As Industry Revolution 4.0 (IR4.0) rapidly advances on Malaysia’s business sectors, multiple challenges and opportunities will come to the fore. Smaller businesses – such as small and medium enterprises (SMEs) – are finding themselves in a vulnerable position in the coming transition.

To move forward more smoothly into the digital era, Malaysian SMEs are working more closely with government for support and assistance. Three key digital enablers – AI, blockchain, and IoT – can offer much growth potential to businesses of all sizes, provided an integrated strategy is adopted.

Let’s delve into some of the digital transformational possibilities offered through the implementation of these three digital technologies.

Artificial intelligence

AI can assist SMEs perform tasks more efficiently with reduced manpower, resulting in lower operational costs: an essential approach in today’s challenging economy. According to Microsoft and IDC Asia/Pacific, AI could improve productivity levels in Malaysia by up to 60 per cent by 2021.

RHB Banking Group recently launched a mobile app that uses AI to assist SMEs with faster loan applications. SMEs are now onboarded automatically, and are able to submit loan applications remotely. The app uses AI and big data to drive facial recognition for faster processing – all in real time. RHB envisions financing RM500 million (US$121 million) to support small businesses in the next year through this app, reported The Edge.

A widespread uptake of AI will prove to be a game changer for Malaysia, especially as the SME sector has grown faster than the overall economy in recent years. The SME Corporation reported that 36.6 per cent of the nation’s Gross Domestic Product (GDP) is contributed by the SME sector.

In addition, Malaysia is equipping entrepreneurs with AI skills to support their growth plans. National applied research agency MIMOS Berhad recently set up the Centre of AI for Future Industry to impart AI and IoT skills to professionals. “We want SMEs to adopt (the) latest technologies in the face of IR4.0 and one of the key elements is AI,” says MIMOS CTO Thillai Raj.

SMEs must both complement and work with Malaysia’s key sectors to ensure successful growth. Hazlina Selamat, director of the Centre for Artificial Intelligence & Robotics (CAIRO) at the Universiti Teknologi Malaysia, said in MIT Technology Review Insights: “AI and robotics firms in Malaysia need to focus on technologies for specific local applications (such as palm oil or fisheries) and affordable technologies for local and regional industries.”

Blockchain

Blockchain technology enables companies to store transaction records on multiple computers and allows distributed access to the digital database to any authorised person. Records are updated simultaneously across all platforms, eliminating the need for any middleman to authenticate the data. SMEs will have seamless access to details of loans, smart contracts, and enable increased trade.

For example, SMEs could incorporate blockchain into their crowdfunding platforms to provide information to and receive more funding from international investors. SMEs can then easily access overseas investors and clients in a more transparent and secure manner.

Malaysian startup MoneyMatch uses blockchain to help SMEs pay international suppliers. “Banks typically focus on larger customers who are sending higher volume transactions and can afford higher fees,” said CEO and co-founder Adrian Yap.

The issue with this is that banks often charge smaller firms the same rates. “SMEs don’t have much choice other than to accept these same rates, which adds to the cost of dealing with foreign suppliers,” Yap explained.

MoneyMatch partnered with blockchain company Ripple to create a cross border payment system. This offers SMEs lower rates, eliminating the need to pay high exchange rates on small payments. The firm is already connecting SMEs with suppliers across 120 countries.

Meanwhile, TM ONE, the business solutions arm of Telekom Malaysia (TM) has partnered with Korean technology company, FNS Value Co., Limited (FNSV) of Korea to deploy Blockchain Secure Authentication (BSA) products and solutions for Malaysia that would enable SMEs to use authentication methods to secure their online businesses. BSA is a password-less authentication method, so users can securely access their online accounts and approve online transactions over web or mobile.

IoT

While some SMEs are able to readily benefit from advanced technologies, rural SMEs often require simpler digital tools to match their financial capacity. However, this should not close off the benefits offered by digitalisation.

For example, Delima Emas, a poultry farm in Kuala Selangor, is leveraging IoT to achieve greater efficiency in its farming operations, and minimise their dependency on human labour. “Our chicken farm rears up to 200,000 birds in a cycle and our profit margin is thin, so we cannot afford to rely on manual labour,” says Khalid Ahmad, Chief Executive Officer of Delima Emas.

With TM ONE’s wide range of smart solutions including smart agriculture, Delima Emas will be able to expand their smart solutions for their farms to improve operational efficiency. Currently, the company uses smart sensors installed in the coops to monitor and maintain temperature, humidity and ammonia levels, which are three important parameters in chicken farming. “Chicks require a warm temperature but as the birds mature, a cooler environment is needed. In addition, we need to control the ammonia level as it will affect the health and quality of the birds,” added Khalid.

“We need to watch out for diseases such as bird flu and ensure optimum farming environment to prevent any disease outbreak. Smart poultry farming powered by IoT helps us to minimise human intervention, thereby reducing the risk of a disease outbreak, as well as helping us to maintain top quality for our organic chickens,” Khalid concluded.

The use of smart poultry farming also helps Khalid and his team to monitor the farms remotely from anywhere, and in real time. This is especially important for Delima Emas, as the farms are located in Kuala Selangor, while the company’s headquarters is more than 100 kilometers away in Nilai, Negeri Sembilan. In addition to smart poultry farming, Khalid is also looking into expanding the use of technology into Delima Emas’ entire supply chain, from food manufacturing, logistic, packaging up to its distribution process.

“Business owners may have great ambitions to take their business forward, but by breaking down big digitalisation goals into smaller ones, SMEs can take incremental steps towards realising the benefits of digital transformation. At TM ONE, we can facilitate your transformation journey via our innovative digital solutions that will deliver higher productivity and efficiency. We will continue to establish a solid foundation for the country’s Digital Economy, in line with TM’s unique role as the enabler of Digital Malaysia,” says Maznan Deraman, Head of Innovative Solutions at TM ONE.

Technology and digitalisation are certainly not the sole province of large corporations. Neither should they be an expensive affair. SMEs can begin their digital journey by identifying the low hanging fruits that they can adopt quickly and cheaply, then moving on to bigger ambitions as they begin realising the benefits of the initial investments.

Alternatively, they can also begin from their most pressing pain points where technology applications can yield the most benefits. The identification of these starting points can be undertaken either on their own, or by seeking help from a technology expert.

IR4.0 promises to offer a tidal wave of opportunities for SMEs around the world. With a comprehensive digital toolkit and the right partners, Malaysian SMEs will ride the wave, and transform themselves to the next level.