Indonesia’s SMEs hold the key to growth. How can they scale up?

(Credit: Unsplash)

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Arip Tirta President, Evermos, Prasanti W. Sarli Head of Social Impact, Evermos

  • Indonesia’s small businesses will be an essential driver of the country’s future development.
  • Currently most are micro-enterprises – there is an urgent need to understand how they could scale up and become established companies.
  • A new blueprint will help owners to understand how they can take their businesses to the next level.

Indonesia is going through unprecedented times. A new middle class is on the rise, and digital technology has brought increased opportunities to start a business. Currently there are over 62 million SMEs (Small and Medium-sized Enterprises) in the country, which is one SME for every five Indonesians. Of these, 98.75% (61.5 million) are micro-enterprises. Developing these small businesses into bigger ones will be an essential driver of the country’s future development.

Many early-stage SMEs lack a strategic growth plan. There is an urgent need to develop a blueprint to help more SMEs scale up successfully. The main focus in the past couple of years has been digital transformation. For micro-enterprises, however, this is not always the answer; they don’t have the managerial or operational capacities to grow, even with digital help. What is it that allows some SMEs to become established companies?

To find the answer, we have conducted extensive interviews with more than 50 Indonesian SMEs at various stages. This was supported by Evermos and Shopee, large e-commerce websites serving Indonesia and elsewhere. Our particular interest was to understand the different characteristics among SMEs and how they grow.

It became clear that many businesses didn’t know exactly where they were in their growth journey. More importantly, they did not have a clear sense of their own potential. Even when asked what skills and mindsets they would need to grow, almost all of the owners –especially the ones in earlier stages – couldn’t answer the question: they simply had no idea.

We categorized the SMEs into different stages, with distinct characteristics: newcomer, artisan, emerging, challenger and mainstream. We looked at the characteristics of the owners, their mindset, skills and how they operated their business, and combined our findings into a practical framework. This can be used by SMEs as a guide to help them to achieve their full potential, from starting their business to creating a scalable managerial and operational system.

Strategic blueprint for SMEs growth
Different categories of SME face different obstacles to growth. Image: Evermos

The first three stages (newcomer, artisan and emerging businesses) are most important, as they make up 99.85% of all business in Indonesia. They often lack the resources to take on a strategic approach toward growth. Many newcomers, which make up over 99.0% of the business, are stuck. They have problems in identifying the right target market, what type of product/ service the market needs, and how to fulfil that need at a profit.

The challenges are different for artisans (0.5%). After they find their product market fit, they struggle with scalability. To deliver their products to their target market, they need to create a scalable system for key resources and processes. For both categories, digital transformation will be of limited benefit. These businesses require basic training in value creation and system building (whether in customer value proposition, team building, production, sourcing material, etc).

What is the World Economic Forum doing about digital trade?

What is the World Economic Forum doing about digital trade?

The Fourth Industrial Revolution – driven by rapid technological change and digitalization – has already had a profound impact on global trade, economic growth and social progress. Cross-border e-commerce has generated trillions of dollars in economic activity continues to accelerate and the ability of data to move across borders underpins new business models, boosting global GDP by 10% in the last decade alone.Embracing Digital Trade

The application of emerging technologies in trade looks to increase efficiency and inclusivity in global trade by enabling more small and medium enterprises (SMEs) to repeat its benefits and by closing the economic gap between developed and developing countries.

However, digital trade barriers including outdated regulations and fragmented governance of emerging technologies could potentially hamper these gains. We are leading the charge to apply 4IR technologies to make international trade more inclusive and efficient, ranging from enabling e-commerce and digital payments to designing norms and trade policies around emerging technologies (‘TradeTech’).

Emerging business (0.35%) face a different problem. Business owners at the emerging stage have a sense of accomplishment as they have already achieved some growth. Owners proved themselves, and have often received validation from their peers in their industry. But despite their hard work, many business owners at this stage hit stagnation, which they take as a false signal of having reached their peak. Many business owners then jump to the conclusion that there is no longer room for growth in their market segment. Some seek new challenges by expanding their business, sometimes even outside their own initial industry, at the risk of losing focus.

In the emerging stage, the main challenge is to maintain focus by going deep into their product and knocking on doors, opening new sales channels along the way. At this stage, what businesses need is help to expand their sales coverage by building a robust sales channel throughout different regions in the country.

