What else can be done to help SMEs go digital?

A complexity-based perspective

Small and medium enterprises (SME) are an essential driver of the economy. They employ over 40% and 70% of the Australian and Singaporean workforce respectively. Yet over 80% of them have yet to embark on their digital transformation journeys, citing costs, lack of skills among many other reasons, according to recent 2017 Commonwealth Bank and Singapore Business Federation (SBF) research findings. Others simply dismiss the challenge as too hard.

Governments can only do so much. The Industry Growth Centres Initiative costing $238 million in Australian Government funding over the four years from 2017/18 to 2020/21 is established to deliver the Initiative in six industry sectors of competitive strength and strategic priority. 23 Industry Transformation Maps (ITM) being developed under the $4.5 billion Industry Transformation Programme announced in 2016 Singapore Government Budget lay out the growth and transformation strategies for the 23 key industries over the next five years. In addition, The Australian Federal Government has set up the Small Business Digital Taskforce to help small businesses adopt digital technologies and operate more efficiently. Singapore Government also has a SMEs Go Digital programme to help SMEs use digital technologies, build strong digital capabilities and participate in the Digital Economy. Established by the Singapore Infocomm Media Development Authority (IMDA) and operated by the Association of Small and Medium Enterprises (ASME), the SME Digital Tech Hub is a dedicated hub that provides specialist digital technology advisory to SMEs with more advanced digital needs, such as data analytics and cybersecurity.

From a complexity-based perspective, these initiatives or programmes will interacts with one another in a complex digital ecosystem since no two industry sector is completely independent of each other.

Before we look at those interactions in greater detail, lets be reminded about the 5 key insights from complexity science applied in practice. Watch Professor Lex Hoogduin explained those 5 principles in the video below around 21:40 minute onwards for less than 5 minutes long.

The implications of those 5 principles are an inter-related set of 5 core capacities that individuals and organisations must possess in order to be fit to take effective actions or intervene in such a complex and uncertain environment we live in today.

THAI-FAUC® Framework

Following a previous article and, to a lesser extent this too, on the state of Singapore’s 23 ITMs announced so far with a few questions I have invited readers to ponder upon in respond to these and other upcoming changes, lets now take a holistic and integrated view of some of those ITMs as an example to illustrate the case for taking a complexity-based approach to the challenge at hand.

The inter-relationships between 6 out of total 23 ITMs

As shown above, each ITM (4 in Lifestyle and 2 in Modern Services categories) leverages the same 4 strategy pillars of manpower optimisation, skills improvement, technology adoption and products internationalisation. In particular, the ICT and Media ITM will be developing 3 core technologies of AI & Data Analytics, Cybersecurity and Immersive Media & IoT which would be adopted by other industry sectors through their respective ITMs. This is a leverage that SMEs in the ICT and Media sector can take advantage such that their digitalisation efforts will be amplified many fold in the ecosystem.

A case in point is the Hotel ITM. The Singapore Tourism Board (STB) has just unveiled its Smart Hotel Technology Roadmap in collaboration with the Hotel Innovation Committee, led by the Singapore Hotel Association (SHA). It aims to paint a vision of what a smart hotel is, regardless of size, and to identify technology that hotels can adopt.

Now, we are ready to explore the power of looking into this challenge of helping SMEs go digital more easily through a complexity lens.

As an MP and Professor has suggested one way to jumpstart SMEs’ digital transformation journeys is to increase the diversity and density of the digital ecosystem, namely attract more players or agents to join the community and interact with one another (resilient and adaptive). Other suggestions include Trade associations and business chambers (TACs) taking on a greater role in guiding SMEs to venture abroad for a bigger market exposure, thereby reaping economy of scale for products-oriented businesses (alert and adaptive). Meanwhile, Government and TACs can also help in simplifying the regulatory environment such as the setting up of “sandboxes” for quick experimentation and trials.

Finally, it takes 2 hands to clap. It is a reality is that any digital transformation involve a deep mindshift from operating in the fail-safe physical to the safe-fail digital economy simply because of the VUCAness we are all experiencing today. SMEs have to learn to be more entrepreneurial and creative in taking on the above suggested initiatives, that the best decisions are only probabilistic and no matter what they do they cannot guarantee success. This is arguably the hardest change because it require a mindset change to be willing to take on many small safe-to-fail experiments at the same time, learn from their failures and adapt themselves quickly to the winning move. The only way forward is to imagine, rehearse and adapt while defending and maximising efficiency from their existing core businesses.

“The heuristic approach echoes Visa CEO Dee Hock’s explanation of how he succeeded in founding the Visa credit card association: We have no precise plan, only a clear sense of direction”.

Finally, in closing, the above suggested moves including the interactions of ITMs, initiatives or programmes put in place by government to increase diversity and density are perfectly aligned with the surprising insight from complexity science that all complex systems (such as an enterprise or the digital ecosystem SMEs operate in) are at their optimum health, viability and sustainability at the edge of chaos — the sweet spot between order and disorder. It is what having an agile mindset and behaving in an agile-at-scale manner is all about — hyper interaction and collaboration between autonomous agents. On the other hand, stability for too long is doomed.

At the end of the day, these moves involve reshuffling people into new and uncomfortable zones, to disrupt and alter habitual ways of working and to expose people to alternative ways of doing things.

Depending on their specific circumstances and strategy, SMEs must identify key processes and explicitly ask the question “Why do we do it this way?” If the answer is a shrug of the shoulders and a proclamation of “That’s how we’ve always done it,” it may be a prime candidate for change. This might involve taking on difficult clients or projects that fit their new strategy and that trigger learning throughout the firm.

A more general discussion about the case for adopting a complexity lens in decision-making is found here.