Over half of SMEs still in early stages of digital maturity: report

Digital transformation in 44.6% of SMEs already has some alignment to company strategies.

About 55.5% of SMEs in Singapore is still in the early stages of digital maturity, with digitalisation programs remaining largely unaligned with the broader enterprise strategy and multiple initiatives running in parallel across business functions, EY revealed.

“Whilst the benefits of digitalization are apparent, the digital ambitions of the SME respondents may not sync up with their perceived level of digital maturity,” it said in a report.

The majority of SMEs (44.6%) are at stage 2 of digital maturity, where digital transformation initiatives have some alignment to the organisation’s enterprise strategy and are initiated at the functional level or lines of business with multiple strategies running in parallel.

Less than a fifth (10.8%) of respondents are still at stage 1, or the initial phases of digital transformation, where initiatives are largely informal, tactical and separate from the organisation’s broader enterprise strategy.

Only 3.1% of Singapore SMEs are at stage 5 of digital maturity, where the organisation has a single digital platform to scale technological innovations and consider themselves a digital native enterprise.

Choo Eng Chuan, EY Asean growth markets leader, commented, “Most SMEs are currently rather tactical in their digitalisation efforts – placing ad-hoc smart bets and picking the low-hanging fruit, before embarking on deliberate steps toward a more defined digital transformation strategy as they mature along the continuum. Additionally, Singapore SMEs may have higher expectations on what is defined as digital being aligned with the enterprise strategy. Hence, more Singapore SMEs perceive themselves to be at the earlier stages on the adoption continuum.”

As most SMEs are still in the early stages of digitalisation, the top three challenges they encounter are the following: a lack of access to digital talent (64.7%); pressure to focus on the short-term benefits of digitalisation (64.7%) and digital risks (64.4%).

In Singapore, the top three challenges are limitations from legacy infrastructure (63.1%), lack of digital talent (60.0%) and uncertainty around how to optimise digital technologies and align with the broader enterprise strategy (53.8%).

Amidst digitisation efforts, the study found that in Singapore, transformative technologies (81.5%) are already a top investment priority among SMEs (FY 2019), followed by current technologies (67.7%) and fixed assets (58.5%). Looking ahead, SMEs in Singapore expect transformative technologies (81.5%) to continue to take investment precedence, followed by current technologies (69.2%) and fixed assets (53.8%).

Transformative technologies cover digital applications such as artificial intelligence (AI), machine learning, blockchain and robotic process automation (RPA), whilst current technologies are defined as upgrades and expansions to existing infocomm technology (ICT) software, hardware and services.