Digital Transformation Competition among Singapore SMEs – A Study

Digital Transformation Competition among Singapore SMEs – A Study

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Digital Transformation – Out of the 55% small and medium enterprises (SMEs) in Singapore who’d like to have their business go global, only a quarter (25.4%) of them are going to pursue any credible business transformation towards the same. ‘Digital Transformation’ features among the top reasons for Singaporean SMEs to curb their global intent. Large SMEs like Aik Moh Paints & Chemicals Pte. Ltd. & In.Corp Global Pte. Ltd. (winners SME Digital Leap Awards 2019), owing to their increased interest in DPT (Digital Platform Tools) & ADT (Advanced Digital Tools), mitigate this barrier conveniently. Large SMEs fulfill a considerable portion of S$300 Billion (GVA) coming from final foreign demand every year in Singapore. Not only that, better digital adoption has driven a visible gap between Large SMEs and Small SME companies in Singapore. In terms of productivity, FDI, service exports, and more; digitization leads to the entrepreneurial success of SMEs both inland and overseas.

Digital Transformation Gap between Large and Small SMEs

Enough reports have reiterated the fact that 99% of businesses in Singapore fulfill the SME categorization conditions. Large SMEs continue to implement Industry Transformation Maps across all 23 sectors as compared to Small SMEs. Innovation, technical adaptation, workforce challenges are the differentiating concerns that have led to this success. The increasing gap between ‘Technology Readiness’ also contributes to other factors like foreign trade compliance, networking, change management, and cost of resources. Here are some quick insights regarding the digital transformation factors which contribute to digital competition among organizations (esp. SMEs) in Singapore.

Source: Freepik

Factors of Digital Competition among Singapore SMEs

The financial growth of SMEs commonly depends on their access to three economic provisions – access to capital markets, regulated market competition, and infrastructure support. These aspects allow large SMEs to dominate the market. Any organization with access to capital markets can incline the market competition towards securing support from various government /non-government Institutions.

Access to capital markets allows SMEs to secure infrastructure support from institutions. Which in turn creates an irregulated market where one organization can create a disbalance in an otherwise healthy SME community. In a country where 99% of businesses are SMEs, Digital Transformation is what fuels the evolution of industry. It offers a multi-dimensional approach to all these concerns.

Here are some significant factors which influence a businesses’ standpoint in the ongoing technical competition and their potential risk towards ‘SME Digital Darwinism.’

  • BDT/ADT/DPT Adoption
  • Cyber Security
  • Global Business

Digital Transformation Tools Adoption in Singapore SMEs

Digital transformation is facilitated only by the grade of tools employed by any business. In the recent reports submitted to MTI, SMEs which use advanced digital tools show a 26% increase in their gross value added to the national economy. Other observations by the Ministry in this context have led to active promotions of the SME Go Digital Campaign in Singapore.

But what are these SME digital tools?

●   Basic Digital Tools (BDT)

  • Internet Usage
  • Computer Usage
  • Web Presence
  • Infocomm Security

●   Digital Platform Tools (DPT)

  • E-Payments
  • E-Commerce
  • Software as a Service (SaaS) Solutions

●   Advanced Digital Tools (ADT)

  • Internet of Things (IoT and IIoT)
  • Data Analytics
  • Artificial Intelligence (AI)

Despite the low attribution rates of even DPTs in Singaporean SMEs, there is enough data to prove that organizations employing either DPT or ADT support enjoy a 17% increase in their overall productivity. These are the kind of solutions which organizations need to take advantage of, to mitigate the growing digital domination of other SMEs.

Source: Freepik

Digital Transformation for Cyber Security – Elephant in the room

Although 65% of SMEs in Singapore experienced at least one cyber-attack in the previous years (2018-19), still, only 34% have employed digital tools of cyber insurance. No wonder why 2018 has seen cyber-attack losses of total S$ 58 Million (approx.). It is these insured organizations that surfaced from the digital epidemic of Ransomware in 2018.

17% of the SMEs have faced business disruption due to technical faults, 24% have suffered data loss of clients/customers/users, 32% succumbed to operational disruption, and ransomware threats as a combined result of not adopting digital transformation for cybersecurity. With intellectual property and development data being the new capital of this Industry 4.0 age, choosing cyber insurance systems is more of a competitive decision than a survival decision for SME companies in Singapore.

Digital Transformation Equation of 2020 – SME Go Digital means SMEs Go Global

Singapore Business Federation (SBF) found that 41% of Singapore SMEs are unable to map the informational gap between global markets and Singapore. In recent times when high-interest rates hit Singapore’s global momentum, government spending on digital transformation is what helped in neutralizing the effect. Now when the ASEAN markets are relatively resilient towards pursuing global trade, Singapore SMEs have a chance to capitalize on their position worldwide.

To quote Hon’ble Senior Minister of State Koh Poh Koon (Ministry of Trade and Industry):

Digitization can break Singaporean SMEs from the constraints of geography and at the same time breath efficiency into supply-chain, risk management, finance and logistics of organizations. Govt. with its SME Go Digital & allied initiatives like GeTS (Global eTrade Services), CIC (Commodities Intelligence Centre), and NTP (Networked Trade Platform) is out there to enable SMEs in conquering the global expansion challenges.

