The ongoing global pandemic has brought about a silver lining for many firms – accelerated digital transformation. In fact, a report by cloud communications firm Twilio found that COVID-19 has fast-tracked companies’ digital communications strategies by a global average of six years.
Closer to home, a Microsoft-IDC study launched in September revealed that 73 percent of mid- and large-sized companies in Singapore have sped up digitalisation in a variety of ways to adapt to the new reality, whether by launching digital products or introducing digital payments to embrace ecommerce and automation.
But here’s another reality: COVID-19 is also widening the digital divide, between those who were able to muster resources to pivot their businesses and those that did not. And unfortunately, it’s the smaller companies who seem to be lagging behind.
Although 30 percent of Singapore SMEs said they were forced to digitalise due to the pandemic, more than half actually reported delays in their digital transformation plans, according to a 2020 SME Digital Transformation Study by Microsoft and the Association of Small and Medium Enterprises (ASME). Even those with digital transformation strategies in place are only seeing moderately low success rates, with just two in five SMEs perceiving their digitalisation efforts to be successful. This means that while bigger companies are getting ahead in the game, small and medium enterprises (SMEs) are struggling to even reap the full benefits of digital transformation.
Not all digital transformation is equal
SMEs – defined in Singapore as companies that have at least 30 per cent local shareholding, and a group annual sales turnover of less than S$100m or an employment size of less than 200 workers – are unique in terms of structure and culture. While it may be argued that their smaller size allows for agility, they typically lack the same level of access to resources and funds that larger multinational corporations (MNCs) have.
High implementation cost remains one of the top barriers to digital transformation among SMEs, according to the ASME-Microsoft study. Cost aside, factors such as the lack of internal resources and inertia to make meaningful change within the organisation also contribute to the digitalisation delay. Despite the prevalence of government grants and programmes to support Singapore SMEs in digitalisation, awareness and utilisation of such initiatives are low. Throw a global pandemic into the mix, and now digital transformation is the last thing on the minds of smaller firms, who are busy trying to survive and recoup falling revenues.
Despite the challenges, it is important that we attempt to narrow the widening digital transformation gap between SMEs and MNCs to avoid the long-term implications on smaller companies.
Keeping SMEs on the path to digital transformation
The 2020 ASME-Microsoft study revealed that investing in digital transformation can potentially deliver an average 23.5 percent in cost savings and 26.5 percent in revenue gains for SMEs, according to those who have digital transformation strategies in place.
Digitalisation is known as the first step to improving efficiency, growth and decision making. Those who fail to digitalise will have a higher risk to their business as their competitors become more agile and secure. SMEs need to start transforming the way they work, by ramping up the skills of their people and using technology where it makes sense to automate and draw meaningful insights for their business.
Take inspiration from local SME Sunlight Paper Products, one of Singapore’s largest tissue products suppliers. The 43-year-old company was founded at a time when the term ‘digital transformation’ was unheard of, but today, they have automated and migrated the bulk of their operations to the cloud. With the help of Microsoft Dynamics 365 Business Central and a seamlessly integrated Fleet Management System for their delivery trucks, they have since reduced time spent on manual, end-to-end paperwork – improving productivity by up to 400 percent. Customer satisfaction scores are also higher now, as the software allows them to track orders in real-time, minimise delays and ensure timely deliveries. By being an early adopter of digital transformation, Sunlight Paper was able to quickly reallocate resources and seamlessly continue their operations even when the pandemic hit.
Delaying digitalisation may be the most instinctive way to mitigate rising costs during this time, but SMEs need to keep in mind the long-term value of digital transformation to their businesses. Today, 80 percent of Singapore business decision-makers recognise that innovation is a ‘must’ and not just good to have, and they see the ability to innovate as vital to performance and resilience, according to the Microsoft-IDC study.
The journey to digital transformation is not a race, but a marathon. A shift in mindset is required among SMEs to encourage long-term thinking and persistence to stay on the path to digitalisation – even at a slow and steady pace.
Bridging the gap and empowering SMEs to thrive in the new normal
How then can SMEs continue to forge ahead despite the challenges? Here are three suggestions to keep the pace:
Stay informed and learn about new digital technologies in the market. Knowledge is power, and SMEs must be empowered to take charge of their digital transformation journeys. Learn more by visiting Microsoft’s Singapore Business Portal, which offers a range of free webinars and resources on small business software and technology – covering topics from Artificial Intelligence and cybersecurity to cloud and collaborative tools for a modern workplace.
Leverage free consultation services. Digital transformation can be complex and intimidating, but SMEs can make use of available services such as the free data analytics clinic at SME Centre@ASME, or the SME Digital Tech Hub where they can seek expert advice from ICT consultants who specialise in areas of data analytics, data protection, cybersecurity and internet-of-things.
Take time to read up on and understand government grants. A wide range of initiatives to support SME digital transformation are available, yet these programmes are often underused due to low awareness. When utilised, SMEs often fall into the trap of purchasing tech solutions simply because they are approved by government grants, without considering whether these solutions are best suited to their business needs. SMEs are encouraged to adopt an outcome-driven mindset when it comes to digital transformation – by ascertaining their business objectives and needs before identifying suitable types of digital technologies that can help achieve their desired outcomes.
For more insights on digital transformation among Singapore’s SMEs, read our ASME-Microsoft study here.