The government could start a Digital MSME program to guide, mentor and support MSMEs who are starting off on this digitalisation journey. (Image: pixabay)
The previous decade saw the inception and fostering of newer technologies based around the rapid increase in data interconnectivity and smart automation, leading to what is referred to as Industry 4.0, or the 4th Industrial Revolution. Although the 4th Industrial Revolution started a decade ago, it is only recently that MSMEs began embracing digital technologies to scale up their business and improve operational excellence. But the Covid pandemic saw MSMEs forced to break this inertia, to realise the importance of digitalising and accelerate their attempts to digitalise operations. And yet, MSMEs are not completely satisfied; the ambiguity remains on why digitalisation has become a crucial part of the path forward. Why must MSMEs digitalise? What operations must be digitalised and how do MSMEs go about digitalisation? Is there a “correct’ timeline to adoption?
There are several questions that have gone unanswered, or insufficiently answered, creating uncertainty among MSMEs. None of these factors support the argument in favour of digitalisation. Further, most MSMEs started digital initiatives based on market trends or what their competition has been doing, without creating a unique digital-specific mission or purpose.
In addition to the confusion, current data indicates that over 70% of digitalised projects fail, due to various challenges posed such as many MSMEs are genuinely unaware of the impact of digitalisation, they have limited growth capital in general, they are primarily controlled by the promoter(s), who are not conversant with digital technologies, and there is also an element of fear of failure and inherent resistance to change. There is no formal process as well within MSMEs to regularly understand their customers buying behaviour, needs, wants and competition landscape. Many MSMEs have not automated their core processes and have been driving their businesses using excel sheets.
To overcome these challenges, MSMEs have to first define their digital mission based on market trends, shifts and customer needs, analyse the competition and identity their digital initiatives. MSMEs have to prioritize the digital initiatives based on their customer needs, investment ability, leadership bandwidth, culture and internal digital capabilities. They must create the Digital Business Value Increment Map, and plan the budget and resources in stages, to absorb and deliver value to their customers.
It’s time to let go of the idea that businesses are distinct and unique, and acknowledge that there are no off-the-shelf digital solutions available. Hence, groups of MSMEs must form clusters based on pre-defined criteria, and ensure that for all non-mission critical areas of their business, they will all share a one digital platform and also the cost of technologies, infrastructure and related services.
In the Union Budget 2022, the integration of Udyog Aadhar Registration, e-Shram, National Career Service, ASEEM and Skill Management Information System announced may become a catalyst for MSME growth. The seamless integration of MSMEs with the databases of a skilled workforce – an unorganised workforce with necessary training support, would help MSMEs. Specifically, Drone Shakti would make a great Drone Components Supplier Ecosystem in India. In addition, the Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE) and Emergency Credit Line Guarantee Scheme (ECLGS) would provide some breathing time to MSMEs to bounce back from the impact of the Pandemic.
While all these initiatives provide adequate support, MSMEs are mainly concerned about their day-to-day working capital. So, MSMEs must balance the need to invest in digitalization and maintaining their daily operations, and choose the best option.
Following is an indicative skeletal road map in five levels that MSMEs can use and customise. MSMEs may change their roadmap mentioned below as appropriate to them.