Micro, small, and medium enterprises (MSMEs) need to undergo business transformation that empowers them to innovate and leverage digital technologies.

Micro, small, and medium enterprises (MSMEs) need to undergo business transformation that empowers them to innovate and leverage digital technologies. They represent 99.52% of all businesses in the country and serve as a significant source of employment, providing over 60% of the total jobs in the country. Without a doubt, their contribution to the country’s economic growth and stability is invaluable. 

The COVID-19 pandemic and the current economic instability has brought unprecedented challenges and opportunities for micro, small, and medium enterprises (MSMEs). These disturbances disproportionately affect this sector, exposing its vulnerabilities and gaps in digitalization. If a business wants to survive and thrive, it must transform its business and improve digitalization to cope with the stresses and demands of the post pandemic market. 

To understand how business transformation in the Philippines and how it empowers companies, we need to first distinguish it from digital transformation and explore their interrelationship.

Business transformation refers to a shift in how a business is conducted, be it changing its processes, tools, culture, strategy, and goals.  Digital transformation is about changing the way the digital tools and platforms are used to conduct business, such as its systems, applications, data, and customer interfaces. Digital transformation is a subset of business transformation, as it involves aspects of business change.

In today’s rapidly evolving world, digital transformation is often a key enabler and driver of business transformation, as it offers opportunities for innovation, efficiency, competitiveness, and growth. Digital transformation involves not only adopting new technologies, but also creating environments where businesses can leverage innovation to drive positive business outcomes.

What makes digital transformation crucial for MSMEs?

Digital transformation offers several benefits for MSMEs, such as:

  • Automating the majority of repetitive tasks
  • Enhancing customer experience and service delivery
  • Expanding market reach and access by participating in global and online markets
  • Increasing competitiveness and innovation by using new tools and services

How are MSMEs performing in digital transformation?

According to a 2020 baseline survey on the business transformation of MSMEs in the Philippines conducted by DTI, most MSMEs still need to build their capacities to digitize their business operations. The survey found that only 26% of MSMEs have a website, 46% have a social media account, 12% use e-commerce platforms, and 9% use digital payments. Moreover, MSMEs cited they need to train their staff on the following digital related subjects:finance, marketing, content management, and the basics of e-commerce.

The survey also revealed that despite being a country with heavy internet usage and high social media consumption, the Philippines is still trailing behind in the adoption of technology compared to its regional neighbors. This relatively poor performance may be attributed to the country’s inadequate digital infrastructure, organizations not utilizing digital payments and online platforms, and bureaucratic restrictions hindering the efficiency and effectiveness of the country’s logistics systems.

What obstacles and opportunities for companies undergoing a digital transformation?

Some of the key challenges that MSMEs face in digital transformation are:

 –         Consistency and speed of internet connectivity: MSMEs rely heavily on telecommunications service providers for their online operations. If the Philippines wants to improve its internet connectivity, then it should look into how neighboring countries like Malaysia, Singapore, and Thailand implement their services consistently. 

–          Need for budget and investment: MSMEs need to allocate resources for acquiring digital tools and equipment, upgrading their systems and processes, training their staff, and complying with regulatory requirements.

–          Lack of technologically trained talents: MSMEs need to hire or develop skilled workers who can manage their digital operations and implement their digital strategies.

MSMEs can look into these solutions to address the challenges with regards to digital transformation.

–          Improving digital infrastructure: More investment into the technology and hardware used by ICT companies in the Philippines should be made to make it more affordable and consistent. Government must also review and rewrite regulations and policies to support the development of ICT infrastructure and services.

–          Providing financial support: The government needs to provide more financial assistance and incentives for MSMEs to access digital technologies and platforms. It also needs to encourage more diversified financing instruments from banks and other institutions that cater to the needs of MSMEs.

–          Enhancing skills development: The government needs to provide more training programs and online resources for MSMEs to enhance their digital and entrepreneurial competencies. A collaborative environment between MSMEs, academia, research institutions, and other stakeholders is needed to develop specific tools that address specific problems here in the Philippines.

Digital transformation is no longer an option but a necessity for MSMEs in the Philippines. By embracing innovation and digitalization, MSMEs can improve their performance, competitiveness, resilience, and growth in the new normal.

Innovation is crucial for business success in today’s rapidly changing world. That’s why we are here to support you. We are a consulting firm with a team of experts who specialize in digital transformation and business transformation in the Philippines that empowers companies. 

Whether you want to create or improve your online presence, e-commerce platform, digital systems, or staff skills, we can help you make it happen. Get in touch with us today and let us help you prepare your business for the next level.