In today’s hyper-digitalized era, digital transformation is rapidly becoming a necessity for Micro, Small and Medium Enterprises (MSMEs) to remain relevant in a steeply competitive global business environment.
Digitalization has brought about core transformations for enterprises in their relationships with customers, partners, as well as, competitors. Continuous improvement and innovation in emerging tech – like artificial intelligence (AI), Internet of Things (IoT), and Big Data – is drastically altering the business environment, creating novel solutions for today’s challenges.
MSMEs stand to benefit from digitalization in many ways, including:
- increased efficiency and cost savings
- higher customer satisfaction and retention
- expanded market reach
- increased competitive edge
- greater resilience during crises
Demand for services from digital platforms has also soared in recent years. For example, the digital economy’s gross merchandise value in Malaysia grew around 27% in 2020 and 47% in 2021 respectively – representing a US$7 billion increase in value. These growth prospects are expected to remain strong in Malaysia and the wider Southeast Asia region.
Digital Transformation Strategies
Strategies for digital transformation include approaches to remodel businesses and integrate digital technologies – wherever needed – to achieve higher efficiency, productivity, business growth, enhanced customer experience, and optimized costs; this comprehensively influences nearly all internal and external factors concerning the business environment.
Digital transformation strategies should ideally include approaches to:
Automate and optimize processes
Digital tools and platforms can help MSMEs automate routine tasks and streamline their operations. From repetitive administrative functions like payroll and invoicing to employee onboarding and document management, the implementation of digital tools can reduce manual work, increase coordination, and minimize human error – leading to better operational efficiency and more cost savings. Cloud-based solutions, CRM systems, and project management software all play a part in facilitating the work that employees carry out, while also freeing up time for them to focus on other crucial and value-added areas of work.
Access new markets
Expanding market reach – both locally and internationally – becomes significantly easier with digitalization. Digital solutions such as search engine optimization (SEO) and social media advertising enable MSMEs to increase their visibility and attract customers at a lower potential cost compared to traditional marketing, and allow for the customization and tailoring of marketing strategies to target specific demographics with relevant and curated content. Building a strong online presence can catalyze everything from engagement to brand visibility, while creating avenues for organic growth, such as user-generated content.
In the pre-digital era, businesses often faced many challenges when expanding internationally – from geographic and communication barriers to logistical complexities. Digital solutions provide much easier access to global markets, with e-commerce platforms, digital payment gateways and communication tools making it much simpler for small businesses to offer their goods and services to a wider market, with much lower barriers to entry.
Improve how data is collected, processed, and analyzed
Implementing data analytics – especially to process large volumes of heterogenous data – provides MSMEs with real-time insights into everything from their finances and market conditions to resource optimization. Adopting a data-driven approach can help businesses make more informed decisions, tailor their products and services to meet changing market demands, or forecast and respond quickly to emerging trends. For example, businesses could identify the most effective channels to interact with customers, create hyper-personalized offers and advertising for different audience segments, or even identify threats from competitors and prepare mitigation plans accordingly.
Digitalize trade finance for regulation and cost-optimization in cross-border trade
Though businesses have undergone extensive digital transformation, business financing options have remained largely traditional, especially in the realm of international commerce. However, the past few years have witnessed a rise in the digitalization of trade finance. Trading enterprises need to implement technologies that help in the effective management and regulation of digitalized trade finance and reduce costs involved in international trade.
According to experts, digital trade finance has major potential to support innovative services and carry out more functions of traditional currency. Digital financing options can provide significant breakthroughs in B2B international commerce and redefine the interaction between payments and user data. As digital trade financing gains traction worldwide, it contributes to the growth of B2B e-commerce platforms – which are estimated to expand at a CAGR of 18.7 percent from 2021 to 2028.
Conclusion
MSMEs stand to benefit greatly from digitalization, yet there are many challenges that impede this process – including lack of financial resources such as access to credit, limited liquidity due to cashflow constraints, and limited information and skills related to digital technologies.
Private sector companies can also lend their expertise and reduce the barriers to entry for MSMEs to pursue digitalization. Digital trade platforms like BBX can provide alternative means of trading and settlement to cash. By leveraging BBX Digital Trade Credits (DTC) and interest-free DTC credit lines, MSMEs are able to acquire what they need to keep their business running while saving valuable cash for other needs such as business development initiatives.
Such platforms can provide a starting point for internationalization by providing access to global networks of business owners to trade and collaborate with. Through sharing best practices, digitalization strategies, and individual areas of expertise, these businesses can grow and thrive together in an ecosystem that facilitates collective success.
Ultimately, it is crucial for MSMEs to navigate the wide array of options available for digitalization, explore suitable strategies to transform their businesses, and start building their resilience against the challenges of today (and tomorrow!) – or risk falling behind in an increasingly competitive and uncertain business landscape.