Digital Transformation Growth in MSME Sector
Published on : Monday 12-07-2021
Darshana Thakkar on how MSMEs are coping with and benefitting from digital transformation.
Bharat is a great country with diversity in culture, religion, language, food and lifestyle. The diversity is not limited to these aspects but also the way business practices are followed and employment opportunities available in different sectors across the country. Every enterprise, especially small organisations in different regions of the country, have their unique methodology of business operations according to their culture and comfort zone. Starting from working hours and HR practices to the adoption of technology for the business.
At the end of 2019, the deadly Coronavirus started spreading in few countries of the world, and by March 2020 the virus had spread globally including India. By 19th March 2020, Coronavirus has already claimed four lives in the country and infected at least 169 people. To stop the spread of the Coronavirus in the country, the Prime Minister announced a one-day Janata Curfew for 22nd March. Further to this, on the evening of 24th March 2020, the Government of India ordered a nationwide lockdown for 21 days starting from 25th March, limiting movement of the entire 138 crore population of India as a preventive measure against the spread of the Covid-19 pandemic. The unlocking started in a phased manner from June 1st, 2020 onwards.
These are the days (during and the post lockdown year) when the acceleration of digital transformation started in our country and especially in the MSME sector. It is well known that our country is having an abundance of labour. Moreover, not only the initial cost of Automation and digital transformation but also the awareness of the solution is the big hindrance in the MSME sector to adopt the digital transformation.
Because of the sudden lockdown, businesses came to a standstill. Large corporates have the resources and facilities so they quickly switched to the ‘Work from Home’ model to keep the operations running. But for the MSME sector, this proved to be a major challenge as the whole work is dependent on human resources and even the office work is manual to a large extent, with computerised data available only at business premises and not on the cloud. Upon unlocking after a break of almost 8 to 9 weeks, the new challenge faced by industries was of the migrant worker. In our country, many industries are employing migrant workers. Delayed re-joining of workers and safety guidelines including social distancing at work forced the entrepreneurs to think of Automation.
The lockdown and Coronavirus crisis became a phase of evolution for various MSME segments. Digitisation opened the gates for many local businesses to strengthen their operations and cope up with these stressful times.
Technology for MSMEs
To reduce dependency on manual labour, MSME companies have started transforming their manufacturing processes. Of course, because of fund crises, the progress is very slow, but it is steady. The adoption of automation in manufacturing is the first step towards the digital transformation of MSMEs.
India is a country with very high numbers of internet users for the last few years. As of January 2021, the number of internet users in India was around 62.4 crore. Earlier the use of the internet for business purposes by the MSME sector was limited. But post lockdown, more people have started using technology for business purposes. The same technologies were available earlier, but the tough times changed the perspective of using them now.
The increasing affordability of smartphones, rising internet usage, and growing digital media use is shaping the future of MSMEs and startups in India. India is amongst the biggest and fastest developing markets for digital users. The MSMEs now understand the value of digital transformation not only for business expansion but to survive in a hyper-competitive marketplace. They believe digital proficiency is vital to set foot in the online market successfully.
Key drivers for digital transformation of MSMEs
In the manual mode of operations, it is very difficult to compile various information to produce useful data for decision making. Most small enterprises have never tried to utilise data for decision-making. MSMEs can make better decisions with the help of data analytics and business intelligence as they offer a more in-depth insight into market trends and consumer journeys. The acquired details help to estimate and foresee client needs. Further, with the rise of cloud-based solutions and freemium models of these services, businesses can create systems that can improve the customer experience.
Challenges on the way
Nevertheless, Indian MSMEs also have to clear some roadblocks to sustain on the path of digital transformation. The major challenges are:
1. The first and foremost important factor is knowledge about appropriate digital solutions for the respective enterprise that can be the right fit with minimal change resistance among the team and culture of the organisation.
2. MSMEs have limited growth capital that makes technology adoption and digital transformation more challenging.
3. Buying the latest smart devices, best internet services, and retaining skilled employees to manage digital systems is also an expensive affair for MSME enterprise.
4. MSMEs are resistant to augment digital technologies because cutting-edge technologies evolve faster, and they sometimes may not be able to match up with that advancement and the fast pace of technology changes.
