Digital transformation strategy for small-and-medium enterprises in Vietnam – Foresight Approach (Part 2): Policy recommendation

14 November, 2023

In accordance with the surveys in Part 1 on the level of digital transformation of small and medium enterprises in Vietnam, in Part 2 of this article, the author of University of Economics Ho Chi Minh City (UEH) has provided the analysis and some policy recommendations for businesses digital transformation strategies in accordance with the Foresight approach.

Barriers/difficulties, motivation/expectations and recommendations to support digital transformation

In accordance with the survey results, SMEs face many barriers in determining a suitable digital transformation strategy (97%), digital transformation support guidelines (89%), and software systems/tools to support digital transformation (88%), finance (86%) and so on. When analyzing in terms of business size, micro-enterprises (1–49 employees) face the most difficulties in terms of legality and support from the government (18%), the second most difficult is the CDM strategy (17%); For medium enterprises (60–300), in addition to difficulties in strategy and digital transformation guidelines at the top, they are concerned about digital transformation but encounter difficulties in human resources (11%) and culture (11%) upon implementing digital transformation.

In terms of motivation/expectations upon implementing digital transformation, SMEs have high expectations for the efficiency brought about by digital transformation (96%); monitoring/tracking capabilities (88%); customers and markets (86%); human resources (85%) and so on while 2% of businesses have no expectations regarding the benefits that digital transformation can bring. When analyzing in terms of enterprise size, the micro enterprises (1–49 employees), in addition to the motivation for efficiency and ability to supervise/track, have high expectations for changes in human resources due to digital transformation that brings about: Improved employee capacity; improved sourcing/talent retention/employee experience and so on. For medium enterprises (60–300 employees), they do care the quality, the customers and the market following the efficiency that digital transformation brings.

SMEs also aim more support from the government as well as tools to support digital transformation so that their digital transformation activities can be carried out more effectively and quickly.

Regarding the proposals towards the Government, SMEs aim to have specific legal documents and policies on digital transformation (80%) and specific legal regulations related to network security and data security (77%) to protect businesses upon operating on digital platforms or the Internet against the cyber attacks. Most SMEs often encounter various financial difficulties when implementing digital transformation; therefore, they need reasonable and adequate financial support policies to implement digital transformation (75%). In addition, SMEs would like the Government to have policies to support and to encourage the leading real estate enterprises in Vietnam to share experiences and to build infrastructure, platforms, and services to support SMEs (74%) or give access to the information concerning the existing digital solutions and uses (74%). In addition, SMEs have given a number of other suggestions to the Government listed as: There should be detailed instructions on the digital transformation process; supporting vocational training; having separate policies for businesses implementing digital transformation listed as: technology support, experts, taxes and more as well as supporting community human resources.

Regarding the proposal of a tool/ a software to support digital transformation activities, SMEs hopes that digital tools are able to help businesses develop a specific and appropriate digital transformation roadmap; allowing businesses to share experiences through examples and cases of good practice as well as the ability to collaborate and to cooperate to form community communities in SMEs. Businesses are often limited in finance, human resources and technology; as a result, they, firstly, will often choose a few main activities to implement digital transformation for the allowance of the selection of these areas. Digital transformation (customers, products, processes and so on) are suitable for implementing each step. Recognizing the future digital transformation scenarios that may occur in the future is another desire when businesses build their own digital transformation strategies. Particularly, the function of providing digital community orientation for each specific field is not of much interest to SMEs. It is possible that businesses would like that the digital tools have specific digital community support functions that are more suitable for businesses than the attention towards the digital transformation issue of each field or industry.

The application of 4.0 technologies, digital technology and digital transformation orientation

SMEs should prioritize “quick win” work because it is of high importance to be completed soon and has low implementation effort (i.e. the gap between the desired intensity and the low current intensity of use): 3D printing, automated robotics, horizontal and vertical system integration, simulation, cloud computing and cyber ​​security. This is a rather optimistic and positive signal regarding businesses’ awareness of cybersecurity issues in order to have policies, plans and precautions in the process of using digital tools as well as implementing digital policies. As for artificial intelligence technology, the Internet of Things, big data and analytics will bring great benefits to businesses as well as create breakthroughs and transformations for businesses. On the other hand, to successfully apply these technologies requires businesses to invest more in time, technology, people, finance and more with a serious and detailed implementation plan. Augmented reality and virtual reality technology should be entrusted to businesses with extensive experience and development teams. Blockchain technology, in particular, is very difficult to complete; consequently, it is postponed. Blockchain has not received enough attention, partly because of the following two reasons: not many businesses work in the financial and banking sectors in this survey and Blockchain is in its early stages.

SMEs should focus on immediately implementing digital transformation for main activities including: business processes, customers and markets. Enterprises can immediately implement digital transformation for supply chain activities if the enterprise evaluates the priority level above 4; in other words, it is as high. For administrative and management activities, human development and organizational culture, businesses should proceed cautiously and plan their implementation. For activities on digital strategy orientation and network information security, businesses should entrust companies with more experience to support or rent or buy available digital tools. Enterprises should not focus on IT infrastructure, data, data analysis and smart factory activities at the present time. This is a fairly common characteristic of SMEs, with limited time and resources; therefore, they will focus on profit-generating activities first.

The study presented an overview of the current situation of digital transformation of SMEs in Vietnam in recent years. The level of digital transformation readiness of businesses in Vietnam in the period before 2019 was being at a low level, especially SMEs. However, after the COVID-19 pandemic, there have been bright spots in the level of digital transformation readiness of SMEs in Vietnam. However, businesses have been encountering various difficulties and barriers in finance, infrastructure and so on when implementing digital transformation. The Politburo, the Government and other relevant Ministries have issued the diversity of policies to support SMEs, especially the process of approaching the 4.0 Industrial Revolution and implementing digital transformation.

The study also presented the results of a Delphi survey following the Foresight approach on the current status and vision of digital transformation in SMEs in Vietnam with more than 300 digital transformation experts at SMEs evaluating the current status of digital transformation, of which, approximately 100 experts evaluate the future direction of applying key technologies of Industry 4.0 and digital tools to businesses. The survey results indicate that SMEs in Vietnam are looking for a digital tool or an information system to support businesses in implementing digital transformation more comprehensively and effectively. Concurrently, because of the limitations in finance, human resources and technology, SMEs should prioritize and select appropriate technology applications and implement them gradually. From these survey results, SMEs should focus on Industry 4.0 technologies as follows: 3D printing, automatic robots, horizontal and vertical system integration, simulation, cloud computing and network security; besides, they should prioritize digital transformation implementation for those activities belonging to business processes, customers and markets.

Author: Nguyễn Mạnh Tuấn & Lê Ngọc Thạnh – University of Economics Ho Chi Minh City (UEH), Trương Văn Tú & Nguyễn Trung Tuấn – National Economics University (NEU).

This is an article in the series of articles spreading research and applied knowledge from UEH with the “Research Contribution For All – Nghiên Cứu Vì Cộng Đồng” message, UEH cordially invites dear readers to look forward to the upcoming Knowledge Newsletter ECONOMY No. #95.

News & photosAuthor, UEH Department of Marketing & Communication