According to a report surveying 370 small and medium-sized enterprises (SMEs) across the Big-6, by Ernst and Young, all signs suggest that South East Asia is looking to adopt digital transformation across their businesses in the next three years. This comes with the realisation that the digital revolution is here to stay and it will continue to change how businesses work. The rapidly evolving digital landscape has made the need for these businesses to embrace digitalisation.

In a recent study carried out by ASEAN, small and medium enterprises are the pillars of local economies and account for 50% of the GDP. Out of the 1,235 SMEs interviewed across a number of sectors, 60% of these businesses had technology as a key investment in their digital transformation plans. However, digitalisation doesn’t start and end by using the latest cutting-edge technologies. Digital transformation requires a shift in organisational structures, processes, business strategies, and company culture.

How to keep your business ahead of digital transformation

The region’s digital maturity

Over half of the region’s SMEs (around 55%) are in the early stages of digital maturity. However, many of the digitalisation efforts still remain unaligned with the broader business strategy. 

Majority of the SMEs are reportedly at the second stage of digital transformation, and more than 16.5% falls under Incidental, the first stage of digitalisation. Organisations and businesses at this stage are often executing plans to support digital transformation. These efforts are often informal and cannot be integrated with their current workflows and processes. 

There is, however, a rising percentage of about 8.7% of SMEs who have reached the highest ranking of digital maturity. These businesses and organisations have successfully integrated and optimised transformative efforts and identified digitalisation as a core organisational need.

Challenges in digital transformation

One of the biggest challenges SMEs in the region face in the process of digitalisation is talent acquisition of digital professionals such as data scientists, and social marketers. Finding qualified talent with relevant skill sets in the emerging markets of the region is a scarce asset. 

SMEs in the region also tend to focus on short-term digitalisation Return on Investment (ROI) as opposed to investing in long term and digital future-proofing. 

Digital transformation comes with the evolving risk of cybersecurity. This hinders the willingness of SME owners from transitioning traditional processes to well-coordinated, streamlined, and automated processes that come along with digitalisation. It is also important to point out that the cost of protecting data is expensive, which is also a factor of why businesses are stalling their investments, and efforts towards digital transformation.

In addition, the region’s slow regulatory reforms, extensive bureaucracy, and lack of government incentives slow down the process towards digital maturity.

Digital transformation success

Collaboration will play a very important role for Southeast Asian SMEs who want to see success in the digital space or their complete transformation to a digital enterprise. Collaborations not only through partnerships but also in the practical implementation of technological tools.

person using laptop

First, businesses will need to move from blueprint to the execution stage, and redefine their business model. They will need to scale up processes, re-evaluate business goals, create long term strategies, and implement automation that has higher outputs while reducing operational costs.

Developing a financial plan that includes IT infrastructure would also help companies towards their digitalisation success. This includes investments in transformative technologies like Artificial Intelligence (AI) and Machine Learning (ML).

Lastly, future-proofing products and services by watching and taking influencing factors (such as an increase in smartphone usage, internet accessibility, and new technologies, etc.) will also be vital to businesses.


When it comes to digitalisation, the region is admittedly not yet at its fullest potential. However, that leaves room for a lot of opportunities.

According to Google-Temasek, it is forecasted that the internet economy in the region will reach $200 billion USD by 2025. This presents a hub of opportunities for SMEs involved in e-commerce, travel, advertising, and gaming.

What is digital transformation really?

There will also be an expected increase in foreign direct investment (FDI) by the year 2030 according to the findings from ASEAN. This presents global partnerships with the Southeast Asian SMEs, which leads to expansion, foreign investments, tapping into global talents, and increased value of products and exchange.

Digital transformation is progressive and futuristic for SMEs. The promise of reinvention, financial gains, evolving opportunities, and for once a bridged gap between consumer and the businesses will drive the SMEs to start taking action. With the consumer’s cry for fast, convenient, accessible products and services, the digital economy will not only establish new opportunities for existing businesses but will also breed a new echelon of entrepreneurs in the region.