5. Storing, analysing and managing crucial structured and unstructured data to make business decisions is challenging for MSMEs.
6. Data, cloud, and system management along with the training required to handle them, leave MSMEs uncertain.
7. Last but not the least, the most important challenge is the security of the system. Cybersecurity is a big challenge even for large corporates nowadays. The additional cost in keeping systems secure is also a great hindrance to the adoption of digital technology.
Role of startup ecosystem
Tech-based startups are playing an important role in the digital transformation of micro and small businesses. Their vision is adjusting the MSME segment with the digital world; building a full digital ecosystem and rendering the best support will promote Indian MSMEs towards successful digitalisation.
Exclusively developed free tools
Many tech-based companies are building exclusive tools to support small and medium enterprises. These tools can enhance the business proficiency and profitability of these MSMEs. For instance, Google Advantage, an initiative by Google India, facilitates MSMEs to use the growing online clientele base. Then there is Google My Business specifically developed to support startups and MSMEs in India to succeed virtually. These tools are great free resources to create and restore the business data on Google Maps, Search, and Google+ in Hindi as well as English.
Advanced technologies, including AI, data science, IoT, Blockchain, cloud computing, robots, and the development of new business models, will extensively help transform the business models of Indian MSMEs.
To sum up, I would like to share details of my own digital transformation journey along with a few examples of my Clients/Associates.
I started my venture transformation in Jan-2018 after investing 22 years in the industry. Before the lockdown, I used to visit client factories and offices for meetings, planning and execution of the tasks. In a single day, I could meet a maximum of two clients that too if in the same location. For an outstation assignment, I had to spend the whole day and sometimes two days on a single project. Physical meetings and personal interaction were part of business practices at both ends. In this situation, I was able to handle a limited number of projects in a specific duration. All the digital tools of virtual meetings were there earlier too. But personal interaction was protocol for a successful business association.
Lockdown and requirements of social distancing due to pandemic has forced everybody to work remotely. Virtual meetings have become an integral part of every business. Geographical boundaries are broken with the practice of virtual interaction.
Now, at a time, I am managing more projects of MSME transformation. That too without any barriers of geographical boundaries. My operating costs of business have been reduced drastically, mainly on account of two reasons with the adoption of digital platform:
1. Reduction of travelling expenses as factory visit is only occasional, and
2. Saving time as I am conducting multiple meetings in a day without spending hours travelling.
My operating cost has been reduced to 50% due to this. This saving I am passing directly to my clients as such making my services more cost-effective and budget-friendly for the MSME sector.
Now I am providing strategy consulting and handholding support to tiny enterprises of the remote location within their budget. For example, sitting at Vadodara, Gujarat, I have associated with the enterprises based out of Calcutta, Mumbai, Indore and Ahmedabad. Without a digital platform, it was not possible to get engaged with the client of such a remote location for a small project.
One of my clients in the engineering industry has installed a CNC machine in the machine shop replacing 6 manual machines with a single one. As such dependency on manual labour has been reduced.
Another micro-enterprise has adopted digital transformation in the documentation process. Earlier they were preparing all the documents like Quotation, PO, Invoices, etc., manually in pre-printed stationery. Post lockdown now they are doing all documentation and communication through digital platforms only.
In the coming times, there is a huge potential with MSMEs for growth. The only and most important condition to survive and grow is to become adaptable and resilient with digital technology.
Darshana Thakkar is MSME Transformation Specialist and Founder, Transformation – The Strategy Hub. An Electrical Engineer followed by MBA – Operations with rich industry experience, Darshana is an expert in transformation, cost reduction, and utilisation of resources. She has invested 25 years in transforming Micro and Small Enterprises. Her rich experience in resolving pain areas and real-life problems of SMEs helps organisations achieve quick results. Her expertise in managing business operations with limited resources helps clients transform their business practices from person driven to system driven with existing resources.
Darshana has helped many organisations to increase profitability and achieve sustainable growth. She is passionate to support the start-up ecosystem of our country. She is associated with CED, Government of Gujarat as a Business Function Expert in the Entrepreneurship Development program, as faculty for industrial subjects in the Second Generation Program (SGP), and as a start-up mentor and member of the start-up selection committee in the CED incubation centre.
