SMEs wake up to importance of modernising in digital age

To further digital transformation, business still require much support

Struggling like many other businesses this year, local furniture manufacturer Xuan Hoa JSC is looking to the future in order to escape financial woes. General director Le Duy Anh is now going to utilise a digital transformation to assist the company in quickly adopting new business models while fostering work efficiency and maintaining competitiveness in times of hardship.

“To survive the pandemic aftermath, enterprises need to simplify and streamline production, and for Vietnam to become the world’s high-tech manufacturing hub, we have to compete with enterprises from China, Europe, Africa, and the United States,” said Anh.

He said it is crucial for domestic firms to scale up their business and enhance their competitiveness in order to survive now more than ever. As a result, the consultant team’s involvement in assisting organisations in visualising a roadmap and developing their digital transformation journey is critical.

“We will gradually digitalise our process towards building a smart factory with a wide range of products, a high degree of customisation, and a complex list of materials. This is the only way for us to efficiently conserve our resources while growing our business,” he said.

Supported by government agencies

The Vietnamese government is making efforts to enhance the development of the supporting industry, which kicked into higher gear last year with the introduction of Resolution No.115/NQ-CP on promoting Vietnam’s supporting industries. The industry is expected to develop through the mobilisation of resources of all economic sectors, especially foreign-invested enterprises and domestic counterparts.

In order to encourage enterprises to boost digital transformation, in January the prime minister issued the National Strategy on the Fourth Industrial Revolution towards 2030 to fulfil the goals set in Resolution No.52-NQ/TW, which outlines policies guiding Vietnam’s active involvement in Industry 4.0

In the past year, digital transformation has felt the participation of the whole political system in Vietnam. In the framework of a meeting to review the first year of the strategy, which was organised by the Central Institute for Economic Management (CIEM), deputy director Nguyen Hoa Cuong said that ministries, relevant authorities, and localities have been allocated financial power for developing e-government, aiding digital transformation, and applying AI in more operational processes.

“Numerous units are also proactive in issuing action plans to implement the national strategy. Besides that, they have proactively integrated the objectives and tasks of the strategy into the objectives and tasks of the localities’ socioeconomic development plans,” Cuong said.

The education and training of human resources have also been innovated, Cuong added. “The content and training programmes have approached the content of Industry 4.0, especially in IT. The Academy of Policy and Development under the Ministry of Planning and Investment (MPI) has also established a faculty of digital economy, aiming to offer the first bachelor’s degree in the digital economy in our country,” he said.

Along with completing policies, infrastructure, and the workforce, the government is also cooperating with international organisations to implement supporting programmes for enterprises, especially small- and medium-sized ones.

Xuan Hoa was one of the first enterprises to participate in the Supporting Enterprises’ Digital Transformation programme, developed by the MPI in collaboration with the US Agency for International Development (USAID). To build a smart factory, Xuan Hoa had already studied numerous models and solutions to build a smart factory but, after hitting roadblock after roadblock, was able to connect with the USAID initiative. Since the end of 2020, Xuan Hoa and other companies in the programme have been helped by experts.

“These experts have given us information, practical advice, and offered lessons to remove our confusion and craft technical solutions meeting our requirements for development, which involves optimising production capacity of various highly-customisable products, and building a complex material portfolio,” said Duy Anh of Xuan Hoa.

Specifically, digital transformation is being applied in design and material management. Some technologies can also help businesses like Xuan Hoa to measure and read data to help it manage warehouses, materials, design, and inventory. “Digital transformation will be the saviour of my business,” Anh added.

The Supporting Enterprises’ Digital Transformation programme, which will be in action until 2025, has been carrying out in-depth assistance to build digital transformation plans for 11 businesses in total. The programme has built tools for digital transformation evaluation on its website with the implementation of 500 businesses; and organised two training courses on digital transformation in Hanoi and Hue with the participation of 200 businesses. The initiative has also built and released related guidelines that have been downloaded 3,000 times, and delivered to all departments of planning and investment across the country. Also, the three packages of Start Digital, Grow Digital, and Go Digital have been designed and will be perfected before release next year.

Le Manh Hung, director of the MPI’s Agency of Enterprise Development, said, “Businesses have been designing their digital transformation roadmaps in line with the current situation, industries, goals, and resources of each individual business. As a result, enterprises can have an overall picture, a long-term strategy, and detailed information on which activities to accomplish and which technological solutions to deploy in order to achieve comprehensive digital transformation, and seize the opportunities of Industry 4.0.”

Limitations to overcome

With the speed of change in the digital overhaul, enterprises will inevitably hit unforeseen obstacles as they attempt to modernise.

Dr. Ho Cong Hoa, deputy head of Social Affairs Research under the CIEM, said that many enterprises have yet to have a deep understanding of digital transformation’s definition and many businesses simply do not know where to start in terms of implementing a specific schedule.

“They also do not have finance for much of this work. In numerous businesses, they lack the workforce to implement these changes. Meanwhile, numerous businesses face difficulty in looking for consulting units or partners to support them to implement digital transformation,” Hoa said.

Hoa also noted that synchronisation is a major weakness for some businesses. Although digital platforms are commonly being applied in simple works including payment methods, sales and marketing, and building manufacturing plans, smaller enterprises are neglecting to apply digital tech solutions to the key stages of processing and supply chain management. “There also needs to be links between enterprises and customers and suppliers. A further important solution is to increase the links between enterprises with the database of the country and localities, including data on statistics, surveys, and summarised figures about the market, which can also be updated regularly,” Hoa said.

In light of that, the Social Affairs Research Department has proposed that in order to promote digital transformation, it is necessary to increase such links between enterprises and authorities via building connecting tools in order to help enterprises update adjustments in policy, and support them during the process.

Gregory Leon - Director of Economic Growth and Governance, USAID Vietnam For the past three years, USAID has been helping SMEs reach levels where they can produce products at world-class standards, suitable for international supply chains. We did this by helping them link with lead firms operating both in Vietnam and overseas. When the pandemic hit, we broadened our assistance to include digital transformation and access to finance. Digital transformation helps SMEs become resilient and efficient, and access to finance helps them reduce debt and to pay for upgrades. SMEs have been hit very, very hard this year. As a result, we are increasing our commitment to helping them recover. We will be expanding our efforts in digital transformation and financial accessibility. We are also developing programmes that would increase worker skills in key areas important to SMEs, that would improve workplace pandemic prevention and mitigation, and that would encourage more proactive debt restructuring. In order to improve the business environment, since 2020 USAID has been assisting the Vietnamese government to accelerate and broaden its efforts to make the legal and regulatory environment more friendly to SMEs. This is crucial to the country’s longer-term competitiveness and economic growth. A substantial portion of this work has been in support of the efforts of the Government Office and ministries to implement Resolution No.68/NQ-CP from May 2020 on simplification of business regulations until 2025, and Resolution No.02/NQ-CP on the ongoing improvements to the business environment to enhance national competitiveness. We are also supporting efforts to digitalise public services, which will allow SMEs to interact with government agencies. USAID is also supporting the government in implementing the Law on Supporting Small- and Medium-sized enterprises. Decree No.80/2021/ND-CP accelerates and broadens this assistance, which includes government grants to help SMEs accelerate digital transformation and improve competitiveness.