November 30, 2020

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Philippine small, medium businesses thrive in a digital context

Digital transformation is the process of adopting the current and/or emerging digital technology in driving the business through strategic plans and organisational change to augment or adapt services, delivery and revenue.

Respondents of a 2020 Asia Pacific small, medium business digital maturity study acknowledged the crucial role of digital transformation in the businesses. The study, covered Australia, China, Hong Kong, India, Indonesia, Japan, Malaysia, New Zealand, the Philippines, Singapore, South Korea, Thailand, Taiwan and Vietnam as markets. Conducted at the beginning of the year, the study had 1,400 respondents from across the commercial landscape exploring various industries from financial services, telecommunications, media, manufacturing, construction, transportation, retail to wholesale.

It found that digitally mature small and medium businesses (SMBs) have higher benefits in terms of revenue and increased productivity, contributing to their growth and economic recovery. Data revealed that digitally mature SMEs could enjoy up to 16% increase in revenue and a 14% increase in productivity, allowing for a greater contribution to a nation’s economy. The study showed that 31% of SMEs in the Asia-Pacific region are still in the first stage of the digitalisation process, called the digital indifferent stage. Meanwhile, 53% are in the observer stage, 13% in the digital challenger stage and only 3% are in the digital native stage.

A senior industry head opined that Philippine SMBs are eyeing improved customer experience and service delivery through digitalisation. Lack of budget and shortage of skilled talents are the key challenges for Philippine SMBs. They also had to deal with the lack of necessary technologies, lack of insight into operational or customer data, cultural resistance to change, among others.

The pandemic has entirely changed the context, scope and nature of transactions done by people. Enterprises need to learn, adapt and maximise the use of technology, especially now that most people rely on it to continue their businesses and lives in the new normal.

Business process outsourcing (BPO) companies, for instance, continue their services remotely, while most organisations have implemented work-from-home (WFH) strategies that rely on a digital workspace. In this scenario, businesses rely heavily on telecommunications service, cloud and cyber resilience services increasingly.

About 70 % of SMBs in the study said they are accelerating digitalisation in response to the coronavirus disease COVID-19 pandemic. Well over half (62%) of the respondents are looking at digital platforms, services and solutions to launch new products and services. They recognise that staying ahead of the competition remains an important factor.

A local entrepreneur confirmed how dependent the business is on technology and how poor digital services,  like intermittent or low-bandwidth internet, could affect service and revenues. Unreliable internet connectivity results in a delay in receiving inquiries from potential clients. If not serviced promptly, this translates into a lost opportunity. As such, it is critical for the internet connection remained stable, especially when products were being uploaded online. To ensure this, they consistently monitor the internet connection speed using an app. Similarly, the business uses a money manager app to monitor the cash flow and expenses, as well as consistently upgrades phones/cameras to be able to take good photos.

Data from the survey show that respondents plan to invest in cybersecurity, information technology infrastructure upgrade and cloud. The pandemic has increased the technology investment priorities on customer experience and video conferencing solutions and artificial intelligence (AI). In the Philippines, 18% of respondents shared they are looking to invest in AI, while 15% have prioritised IT or software upgrade. Another 15% answered that cloud would be the main focus of their technology investment.

The study suggests that accelerating the digitalisation process could add US$1.3 trillion to the region’s GDP in 2024. The pandemic brings an opportunity for SMEs to accelerate their digital transformation, as the process will not only help them solve problems but also sustain their growth in the long run.