What’s Next 2017: Getting the ball rolling for SMEs

• In Southeast Asia, there is a fear of failure which holds people back
• Very important to think about strategy and to just start somewhere

WHEN was the last time you heard of a plastics manufacturer or hardware store owner talk about e-commerce and about going digital? Rarely, we should think, but that is what is happening in Malaysia and this is what delegates discovered at the recently held “What’s Next 2017: The Business Impact of Disruptive Technology”.

ATKC Hardware Trading Sdn Bhd director and What’s Next panellist Ang Kok Gei spoke frankly about taking his business down the e-commerce route.

“We’re a classic example of a Malaysian SME- traditional, conventional and family-owned. We ventured into e-commerce because in 2012 the company had reached optimum growth and narrow margins. Our location in Banting was not accessible for customers,” Ang explained.

Finding it difficult to locate potential customers, he began looking for a solution and identified two options: opening more physical stores (which would be costly), and venturing into e-commerce, which customers could access 24/7 and turned out to be the ideal business model.

In 2013, they launched their online platform and today they are the country’s largest hardware and building manufacturer store.

“With e-commerce, we’ve been able to match the capacity of multiples of physical stores and penetrate bigger markets,” he enthused.

Overcoming obstacles

When Ang was asked by panel provocateur Roshan Thiran (CEO of Leadernomics) about the challenges he faced prior to embarking on e-commerce, he mentioned that the first obstacle came from his wife, who commented that he was going for e-commerce although he couldn’t fix a router.

His business partners and friends were also sceptical, telling him there would be shipping constraints and doubting whether people would really buy hardware products online.

“But I believed in myself more and managed to convince the shareholders to give it a try. The first year, e-commerce made up 1.2% of sales revenue. By the third year, we reached the RM1 million benchmark in sales via e-commerce,” he said.

LH Plus Sdn Bhd managing director Callum Chen, who runs a family-owned plastics manufacturing business, faced many challenges before he even thought about e-commerce.

In 2000, for instance, a fire razed the business to the ground which taught them the importance of insurance. In 2009, they suffered from embezzlement by a former employee. “Sometimes we forget about these things; we need to look at risk management very closely.”

The business started exporting in the late 1990s, and had a lot of objections from other family members. However, Chen persisted and today they export 90% of their goods. “Eventually we moved from being an original equipment manufacturer to original brand manufacturer,” he explained.

On embarking on e-commerce. Chen advised that one needs to be persistent. “Stay focused and invest, you need the right people to advise you.”

He noted that while Industry 4.0 is not a priority of many SMEs, it is important.

“In fact, the Malaysian Plastics Manufacturers Association started looking at it as far back as May 2015. The plastics industry made RM27.3 billion in 2016, 80% of members are SMEs. The next thing they have to look at is e-commerce; some members are already doing that.”

Lessons learnt

Fusionex International managing director Ivan Teh expounded on the importance of data. “Data for us is crude oil, we started by saying that if people have lots of data stuck within an organisation, that is called data constipation. A lot of organisations get rid of the data by purging the data, data diarrhoea. How do you process all the data very quickly?

“Again, we look at working with organisations in partnerships irrespective of organisation size. I have seen go-getters and naysayers, seen many successful entrepreneurs who can make it. The more dots you are able to see and connect the better and you can become someone who can do amazing things.”

Jes Min Lua, co-founder of Recommend Group shared her lessons from scaling the SME quickly. “We started in Malaysia in 2014. The next year we grew to Indonesia, 2016 Thailand and 2017 Singapore. We made a lot of mistakes along the way, we learned how to make mistakes faster and correct ourselves from there.”

“We also built everything on a technology platform with scalability in mind so going to a new country would be easier.”

She added that localisation is also important. “From a cultural basis, Southeast Asian countries have little in common so a local team is essential, especially in countries like Indonesia and Thailand.”

The third lesson she learned was understanding the customers in each country. “We are nowhere near what we need to do with data yet, but the fact is that we are different from the average person. Don’t ask people what they want. Instead, put something in front of them and measure their response, then tweak it,” she advised.

