MSMEs in India is on the road to recovery through transformation. This disruption of automation is leading the path to evolution for MSME owners who are planning the next normal future with the benefits of digitization while moving ahead towards digitalization.
The transforming phase of MSMEs in India
Rising above the pandemic challenge, small businesses in India are taking the digital road ahead. Striving to sustain in the fast-evolving MSME sector, they are re-imagining digitalization strategies to accomplish business transformation in these new normal times of change. India’s MSME segment is rightly considered to be the driving force or the backbone of the Indian economy. While contributing a significant 30% to the country’s GDP, the sector has also been generating immense employment opportunities to boost overall economic activity. However, last year was different. According to CRISIL Research, the pandemic has reduced the sector’s contribution to GDP by 5%. Hence, it has become imperative for a small business in India to adopt a relevant digital transformation strategy and thereby create its own path to digital business transformation. During this phase of evolution, the Indian MSMEs need to redefine their success strategies by adopting the digital growth mechanism.
The rising need for digital business transformation
Success for an Indian MSME is dependent on several factors. However, the need for digitalization arises from a few common challenges that continue to hinder business process transformation for small businesses across the country. A few of these challenges include:
Lack of adequate training and skills- Reduced knowledge and efficient and digitized ways of doing business is impacting overall business productivity and performance for the MSME owners.
Lack of digital literacy- Due to very less understanding of digitization tools and techniques, Indian MSMEs are held back by old traditional methodologies. They are unable to innovate newer ways for building a strong and consistent customer base.
Dependent on time-consuming operational methods- With an objective to save costs, most of the traditional MSMEs depend on manual operations for doing business, thereby resulting in the risk of making human errors through lack of precision.
The above common challenges have led to an imperative need for driving small businesses towards the numerous benefits of digital transformation.
According to the Cisco India SMB Digital Maturity study 2020, the digitalization of SMEs could add US$ 158 to 216 billion to India’s GDP by 2024.
Digitization to Digitalization- The inevitable journey towards business transformation
The evolution of Indian MSMEs had begun even before the pandemic outbreak. As a result, almost 97% of mid-market businesses are already in the process of leveraging innovative IT infrastructure and processes, in addition to experimenting with cloud-centric ways of doing business. Now is the time for small business owners to reimagine their business models to re-invent newer and innovative ways for achieving their business goals with digital disruption.
Digitization is the process of automating traditional tools and techniques of doing business, thereby simplifying processes by reducing costs and increasing efficiency. On the other hand, Digitalization is the process of using digitized tools and information to establish innovative ways of doing business to enable maximum business potential through reduced effort and increased productivity.
Digitalization of small businesses through digitization of their process is the way forward for our fast-evolving economy.
MSMEs in India are currently contributing to around 6.11% of the country’s manufacturing GDP, 24.63% of GDP from service activities and 33.4% of manufacturing output. Now, the digitization of these businesses can add up to $200 billion to the nation’s overall GDP.
There are numerous advantages of digitization that can help the small businesses in India to move forward on the road to business and process transformation and enable growth in today’s challenging yet fast-evolving digital age. Some of the several benefits of digitization include:
Seamless operational efficiency: A digitized MSME can leverage the benefit of technology to simplify operations and use resources in a more efficient manner.
Better risk management: By adopting a digitized working model, small businesses in India can protect their physical assets through advanced surveillance and make their logistics more powerful while protecting sensitive information and financial data.
Enhance employee productivity: Digitized training modules can help MSME owners identify areas of improvement for their workforce and thereby track their productivity and performance while helping them learn about the latest industry trends and scenarios.
Achieving excellence through innovation: Adopting the latest digital tools and techniques can help small business owners in India in monitoring growth metrics like employee performance, consumer insights, sales, and acquisition, etc. Such digital-first ways of doing business can help Indian MSMEs in driving excellence through technology and innovation.
Save costs on complex business procedures: A digitized MSME can cut down massive operational costs by automating core processes.
Increase outreach: Digitization provides an easy and cost-effective way of expanding the reach of small businesses to the world and thereby reach out to a much larger audience, without any extra cost or complexity.
Digitalization for MSMEs
The rise of MSMEs in India is moving fast towards transformation through digitalization. The process of digitalization makes use of digital technologies to transform a business model and create value-producing opportunities for growth and progress. Amidst a digital revolution, India is headed towards being an Internet-first nation. Digitalization of businesses is the first step towards building a business transformation strategy that has now become the need of the hour for the fast-evolving MSMEs in India.
Building a future-proof business model: in a fast-developing economy like India, Digitalization is the way forward. Through the adoption of the latest technology and tools, the highly efficient process of digitalization can help small businesses showcase their unique capabilities by leveraging digital possibilities.
Driving innovation in the new normal world: By optimizing upgraded digital technologies for better reach and faster results, a digitalized MSME can leverage massive growth opportunities in today’s digital age.
The increasing Government support towards digital transformation
Understanding the massive scope and potential of the fast-evolving MSME sector, the government of India is offering full-fledged support towards its growth and progress. The launch of ideas and innovation portal for SMBs is a remarkable step towards helping small businesses become self-reliant by driving innovation and research in the new normal digital scenario. Alongside the government, some renowned private corporate giants like Amazon, Flipkart, and Mastercard are also rolling out some remarkable initiatives to help the MSMEs in their digitization journey.
Some challenges on this road to transformation
The primary efforts towards digital transformation for MSMEs are pacing up with the constant support from the government and various corporations. However, there are still a few challenges that can create hurdles on this journey of digital transformation.
Absence of adequate skills and talent- Lack of proper training for the MSME workforce can hinder small businesses from leveraging the complete benefits and potential of digitization.
Lack of awareness- Due to less knowledge and understanding of the right platform for digital marketing, some mid-market business owners are unable to optimist their growth strategies in the best possible manner.
The road ahead
Despite the above-stated challenges, MSMEs in India are fast adapting to the digital way of doing business. According to a study by Cisco India, almost 13% of MSMEs in the Asia Pacific region have reached the advanced stages of digital transformation while 31%are still in the initial phase. Here arises the need for efficient digitalization strategies that can help emerging businesses differentiate themselves from the competition and grow further. Once implemented effectively, digital transformation can help the evolving MSMEs in India to re-imagine their unique business models and remodel a value-driven structure for the business. Further, it can help improve employee productivity through sustainable skill training methodologies. Moving forward into the new normal world, there is an imperative need for small businesses to re-invent their business strategies that can ensure inclusive and sustainable value for all stakeholders.
Here comes the need for technology-driven software like Enterprise Resource Planning that provides comprehensive solutions for emerging small businesses in India to implement efficient business technology for delivering effective and relevant solutions in today’s digital-first world. ERP is a comprehensive digital solution to help MSMEs in India to upgrade their business model for enhanced efficiency and strategic planning to achieve defined business goals by implementing cost-effective, growth-oriented business technology. Once effectively implemented, the ERP model is certain to help small businesses make a big difference through the strategic digitalization of digitized processes.
The digital evolution of MSMEs in India is the result of the rapidly growing digitalization of Indian consumers. This significant shift in consumer behavior is leading to increased growth opportunities for emerging small businesses across the country.
Digitalization of the service and manufacturing segment of the MSME sector can help in tapping the massive potential of digital processes. By implementing cost-effective and efficient technologies, the fast-developing sector can enhance the effectiveness, profitability, and overall growth of MSMEs in India. This, in turn, is certain to add to the benefits of the Indian economy that is opening into the next normal future by leveraging maximum customer benefits and satisfaction.