According to Cisco’s APAC SMB Digital Maturity Index 2019, Singapore is ranked the highest in the digital maturity of its SMBs, positioning the country ahead of Japan, South Korea, ANZ and Greater China.
However, reminds Bidhan Roy, Head of Small Business for APJC at Cisco, “Singapore is classified as a Digital Observer – in other words, its SMBs have embarked on some digital efforts but these remain purely tactical, bite-sized and focused on process automation.”
This study, commissioned by Cisco and performed by the International Data Corporation (IDC) looked at the state of digital adoption of SMBs across the region. The results put a spotlight on the state of digital maturity of SMBs in the region, revealing the key drivers of their digital transformation, the challenges they face, as well as their key technology investments.
The aim was to understand the challenges and opportunities for SMBs in different industry sectors and countries, and the kind of technologies and solutions they can embrace to address those and unlock long term growth.
Building a framework for SMBs’ digital transformation
The Index, developed by IDC, is based on a survey of 1,340 SMBs from multiple industries across the 14 major economies in Asia Pacific: Australia, China, Hong Kong, India, Indonesia, Japan, Malaysia, New Zealand, Philippines, Singapore, South Korea, Thailand, Taiwan and Vietnam.
IDC developed a framework to help SMBs clearly assess their current capabilities and establish goals that work to synchronize business objectives with IT needs. Each SMB was surveyed on four dimensions of digital transformation: strategy and organization, processes and governance, technology, and people and skills. According to the responses, the SMBs were classified into four stages of digital maturity: Digital Indifferent, Digital Observer, Digital Challenger and Digital Native.
SMBs that are Digital Indifferent were largely reactive to market changes, and did not have digital efforts. They had little automation, relying heavily on manual processes, and did not use digital technologies nor cloud resources.
Digital observers have already started digital efforts though these remain tactical, small initiatives that are often heavily focused on processes automation to achieve efficiencies. There are some cloud resources used and technology investments siloed, though the strategies may not be well-coordinated. When ranked overall, Singapore’s companies fall into this category, just ahead of Japan and New Zealand in second and third place respectively.
Digital Challengers have a strategy for the use of digital technologies focused on becoming adaptable and agile, with automated core processes and a shift towards becoming more proactive in its market responsiveness . They may have a roadmap for technology investments to support digitalization and hybrid cloud as well as investments in talent management.
In Digital Natives, the digitalization strategy is integrated, focused on driving continuous innovation, contains a proactive data-driven approach in its go-to market, supported by analytics and full process automation. The companies are cloud first with digital technologies embedded and used to amplify companies size, presence and competitiveness in the market. No APAC countries were found to fall in these last two categories when their survey respondents were considered overall.
Opportunities and Challenges in digitalization
43 percent of SMBs surveyed say they are digitalizing as they recognize that they face a real danger of being left behind if they do not transform.
Another key driver of digitalization is customer demand. Increased smartphone ownership, coupled with the advent of consumer apps, has created an environment where customers now expect they can get what they want, when they want and where they want it, all at their fingertips. Customers are now demanding the same level of service from SMBs as well.
SMBs also use technology to scale quickly. The Cloud, which allows businesses to build mass-scale computing power and minimize IT requirements and physical storage, is the top technology that SMBs across the region are investing in, allowing them to achieve their goals without large upfront investment in IT infrastructure.
However SMBs also face multiple challenges in digitalizing. One is the competition for the right talent. A successful digital transformation requires a variety of skilled professionals: technology specialists, to data analysts and those with highly specialized skills in areas like Cybersecurity.
As digitalization gathers pace, companies are vying to attract and retain talent with the right skill sets. This has triggered a war for talent across the globe and Asia Pacific is no different. The other major hurdles they listed are lack of insight into operational and customer data and having a robust IT platform.
Government initiatives driving SMB digitalization
Governments in Asia Pacific recognize the importance of SMBs for their economies. They also understand that the advent of the digital economy has increased the need for change across business organizations.
For governments, focusing on digital transformation among all organizations, including SMBs, creates a competitive economy in today’s global marketplace. Digitally-enabled businesses, improved technology infrastructure and a skilled talent pool are vital foundations to increase economic growth as well as social inclusion.
According to Bidhan Roy, “Singapore scored highly when it came to levels of investment in digital preparation by both businesses and the government, as well as the availability of human capital.” 41.4% of Singaporean respondents reported being aware of, and having benefited from, government support.
“Indeed, the Singapore government in particular offers some excellent incentives and grants to help SMBs achieve their potential – from a range of training programs to dedicated support packages to help offset the costs of technology implementations,” he added.
“While as a region, there’s more that could be done to support small businesses, SMBs in Singapore are well-positioned to take those next steps in scaling by leveraging government funding and support,” he concluded.
Recommendations for APAC SMBs
The study concludes by recommending companies see digital transformation as a marathon rather than a sprint, constantly accessing their maturity and prioritizing key initiatives to address gaps. They also need a well-defined strategy and roadmap for transformation which will allow them to leverage relevant technologies and standardize processes. Later on processes can be transformed to increase innovation rates and gain agility.
The study also highlighted the importance of buy-in from employees and senior management, and the need for an experienced technology partner that brings consultancy and project management services, on top of technology know-how. In particular, partners with experience working with and within the SMB ecosystem are vital.