DIGITAL TRANSFORMATION – OPPORTUNITY FOR SMALL AND MID-SIZE ENTERPRISES FOR SMEs TO RECOVER AFTER COVID-19

2021 marks a significant milestone in digital transformation innovation, with solutions to help digital transformation enterprises revise and assist society in return to the “new normal”. As the epidemic subsides and consumers become more familiar with digital transformation technologies, this trend promises to provide an opportunity to convert and revive SMEs after Covid-19.

 

 

 

 

 

 

The tendency for digital transformation “blossomed” during the Covid-19 pandemic.

 

What is “Digital transformation”? What is the importance of digital transformation?

 

Digital transformation is defined as the application of developments in digital technology to all operations of organizations and enterprises in order to optimize management and operation processes. Such as cloud computing, big data, and so on. The most obvious advantage for businesses is the potential for cost savings in operations. Furthermore, this method helps firms approach more customers in the long run by utilizing a fast and streamlined reporting system. It not only assists managers in making better decisions but also in improving employee performance. As a result, enterprises can improve their operational efficiency and competitiveness.

 

According to market research and analysis experts, there’re 5 main goals that digital transformation businesses strive for:

 

 

Digital transformation businesses adapt flexibly in the context of the Covid-19 pandemic

 

The typical operation makes many enterprises problematic, fragile, and reluctant to alter in the context of the Covid-19 pandemic. So they have to utilize “numerical levers” to “cure the wounds”. How have businesses implemented digital transformation to get through the “dark” days of the Covid-19 pandemic?

 

Enterprises have escalated the speed of digitizing customer interactions, supply chains, internal operations, and corporate operations since the outbreak of the pandemic. Many organizations, in particular, have successfully used digital technology platforms that enable enterprises to function remotely. Furthermore, the number and value of non-cash payment transactions increased greatly as a result of the Covid-19 outbreak. Especially, the number and value of transactions via mobile phone channels surged dramatically. Many enterprises have been able to survive the difficult times of the pandemic and achieve revenue growth by modernizing the way they approach and meet the needs of online payments from ordering to receiving items. Tiki, Speed Lotte or Coopmart, BigC or VinID… are examples of enterprises that have successfully implemented the aforesaid approach.

 

According to the results of a survey on the cost of digital transformation at enterprises performed by the Vietnam Report in November 2021, 94.7% have invested in it. Particularly, 44.0% of enterprises spend less than 1% of total revenue on digital transformation; 40.1% spend between 1% and 5% of total revenue; 9.3% spend between 5% and 10% of total revenue, and 1.3 % spend more than 10% of total revenue on . As a result, it is clear that Vietnamese enterprises were hesitant to invest in digital transformation and pay little attention to this strategy. However, since the appearance and spread of the COVID-19 outbreak, as well as the clear benefits it has brought, Vietnamese enterprises have become more active and willing to compete in the digital race.

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Sources: Vietnam Report (11/2021)

 

During the Covid-19 outbreak, several industries, including home medical care, delivery services, internet commerce, and so on were successful in implementing digital transformation.

 

Strong growth potential for SMEs to digitally transform in the post-Covid-19 pandemic.

 

The Ministry of Information and Communications conducted a conference in Hanoi on March 24, 2022, to promote the initiative to support SMEs in digital transformation in 2022.

 

According to VIRAC research, Vietnam has over 2 million enterprises (both listed and unlisted) with SMEs accounting for more than 98 percent of the total. According to the Government’s strategy, the Ministry of Information and Communications will continue to pick good digital platforms in 2022, with the objective of assisting 30,000 SMEs in their digital transformation.

 

Digital transformation enterprises – An attractive destination for foreign investors

 

The leaders of Vietnam and the United Kingdom emphasized the potential for the rapid digital transformation of Vietnamese enterprises in the next 5-10 years during the Vietnam investment forum in London on March 30, 2022, with the theme “New Era of Digital and Green Transformation”. The foggy country may become the leading investor in Vietnam with projects on it. Not only that, but the UK has become one of the world’s leading e-government countries in the last ten years. As a result, this will be a fantastic time for SMEs to recover and thrive.

 

Digital Transformation is a field that not only receives considerable backing from the UK but also attracts US investors. Through the Project on Promoting reforms and Improving Connectivity for SMEs, the Ministry of Planning and Investment has collaborated with the United States Agency for International Development (USAID) to organize the “Supporting enterprises’ digital transformation program from 2021 – 2025”.

 

Mr. Rafael Frankel, Public Policy Manager for South Asia and Southeast Asia of Meta Company (USA), emphasized the importance of attracting FDI in digital technology and expressed his intention to collaborate with Vietnamese enterprises in the development of innovative start-up ecosystems and the renovation of Vietnam’s economy in the post-COVID-19 time in the long term. 

 

Digital transformation helps improve the competitiveness of Vietnamese SMEs after Covid-19

 

In a survey by WS and Skift (2021), more than 87% of business leaders suppose that it is extremely important to continue to strengthen digital transformation in the post-COVID-19 era. 82% of the group of enterprises that depend on direct services participating in the Fujitsu survey confirmed that they will focus on investing in automating processes. According to a Fujitsu survey, the proportions of industries focus on investing in it are as follows: production accounts for 85%, finance accounts for  86%, healthcare & transportation accounts for 80%, retail accounts for  79%, and public services account for 81%.

 

Digital-transformation-enterprises-segment

 

Sources:  WS and Skift Report (2021) 

 

Data will continue to operate as a kind of “creative raw material” to stimulate growth and create competitive advantages for Vietnamese enterprises, particularly SMEs. According to Google, Temasek, and Bain & Company research, Vietnam had 8 million new digital consumers from the start of the pandemic to the first half of 2021, with 55% of them coming from non-urban areas. This figure demonstrates that not only enterprises but also consumers are rapidly transforming into a digital world. It is clear that the ready-made demand and digital transformation framework will benefit SMEs greatly.

 

After more than two years of “coexisting” with the Covid-19 pandemic, digital transformation has become a “strong weapon” for SMEs to increase their capacity and gain competitive advantages. 2022 is expected to be a “golden” year for SMEs. According to VIRAC data on Vietnamese enterprises, public companies account for only about 0.3% of those that issue financial statements. As a result, unlisted SMEs will be potential competitors for thousands of enterprises.

 

With over 6 years of experience, VIRAC has supported and been trusted by many domestic and foreign clients in a variety of industries, including finance – banking, securities, consulting, investment, mergers and acquisitions, FDI firms with foreign capital, and so on. VIRAC is confident to accompany and support your businesses in providing reliable market research – company research information, assisting in the assessment of potential partners, and aiding your company in the planning and decision-making processes.

 

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