Barriers to Digitalization for Malaysian Companies

Barriers to Digitalization for Malaysian Companies

Malaysian companies, both Small and Medium Enterprises (SMEs) and large companies, are well aware of digitalisation and are driven to digitalise but still face various obstacles towards digital adoption. Latest report from YCP Solidiance showed that while the majority of companies acknowledge that digital transformation is imperative to sustainable progress and would like to be a more effective, digitally-powered organisation, these ambitions were not translated into actionable digital strategies.

Digitalisation in Malaysia
Source: YCP Solidiance’s Research and Analysis

The digital economy had experienced robust growth in the past few years and contributed approximately 18.5% to the nation’s economy in 2018; and it is expected that the impact of the COVID-19 pandemic will continue to fuel this growth in the medium term as we enter into a “new normal”, compelling behavioural changes and urging business operations to become more digitalised.

Difficulties to Adopt Digital Transformation

According to YCP Solidiance’s research common main hindrances to actively digitalise are unequivocally gaps in digital talent and competencies within the company as well as the inertia to changes due to organisational silos or ineffective change management, leading to a lack of follow through in digitalisation plans.

Digitalisation in Malaysia2
Source: YCP Solidiance

A more in-depth review showed that SMEs, the bedrock of Malaysia’s economy, primarily lack the exposure to the benefits of digital tool usage. In order to realise both short and medium-term intentions, SMEs will need to overcome its main barrier of digital competency by the upskilling or reskilling existing talent within their company through trainings and/or attracting new digital talent that is able to diagnose the digital needs of the business and implement the right digital tools and workflow.

Conversely, large companies have relatively larger human resources and financial capacity to devise and implement digital transformation plans. However, they face more deeply intertwined issues to move forward in their digitalisation journey in which obtaining organisation buy-in is highlighted to be the root cause. This is largely due to the resistance towards change and disruption of current workflows stemming from a larger number of departments and employees involved.

The critical factor to a successful digital transformation is the management’s resolve to drive the importance of a digitally powered company, starting from communication to ensure that the digital ambition is cascaded to every employee within the business. Larger companies may consider establishing a dedicated taskforce and allocating skilled digital talent in every department to minimise workflow disruption and facilitate effective collaboration across various departments.

State of Digitalisation in Malaysia

According to the report, Malaysia is also still in the early stages of digitalisation, with 6 out of 10 companies at the basic digitalisation stage, which is the digitisation of current work processes from what used to be manual to digitally-enabled; for example, digital payments as opposed to writing cheques.

On the other hand, only an estimated 4 out of every 10 companies have a clear, integrated digital strategy as part of their business plan to actively digitalise and move towards the advance stages of digitalisation such as the use of analytics to reduce the lead time of procurement process.

The notion of digitalisation among the vast majority of Malaysian companies is skewed towards digitisation, in which 73% of companies inferred digitalisation to be the use of IT system (30%), converting manual to digital (27%) and use of data (16%) – all of which are leveraging on digital tools and technology for conversion of traditional or manual methods into digitally-enabled process.


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