Digital business transformation: Building COVID-19 resilience in Indonesian SMEs
Indonesia’s daily economic life is underpinned by millions of small and medium enterprises that are found in the laneways, roadsides and retail streets of this busy nation. They account for 97 percent of the domestic workforce and 60 percent of national economic growth.
It is no surprise that COVID-19 has had an impact on business as strict lockdowns and restrictions on mobility have reduced the customer base and interrupted supply chains. And while the pandemic has resulted in the closing of many of these businesses, it has also pushed many others to adopt digital solutions and proved their capacity to be resilient and change.
The research has revealed that business owners and workers are highly innovative and have been spurred to self-directed learning, using online tips and guides to master digital transformation skills. Many of these small and medium enterprises (SMEs) have dealt with broken supply chains, fragmented internet connections and limited financial capacity, and still found a way to make a digital pivot.
Meanwhile, new start-ups have also emerged, using digital transformation and e-commerce platforms to operate in the COVID-19 landscape. This makes sense in a country where some of Southeast Asia’s biggest e-commerce platforms have come to the fore, and 99 percent of Indonesians receive their marketing information from videos on social media.
The importance of digital integration for SMEs was recognised before 2020 by national and provincial governments in policy positions, including the need to improve internet connectivity, regulations and skills training. Yet the research has found that the policies introduced last year to address the impact of COVID-19 barely mention digital transformation.
This research analysed the effectiveness of the national and Jakarta city government policies in supporting SMEs to digitally transform. Interviews were conducted with 11 business owners, and a survey was sent to 9147 participants in the city of Jakarta’s entrepreneur program (Jakpreneur). The research team also met with national and provincial government policy officials.
The report concludes that while SMEs have been independently proactive in adopting digital solutions to remain viable, government policy is critical to helping them take advantage of opportunities and secure their futures. This includes financially supporting businesses to enable them to set up digital systems and learn new skills.
This report delves into the barriers hindering digital transformation during the pandemic and provides five recommendations to help industry and policymakers provide targeted support to business owners at this trying time.
- Provide digital training for SME owners and workers to help them digitally transform their businesses and assist in website creation, data analytics, cyber security competency, business planning and social media.
- Create a digital community of practice for SMEs to provide a peer learning and mentoring environment. This could link to Jakpreneur and other SME support organisations. It could include export awards and incentives, and encourage pursuit of sustainability and social impact, in addition to economic goals.
- Establish transparent and sustainable SME funding schemes that include rebates on business start-up fees, tax incentives/relief, access to capital and interest-free loans, and assist in the transition to e-commerce operations.
- Provide incentives for SMEs to employ minority workers via a digital traineeship and/or training stream that funds the apprentices, trainees and interns while they are working and learning about digital transformation.
- Enhance government standards, delivery and evaluation to ensure there is clear communication of government support and access to it, and adherence to best practice governance principles.