Malaysia 5.0: Here’s How Your SME Can Benefit From Digital Transformation

Category: SME,Technology

Malaysia 5.0 can lead to better and more sustainable economic growth. With this, Small and Medium Enterprises (SMEs) play an important role in performing digital transformation strategies. But what is digital transformation? What are its benefits and how can your business take advantage of it? Read this article to learn more.



If you follow the news of digital transformation in Malaysia, then you’ve probably heard about Malaysia 5.0 scoring headlines quite recently.

Mobile supercomputing. Intelligent robots. Self-driving cars. These are perhaps some of the things that we would imagine when thinking of this concept.

There’s genuine buzz surrounding the idea, its prospective values and merits – but what does Malaysia 5.0 truly mean, and why does it matter to us as a society or more specifically, for budding entreprepreneurs or small-medium enterprises (SMEs), who make the backbone of Southeast Asia’s growing economy?

To understand the trickle down effects of Malaysia 5.0 towards society, we must first grasp the meaning and history behind Society 5.0.

What is Malaysia 5.0?


Widely cited as the fifth stage of human development, chronologically following hunting, farming, industry and information. (Image source: B20 Magazine)

Derived from Society 5.0, Japan’s idea for a technology-based and human-centered society, Malaysia 5.0 aims to integrate cyberspace and physical systems to ensure economic advancement balances with resolution of social problems. In other words, it is about creating a society that combines digital transformation and higher values and services, with the hopes of creating a richer life that benefits society.

Originally conceived by Yuko Harayama, who advised the Japanese cabinet on matters related to innovation, the catalyst for Society 5.0 was the need to establish a system that balances digital transformation advancements and societal needs.

This type of system empowers the advancement of fourth industrial revolution (4IR) technologies such as Internet of Things (IoT) technologies, big data, machine learning (ML) and artificial intelligence (AI), while balancing it with societal needs like higher standards of living and equal distribution of wealth and information.

Society 5.0 also allows governments to leverage on 4IR innovations, like autonomous systems, robotics and internet-based technologies, to streamline labour intensive processes and increase productivity.

This innovation may bring about widespread improvements to age-old societal problems across many emerging sectors. And the results are clear – the markets grown in Japan have been impressive. In robotics, they predict around $87 billion in investments, and the IoT market was poised to hit $6 billion in 2019. According to the latest market impact survey, Japan’s IoT is forecasted to grow at 27.9% in a global market expected to reach US$1 trillion (RM4.3 trillion) by 2027.


Data proves that Society 5.0 is creating growth potential for businesses in emerging sectors such as robotics, AI and IoT. (Image source: Japan Government)

The hope is to create new knowledge and value systems by connecting “people and things” and the “real and cyber” worlds as ways of resolving pressing issues in society, creating better lives for people and sustaining healthy economic growth.

Society 5.0 ties well with the United Nations Sustainable Development Goals (SDGs), a blueprint to achieve a better future by calling all nations to work together toward a sustainable world that aims to achieve both economic development and solutions to societal issues.

In essence, that’s how Malaysia Society 5.0 was born –  an emulation of the ideals originally brought forward by Japan.

Malaysia 5.0 and digital transformation – what’s the connection?

The movement towards creating Society 5.0 will be enabled by digital transformation, a necessity in today’s changing world especially with the evolution of information and communications technology (ICT), according to the report Society 5.0: Aiming for a New Human-Centered Society.

But what is digital transformation? It means exactly what it says – it’s the use of new, swift and frequently transforming technology to solve problems, converting non-digital processes to digital processes. It could be from something basic like using cloud computing (Dropbox, Google Cloud, iCloud) which reduces the reliance on hardware and increases dependency on subscription based cloud services.

Seeing how digital technologies are dramatically disrupting the market, many companies have been pursuing large-scale change efforts to digitize their business and stay competitive. In a 2018 McKinsey Global Survey on digital transformations, more than eight in ten respondents say their organizations have undertaken such transformation efforts in the past five years.

But what’s all the fuss with digital transformation? Deloitte says it will improve efficiency, enable new products and services, permit new business models, and blur the boundaries between industries, and is expected to become a pillar of industrial policy in many countries as digital transformation is the common element driving high level strategic transformation plans, i.e. Industry 4.0, Smart Cities, Made in China 2025.

The evolution of the digital economy is closely tied to the development of many cutting-edge technologies we see today, including the block chain, IoT, 5G, cloud computing, automation & robots, AI, data science and 3D printing.

The World Economic Forum predicts that by 2022, around 60% of the global Gross Domestic Product (GDP) will be generated from the digital economy – a clear indicator of the colossal impact that the digital economy will have on the future of the global economy.


This diagram clearly illustrates how new digital technologies are mushrooming across the globe. (Image source: Society 5.0: Aiming for a New Human-Centered Society) 

Newly appointed MDEC chairman Dr Rais Hussin, in a recent public statement, described Malaysia 5.0, as having a “problem solving approach to society’s challenges and problems through the deployment and implementation of Fourth Industrial Revolution (4IR) technologies which integrates both physical and digital environments.”

