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Why SMEs Must Take Their Place in The Digital Economy?
February 19, 2019 News

SMEs contribute a rather significant amount to a country’s national GDP. In most countries in Southeast Asia, SMEs contribute between 30% to 40% to the GDP. Governments have realised the importance of this and continue to nurture, fund and help create more SMEs. In most countries, there are programs to help SMEs in ensuring their business is successful.

Right from its incubator stage, SMEs need proper planning and guidance if they want to make it big. And indeed, many have been successful in recent years. Common examples include ride-hailing services like Grab, which now dominates the entire Southeast Asian region in this sector. Another example would be food delivery companies like foodpanda and honestbee which continue to control the food delivery market in the region.

Most of these SMEs started off in a digital environment. Hence, their digital journey was well-planned and executed to ensure they meet the demands and supplies of the industry. But what about traditional SMEs? While digital SMEs continue to enjoy the benefits of the digital economy, other SMEs need to embark on their digital transformation as well.

The ASEAN e-commerce agreement which aims to spur the use of e-commerce and digitalisation for economic growth is expected to be worth US$200 billion by 2025. Globally, analysts have reported that the digital economy is looking to reach values of US$3 trillion by 2025 as well. And there is no doubt that part of the figures will be contributed by SMEs.

By embarking towards the digital economy, SMEs will find themselves in scenarios they probably never anticipated. This is because SMEs have tonnes of data at their disposal. More often than not, these small and medium businesses do not know how to use this data, let alone process it. In most cases, the data is just collected and stored or even disposed of. They fail to realise that the answer to unlocking their fullest potential is already with them.

When SMEs begin harnessing and processing their data, they will be able to study their users and customers’ behaviour in ways they never thought they could. Powerful data processing and analytics tools will be able to process their data and give SMEs insights on their customers. Put it simply, SMEs will be able to understand and control the demand and supply of their goods and services by utilising the data they have and making the data work in their favour.

Oftentimes, SMEs feel that they don’t have enough funding to invest in such tools. But if they were to really look beyond that, the long-term profits will be beyond their initial funding. This is because with digitalisation, automation comes into play as well. SMEs can leverage automated systems to ensure their products and data are processed efficiently and at speed.

With automation in place, supply becomes automated as well. SMEs will be able to link their data in their supply chain to work out with their suppliers on their products. For example, the processed data may show that a particular product is popular in a certain zone or area; the information allows the company to prepare more products for that area and at the same time, notify the supplier on the need to have more supply of that particular product.

We are already seeing this with digital SMEs. Companies like Grab rely heavily on automated supply and demand data. Their entire business runs on and depends on their supply chain for this. Areas that have high demand are sent more cars while lesser demand areas have fewer cars.

Where is the profit in all this?
This is where SMEs have to realise that their data is actually worth a lot more than they expect. The data they process may not only give them insights into their own business but will also provide insights to other businesses as well. It is in this way that SMEs can share their data and find ways to make a profit at the same time. Of course, they would need to meet the regulatory compliance on the data, but even with that, there is still tonnes of information that can be shared with other SMEs.

To put it simply, SMEs that refuse or are slow in their digital transformation will find themselves losing out to those that are already digitalised. SAP can help SMEs embrace their digital transformation. They allow SMEs to choose the right digital strategies for their businesses while ensuring best practices. If SMEs really want to be profitable and have a share on the digital economy, they need to embark on their digital transformation journey now.