Digitalization: an important next step for MSMEs

 

On June 27th, 2021, the world celebrated Micro, Small, and Medium-sized Enterprises (MSME) Day . The UN-designated MSME Day in 2017 to highlight the importance of MSMEs, and while the holiday is only one day each year, it’s more important than ever to recognize the vital role they play in our global communities.

Since the start of the COVID-19 pandemic, MSMEs have been battling crippling lockdowns and economic setbacks. Some have managed to pick themselves up and survive these obstacles, in part by rapidly leveraging digital tools. Other MSMEs around the world are still struggling, and in order to overcome the adverse effects of the pandemic, digital transformation is crucial for this sector to continue to thrive.

What makes small businesses tick?

 The World Bank Group’s Enterprise Survey showed that MSMEs globally are at an alarmingly low level of even “basic digitalization.” Despite the fact that 90% of global businesses are predominantly MSMEs, digital transformation in this sector is still moving at a snail’s pace. Even though the pandemic has accelerated digital transformation in many fields, it hasn’t been smooth sailing for MSMEs since small business culture differs regionally.

Most small businesses around the world fall into primarily two sectors: Services and Retail. These sectors are also influenced by cultural and regional factors, depending on the country of origin. Many assume that core business principles and profit-making are key drivers for all small business owners, but this would be a mistaken generalization.

 Even though small business owners have to focus on the bottom line, factors such as trust, value, and culture matter. These factors (among others) differ regionally, so it is vital to keep an open mind when discussing how to digitally empower this sector.

 The importance of local knowledge and understanding local resources shapes activities that surround small business owners. The ability to recognize these inseparable links especially in underdeveloped regional markets is what will empower small businesses globally.

Family businesses: the heart of MSMEs

A recent survey by the World Economic Forum found that family businesses account for approximately 70% of the global GDP. Most of these family-run companies here are accustomed to legacy systems so SaaS-based tools are yet to gather momentum.

Since most family-owned MSMEs follow hierarchies, crucial management decisions are usually made by one or a select few senior family members. Preoccupied with everyday business decisions and the fact that most operations involve localized vendors and customers, digital transformation is considered rather risky for short-term gains.

 Although reasons may vary, another common aspect across MSMEs in developing economies is a hesitancy or even fear to digitalize their company. However, with more tech-fluent Millennial and Gen Z employees being part of this mixed-generational workplace, digitalization is still a possibility. MSMEs that embrace technological diversity will be able to transition better from legacy to digital systems.

Moving beyond free trials

 Most software providers offer free trial periods for their products; however, for small business owners to absorb and test new technology efficiently, software companies need to go beyond the free trial period.

 Since most small businesses are independent and are used to functioning autonomously without relying on outside experts or contractors, the momentary disruption of implementing new tech creates a sudden dependency on others, owing to the lack of upgraded digital expertise. Seemingly simple tasks such as installation, domain registration, bandwidth selection, or even establishing a web presence can significantly disrupt their usual work processes.

 In order to enable digital transformation for small businesses, software providers now need to explore support strategies that could include complimentary online training, tech empowerment programs, and implementation initiatives that can help MSME’s see how technology addresses their unique challenges.

 Even these small changes can help small businesses overcome these barriers, while also amplifying the software provider’s voice and creating a more digitally mature culture for small business owners.

Local challenges, global solutions

The factors preventing MSMEs from joining the digital economy are diverse and not limited to substandard ICT infrastructures. Lack of conceptual awareness of digitalization is a more pressing challenge for many MSMEs.

 We at Zoho witnessed the challenges many small businesses face in our active partnership with TANSTIA, a Tamil Nadu-based government body aiding small businesses in the state.

 A common challenge we saw while onboarding small business leads was the nature of their accounting. Since these businesses mostly trusted local tax consultants to tally their books and file their taxes, an affordable, do-it-yourself cloud software solution like Zoho Books seemed unreliable and alien to them.

 This brings us to a question of whether these challenges could be similar and present with most MSMEs in developing economies. If so, is there a better path forward?

Zoho empowers MSMEs

Since most small business owners rely on and are often discovered through social media, we at Zoho wanted to do our part in aiding these businesses through this platform. Zoho One’s #EmpowerSmallBiz challenge, which worked to raise awareness of digital adoption for MSMEs, is one of our ways of giving back to the MSME community.

 Here’s a look at how we conducted the challenge:

 

We have featured some of the businesses from the #EmpowerSmallBiz challenge on our official Instagram handle.

One of the many things that this initiative taught us was that MSMEs need flexible, custom solutions that do not intimidate businesses migrating from legacy tools to a cloud-based operating system.

Some of the other challenges MSMEs face in digitalization include lack of adoption support, limited language-specific resources, and nonexistent financial aid.

The journey forward  

While it’s true that MSMEs share some common characteristics globally, they also face challenges unique to their region and culture. Understandably, building a culture of better understanding of the digital ecosystem involves multiple stakeholders across institutions, who need to be aware of the shifts underway for continued growth and survival.

 In order to better reach and work with MSMEs, software providers now need to look beyond merely offering a trial period and focus on better ways to support these small businesses to accelerate their digital growth—even if it means going the extra mile. There is no instant solution to the everyday challenges MSMEs face, but with a bit more awareness, trust, and acceptance, small business owners have a better chance of surviving global downturns and thriving in our digital world.

What’s your take on Digital Transition for small business owners? Do you have any tips that will help MSME business owners?

Please feel free to share them in the comments section below. We will feature your suggestions in our upcoming blogs.

2 Replies to “Digitalization: an important next step for MSMEs”

  1. As a first generation small family business, Zoho One has been paramount to our success. It’s provided a solid framework of how to best manage our business operation.

    1. Thank you, Jon. We at Zoho One have been working towards aiding small businesses and we are really delighted your family business was able to benefit from this framework. Would you be open to connecting with us, so we could understand your business story better? If yes please feel free to contact me @ jeremy.dc@zohocorp.com

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