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How SMEs can own their digitalization journeys

To transform, companies must review their business models, technology, people and processes. Tapping government support can help.

In brief

• Enterprises need to reinvent their business models when leveraging innovative technologies for successful digital transformation.
• This involves building strong digital leadership and a digitally skilled workforce, as well as redesigning jobs and processes accordingly.
• Government schemes and ecosystem collaboration can be particularly helpful for small and medium enterprises with limited internal resources.

With S$1 billion set aside in Singapore Budget 2021 to support mature enterprises’ adoption of digital solutions and new technologies, the digital transformation of local mature enterprises, including small and medium enterprises (SMEs), is clearly a national priority.

The additional support would be widely welcomed by SMEs, where there is a growing appreciation of how digitalization can improve productivity, create new opportunities, open up markets, speed up recovery from the COVID-19 pandemic and drive growth. According to a survey by the Singapore Business Federation in January 2021, the pandemic has already accelerated digital transformation efforts for 84% of the business respondents, by an average of two years.

However, these digitalization efforts may not necessarily result in successful digital transformation. The core idea of transformation goes beyond simply moving an existing product, service or solution online. Rather, organizations need to reinvent their business models in ways that can leverage technological advancements to deliver superior customer engagements and generate new sources of income.

The significant structural and process changes required in digital transformation will invariably pose challenges. To overcome these barriers amid current economic uncertainties and the limitations of their internal resources, it is worthwhile for SMEs to look externally to leverage available government schemes and collaborate with players across the ecosystem.

Build strong digital leadership

Many SMEs lack strong digital leadership at the top as well as a clear and compelling digital vision and road map. This is often due to a lack of digital expertise at the leadership level and insufficient data to accurately identify digital opportunities.

The new Digital Leaders Programme announced in Budget 2021 is therefore useful, as it seeks to help SMEs in building technology capabilities, as well as developing and implementing digital transformation road maps, through funding support. With a road map in place, organizations will be able to streamline their digital projects. Our experience working with a global manufacturer based in Singapore to address dependencies between ongoing automation projects and sequence these projects in a digital road map shows that there are opportunities to better optimize the value from individual digital initiatives.

Leverage emerging technologies

Organizations with ambitions to be digital front-runners must be prepared to embrace emerging technologies, such as 5G, artificial intelligence, blockchain and internet of things. Although the value-creation potential of these technologies is high, their developmental nature creates some level of uncertainty. As businesses are under constant cost pressures, initiatives with more tangible, short-term returns on investment may often take precedence over longer-term digitalization programs that may not yield clearly quantifiable benefits. SMEs struggling to get internal buy-in on piloting technologies can offset some costs by obtaining co-funding through the new Emerging Technology Programme announced in Budget 2021. The enhanced Enterprise Development Grant will also fund up to 80% of project costs for digital transformation.

In addition to cost concerns, organizations will need to mitigate their digital risks. All technologies run on organizational and customers’ data — and could be targets of cyber criminals. Without proper cybersecurity, risk mitigation measures, or compliance and security protocols, organizations face a higher risk of exposure to cyber breaches, incidents or data thefts.

As SMEs may not be familiar with the end-to-end deployment of these new technologies and the risks, they should consider tapping into technology professionals through the new Chief-Technology-Officer-as-a-Service initiative. External expertise can help SMEs understand how they can blend strategy and execution with the soft skills for inspiring leadership, and train teams to transform businesses, seize opportunities, and mitigate digital transformation risks.

Redesign jobs and processes

Even the best digital transformation plans will be futile without the right talent in place. Building a digitally skilled workforce has been on national and corporate agendas over the last few years. Many SMEs have been facing difficulties in reskilling and transitioning existing staff toward a digital-first culture, according to Redesigning for the digital economy, an EY study of SMEs in Southeast Asia. Resistance to change, especially when it comes to disruptive new processes and unfamiliar new technologies, is not uncommon. Business leaders will need to allay fears that new technologies will always displace jobs and to that end, redesign jobs and train employees to get ready for their new roles.

However, redesigning jobs and developing robust training programs can be an unfamiliar exercise that also requires significant and long-term capital commitment. It is useful for SMEs to review the national Skills Frameworks for various sectors to map out future roles and skills needed. They can also tap into the enhanced Support for Job Redesign under Productivity Solutions Grant, where the Singapore Government has raised their co-funding ratio from 70% to 80% till end-March 2022. To understand where and how to start, consulting with agencies like the Singapore National Employers Federation and Workforce Singapore, which work with professional services firms to assist companies in their job redesign efforts, will be beneficial.

SMEs can also explore industry-specific programs, such as the Industry 4.0 Human Capital Initiative enabler program for the manufacturing sector or the RPA Deploy program for the food services and retail industry, which are targeted at these sectors with a huge potential for productivity gains from digitalization.

For successful digital transformation, SMEs need to reinvent their business models, build strong digital leadership, embrace emerging technologies and redesign jobs and processes accordingly. They should also seize opportunities to capitalize on government schemes and tap into the broader ecosystem for support and partnerships.

Beyond building internal capabilities and accessing external talent, tapping into the broader ecosystem for support and partnerships offers SMEs with limited time, money and skills the opportunity to share resources and align capabilities to accelerate their digital transformation and drive innovation and growth.

In an increasingly uncertain environment, digital transformation will enable companies to stay resilient, remain competitive and secure new growth paths. SMEs must own their digitalization journeys. Proactively assessing and capitalizing on the available support can prove to be a valuable sweetener in the face of the perceived challenges in this strategic endeavor.

The co-authors of this article are Jimmy Ong, EY Asia-Pacific Blockchain Leader and Samir Bedi, EY Asean Workforce Advisory Leader, with contributions from Kok Yong Tan, Director, Consulting, Ernst & Young Advisory Pte. Ltd.

This article first appeared in EY on 10 Mar 2021.