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Role Of Emerging Technologies In Micro, Small and Medium Enterprises There is a lot of buzz around digitization, innovation, automation, but the disparity in its adoption is glaring when analyzing the MSME segment

By Anurag Sahay

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India, today, on the global map stands as one of the largest and fastest-growing markets for digital transformation, but its adoption is uneven among businesses. Digitization is not confined to just implementing technologies; it denotes a holistic change to make experiences better, communication more effective, and work simpler. India is currently poised to become a technology leader primarily attributed to the enhanced internet penetration, advancements in telecom services, rapidly growing digital consumers, and the government's focus on adopting emerging technologies and investments in ICT. Digitization is now more a priority over a choice for organizations to stay afloat. According to McKinsey's 2019 Digital India Report, we stand as the second-fastest digital adopter among 17 major digital countries studied, with an influx of global and local digital businesses in the region.

Digital Adoption Vis-à-Vis the Indian MSME Segment

There is a lot of buzz around digitization, innovation, automation, but the disparity in its adoption is glaring when analyzing the MSME segment. India's micro, small and medium enterprises (MSMEs) play a pivotal role in India's economic and social development. As per a report by the SME Chamber of India, MSMEs, the manufacturing segment accounts for 7.9 per cent of GDP while its total contribution to GDP is 37.54 per cent. It also contributes to 30.50 per cent of services. But most MSMEs confront significant barriers in adopting Industry 4.0 practices, continuing with their old-world business practices and technologies based on Industry 3.0 or Industry 2.0 environments. Therefore, it becomes critical that to stay afloat and have continuity, the industry must integrate technology enablement as a key focus for driving better business outcomes, efficiency and quick time to market for customers and stakeholders alike.

Some of the trends identified towards the adoption of digital technologies in the Indian MSME segment include fast adoption of online business models, while there is a staggering 70 per cent of the players who still function on the offline model. Adoption of technology to improve business operations and productivity is critical and the need of the hour.

Therefore, this is an ideal opportunity for MSMEs to move into the ambit of a digital approach and gear up for the future of a digital-ready India; or, more aptly, get ready for the future of business.

Why MSME businesses need to alter and not tamper their approach: seeing it through with a digital prism for continuity and embracing the tides of change

With almost every organization worth its salt in the IT industry speaking digital transformation, what is it that would be an ideal fit for an industry that has primarily remained digitally untrained. A majority of the MSME sector comprises small and informal enterprises that operate in unorganized sectors. Industry statistics estimate the potential of generating employment to the tune of 50 per cent of industrial workers. Additionally, keeping in view that over 97 per cent of MSMEs can be classified as micro firms (with an investment in plant and machinery less than INR 25 lakh), and 94 per cent are unregistered with the government, what is needed is more of an industrial transformation and not just a digital one.

Therefore, digital transformation (DT) cannot exist or operate without delivering experience or being a part of an evolving ecosystem that needs alignment with, and here is where there is a counterpoint in the thought process.

Customer experience (CX) and digital transformation (DT) must come together to deliver an overall digital experience (DX). To stay relevant and future-ready, the MSMEs need to adopt customized solutions to fit the DT journey and chart their own digital experience (DX) journey that transforms them to be competitive. Delivering at the same level without disruption or destroying the core of their operating models.

MSMEs need to adopt a DX approach to continue supply, predict, chart, monitor and execute demand. They also need to modernize legacy architecture that will ultimately drive the industry to become business-ready and future-ready. They need to cover virtually every aspect of innovation that encompasses critical requirements of access to finance, technology, market knowledge, augment R&D capabilities, and having a job-ready workforce that drives a collective innovation agenda.

It's not just a "sarkari' deal but a reality that the government is also pushing for

Even the government has constituted five task forces to make India's micro, small, and medium enterprises future-ready and formulate a concrete strategy towards making the country a leading exporter. This is a clear testimony to the focus from a nation-building perspective where the MSME sector should be heading.

With this initiative, one of the five areas identified is Industry 4.0, including elements like artificial intelligence, 3D and virtual reality. This task force has been formed to make India a global leader in Industry 4.0. So, where do we go from here?

With an objective set to catalyze export promotion and import reduction, including focusing on the key manufacturing areas and improving our quality standards, designs, and technology, packaging, the final objective is to ensure India becoming a global manufacturing hub and a leading exporter in the world.

Survival and resilience: redundancy and revival

Taking lessons of survival to recovery paths from the pandemic, from devastation to resilience, the MSME sector has a lot of potential to harness, if investments are made, to re-engineer themselves vertically and horizontally. It is important to look inwards now, reduce redundancies, and adopt technology relevant to them and not the rest of the digitally schooled industry with an overarching DT perspective. A DX approach should align existing business modalities with a future orientation that meets their needs and not just the customers at large. Therefore, it is critical that they at least start thinking about these things instead of just changing within the digital branch analogy. In the new world, the utility and relevant delivery will determine the context of survival to revival.

MSME players should consider their requirements and not blindly follow the herd; but rather to assess and introspect on the tools and how they would want to implement them. With growing restrictions on the physical infrastructure of enterprises due to COVID, it is important to be digitally ready with operations that meet customers' needs and deliver TCO optimization. Here is where 'SaaS-ification' will become the ideal ingredient to building the DX journey. Digital front-end solutions will help redefine legacy applications to modernized micro-solutions, which will accelerate growth through optimized costs and creative and agile ways of working.

Anurag Sahay

Managing Director, Nagarro


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