The Malaysian SME, via casual business encounters

By Bernard Sia May 22, 2013

There are two extremes of IT literacy and usage capabilities, as well as patterns differentiating SMEs
There are the old-school SMEs and the modern Net-savvy SMEs, which have different needs and issues

The Malaysian SME, via casual business encounters I HAVE nothing but the utmost respect for small and medium enterprise (SME) owners because, while SMEs are driving Malaysia’s economy forward, I am very much a pencil pusher.

Lately, I have been serendipitously having conversations with acquaintances attempting to penetrate the SME market with IT solutions, and they seemed like a pretty frustrated bunch, so perhaps these insights can help.

When technopreneurs talk about SMEs within the context of IT, there are several products that tend to get bandied about: E-commerce, CRM (Customer Relationship Management) Lite, online product listings, trading marketplaces even cash management services offered by banks such as Maybank2E.

Perhaps at the end of this article there may be more innovations that can be explored, such as mobility applications, and better ways for SMEs to attain even more control over their business through IT.

Now, these observations are not collected from a survey of 2,000 SME owners – just your armchair economist (me) talking to neighbours who are mostly SME owners, as well as friends and colleagues who have taken the plunge into entrepreneurialism and become respectable SME owners themselves.

Pretty quickly I noticed two ends of IT literacy and usage capabilities, as well as patterns differentiating SMEs which make products versus those who provide services.

The details within the matrix describe the general types of SMEs and how they use IT, and I have also attempted to order them by magnitude from a relatively high IT usage to gradually lower ones from top to bottom.

The matrix above serves as a rough guide to segment the SME market from an extremely high level standpoint of IT adoption; perhaps even offer visual tell-tale signs of whether they’ll even bother to give you the opportunity of a sales call. Whether to see it as a cup half-full or half-empty is entirely up to you!

There are a ton of other examples; but here are the main points that I would like to offer.

Old school SMEs do not see the need for IT (left column)

They eschew IT for various reasons:

Transactions are in cash or cash cheques

If you happen to believe that it is because they are old and uneducated, that is too much of a generalisation, and not true. SME owners that I know are in their 30s and 40s; they use iPads, iPhones and Blackberrys, and their children are very much into IT.

But businesses have a set way of attaining control of cash flow through cash-only transactions.

One acquaintance even lamented that perhaps SMEs in Malaysia do not have the ambition to grow because they are already satiated with how the business is run. Again, I beg to differ; I happen to believe that SMEs are ambitious, but can’t seem to let go of the reins of running the business.

The need for power and control

SME owners do not like to feel beholden to the technology. SMEs have been instinctively trained through many years of struggling during the inceptive years to not be “trapped” – if the software comes with too many preconditions or places their business in a situation that makes them utterly dependent on the tool, SMEs get uneasy. They are not about to give away control without a huge dose of trust.

Technopreneurs need to realise that with SMEs, the business IS a life and death situation.

Trust is paramount

You have to gain both their personal trust as well as their acceptance of the technology use cases. Whatever the solutions are, they need to be instantly easy to use, always-on, highly reliable and yes – cheap.

SME owners can be exceedingly hands-on; if they do not understand the technology, they cannot trust it.

Talk about licensing and hardware costs annoys them; in Chinese literally – “One mouth price, how much?” translated to English “I do not have time for price breakdowns and complicated bullocks – please simplify.”

More importantly, you have to manifest trust; giving away software or hardware product for trial runs do help – no obligations in fact, with prompt attention for assistance during the period.

They interact with their customers and suppliers PERSONALLY!

They know their customers far better than you know your parents through Facebook – down to the very brand of whisky, favourite restaurants and golf courses, as well as making it a point to meet their customers for birthdays and festive greetings.

CRM, social networking and e-cards? The owners would be wondering whether you’re a wee bit too shy to run a business.

They interact via their customer’s respective mother tongues; and the business is operated in their own mother tongues

These two languages and dialects are not necessarily the same! If the customer speaks Hokkien, it will be Hokkien all the way. Multi-dialect trumps multi-lingual. This is a degree of personalisation unheard off in IT because dialectic nuances and mannerism can make or break a deal.

Modern IT-savvy SMEs pander to Net-savvy customers

Fundamentally, urban middle- to upper-class yuppie types as well as young adults with the buying power accorded by their first jobs – they happily pay a premium for a better experience and depend on bloggers, review sites as well as social networks for the latest product raves and feedback.

The question is, will this set of SMEs and customers attain a tipping point to supplant old-school SMEs? I do not have the statistics to answer that, so perhaps the rate of urbanisation and Internet penetration in Malaysia can provide some thoughts.

Source: Malaysian Statistics Department: Population Distribution and Basic Demographic Characteristic Report 2010

Source: World Bank, Google

When you juxtapose these two data sets, you’ll realise that there are still some ways to go

How long? Your crystal ball is as good as mine. I give the SME market today, a tough nut to crack still, at least a good five to seven years. Although Internet penetrations is growing healthily, both growth in Internet penetration rates and urbanisation have slowed down to 71% and 60% respectively.

These new Internet-savvy SMEs are also very services-oriented by nature, with little emphasis on manufacturing, so technopreneurs have to figure out how to make already good services, better.

What can the technopreneur do?

The easier strategy, humbly, is to attack the market that is most receptive to IT (the right column). The market is still growing, so the technopreneur needs to catalyse the SME of today and intercept the rise of tomorrow’s SME.

The current dominant old-school SME owners are indeed lucrative as they form the backbone of the Malaysian economy through a “Long Tail” like populace and potential earnings; but these SMEs require a far more personalised approach and a greater understanding of their business dynamics before you can even begin to propose IT solutions to them.

So good luck; and start sounding native -- “Ai piah jiah eh iah (要拼才会赢) – “You have to dig deep in order to win it!”

Bernard Sia is head of strategy at Mesiniaga Alliances Sdn Bhd. His opinions here do not necessarily reflect the views of Mesiniaga.