Curtain Raiser: The path to transformation for SMEs

This article first appeared in Enterprise, The Edge Malaysia Weekly, on July 8, 2019 - July 14, 2019.
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Malaysian companies are being buffeted and assailed by the forces of change, which are intensifying rather than slowing down. Technological development is moving at warp speed and much of what once was, is gone.

Many are caught in this tornado, without a clue of what to do or which map to follow. Some prefer to bury their heads in the ground, terrified of what all this change may signify, while others trudge bravely on, willing themselves to live to fight another day.

Raymond Miranda, co-founder of Labora[s]tory Sdn Bhd, believes it is time for companies to stop worrying about pain points and start tackling what he refers to as “fear points”, which can lead to a much deeper and more holistic transformation.

Miranda, who will be speaking about fear as being data for transformation at The Edge SME Forum 2019: The Path to Transformation says: “For the last 20 years in the start-up and SME world, a lot of innovation has been centred on pain points: What is the customer’s pain point and how do we create a solution to solve it?”

This focus, he points out, has made the life of the customer a lot easier. “We find that our routines are getting better and easier and more connected and it has simplified our lives. And by virtue of that, it has taken away the one thing that human beings are given to evolve; tension and conflict.”

In the next 20 years, however, Miranda says, companies need to begin to address a higher level of transformation. “And that’s related to fear points. What fear does is move us back into status quo. So, a lot of companies are refusing to look at what this digital transformation will mean for them because it could mean that they will no longer be relevant in the next five to 10 years.”

He says if companies are brave enough to stare their fear in the face, the entire human species will evolve in very new ways. “Not in ways that will simplify our lives but ways that, in the next 10 years, will prepare us to deal with large global issues about what it means to be human in this time.”

The natural human response is to shy away from the big issues facing us and to look the other way. “Our desire is not to think about climate change or how the world is shaping up politically and how families are being reorganised and the crisis of digitalisation into our personal lives.

“The desire is not to acknowledge all those things that are really putting us in crisis, but these are also the points of transformation for us as organisations, as individuals, as a species. So, that’s the larger conversation,” he adds.

Miranda points out that companies at the forefront of using technology to create deeper meaning will be making inroads faster in the next 10 years.

SilTerra Malaysia Sdn Bhd CEO, Firdaus Abdullah, believes that real innovation is happening, but it is going on in pockets throughout Malaysia. “A lot of it is being done in places like SilTerra, but people don’t know about it.

“I guess it’s just the Malaysian attitude; we don’t like to trumpet what we do. We do our own thing and we think tak cukup bagus (not good enough) because we’re in our silo and we don’t have an active communications strategy.”

He says SilTerra has come up with core technologies such as the Piezoelectric Micromachined Ultrasonic Transducers, which can be used for a variety of applications in sensing and imaging, for instance, in creating fingerprint sensors.

“If you want to create a medical device, you can embed this technology to enable better sensing. It’s still at the exploratory or prototyping stage, but it’s a very good step forward.

“When you look at what we have in Malaysia, we actually have a lot of small product companies in the medtech and E&E (electrical and electronics) ecosystem and, with some R&D, we can lead in creating the next generation of portable devices and point-of-care products.”

Firdaus says Malaysian companies should look further than just packaging and testing. They should look instead at using these core technologies to create products.

“That is what Tun Mahathir wants us to do: to create products that show our command of engineering and the sciences.”

He says the difference between Malaysian companies and those in South Korea and Taiwan is that while Malaysian companies may start earlier, they do not improve as much. As such, they are easily overtaken. “We tend to stagnate to a large extent.”

But stagnation is not the only problem. Malaysian companies are uncomfortable with uncertainty. According to a study by management consulting firm Korn Ferry, the confidence of Malaysian leaders is restricted to operating in process-driven environments with a high degree of certainty.

Digi Telecommunications Sdn Bhd chief business officer Eugene Teh agrees. He points out that process-driven environments are important to ensure vital tasks are carried out and jobs are streamlined. “But in our current days of exponential change, certainty can be short-lived.

“Are we trading off potential growth for certainty? Are we willing to risk doing the same thing over and over, expecting a different outcome, in particular when everything around us is changing? These were the questions we asked ourselves many years ago, which led us to begin our digital transformation journey that we are now reaping the benefits from.”

Teh points out that SMEs that have been in business for the last decade are typically run by owners who are very familiar with their ecosystem and understand where changes need to be made to drive more efficiencies.

“This first wave of business optimisation usually sees improvements in processes, supply chain, sales activities and all parts of the value chain in their current environment without major IT investments. With good stewardship, entrepreneurs will see growth and win market share until the optimisation hits a plateau,” he points out.

Teh believes that the next wave of growth will be driven by digitalisation. “Having grown bigger, businesses deliberate on introducing new technologies to manage their now more complex environments, in which there are new people, new systems, new value chains to consider.

