Digital Transformation: It’s Not Just for Big Businesses

The costs and complexity associated with digital transformation concern a large number of Malaysia’s SMEs. They wrongly assume that it is something only to be undertaken by large companies with excess budget and resources. 

Nothing could be further from the truth. As we will see later in this series, business-enabling technology is more affordable and accessible today than at any other point in history. This is vital because there has also never been another time in history where businesses were forced to continuously adapt to change.

How technology has levelled the playing field

Technology has changed what it means to be an SME. In the past, being an SME generally meant your small- to medium-sized business operated locally, servicing a core group of customers. Now the internet makes it possible for even micro-enterprises to serve a global clientele. In addition, cloud-based software, development platforms and infrastructure give smaller companies access to the same resources used by much larger competitors. 

In other words, advances in technology mean that dreams are no longer limited by a company’s size. Photobook is a Malaysian company that started with a team of five operating out of the home of its founder. It turned an investment of RM1.4 million, an understanding of what customers want, and a solid digital strategy into a thriving global business, which today is valued at over RM600 million.

Even the smallest restaurant or boutique store can afford, easily implement, and see massive returns from cloud-based point-of-sales systems. In an era where customers expect fast delivery, companies with anywhere from one to thousands of vehicles can simply install plug & play devices to improve their fleet’s efficiency and lower costs. Three years ago, only 2% of customer service operations used chatbots or other virtual customer assistants. By this year, this will become a practice in 25% of operations.

Innovations such as these are just the tip of the technology iceberg that help SMEs compete with big players. 

Exciting but volatile times

Before we look at changes driven by desire, let’s look at changes that companies are forced to make in order to survive. Today’s businesses are forced to build on shaky ground. The modern business environment is marked by volatility, uncertainty, complexity and ambiguity, or ‘VUCA’. The irony is that technology is both the cause of and the solution to VUCA. When changes are extreme, we have what is known as digital disruption.

Disruption occurs when technology diminishes the relevance of current practices beyond recognition. It refers to a change so dramatic that it has the potential to make or break companies, even to create or destroy entire industries. 

The disruptive effects of technology

Consider how online ticketing portals shrank our dependence on traditional travel agencies, on-demand streaming all but put an end to DVDs (as well as vastly reduced subscriptions to cable and satellite TV services), and e-hailing apps pressured taxi companies to adjust or perish. 

Some industries that have been disrupted overseas have remained relatively stable in this part of the world. This is temporary. Advanced technologies, processes, and ways of thinking are inevitably seeping across our borders. 

Feeling the impact close to home

The next few years will see ever greater changes to numerous industries, including retail, security services, construction, banking and financial services, administrative services, business training services, agriculture, and more. How prepared are you?

SMEs make up 97% of our country’s manufacturing companies, and yet, in spite of being an industry with a high potential for automation, most of these businesses still rely on manual labour for over half their processes. How then, will they compete when the industry is disrupted by 3D printing, among others? 

The perils of ignoring technology – and the benefits of embracing it

Today, the world’s five most valuable brands are Apple, Google, Microsoft, Amazon and Facebook. All are younger than nearly all the other 95 brands on the list; in some cases by more than half a century. Apple and Microsoft were founded in the 1970s. Google and Amazon were founded in the 1990s, and Facebook is just about to celebrate its 16th birthday. 

Now let’s look at a brand that is not on that or any other list. In 1976, the same year Steve Jobs and his friends founded Apple, Kodak dominated the American film and camera industry, having captured 90% and 85% of them respectively. Only one year earlier, this industry giant had also invented the world’s first digital camera. 

Unfortunately, they saw no future in developing the technology and decided to stick to what they knew. True, they stayed at the top of their industry for a while but ignored the ever-clearer signs of change. By the time they acknowledged that the world had moved on to digital photography, it was too late. The company limped along for a few more years, then finally filed for bankruptcy in 2012.

Back to today’s top brands

In spite of their relative youth, the top five brands are marked by continuous evolution that keeps them on top of the times. In fact, more often than not, they have led the revolution themselves. Every year customers still queue up for hours or even days to buy the latest Apple product. Amazon has changed so much that it is hard to remember its straightforward roots as an online bookseller.

While it is virtually impossible to predict all possible disruptions, it is possible to prepare for changes. How this is done is the topic of our next article.