Malaysian SMEs have a role in accelerating digital economy

• Nevertheless, many companies in SEA are already trying to find ways to collaborate
• Government has a role to play, for example in the war for talent

"WE NEED to start looking for success stories," said Khailee Ng, 500 Startups managing partner, who was stressing the point that Malaysian industry is ready and able to go digital, despite what naysayers might say. "If we're looking for the risk and what goes wrong, we're not going to go anywhere."

Ng was talking during a panel titled "Three Things Malaysia Must Do To Accelerate Its Digital Economy" at the recent What’s Next 2018 conference organised by Digital News Asia, and his tone of cautious optimism was reflected in the comments of the other panellists.

Another panellist was Malaysian SME Association president, Michael Kang, who revealed that only 10% of SMEs are currently online. He said that a host of poor excuses belied this low number, including a belief that the technology is beyond them, that they lack the talent and they just don't have enough experience.

"That mindset for the SMEs (will) have to change," stressed Kang. 

Leo Ariyanayakam, Scicom MSC Bhd CEO went one step further, saying that it was vital that Malaysian companies owned their their own IP, especially those in the IT industry.  "I think if you are going to be a significant player in the software and service space you have to have your own IP," he said. "You can't export if you don't."

Will Duckworth, EY Asia Pacific Digital leader and partner, was well aware of how cautious companies can be as they try to find the balance between disruptive innovation and "business as usual". "I think there's a hesitancy in most businesses to invest and take risk and that paralyses businesses," he observed.

"So what we actually encourage with our clients is to take more risk – but smaller and quicker," Duckworth clarified.

As an example, he referred to a project that had invested US$30 million in a complex digital transformation project, but failed. "We said that needs to be 60 initiatives, at half a million dollars each. Quickly test and learn, iterate."

He concluded, "They need to make more mistakes".

Collaboration with SMEs

SMEs can play a vital role in creating an environment for innovation that the larger regional players can leverage. Khailee shared with the audience results from a survey 500 Startups did with Insead on SME collaboration.

"The global 500 companies who had the most growth over the past five years, they're the ones who also were most highly engaged with the startup community," he said. "The top one-third of these companies have almost three to five times more startup engagement than the bottom of this group."

The good news is that companies in the region are proactive. "They're already engaging startups, except they don't like to talk about it," explained Khailee. "You see this happening across Southeast Asia, it's already happening, they're very quiet about it."

"They don't what the competitors to know," he surmised.

Governments can help

A familiar refrain that stiff competition for talent is one of the things holding Malaysian companies back. "We don't have enough talent in this space," said Leo Ariyanayakam. "Unfortunately Singapore's grabbing all of them, Hong Kong, everywhere else."

Leo believes that government must play its role in helping retain this talent, and Kailee supported him by pointing out that for example, Singapore has an initiative where the government for two years contributes in part to the salaries of data scientists.

However, Duckworth is quick to point out that initiatives for digitisation shouldn’t just be limited to IT companies.

"There is no such thing as the digital economy, there's only the economy,” he explained. “This over-emphasis on startups and early investment is absolutely something that's essential...  but how is that going to change your what core economy quick enough?”

“That's a challenge frankly of skills of leadership and culture not one of investment in startups.”

Related Stories:

Clearing the clouds around Malaysia's digitization ambitions

What’s Next 2017: Moving SMEs online and abroad

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