Digital transformation: A life-and-death matter of Vietnamese businesses

31/10/2021| 10:34

In the context of the negative effects of the COVID-19 pandemic, slow digital transformation can put businesses at risk, even bankruptcy. Especially when international economic integration has developed in both width and depth, digital transformation becomes more and more vital.

Digital transformation: A life-and-death matter of Vietnamese businessesWhen international economic integration has developed in both width and depth, digital transformation becomes more and more vital. (Photo: EcoChank)

In the Socio-Economic Development Strategy approved by the 13th Party National Congress, the digital economy is considered as one of the driving forces in the coming decades, allowing Viet Nam to achieve its goal of becoming a high-income economy by 2045.

As underlined in the documents of the 13th Party Congress, we need to promote national digital transformation, digital economy, and digital society development to make breakthroughs in improving productivity, quality, efficiency, and competitiveness of the economy.

Accordingly, it is necessary to promote creative startups, develop industries and businesses based on the application of scientific and technological achievements, take advantage of the Fourth Industrial Revolution; at the same time develop products of high competitiveness with cutting-edge technology, high added value, and eco-friendly production, effectively participating in the global production network and value chain.

Can not be delayed

According to data from the General Statistics Office, in the first nine months of 2021, Viet Nam recorded 90,300 businesses leaving the market in which 45,100 enterprises suspended their businesses for a definite time, increasing by 16.7% compared to the same period last year; 32,400 enterprises stopped operating and waited for dissolution procedures, up 17.4%; 12,800 enterprises completed dissolution procedures, up 5.9%. Thus, on average, more than 10,000 businesses have left the market per month.

Since the outbreak of the epidemic, many countries have applied social distancing measures. Many businesses have to arrange for staff to work from home and hold online activities.

Basically, it can be understood that businesses have actively applied digital transformation to their activities. In addition, with the current epidemic situation, social distancing, digital transformation is an urgent requirement, an effective "vaccine" for businesses to overcome challenges.

Currently, there are diverse definitions of digital transformation, but in the simplest way, it is the full infiltration of digital technologies into all areas of an enterprise, changing the operation and business model and bringing new values to the customers.

It is said that digital transformation brings a lot of benefits to all aspects of businesses, including cutting operating costs, reaching more customers in the longer term, fasten the decision-making process and optimizing employee productivity.

According to WVR, Assoc. Prof. Ph.D. Dr. Nguyen Quang Trung, Research Head of Smart Transformation Management at RMIT University, digital transformation for businesses is a life-and-death matter for the time to come, especially in the context of the deepening international economic integration and the reopening of the economy in the post pandemic period.

He also emphasizes that we are living in a rapidly changing world, which forces businesses to digitally transform to meet the changing needs and expectations of customers, employees, competitors, shareholders, etc…

A tough question for small-medium enterprises (SMEs)

It can be said that, in the context of the pandemic and the fourth industrial revolution, almost all Vietnamese enterprises have identified digital transformation as a vital way to survive.

However, even before the pandemic, most SMEs in Viet Nam also faced difficulties due to poor governance, low competitiveness, low innovation capacity, and difficulties in accessing capital and high operating costs. Meanwhile, the issue of digital transformation is so unfamiliar that businesses are still "hesitant" to apply to their activities.

Digital transformation: A life-and-death matter of Vietnamese businessesAssoc. Prof. Ph.D. Dr. Nguyen Quang Trung, Research Head of Smart Transformation Management at RMIT University. (Photo: MN)

In this regard, Prof. Dr. Quang Trung says that digital transformation in enterprises usually takes place in two main forms.

Firstly, the application of digital technology to the current business model, for example, to improve the customer experience from purchasing decision-making to after-sales.

Secondly, the change in the operating model and structure, such as the revenue model based on new digital technology and big data.

Although digital transformation has been going on for more than 10 years, it may take more time to clarify the leading companies in this field, said a RMIT University expert.

Currently, most digital transformation in domestic and international enterprises is based on temporary solutions.

Dr. Trung said: “In collaborating with KPMG in recent research, we have found out that foreign-invested and large private enterprises are doing good digital transformation. Meanwhile, in terms of capacity and governance, both SOEs and SMEs in Viet Nam are only in the early stages of this journey.”

According to a survey by the Ministry of Industry and Trade and the United Nations Development Program (UNDP) on the readiness to approach the achievements of the 4.0 revolution for nearly 2,700 businesses, up to 61% of businesses are still on the sidelines and 21% of new businesses have just started entering.

Currently, SMEs account for 97% of the total number of enterprises in Viet Nam, but the level of science and technology is still low, in which 80% to 90% of machinery used in enterprises is imported, nearly 80% is old technology from 1980-1990s decade.

Thus, in reality, it is clear that digital transformation is not an easy process but a challenge for SMEs themselves unless there are suitable solutions.

Therefore, according to Dr. Trung, when making strategies of digital transformation, SMEs should closely examine the industry they are operating in, competitors, size, priority areas, corporate culture, as well as determination and consistency of leadership.

In addition, digital transformation is not only a change to a new business model but also an opportunity to significantly improve customer experience and optimize operations. When setting priorities, in general, two main factors need to be considered: the importance and urgency of the problem.

The expert from RMIT University says that Vietnamese businesses also need to add the short-term and long-term factors impacting on their priorities while doing digital transformation and strengthening their capacities in the future.

Some points suggested by Assoc. Prof. Ph.D. Dr. Nguyen Quang Trung to help SMEs in a comprehensive digital transformation strategy:

- Comprehensively understanding the cause of digital transformation. It is experienced that what helps businesses succeed now may not work in the future.

- Promoting the spirit of innovation and creativity.

- Building digital transformation capacity in activities such as: enterprise governance, digital strategy, corporate culture, technology and security, data analysis, and technical staff.

- Acknowledging who will be involved in the process.

- Reviewing existing business models in terms of technology, digital, and data collection

- Prioritizing the adjustment of corporate culture, company vision, risk management, goal setting, data security, and digital human resources.

- Taking immediate actions. Don't put yourself in the position of big businesses that have delayed digital transformation like Sears, Kodak, Nokia, and Yahoo. The slow change in the time being will likely have a greated impact on businesses than the consequences from COVID-19 pandemic.