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Small and medium-sized enterprises (SMEs) make up the most extensive business establishment in Malaysia. Statistics show that 97% of business establishments are SMEs and account for 67% of employment in the country. They are a vital component of economic development, employment creation, and investment stimulation.

They are the backbone of the Malaysian economy, given their vital contributions in the journey towards the attainment of the country’s economic goals. Consequently, there is now growing attention on the importance strengthening SMEs to help them grow to a global scale.

Unfortunately, SMEs in Malaysia have faced many challenges, issues, and hindrances, preventing the growth of their operations. Many of them have had problems in ensuring their sustainability and competitiveness in the changing business environment.

This article seeks to uncover how digital connectivity can enhance and revitalise small businesses in the area by creating service opportunities and facilitating demand. This way, vendors can expand their reach beyond their immediate areas of service delivery.

The Malaysian economy has been through considerable transformation over the past few decades. The shift from an agricultural-based economy to an industry-based one has been evident. Currently, the economy is transitioning from an industry-based one to a technology-based one to propel development.

In Malaysia, SMEs are considered the backbone of the economy, particularly those in the manufacturing sector. They also operate in agriculture, raw material, and general business sectors. Their contribution to job creation is crucial, considering there have been between 10,000 and 30,000 registered SMEs with various ministries over the past decade.

However, the role of SMEs in the Malaysian economy attracts a greater emphasis. These businesses are involved in processing, producing, and distributing raw materials, including wood, food, beverages, textiles, rubber, petroleum, and electrical appliances. According to the Ministry of International Trade and Industry in Malaysia, SMEs contribute more than 20% of the country’s GDP.

The role of electronics and electrical manufacturing cannot be ignored. The SMEs in this sector are known to contribute to the economy positively. They have positioned themselves as value-added and high-knowledge intensive.

However, despite their significant contribution to the economy’s growth, SMEs in Malaysia face common problems in relation to their survival and competitiveness. Available resources show that approximately 50% of new businesses fail within the first five years. While exact data does not exist for Malaysian environments, this is evidence that SMEs face serious issues and obstacles to remain competitive in the market. These include:

• Low productivity: SMEs in Malaysia face several challenges that lead to low productivity. Most of them experience labour shortages and a lack of skilled workers. Urban opportunities have seen most people move to more developed areas searching for greener pastures, leaving businesses without enough human resources. Additionally, these SMEs also suffer a lack of proper managerial skills, high cost of raw materials, and the general economic conditions in the country affect business growth. They also have constraints in shaking off traditional operational methods.
• Lack of access to advanced technology: the adoption of technology among Malaysian SMEs is still slow. They use only a limited range of technologies because they cannot determine their real technological needs. As such, there is a need to shift focus on factors that can propel technology adoption, such as SMEs owners. By influencing their attitudes, characteristics, and values towards technology, SMEs can develop technological infrastructures for enhanced business growth. It’s also essential to identify the external factors that inhibit the adoption of technology by SMEs.
• Effects of the coronavirus pandemic: the pandemic is a global health disruption that has affected SMEs. Findings indicate that the spreading pandemic has had significant impacts on SME businesses, causing disruptions in supplies and sales.

Focus on innovation and technology adaptation are two critical factors that can help propel the growth of SMEs in Malaysia. SMEs’ abilities to use technology in their daily operations would make them more competitive and sustainable in local and global markets. With this knowledge in mind, the government continues to focus on increasing the use of technology. This explains the policies and incentives it has formulated to intensify efforts in developing indigenous technological capabilities among SMEs.

The adoption of technology brings a positive impact on business output and productivity. It can be a powerful tool that helps SMEs gain a competitive advantage by:

• Supporting business processes to develop cost-effective products and services
• Creating time savings by enhancing productive yields
• Ensuring quality control
• Upgrading the capacity of SMEs to innovate
• Stimulating the demand for organisational and technical change
• Enhancing service delivery based on a customer-centric approach

Based on the reasons why SMEs in Malaysia should embrace digital transformation, the next question should be how to effectively transform them to ensure continued profitability amid economic disruptions and challenges. The stakeholders in this process must also be identified, for example, the government that offers skill development for SMEs, process innovation programs, and change.

It also helps SMEs realise the importance of SME digitisation for economic growth, productivity, and job creation. By incorporating digitisation, SMEs can become a powerful game-changer for the economy, enabling transformation on a larger scale for global-scale business operations through online platforms.

Other stakeholders are tech companies that play a significant role in the digitisation of SMEs. They come in handy to identify the technological needs of SMEs. They also provide the relevant tools and solutions to enable small businesses to operate online and compete effectively. Being online is one of the most critical factors in the continuity and survival of many SMEs.

Here at Allo, we provide SMEs the connectivity they need to take digitisation in Malaysia to the next level. Through quality high-speed internet access that is rapidly expanding through the peninsula, we aim to facilitate the growth and survival of SMEs through reliable infrastructure, giving you the competitive edge you need to succeed. As the world continues to go digital, your SME should not be left behind. Contact our team of experts today support your digital transformation efforts.