So while it’s true that there is no definitive guide to growth, this blueprint should help SMEs navigate the challenges at different stages. We are hopeful that with a more personalized approach, more SMEs can grow and contribute significantly to Indonesia’s economic growth.

the sting Milestones

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

Constitution of the 9th legislature of the European Parliament

To solve big issues like climate change, we need to reframe our problems

Any doubt?

GSMA announces first speakers for Mobile 360 Series-Middle East and North Africa

A Sting Exclusive: “Accelerating Trade Digitalization in Times of the Pandemic”, written by the UN Under-Secretary-General and Head of ESCAP

NATO summit, Brussels, 11-12/07/2018

The United Kingdom’s decision to leave the European Union will impact young people’s future the most

Guterres welcomes conduct of Afghan elections, commends ‘all who braved security concerns to uphold their right to vote’

Can I still send mail in the time of coronavirus?

Stable growth momentum in the OECD area

A brief history of vaccines and how they changed the world

Quality Internships: Towards a Toolkit for Employers

This company is breeding millions of insects in the heart of London

7 surprising and outrageous stats about gender inequality

Welfare of transported animals: MEPs urge EU states to do a better job

Financial support for workers affected by no-deal Brexit

EP leaders call for negotiations on upgraded Transparency Register to continue

Eight years after Fukushima, nuclear power is making a comeback

Black historical figures who shook the world, from a warrior queen to a Mexican president

Parliament approves key directive regulating professional qualifications

Russia won’t let Ukraine drift westwards in one piece

Elections in Europe: No risks for the EU, leaders readying to face Trump-Brexit

More needs to be done to bridge the digital gender divide

Technology and public healthcare: the basis to fight COVID-19

Forest fires: EU continues to mobilise assistance for Greece and other countries in region

Data Protection Regulation one year on: 73% of Europeans have heard of at least one of their rights

Too Young to Feel Hopeless – Mental Health of the Youth and the Effects of COVID-19

EU will have stronger powers in trade disputes

UNICEF calls on supply chain and transport industry to take COVID-19 vaccines to the world

Nairobi summit: Women’s empowerment a ‘game changer’ for sustainable development

Syria: At least seven children killed in yet another airstrike

Budget MEPs approve €104.2 m in EU aid to Greece, Spain, France and Portugal

This woman solved one of the biggest problems facing green energy

Withdrawal Agreement: Commission sends letter of formal notice to the United Kingdom for breach of its obligations under the Protocol on Ireland and Northern Ireland

‘You can and should do more’ to include people with disabilities, wheelchair-bound Syrian advocate tells Security Council in searing speech

3 dynamics shaping the future of security on the Korean peninsula

Wednesday’s Daily Brief: Women boost work profits, saving biodiversity, UK loses Chagos Islands vote, Gaza funding, malaria-free in Argentina, Algeria

Madagascar: UN Secretary-General reaffirms support for electoral process

Chart of the day: This is how many animals we eat each year

New Zealand Prime Minister opens door to 4-day working week

Digital democracy: a Swiss view on digital trust

Libya: Heavy shelling and civilian deaths ‘blatant violation’ of international law – UN envoy

Coronavirus: Commission presents practical guidance to ensure continuous flow of goods across EU via green lanes

Further reforms in Sweden can drive growth, competitiveness and social cohesion

Plastic is a global problem. It’s also a global opportunity

‘Counter and reject’ leaders who seek to ‘exploit differences’ between us, urges Guterres at historic mosque in Cairo

Avocado: the ‘green gold’ causing environment havoc

A third of young people polled by UN, report being a victim of online bullying

As ride-hailing firms drive into the future, who is being left behind?

COVID-19 has been a setback for women. Gender-responsive policies can stem the losses

How India can become a leader in sustainable aviation fuel

‘Stealing’ food from hungry Yemenis ‘must stop immediately’, says UN agency

Why is scientific collaboration key? 4 experts explain

Women in Switzerland have gone on strike – this is why

Climate change hits the poor hardest. Mozambique’s cyclones prove it

COVID-19: Commission creates first ever rescEU stockpile of medical equipment

MEPs strengthen EU financial watchdogs

More than 90% of the world’s children are breathing toxic air

Chart of the day: These countries have seen the biggest falls in extreme poverty

Security: better access to data for border control and migration management

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: