According to Cisco’s APAC SMB Digital Maturity Index, most SMBs in the ASEAN region (with the exception of Singapore) are in the ‘Digital Indifferent’ stage of digital maturity; where companies’ digital efforts are often reactive to market changes, rather than driven by a proactive tactical approach.
Singapore SMBs were found to be the most digitally mature not only in ASEAN, but also across the greater Asia Pacific (APAC) region, ahead of the likes of Australia, Japan, South Korea and China. However, on a positive note, Malaysia and Thailand are very close to becoming ‘Digital Observers’, reaching the next level on the digital maturity scale that will place them in the same league as other developed nations within APAC. Nevertheless, a number of roadblocks must be urgently address if countries in the emerging markets wish to make this leap and catch up with those nations.
Key findings from the report were revealed by Cisco Regional Director & General Manager for SMB Markets & Distribution, ASEAN, Bidhan Roy and Cisco Malaysia’s Managing Director, Albert Chai, during a media briefing which was part of the company’s annual Cisco Connect event held in Kuala Lumpur today.
The Index was developed by research firm IDC based on an independent survey of 1,340 SMBs across 14 major economies in Asia Pacific. It looked at the digital maturity of respondents (or how ‘digitally ready’ they are) across four business dimensions; technology adoption and application, digital transformation strategy and organisation, processes and governance, and the capability to source, manage and retain the right talent to enable their digital transformation.
According to Bidhan, Cisco ventured into this particular study because “SMBs are a significant component of any country’s GDP. [Secondly,] they form close to 97% to 99% of the total enterprises that exist in any country. And thirdly, SMBs, in total, employ close to 96-97% of the total workforce of any country. So it becomes very important for us as an organisation to understand what their pain points are, what their challenges are, what their priorities are, and also equally important, what their technology investments are.”
This is crucial because as Bidhan put it, there is a staggering amount of potential of opportunities that exist today for SMBs to go out and capture all they can in order to participate in the digital economy. The scale at which companies digitalise may be different, but even pen-and-paper businesses have now gone digital to a certain extent, be it by setting up websites, interacting on mobile platforms, or using some amount of automation because in order to compete with bigger companies, technology is going to be a big neutralisation effect which gives them a global access to markets.
As for why SMBs in the region are transforming digitally, almost half (43%) are doing it to survive and keep pace with the competition. 39% are merely reacting to customer demands while 38% of respondents are seeking to disrupt as well as bring new products and services to the market. The rest are still in a ‘wait and see’ mode.
Speaking from a Malaysian perspective, Albert mentioned that SMBs in Malaysia are planning to make initial technology investments particularly in cloud (13.1%), cybersecurity (12.9%) and IT hardware upgrades (11.7%). This is in line with the regional average of 13%, 13% and 10% for all three respective categories. Interestingly, in place of cloud, Thai SMBs are investing more on IoT implementations (13.3%). Meanwhile, Singapore respondents are making major investments in cloud (16.7%) and analytics (11.2%).
This shows that Malaysia and countries in the region are starting to realise the benefits of the cloud in terms of agility, cost and scalability. Both Albert and Bidhan pointed out the fact that contrary to popular opinion, SMBs are certainly aware (and terrified) of the severe impact that cyber-attacks could bring, and are now finally making securing their digital assets a top priority. Albert specifically stated that one cannot become a digital company without being a cybersecurity company.
Commenting on the report, Albert said, “It is encouraging to note that Malaysia has made digital transformation a national priority with over RM5 billion allocated in the recent budget to support SMB migration to Industry 4.0. Yet, less than half of Malaysian SMBs (49%) are taking advantage of such government opportunities. This needs to be addressed as SMBs represent over 95% of businesses in Malaysia and are key drivers of Malaysia’s digital economy transformation. Beyond that, at Cisco, we are committed to playing our part in building end-to-end digital solutions to meet the digital needs of Malaysian SMBs.”
The Index also listed the biggest hurdles ASEAN companies are facing to digitally transform, namely the lack of digital skills and talent within their organisations (17%), lack of insight into operational and customer data (14%), lack of a robust IT platform to enable digital transformation (14%), and lack of budget/commitment from management (13%).
Thus, the Index offers the following suggestions that can help SMBs accelerate their digital transformation journey:
Digital transformation is a journey: It is not a sprint but a marathon. SMBs should constantly access their maturity across the four dimensions and prioritise key initiatives to address gaps.
Invest strategically: SMBs need to have a well-defined digital transformation strategy and roadmap. They need to use this as a guide to make strategic technology investments, ones that help them address their key challenges and leverage specific growth opportunities.
Embark on process automation and digitisation: SMBs should look to gain efficiencies through process automation by leveraging relevant technologies. They should establish policies to standardise processes. As the organisation matures in their digital transformation journey, they should leverage data and digital technologies to transform processes, increase innovation rates and gain agility.
Secure buy-in: Change can be difficult, so SMBs need to ensure buy-in from employees and senior management. They need to identify digital champions within the organisation and bring them in early to the process. They should leverage these champions to catalyse a culture of change by encouraging collaboration, sharing success stories, and taking calculated risks.
Find a trusted partner: Many SMBs find it difficult to execute on their digital transformation strategy. SMBs should look for an experienced technology partner that brings consultancy and project management services, on top of technology know-how. When deciding, it is important to find partners with experience working with and within the SMB ecosystem.