MSMEs must embrace digital technology to stay competitive, improve productivity, and unlock growth opportunities in today’s fast-evolving business landscape.
Micro, Small and Medium Enterprises (MSMEs) are the lifeblood of economies worldwide, accounting for approximately 90% of businesses and providing employment to nearly half of the global workforce. In the ASEAN region, their impact is even more pronounced, comprising over 97% of all enterprises and serving as pivotal drivers of economic growth. According to Department of Statistics Malaysia, MSMEs represent 98.5% of businesses, contribute about 39.1% to the national GDP and employ more than seven million people. These enterprises are essential for job creation and innovation, particularly in developing regions where they offer vital economic opportunities to local communities.
Despite their significant role, many traditional MSMEs face challenges such as low productivity due to outdated and manual business practices. As globalization intensifies competition, digitalization has become a crucial strategy for ensuring sustainability and growth. By embracing technology, MSMEs can enhance productivity, access broader markets and streamline operations to remain efficient and competitive.
Why MSMEs Matter in the Global and Regional Economy
In the past decades, the business landscape has undergone several technological transformations that have reshaped industries and disrupted traditional models. In the 1970s, the advent of relational databases allowed businesses to store and manage vast amounts of information efficiently. Companies like Oracle and IBM developed database solutions that revolutionized enterprise operations and laid the foundation for enterprise resource planning (ERP) systems which are now indispensable for businesses of all sizes. The 1990s introduced the internet and e-commerce, allowing businesses to reach customers beyond physical storefronts. Online marketplaces like Amazon and Alibaba transformed retail, providing opportunities for small businesses to sell products globally.
The 2000s saw the rise of digital marketing through social media platforms like Facebook, YouTube, Instagram and Tiktok, changing how businesses connect with consumers. Small businesses leveraged digital advertising and influencer marketing to engage audiences with minimal investment, helping them compete with larger corporations. More recently, the era of Generative AI (GenAI) since the launch of ChatGPT in 2022 has revolutionized content creation, task automation and customer engagement. Large-language models (LLMs) like OpenAI’s ChatGPT, Google’s Gemini and China High-Flyer’s DeepSeek enable businesses to generate high-quality marketing content and automate customer service with personalized user experiences.
Technology as a Catalyst for Productivity and Growth
In Malaysia, several MSMEs have successfully harnessed technology to drive growth and competitiveness. A notable example is MR DIY, a home improvement retailer that has effectively utilized data analytics to inform its business strategies. Founded in 2005 as a single hardware store in Kuala Lumpur, MR DIY has expanded to over 900 stores nationwide. The company employs data analytics to determine store locations, optimize inventory and understand customer preferences, contributing significantly to its success. MR DIY’s data-driven approach led to the launch of new brands like MR Toys and MR Dollar, catering to specific market segments based on consumer insights.
Another notable example is Malaysian entrepreneur Khairul Aming who successfully grew his sambal brand, Sambal Nyet, into a multimillion-ringgit success by harnessing technology. He used social media for marketing and storytelling, built a strong online presence and sold products via Shopee with tech-enabled fulfilment. His digital-first approach transformed a home-based business into a national sensation, showcasing the power of technology for MSMEs.
Local Success Stories: Digital Adoption in Action
In Malaysia, business digitalization has become a national priority. The government launched the Malaysia Digital Economy Blueprint and MyDIGITAL initiative to encourage businesses, including MSMEs, to adopt digital solutions. Regulatory changes like the introduction of mandatory e-invoicing in 2024 require businesses to integrate digital accounting and invoicing systems through MyInvois Portal, forcing businesses to accelerate their digital adoption.
In Sarawak, the state government aligns with these national efforts through the Sarawak Digital Economy 2023 initiative and the Post COVID-19 Development Strategy (PCDS). These policies emphasize the need for MSMEs to embrace digital transformation to remain competitive. The Sarawak Digital Economy Corporation (SDEC) has introduced initiatives such as SME Digitise!, Kamek Digital and GoDigital grant programs to help local businesses. Many Sarawakian businesses have also started leveraging technology to stay ahead by integrating digital payment systems such as DuitNow or Sarawak Pay, cloud computing and AI-driven business analytics for decision-making. Businesses that fail to adapt risk being left behind as competitors capitalize on the efficiency and scalability offered by these digital solutions.
Future-Proofing MSMEs Through Strategic Digital Investments
For MSMEs that wish to embark on their digital transformation journey, strategic investments are key. Upgrading business infrastructure by adopting ERP systems, cloud computing and cybersecurity measures ensures smooth operations and protects sensitive data. Equally important is acquiring the right talent, whether by upskilling existing employees or hiring professionals with expertise in digital marketing, data analytics and AI-driven automation.
The digital revolution is no longer a distant future but is currently shaping how businesses operate and compete. For MSMEs, digitalization is not just about survival but about unlocking new opportunities for growth. Embracing technology leads to greater efficiency, improved customer engagement and access to a broader market. In an era where innovation drives success, businesses that adopt digital strategies will thrive, while those that resist change risk falling behind.
As Malaysia and Sarawak continue to push for a digital economy, MSMEs must step up and take advantage of the available resources to modernize operations. The time for digital transformation is now, and those who act decisively will lead the way in the future of business.