Online to offline

Online to offline

Small businesses strive to keep pace with digitisation and find new opportunities through online marketplaces.

Technology and digital disruption are compelling companies of all sizes in all industries to adapt and innovate. The world has seen how even multinationals that once enjoyed enviable success can wither or perish if they fail to keep up -- from Eastman Kodak to Blockbuster or even technology companies such as Yahoo, Nokia and Motorola.

Digitisation promotes efficiency and innovation, leading to greater productivity and new market opportunities, says Suwanchai Lohawatanakul, director-general of the Office of Small and Medium Enterprises Promotion. Photo: BANGKOK POST

In Asia Pacific, where small and medium sized enterprises (SMEs) are the backbone of the economy, accounting for 96% of all enterprises, 42% of gross domestic product (GDP) and 62% of all employment, the digital challenge is no less critical. They need to make the transition in order to nurture and sustain competitiveness and the macroeconomic viability of the region.

The misconception about SMEs is that given their size, they are more nimble and flexible so they should be able to adapt their business model easily to be more innovative and dynamic.

But the reality is that there are a huge number of enterprises that find it difficult to connect their physical offline business to the digital world, given their lack of research and development (R&D), limited capacity and lack of resources and manpower.

But help is on the way, in the form of various platforms provided by emerging startups. Even for some of the most traditional industries such as construction, online-to-offline (O2O) transformation is being made intuitive and easy to achieve.

"Adapting to the digital economy and utilising information technology in SMEs is increasingly important and becoming a new foundation for entrepreneurs today," said Suwanchai Lohawatanakul, director-general of the Office of Small and Medium Enterprises Promotion (Osmep).

"Digitisation offers a number of advantages in terms of efficiency, effectiveness and innovation across business functions, which means greater productivity and new opportunities in the market."

Kwo-Liang Chen, secretary-general of the Small and Medium Enterprise Administration in Taiwan, said that as electronic platforms bridge global markets and societies, SMEs gain opportunities and also face challenges like never before.

"For those who embrace digital transformation, the costs of commercialising products and connecting to customers are reduced, and thus they gain the chance to compete with larger companies," he said.

"On the other hand, the customer too has more options over a digitally connected global network, thus the demand for better services and convenience will continue to rise over time.

"This makes digital transformation not only an option to gain an advantage over the competition, but it's something SMEs must do to maintain their business."

Thailand-based is among the local pioneers in the field of free web-based platforms for construction firms that want to tap into the benefits of online-to-offline (O2O) commerce and digitisation of what traditionally has been an inefficient and cumbersome industry.

Patai Padungtin, CEO, Builk One Group SUPPLIED

"O2O is a business model that allows the offline and online realms to be connected and it's now the best time for Southeast Asian companies to adapt to new technologies," said Patai Padungtin, CEO of Builk One Group Co Ltd.

In his view, Thai companies may not be able to compete yet in terms of tech sophistication with their peers in the West or China, but he aims to build a platform that helps to unlock the potential of traditional SME businesses.

"We have been building our businesses through other people's platforms such as Google and Facebook, which are the platforms of tech giants, but we never dared to dream and build our own national platform," he said.

Builk started off as eight years ago as an enterprise resource planning (ERP) provider with a business-to-business (B2B) focus. It collected and analysed data to improve the efficiency of construction contractors, helping them understand the industry and customers in a more structured manner.

Its O2O business Jubili was launched a few years later to connect construction material stores with customers, bridging the supply and demand gaps through a network of digitised storefronts.

Builk now offers six product lines that help improve construction business workflow, with 25,000 users in Thailand, Indonesia, Laos, Myanmar and Cambodia.

"The construction industry has to be changed but how do we change an industry that is not known for tech-savvy people?" asked Mr Patai. "Providing cheap software isn't enough but we also need to evangelise among contractors around Southeast Asia to change their mindset and try to use technology to save their time and costs."

He said it took him four years to understand the key to converting people in the construction industry to start using a digital platform.

"The key is to change their behaviour. Three things that need to happen at the same time: motivation, abilities and triggers," he said, adding that without these three components, many SME businesses would still remain in their traditional comfort zone.

Victor Chua, managing partner of Vynn Capital, said that as a venture capitalist, he sees investments in startups as a form of empowerment and a way to unlock the economic potential of small businesses in different markets.

His firm is looking at supporting online marketplaces that offer two areas of opportunity: to create added value for SMEs to compete better internationally, and to address a larger audience through these SMEs.

In his view, most startups and SMEs lack the ability to perceive the bigger picture when it comes to expanding their businesses and creating scale. Consequently, there is an opportunity for investors to back platforms that offer convenient and innovative ways for businesses to create scale.

By way of example, Mr Chua said Vynn Capital recently invested in an automotive marketplace called Carsome, which creates value for used-car dealers by helping them source vehicles and providing financing. This in turn helps provide scale and improve efficiency as the dealers no longer have to struggle so much to find inventory.

"We see this as a great example of how startups or technology platforms are able to create value to SMEs and unlock economic potential in different markets," he said.

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