Many SMBs stuck in planning stage of digital transformation

SMB digital transformation
Image credit: David Savill

The vast majority of SMBs in Asia-Pacific are fully aware of the need to undergo digital transformation to stay competitive, but less than 40% of them have actually gotten started on that transformation process, according to a new report from IDC.

In its inaugural Asia-Pacific Future SMB intelligence services addressing the growing demand for regional insights into the SMB segments, IDC found that 84% of SMBs in Asia-Pacific (excluding Japan) recognize the need to use digital technologies to make significant changes in their companies’ processes and operations and become more competitive.

But while 39% of those have already started their journey and are at different stages of digital maturity, 42% are still in the planning stage.

Furthermore, according to the survey results, the top priorities of SMBs in the next 18 months are improving revenue growth, increasing efficiency/productivity, and reducing costs/expenses.

While SMBs are driven by an entrepreneurial mindset and possess the appetite to compete, grow, and succeed, they’re not as progressive or innovative when it comes to technology, says says Daniel-Zoe Jimenez, associate VP of Digital Transformation (DX), Future Enterprise, and SMB at IDC Asia-Pacific.

“Due to their size, they face unique challenges such as skills shortage, low technology adoption, and low process automation, as well as difficulties in accessing capital funding,” Jimenez says.

The good news is that digital technologies are so widely available and easier to use that the playing field between MNCs and SMBs is becoming relatively more levelled. That said, Jimenez adds, the market has reached an inflection point in 2019, forcing SMBs to act.

“Driven by the evolved state of digitalization of the SMB ecosystem and the opportunity presented by digital technologies to amplify capabilities and competitiveness, SMBs must progress and evolve towards becoming ‘Future SMBs’,” he says.

For the records, IDC defines a ‘Future SMB’ as “an ecosystem- and technology-first organization that can amplify its presence and capabilities for sustainable business growth, productivity, and competitiveness. It is data-driven, customer-centric, highly automated, and takes an experiment-learn-iterate approach to deliver breakthrough solutions and create new markets.”

SMBs must take their drive to grow their business as the same impetus to digitalize, Jimenez says. “They must recognize that their competition and ecosystem are transforming, and they must keep pace in order to survive.”

IDC’s SMB survey also identified top three challenges that APeJ SMBs are facing to adapt a digital-first mindset:

1. Balancing product/service quality and growth

2. Cashflow

3. Challenges in hiring/retaining talent and improving brand awareness

But with those challenges come a number of new and growing opportunities for SMBs, notes Celeste Narvaez, senior program manager at IDC Asia-Pacific, including the rise of the new digital economies, such as the last mile economy (use of delivery services), the gig economy (tapping freelancers to fill in talent gaps in SMBs, and the marketplace economy (proliferation of marketplaces where SMBs can offer their products and services).

“[These] will force SMBs willing to benefit from the opportunities presented by these new economies to make investments in digital technologies, and become them more competitive,” Narvaez says.

IDC expect 60% of SMBs in Asia-Pacific to be well along in their digitalization journey in the next three to five years.

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