While funding has always been another primary concern for SMEs going global, the more recent financial assessments suggest otherwise. Global trade agreements rank compliance and market research information as more necessary than financial security now. One simply does not require to be a rich SME to trade globally. The digital economy has rendered tools to even the minimalist organizations of Singapore for enhancing their order books without having possessing earlier required liquidity. The latest outcomes of the SME Digital Leap Awards present the SME community with a proof of concept that financial challenges (cost-flow-margin) can get mitigated with technical transformation.

Competitive Benefits of Digital Transformation for SMEs in Singapore

Unlike large enterprises, SMEs do not generally have the luxury of waiting out the global trade shifts or national policy changes. Singapore SMEs, especially after the recent decrease in consumer purchasing power (FY 2018) and Ransomware cyber-attacks, must rely on preventive and proactive digitization for sustainability and scalability. Here are some more reasons to pursue digitization in 2020.

Productivity: Survey respondents for the latest Microsoft’s ‘SME Digital Transformation Study’ conducted in collaboration with the Association of Small and Medium Enterprises (ASME), claimed that digitization touched multiple dimensions of business operations positively. 9% of respondents even claimed to have reduced business operational costs as a result.

Source: SME Digital Transformation Study in Singapore, Microsoft and ASME (2018-2019)

Gross value Added: SMEs in Singapore, mainly routine intensive organizations, have shown positive effects of digitization on organizational efficiency and by association contribution to Gross Value Added (GVA). With SMEs powered by Productivity Solutions Grant (PSG) and assisted with tech-solutions as simple as mobile wallet payment gateways, Infocomm security, SaaS tools, a gross value enhancement 25% from previous years has been observed.

CyberSafety: 3rd Annual Survey conducted by Queensland Insurance (QBE) and another survey by Chubb Insurance Singapore Limited, coincidentally place 35%-40% of Singapore SMEs at critical cyber risk for not adopting any digital solution. 67% of the SMEs surveyed claimed that lessons learned after digital transformation in the year 2018 made them impervious to another similar cyber-attack in the future.

Projected Revenue: The SME Digital Transformation Study also proves that 26% of local SMEs reported a projected revenue increase as a direct outcome of adopting digital processes. Even SBF also states that digital cost optimization among SMEs concerning stronger inventory control and evolving market intelligence would yield an estimated 31% positive change.

Business Costs: While 60% of large enterprises nationwide are capitalizing on digitization to reduce workforce and business costs, only 33% of SMEs are currently employing any such measures. Still, local SMEs have reported an average saving of 22% in business costs by the credits of BDT & DPT tools.

Darwinism Solutions – suggestions for Competitive Digital Transformation (Singapore SMEs only)

Start a Corp-wide Digital Initiative: The best way to resolve a gap is to commit to it. Setting up a core digital change management team, internal surveys, leadership design, and future organizational model are pivotal core steps in the process. Competitive Analysis in terms of digital continuum maps and metrics that give an idea of their stage in the maturity curves, help in building step-goals for the digital leap. 64% of large companies trust in digitization processes to add more value to their business. 31% of SMEs have confirmed that by just laying doing simple measures like using computers in non-digitized departments have yielded better departmental outcomes.

The adoption rate of digital transformation tools among Singapore SMEs

Note: All data is rounded off to nearest estimate for ease of readability | Source: Economic Survey of Singapore Q1, MTI 2019 

Technology Type

Adoption Rate

Internet Usage

100%

Computer Usage

100%

Web Presence

80%

Infocomm Security

90%

E-Payments

75%

E-Commerce

15%

Software as a Service (SaaS)

50%

Internet of Things (IoT)

20%

Artificial Intelligence

2.5%

Data Analytics

30%

Enroll for Government SME Digital programs: Start Digital Initiative by IMDA offers an estimated average S$7000 worth of Digital Solutions to an SME. Networked Trade Platform (NTP), an MTI initiative, allows foreign traders to share electronic forms through a single-trade window, enabling clear and transparent trade communication. Faster payment clearance and reduction in invoice management costs are how this system helps the SMEs. Scale-up SG offers 2.5 years of Digital Transformation training for leading figureheads of SME business in the nation and supports up to 70% of the program costs.

Engage with Cyber-Security Compliance: In times when 49% of SMEs in Singapore have confirmed that their top budget priority is to support the digitization needs of the organization; cybersecurity compliance becomes necessary for organizations. Laying down simple policies (as a written password guide) and creating space for the simplest of cyber-compliances go a long way in ensuring cost optimization and brand recognition.

Digital Transformation is a journey with no end, but SME companies in Singapore might not be looking at some favorable years ahead without some. While Asia continues to increase its S$ 9.1 trillion overseas trade footprint to S$ 20.9 trillion by 2030, Singapore SMEs are missing on a more significant share of this opportunity unless they choose to avoid Digital Darwinism by embracing what’s evident.