Boosting competitiveness critical for Asia's SMEs

Anthony McMahon, SVP General Business (SME) & Channels, SAP Asia Pacific Japan

According to Asia-Pacific Economic Corporation (APEC), small and medium enterprises (SMEs) account for more than 97% of all enterprises and employ more than half of the workforce across APEC countries. SMEs play an increasingly significant role in the socio-economic development strategies of many countries. For the past three decades, the private sector has been the main driver of economic growth and poverty reduction around the world. By helping SMEs scale and grow, governments have been able to increase wealth, market access, job creation, and skills development.

As such, strengthening SME competitiveness is a critical agenda for Asia, given that 50% to 70% of businesses fail within the first 18 months. A new IDC study, commissioned by SAP, found that SMEs which embraced and invested in technology reaped benefits that helped them compete globally: 81% offered employees more flexibility, 74% improved customer loyalty and 72% increased sales and revenue.

Scaling Through Technology, Closing the Gap

SMEs in the region are already prioritizing the acquisition of new customers (51.5%) and revenue growth (42.2%) as top business objectives for the next 12 months.

Yet, a mere 5.5% of SMEs in Asia Pacific Japan have gone beyond integration to derive real-time insights that drive business results. At the same time, SMEs are taking a “practical and tactical” approach to digital transformation – 43% are investing in technology to make an immediate difference in supporting current processes, and less than half see digital transformation as a long-term strategy.

The data points to one thing: there is a gap between what SMEs want and what they are actually doing to achieve it.

Can SME’s really outcompete the bigger companies?

A high failure rate among businesses, combined with increasing disruption in the global economy means that SMEs need to build a long-term digital strategy to help them break barriers, and focus on innovating to remain relevant in the future.

While 39% of SMEs in Asia Pacific Japan recognize that their active participation in the digital economy will be essential to their company's survival in the next 3-5 years, big success is rare and doesn’t come easy. The challenge is in connecting different technology areas for maximum impact. The SMEs that see the openings and respond quickly are surging ahead. The trick however, is not to let complexity creep into the business as it grows. Take family owned businesses as an example –  many are moving towards what is described as “third-generation management” and want to truly run as an international companies. They are moving quickly to digitally transform their business and get ahead in the digital economy.

Avoiding technology to reduce complexity is certainly not an option. SMEs often get caught in the trap of using one-off IT solutions to meet short term needs. That approach quickly results in problems as more disjointed solutions are added to the mix. This is why many SMEs often have the misperception that digital transformation is costly and difficult to manage, or that employees will get bogged down by inefficiency.

Whether you’re a logistic company competing with disruptors or a food producer looking to reinvent to expand globally - there are enormous business opportunities and cost-savings to reap by using technology to modernise and scale their business, fuelling productivity and growth.

SMEs have the advantage of being flexible, adaptable, scalable and responsive – will they be bold and stand out in the digital economy?  Innovating will give them the edge. The imperative is to focus on simplifying your business with technology now – in the long run, it will perform better and grow faster.