Written by Daniel Sitoh, Business Development Intern at The FinLab
“There has never been a time of greater promise, or greater peril,” remarked Klaus Schwab, Founder of the World Economic Forum (WEF), commenting on the Fourth Industrial Revolution at the 2016 WEF Annual Meeting.
In fact, with technological and economic development happening at a breakneck pace all around the world, it isn’t hard to envision how advances in technology could lead to the automation of our future.
This is the double-edged sword of Industry 4.0: the complete integration and digitization of the industrial value chain by merging technology with traditional production systems. It is characterized by new ways to collect, analyze, and operationalize data – where advanced technology becomes embedded within businesses and societies. Businesses able to successfully integrate the technological advances that power Industry 4.0 (IoT, Big Data Analytics, AI, etc.) into their business models will be able to leverage its capabilities to break new ground and capture higher revenue.
The Rise of the ASEAN Tiger
Macroeconomically, the Association of Southeast Asian Nations (ASEAN) has been the recent focus of investors and businesses alike. In fact, with a consumer market estimated at over $1.5 trillion, it dwarfs India’s and may even outpace coastal China’s in the foreseeable future. The figure is expected to increase by one-third by 2020.
To benefit from the digital revolution, ASEAN countries have been turning to technology in a push for more sustainable and effective urban practices. Many countries are already committing resources to establish smart cities by heavily investing in broadband and other technological infrastructure, as governments exhort their domestic industry players to procure the latest capability enhancing technologies.
Chart: Business and government purchases of tech goods and services in ASEAN
From Question Marks to Stars
Technology companies looking to enter the ASEAN economy will find a warm reception in ASEAN Small and Medium Enterprises (SMEs). A white paper published recently by United Overseas Bank (UOB), EY, and Dun & Bradstreet, revealed that three in five ASEAN SMEs intend to focus on technology investments in 2018. Hence there is great potential for the uptake of technological solutions by ASEAN SMEs as they seek to digitize.
For example, digital platform solutions allow firms to match supply with demand more efficiently, which will in turn help SMEs improve price discovery processes and access a wider source of suppliers.
The study by UOB, EY, and Dun & Bradstreet also highlighted that more than a third of firms have the intent to expand beyond their local borders. The accompanying increase in output demand and supply flows makes it even more important for SMEs to optimize and digitize their supply chain.
The need for technological solutions is also shared between different industries. In fact, the white paper suggests that optimism for growth is the highest for agricultural, manufacturing, and financial industries. Tech companies hoping to establish a portfolio of diverse SME and Multinational Enterprises (MNE) clients will see a rising demand for their solutions.
Previously, the lack of financing due to deficient capital markets saw ASEAN SMEs specialize in labor-intensive and low-tech supply chains. With the maturing of capital and financial markets in developing ASEAN countries, private sector investments going into ASEAN SMEs are expected to rise, giving the SMEs bandwidth to move up the value chain and tap on higher value market segments.
Aside from bullish capital markets, strong governmental support for SME digitalization has also gained momentum in recent years. For instance, Singapore’s SME Go Digital program by Infocomm and Media Development Agency (IMDA) seeks to reinvigorate the productivity levels of whole industries by collaborating with specialized technology providers to deploy turnkey-smart solutions.
One successful example is Cheng Yew Heng, an SME food supplier in Singapore which utilizes cloud-based tagging and authentication technology to help export its food products to China. Using this technology helped Cheng Yew Heng improve inventory tracking, and generating analytical dashboards of sales data.
In Malaysia, the Malaysian Industrial Development Finance (MIDF) also assists local SMEs in financing acquisition costs for working capital and fixed assets that include IT software and solutions. This is aimed at enhancing the efficiency and productivity of existing manufacturing processes.
In the private sector, efforts by The FinLab in Singapore help SMEs apply innovation and adopt technology for business growth in the new digital economy. With The FinLab’s past track record working with innovative tech companies, the discovery, engagement, and integration between tech and traditional SME businesses will be accelerated and uplift the level of digitalization of the SMEs as well as demand for innovative tech solutions.
The Way Forward
As the SMEs owners deepen their capabilities in this new economy and look to innovation and collaboration to capture the new opportunities, tech companies will find increasing interest from SMEs to partner or use the tech solutions. With SME owners owning decision-making power, the sales cycle will be relatively faster than that of larger corporates, making this segment an attractive customer group. Tech companies looking to sell to SMEs need to focus on effectively solving the common pain points that SMEs face before accessing the opportunities in the respective industry sector.
The FinLab, a joint venture between UOB and SGInnovate, and Singapore’s first corporate FinTech accelerator, is one such partner that can help open up opportunities for both SMEs and tech companies. Through the mentor networks and expertise in business model innovation, solutions implementation, and business expansion, the FinLab provides its program’s participants with valuable insights and connections into the ASEAN region so they can scale and grow their businesses more effectively. The program is tailored for entrepreneurs that build innovative solutions to facilitate digital transformation for SMEs in ASEAN, enable revenue growth, and increase productivity.
To find out more and apply, click here to submit the required information about your company (the application process will not take more than 10 minutes). We will be closing applications on April 15, 23:59 SGT to invite the best and brightest tech solutions to its Selection Days happening in May!