“How do we introduce e-commerce and new payment options for our products, digitise customer information to create customised services, better targeting and customer loyalty to increase revenue per customer, and deliver goods more efficiently with our fleet?

“This degree of business optimisation is less familiar for many entrepreneurs, but the pay-off makes it worth venturing into.”

Teh dispels some common myths — for instance, that businesses need to be completely reinvented to survive. “The best way to approach transformation is to take it a step at a time. Where can technology be implemented that derives the biggest impact?

“Our transformation at Digi began with processes. We identified which processes could be made more efficient, automated and accessible digitally to benefit both the company and the customer. These changes were first applied internally, and then rolled out to sales, marketing and customer service.”

The second myth he dispels is that digitalisation is necessarily costly and complicated to manage. “Digital transformation is applying technology to simplify and improve business processes. When you have identified an area in which your business needs to transform, it remains as simple as finding a solution that best suits your company. These days, many solutions are made available for subscription online at affordable prices and easily managed across any type of smart device — without needing a consultation.”

He also dispels the notion that digitalisation is the responsibility of the IT department. He says, “Digital transformation involves the whole business and needs the attention of the real decision makers in the company.

“Where technology makes things simpler and more efficient, decision makers need to determine which parts of the business to apply technology. For example, where it would improve customer interactions to create brand loyalty, faster payment cycles and quicker sales turnover, depending on the type of business you run.”

Many companies are afraid of employing technologies such as Internet of Things or 5G because of the threat of spying and security breaches. Teh feels they are coming at it the wrong way. “5G technology is designed with enhanced security features, as it is anticipated to be used across industry verticals with billions of devices connected to the network.

“In terms of security, businesses can gain a competitive advantage when they invest in and deploy a 5G-enabled software defined network — which can introduce the latest cyber security capabilities, one of which is network slicing.

“Network slicing allows multiple logical networks to be created on top of a common shared physical network. These logical networks are, through slicing, tailored to meet the specific needs of applications, services, devices, customers or operators. The fact that network resources are separated or compartmentalised serves as an additional security measure,” he says.

But Teh admits that security is a journey rather than a destination. “It is, and should continue to be, a work-in-progress to build and strengthen a defensible security architecture that protects its users.”

Raju Chellam, Fusionex International vice-president of new technologies, says the top three forces of change are artificial intelligence (AI), big data and the cloud (and, with it, cybersecurity). “Large companies, government-linked companies (GLCs) and companies in regulated sectors such as banking are aware and have the money and muscle to take action, preventive or corrective. But most small and medium enterprises (SMEs) are vulnerable and need to be educated about the opportunities and risks in all these areas.”

Many companies are resisting change, though. Chellam points out that this resistance is a natural instinct of most individuals and companies. “At the individual level, that resistance can manifest in the CEO/chairman/board and percolate down, threatening the future of the company.”

Clarion Malaysia managing director T K Tan thinks companies should stop waiting for the government to take the lead in this process of transformation. Having returned from visits to Japan, China, Taiwan and South Korea, he says the pace of change is so phenomenal that it is mind-blowing.  And the barriers to entry are getting lower.

“Malaysian companies should understand that, if you snooze, you lose. It’s no longer about having the right infrastructure or investment. Any country with the right skill sets can now participate,” Tan says.

In the past, he adds, Malaysia could identify its competitors and expect that these would remain for at least the next five years. “Nowadays, literally anything can change. You may have been the best five years ago, but that means nothing today.”

Many SMEs operate with a paternalistic mentality, expecting handouts or help from the government. “They say, ‘If you give me money, I can do this. If you don’t, I can’t.’ And ‘I can’t be competitive unless you block off the international people.’ But protectionism will not help you anymore. You have to be as good as the rest. You have to collaborate and copy, just like the Chinese. You have to benchmark all the time in terms of transformation, best practices and all those things.”

The level of commitment it takes is exhausting. But it must be done. Tan recounts a meeting with the CEO of an MNC. They were talking about implementing Agile, the latest approach to sofrware development. “I asked the CEO whether the company does Agile and he said, yeah, they do it. But when I asked him further, I realised that he didn’t really understand it.

“Not everyone is willing to learn. For me to do Agile, I watched all the TED talks, read up everything I could find on the web. Then I started discussing with my guys and sending them for training. I started talking about ‘beyond software’. That means I am working with them proactively, so that they get support from the management, from the top down, and not just lip service.

“If you want to bring your team up, you have to be that engaged,” he says.

Tan adds that Malaysian companies should rethink the way they work with the government. Instead of waiting for grants, they should ask for a different sort of help. “The government has done so much for industry, and industry is still not growing. Work it out. Did the government fail? I don’t think so. The business transformation has to come from the community.

“If you want the government to help, it can help by bringing in consultants or specialists to achieve you to meet your goals or push you in the right direction. Not by giving you money.”

For more information about The Edge SME Forum 2019: The Path to Transformation, register at myevents.theedgemarkets.com.