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6 ways digitalization can help boost SMEs


June 13, 2023

digitalization in business

The COVID-19 pandemic has prompted consumers to make a massive shift to digital. It appears that many businesses have also followed suit, but that isn’t the case for small and mid-sized enterprises (SMEs) globally. In a 2021 World Economic Forum (WEF) survey that involved the participation of 6 countries, only 23 percent of the businesses that belonged to the SME bracket accelerated their digitalization goals due to the pandemic. The same survey revealed that 23 percent of SMEs did not employ automation. Rather, these businesses confined the use of computers to documentation and mainly relied on manual labor to accomplish their day-to-day activities. 

How can digitalization boost SMEs?

SMEs are the backbone of the global economy. These enterprises account for 90 percent of all businesses and 50 percent of the global GDP. In the Philippines, 99.51 percent of business operations belong to this bracket. Increasing the rate of digital adoption among SMEs in the country will prove to be an uphill battle, but the benefits of pursuing this goal are well worth it. Promoting the use of digital solutions to this group and upskilling their staff members so that they can fully utilize these tools will drive productivity and economic growth. Strengthening the country’s digital infrastructure through public-private partnerships (PPP), on the other hand, will make digital tools more accessible to SMEs and turn the country into a more attractive environment for future-ready businesses. Aboitiz InfraCapital is working with relevant institutions to realize these goals by putting up small cell sites and telecommunication towers in different areas around the Philippines. These projects, in turn, can help address the digital divide in these places and make them a more welcoming places for tech-savvy SMEs in the coming years. 

The use of digital tools can empower SMEs to do the following. 

Access better financing options

Obtaining financial resources is a common pain point for SMEs. Bank loans are typically out of reach for these businesses either because banks see them as risky clients or because many SMEs do not have sufficient documentation to complete their loan applications. Instead of relying on banking institutions, entrepreneurs often get financial resources from their personal savings, friends, or family members. Given these limited options, SME owners find themselves with unmet financial needs. 

The growing popularity of mobile banking applications and digital wallets is changing this by providing an accessible financial helpline to SMEs, with many even offering loan programs that businesses can use to grow their operations. Aside from extending credit, these digital tools also enable enterprises to safely store their funds, complete digital transactions, and track their financial activities. These capabilities aid SMEs in improving the purchasing experiences of their customers and help them maximize their online selling channels. 

Reduce the cost of doing business

Digital technologies have made it possible for people and organizations to send and receive information in real time. For instance, farmers that are within the range of the country’s digital infrastructure network can be alerted of an incoming storm and avoid excessive losses caused by the said event. Relying on the same digital infrastructure network, an online seller can get early news that a certain type of product is flooding the market. This can then prompt the business to explore other items to sell for a better price. These are just examples of how improved access to digital technology enables SMEs to reduce the cost of doing business. By being privy to timely and accurate information about market conditions and the factors that affect market movements, businesses can make informed decisions that may have a significant impact on their finances.

In addition, digital technologies make communicating with customers, suppliers, and partners faster and cheaper. Leveraging these tools, an SME can actively expand its network while keeping costs down. 

Participate in larger markets

digital creative monitor

Traditionally, many SMEs depended on a long list of intermediaries to get their goods into their respective markets. Farmers, for example, rely on wholesalers to get their products to retailers, who then sell them to customers. At each step of the process, a broker adds their price to the value of the product. Nowadays, with the help of digital technologies, producers can reduce the steps that their goods need to take to reach buyers. A farming cooperative may endeavor to put up its own online market and take orders directly from customers, for example. Managing their sales channels in this way gives producers and sellers better control over the price of their goods and where their products can be distributed. They are no longer limited to catering to wholesalers, nor can they be easily pressured to agree to unfavorable prices just to sell their goods. 

Join training and capacity-building events

The COVID-19 pandemic has demonstrated how digital technologies can be utilized to ease access to education. This applies to school-aged students and adult learners alike. Entrepreneurs and professionals can take distance learning courses and join digital classes that will equip them with the skills to build their businesses. Likewise, these educational opportunities can help business owners deepen their understanding of digital tools and how these may be fully utilized to improve their business growth and performance. Another benefit of attending online learning programs is that it presents entrepreneurs with opportunities to build networks, learn from industry thought leaders, and build meaningful business relationships. 

Make data-driven business decisions

The 2021 survey published by WEF revealed that only 12 percent of SMEs are capable of full automation and are able to leverage big data to their advantage. Many SMEs in the Philippines are still far from this point, but that doesn’t mean that they cannot use commercially available digital tools to make data-driven decisions. Adopting a simple point-of-sale (POS) software or app and using it to log all business transactions, for example, will help a company determine what its most popular sales channels are, its most in-demand goods, and the payment channel customers prefer. Simply knowing where most of their orders were placed can even help businesses determine the locations where they should consider setting up a warehouse or a branch. These and other details can help the company come up with effective business strategies. 

Fuel innovation within the company 

Using the internet, tech-savvy SMEs can easily see what their counterparts in other areas or countries are doing. They can opt to adopt the processes and systems utilized by similar businesses into their own operations, or they can choose to be a part of the fierce global competitive landscape themselves. If they choose the former, there’s a chance that they can help uplift and set the standard of doing business in their own market. If it’s the latter, the business has to innovate in order to survive in the global market and set itself apart from competitors. Either way, digital technologies can inspire businesses to streamline their systems and processes and reach greater heights. 

people tablet with bar graph

Addressing the barriers to digitalization

Given the benefits of adopting digitalization, many SMEs in the Philippines have expressed a growing interest in integrating digital solutions into their operations. At the same time, though, SMEs face practical hurdles to acting on this interest. These include the lack of financial resources and gaps in the country’s digital infrastructure network that are beyond their control. A significant portion of SMEs also have low to moderate digital capability, and this can prevent these businesses from maximizing the digital solutions that they can access. 

Government and private organizations are working together to ease Philippine businesses into adopting digital solutions. Agencies like the Department of Trade and Industry (DTI), for instance, are making it much more convenient for entrepreneurs to register their new ventures by supporting digital channels for business registration and permit applications. Private organizations like Aboitiz InfraCapital are also working with the government to strengthen the country’s digital infrastructure network and improve internet access. These efforts, along with policy changes that aim to promote further investments in digital infrastructure development, can help SMEs in the country maximize the benefits of digitalization.

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