“Are MSME equipped with the necessary tools and skills to compete in the virtual world?

Last week, I wrote about the future of jobs amidst the bourgeoning era of digitalization. As economies venture into the virtual, a number of companies are starting to gear up towards the Internet of things — digitalizing and automating their businesses to catch up on the 4th industrial revolution. But is there any good digital migration can do for our micro, small and medium enterprises (MSME)? Are MSME equipped with the necessary tools and skills to compete in the virtual world?

The Philippine economic landscape is mostly composed of MSME. According to the Department of Trade and Industry, about 99.57 percent of businesses in the Philippines are classified as micro, small and medium. About 89.63 percent are micro businesses — that’s some 820,000 micro businesses all over the country! MSME put in a lot in terms of job generation, too — they provide at least a total of 63 percent of total jobs. You cannot undermine how hefty the contribution of our MSME are, and yet they are the most vulnerable when there are natural disasters, policy changes, financial uncertainties and paradigm shifts — such as digitalization.

But no matter how businessmen and entrepreneurs set aside or delay these sudden changes in the world’s digital landscape that’s rapidly creeping into how we do business, we are all bound to innovate and adapt. A very good example is e-commerce and how it challenged brick-and-mortar stores and forced giant retailers to go online or go home. I remember taking my now grown-up kids to Toys R’ Us when they were little and was a little saddened that this year, the toy store giant had shut down its physical stores. Many factors contribute to the closing of these businesses, of course, but definitely, e-commerce played a role in redefining retail experience. There is no need to travel across the globe for that coveted imported item or across EDSA to go grocery shopping — you can be in your house clothes preparing a meal while getting that important paprika and zucchini to your doorstep through online shopping.

It’s not only through e-commerce that we have seen digitalization on the move. Financial technology or fintech is also on the rise.

Technological advancements had also penetrated the way we do banking and finance. Suddenly, banking and finance had gone innovative and, at the blink of an eye, data is gathered and collected in a manner only digital natives know.

So how will our MSME benefit from going digital? Is this a boon or bane for the country’s economic drivers?

There’s no denying that going digital can be a costly and tedious process. Making your business reliant to technology, given as well the challenges the Philippines faces in terms of improving soft infrastructure like Internet connectivity, can be hard to imagine. But statistics say it is well worth investing now and striking while the digital iron is hot. And I do not see digitalization cooling off soon. As business people, we put a high premium in the concept of ease of doing business. We all know how taxing it is to rely on manual means of, say, record keeping. Going digital means digitalizing records and adapting accounting systems that will make our business records streamlined. Efficiency by going digital is the name of the game here. In the long run, going digital will save MSME more money and time by investing in digital systems. MSME can spend spare resources to other equally important pursuits, instead of doing everything manually.

Ironically, for a country with slow Internet speed, Filipinos are online for hours on end, touted as one of the most social media-savvy people on earth. Some social media portals, for example, such as Instagram, have also turned into a makeshift digital marketplace, with tons of online sellers emerging from the comforts of their homes. MSME can take advantage of just being online and exploring what is out there just by being connected. I remember a staff member raving about a million dollar US cosmetic brand, which emerged from a beauty website featuring women and their beauty favorites and rituals. From the popularity of this website, the owner created her own beauty products to sell. You may not need an actual business plan to actually get a new business running. You might just need an Internet connection.

Going digital also creates network sales to bigger markets, even markets unexplored with just a click. MSME are naturally innovative and the digital ecosystem is a perfect one to exercise this innate trait. MSME can go niching by going digital.

“Efficiency by going digital is the name of the game here.

Digitalization also gives MSME an opportunity to scale up and to become more productive and efficient. Through innovative products and services, MSME are able to compete by changing the beat of the supply chain, thanks to digitalization.

More than ever, this is a truly game-changing era for our MSME and they need all the support and help that they can get from government and stakeholders. Policies must be in place to ensure smooth digital migration, mitigating the risks that can occur.

I have to say that this is a very exciting time for all of us, not just for MSME, to innovate and think out of the box. To explore and to leverage by going digital. After all, change is the only constant thing.