The struggle is real for SMEs

Yet SMEs still struggle with the digital world, with much on their plate and often little understanding of technology and digital. How then do SMEs overcome these hurdles?

Fusionex’s Teh noted that there is a blurring of lines between the physical and digital world. “The rest of the world also has the same access to your markets. Through digital, this can be a challenge or an opportunity.”

SMEs perceptions need to change. “It’s a whole ecosystem. SMEs think adopting technology is going to be very costly. We think we can empower SMEs to level the playing field. The most painful thing for SMEs is if something fails or exceeds their budget, they give up. In the US, failure is a badge of honour.”

“Here, in Southeast Asia, there is a fear of failure and wondering ‘How much risk am I taking?’ By the time they think of all these things, they’ll fade into oblivion.”

He advised SMEs to start by looking at their vision, then get a partner like Fusionex, to help them find the shortest path and the most cost-effective way to get there. “SMEs want to get somewhere, they want to embrace challenges. I think this is an opportunity for companies to work together.”

Getting to digital

ATKC’s Ang said that in going digital, one needs to understand where his or her company is at. “Secondly, you must not stop learning -- learn, attend courses. The misconception is that going digital or e-commerce is difficult. This is because many do not understand the technology terms.”

He advised SMEs to ask experts if they don’t know how to move forward. “E-commerce is the future and by going this route, traders like us have the opportunity to export as well.”

How can SMEs leverage on data to extend their market presence? Jes Min noted that because of YouTube, Facebook and Instagram, if you have a niche product, it is always possible to find a market internationally for your product.

“Then the question is limited resources, what do you do? The key to the future is not building all these competencies yourself -- look at the value chain and find what you are really good at. Look for partners. The skill is having the right partner that has a value set similar to yours.”

Advice for other SMEs 

Roshan of Leadernomics then asked the panellists what other advice they would impart to others embarking on the e-commerce journey.

LH Plus’ Chen said quite frankly that that the biggest challenge is not the younger generation, but people of his generation. “My priorities are different, my appetite for risk-taking is not so high. This is the traditional structure of an SME, when you do RM30-40 million in revenue a year.”

“If there is no persistence and passion, it will not work. We invest in people; our attrition rate is very low. Unless we change our mindset and tell ourselves this is the way moving forward and if you don’t do it, you’ll become a dinosaur. It’s all about collaboration, championing Industry 4.0,” he said.

Teh advised SMEs to think regionally, if not globally. “Very quickly someone else will encroach on you. Malaysia is the right starting point, but it is not a market that is large enough. It is very important to think about strategy and start somewhere.”

“Lots of people are willing to help with resources, advice and funding. It’s important to take a look at the physical and digital worlds. Think about your objective and find the quickest path to get there,” he added.

Jes Min advised: “Instead of thinking how many percentage to grow, think of X amount and you’ll find solutions to problems. Think: ‘How can I find a partner to do it faster than I can myself?’” 

Chen concluded the panel by advising the younger generation to find the time and the guts and to tell them [management] what needs to be done and come up with a plan. “If you can do that, you’ll probably be the next CEO of the company,” he said.

What’s Next was sponsored by big data and analytics specialist, Fusionex International, Malaysia Digital Economy Corporation (MDEC), Maxis Bhd and Anaplan. Accenture Malaysia was Knowledge Partner, iTrain as Training Partner, Leaderonomics as Leadership Partner, Ansible Malaysia as Digital Partner and Valiram Group as Lifestyle Partner. BFM was the Media Partner.

Note: Strengthen your organization's ability to recognise and respond to the opportunities and threats that Digital Disruption is having on your industry, your company. Send your middle level managers to What’s Next: Raise Your Digital Quotient workshop that DNA is organizing together with iTrain Sdn Bhd on Nov 20 & 21. You can get the details of that HRDF claimable workshop here. Besides the dynamic sessions over the two days, you will also hear from the chief digital officer of Celcom, Dave Marrow and Desmond Ng, the COO of Black Box, the big data business of Senheng. It’s going to be a real eye opener of a workshop.