projects in recent years.

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