Even though e-commerce continues to grow and more people move online, the digital transformation of SMEs in Malaysia remains slow. 

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Only 26% of local SMEs included digitalisation and online channels as part of their post-pandemic strategy last year. However, less than half of those SMEs have actually started their digital transformation. 

There is a clear lack of urgency among SMEs in Malaysia to go digital  – and they are missing out on an opportunity to grow their business.

SMEs are reluctant to go digital and adopt technology for a number of reasons. Many are not aware of the potential returns on investment – here, we’ve covered a few widely-believed (debunked!) myths on moving online.

In reality, 42% of Malaysian businesses saw positive returns last year from their digital investment. On top of that, there’s no denying that going digital is crucial for long-term survival and security in a rapidly changing landscape.

This article will help you get in the right mindset and prepare to digitise your business.

5 Steps SMEs in Malaysia Can Take Towards Digital Transformation

#1 Adopt A Digital-first Mindset  

5 Steps SMEs in Malaysia Can Take Towards Digital Transformation

The word digitalisation is thrown around so often these days that it can start to seem gimmicky. However, it is a valid strategy that helps your business become more profitable and sustainable long-term. By adopting digital solutions, businesses can:

  • Increase productivity.
  • Reduce costs.
  • Tap into new markets.
  • Expand business offerings.
  • Deliver more value to customers.
  • Achieve business goals.

Change can be uncomfortable, but digital transformation does not have to happen overnight. Start small but stay consistent in reaching your digitisation goals, dividing them into phases with the objective of meeting business needs. This mindset is necessary to take advantage of new digital opportunities that arise in the future.

Recommendation: Determine how technology can take your business to new heights, whether it’s improving connectivity, agility or customer engagement. By understanding how digital transformation benefits your business, you can then make more informed decisions on which solutions to invest in and forecast results accurately.

#2 Prioritise the Biggest Pain Points

5 Steps SMEs in Malaysia Can Take Towards Digital Transformation

Digital transformation comes at a cost – it’s not ideal to rush into it or try to bite off more than you can chew. Instead, businesses should aim to tackle the biggest pain points first to optimise costs. SMEs in Malaysia should focus on finding technology that their business will benefit the most from and that tally with their objectives.

Starting a website or an online store is the big step towards digitalisation, but it must be optimised to meet business and customer needs. Crossing off low hanging fruits such as task automation and communication enablement will speed things up and provide more confidence to your team.

Recommendation: Look into the business process to identify tasks that eat into lead times. For example, some activities are time-consuming and can be automated.

  • Product and catalogue upload.
  • Order management.
  • Inventory synchronisation.
  • Returns management.

Digital solutions can also drive growth by enhancing the customer experience. Some features that your customers will enjoy include

  • Order tracking.
  • Re-order automation.
  • Pricing configurations.

#3 Get the Team on Board

If you redefine your team’s roles and responsibilities to align with the digital goals, you are 1.5 times more likely to achieve successful digital transformation. This is an important step that most businesses miss out on. 

Getting everybody on board at the beginning helps to lay down the foundations of digital culture at work. Being an SME works in your favour here, as a smaller team is more agile and can pivot easily. It’s important for all the stakeholders to understand how the business benefits from going digital as one of the biggest challenges you will face is employee resistance.

Your business is only as agile as your employees. Part of digital transformation includes educating and upskilling the team so they are prepared for any changes, both mentally and technically.

Recommendation: Be sure to address how a digital transformation affects not just the business but the team too, such as

  • How digitalisation makes their work easier.
  • More challenging or interesting aspects of their job they will have time for.
  • Opportunities for upskilling and personal growth.
  • Assurance that technology does not replace people.

#4 Get the Right Support

5 Steps SMEs in Malaysia Can Take Towards Digital Transformation

Lack of a proper strategy, skills or technical know-how can be a hindrance for businesses. SMEs in Malaysia have attributed their slow digital adoption to these three reasons:

  • Poor cash flow to sustain digitalisation
  • Lack of knowledge and skills
  • Financing issues

These are common struggles in digitalisation but you can overcome them with the right solutions. Here are a few examples:

Pivot into New (and Unaffected) Markets Instead

SMEs in Malaysia are facing poor cash flow because the MCO has been disrupting the market – businesses haven’t been able to trade as they normally would.

One way to restore cash flow is to tap into new markets that are not affected. Signing up to an online marketplace is a great way of expanding as the platforms already have their own customer base for you to leverage.

Word of caution: Be sure to do heavy research if you choose to take this route, as new markets are tricky to navigate, and can come at a cost. 

Find the Right Platform to Help You Move Online Fast

Building your own online store will bring in more customers too, but this is where the lack of knowledge and skills could slow businesses down. In this case, an external technology partner or service provider can help you take your business online. 

A platform like Dropee has extensive experience in helping small businesses build their online presence. Dropee Direct is our one-stop B2B e-commerce suite that allows you to build your online store while providing the necessary features to sell faster, smarter and in larger volumes.

Leverage Government Incentives

As part of the Belanjawan 2021 (National Budget) initiatives, the government is injecting RM100 million worth of incentives into the digital transformation of Malaysian businesses. For SMEs that are in need of financing, this is the perfect opportunity to enhance e-commerce sales capabilities at low costs. 

Dropee is taking part in an initiative by Malaysia’s Ministry of Finance to launch the Go-eCommerce Onboarding Campaign in collaboration with The Malaysia Digital Economy Corporation (MDEC). As part of the campaign, B2B sellers can enjoy up to RM3,200 funding to bring their wholesale business online! Learn more about the Go-eCommerce campaign here.

#5 Collect and Sort Data

Collecting and analysing data can provide insights into the next steps your business should take or where you can improve. Data plays a huge role in improving the business offerings and customer experience. 

However, data silos are very common among SMEs in Malaysia that still use outdated methods like pen and paper – and these lack transparency.

Recommendation: Ensure that data is accessible, cohesive and reliable by

  • Properly documenting data.
  • Validating data integrity.
  • Centralise data in repositories.
  • Sharing data across the team.

Start Small

Digital transformation takes time, but the important thing is to begin with the small steps. SMEs in Malaysia are the backbone of the economy but are lagging behind in digital efforts. 

It is time we address the misconceptions of going digital that have discouraged businesses. Digital solutions are not just for large corporations – every business, no matter how small, must adapt to the current industry trends in order to survive long-term.


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