In his statement, he shares that MDEC hopes to play its part in this ecosystem by offering a “sandbox” for SMEs to experiment with new technologies and stress-test them before implementation so that the risk of failure is reduced.

It’s clear from what we gathered so far that when leveraged properly, digital transformation equates to producing innovative solutions.  But what else can your SME gain from digital transformation?

Beyond increased profitability, enhanced customer satisfaction, and a streamlined and integrated business processes, here are some other advantages of digital transformation for your business.

Also read: Propelling Entrepreneurs and SMEs into the Digital World

8 benefits of digital transformation to businesses

1. Scale up the business faster

Properly executed digital transformation plans could help the business scale up easier and faster, increasing the volume by 10 to 20 times, according to Malaysia Digital Economy Corp (MDEC) chief operating officer (COO) Datuk Ng Wan Peng during a AmBank BizRACE Season 3 webinar on digitalization.

This view is supported by a survey conducted by global intelligence firm IDC, which reported a clear connection between digital transformation and revenue growth. Their survey covered 3,210 small and midsize firms from 11 different countries.

The findings showed that fast growing small and midsize firms with 10%+ annual revenue are significantly more likely to indicate major progress towards transformation than slower growing firms.


Companies that have embraced digital transformation have reported high revenue growth. (Image source: IDC)

2. Increase business efficiency

A key to a venture’s success, efficiency elevates an organization’s performance simply by: increasing output, reducing wastage.

With smart technology and connected systems, business efficiency can be enhanced through integrated and connected technologies such as sensors, app-based controls, analytics, edge computing and smart machinery. These digital technologies provide intelligent automation and data insights that are meant to enhance overall performance.

A real life example, according to CNBC, is when Le Meridien’s luxury hotel – using technology from Schneider – was able to improve building operation, power monitoring, and guest room management by connecting the hotel’s systems, and analyzing big data sets. Overall, energy consumption was reduced by 12%.

3. Generate ideas and make decisions using data-driven insights


The power of digital transformation is providing better customer experience. (Image source: Hitachi via Disruptive Tech Asean)

In today’s growing digital world, it’s imperative for businesses to integrate big data into their business to remain competitive and to achieve further growth and success.

Thanks to analytical tools like Google Analytics and R Programming, businesses can track and analyze the performance of websites, marketing campaigns, and content in real time. It’s these insights that will help businesses strategize their plans, focusing on what works and doesn’t in the long term.

Marketers for example could leverage on tools like Google Trends to come up with an informed global or local business strategy. Using its big data mechanics, Google Trends showcases trending topics by quantifying how often a particular search-term is used relative to the total search-volume. Google Trends helps marketers to ascertain the popularity of certain topics across barriers like cultures, countries, languages.

The growth of e-commerce platforms Amazon, Lazada and Shopee are all in line with the growth of the internet. In a joint-report by Google and Singaporan investment firm Temasek, they projected that the Southeast Asian Internet economy would grow to $200 billion by 2025, fueled by rapid growth in online travel, e-Commerce and online media.


The e-commerce industry is expected to exceed $150 billion by 2025. (Image source: Screenshot from e-conomy 2019 by Google, Temasek and Bain& Co

These e-commerce platforms utilize big data and analytics tools to facilitate their business towards becoming more customer-centric, allowing them the ability to track volatile changes in patterns and behaviours of customers.

Guided by the customer-centric approach, use of data can help your business understand what your customers want.

Similarly, American companies IBM and McCormick both partnered to use AI to create new flavors in food product development.

Through an AI-enabled platform called “One”, it uses the technology to learn and predict new flavor combinations using “hundreds of millions” of data points from sensory science, consumer preference and flavor palettes.

4. Build a more productive workforce and empower your people

According to findings from a Microsoft and KPMG report, some of the trends adopted by SMEs from embracing digital transformation include the establishment of a flexible working environment where more businesses are able to implement remote working practices.

This is particularly true in an increasingly millennial-centric job market, as stated in the report, who are known to be more independent, value private time and seek challenges at work.


Beyond just generating more revenue, digital transformation could also help businesses become more cost-efficient.

From this arrangement, businesses get to save up to $20,000 (RM85,250) savings annually if employees are on full time telework, increase employee productivity by 22%, and reduce employee turnover by 50%.

A business with flexible working arrangements gives them access to a diverse talent pool and minimizes labor costs across all departments.

5. Transform customer experiences

One of the biggest benefits of riding on the digital transformation wave, is being able to alter your business services to meet the changing demands of customer experience.

Unlike six decades ago, where we would physically go to a store if we needed anything – in today’s digital first industry, anything is within the click of a button.

As customers’ needs and wants change, so has the operations of businesses too. Now customers often seek the latest technology – either through the web or social media – with hopes of finding valuable and fast solutions to their problems.

All in all the experiences of customers make up a large part of the digital experience. Many companies recognize this as 92% of leaders have developed digital transformation strategies that are specifically aimed at harnessing consumer experience.

Businesses who are able to meet the demand of customers and provide valuable customer experiences will earn more trust and respect from customers – a good example would be Amazon, who is at the forefront of digital transformation.

Related: MCO Lockdown: 10 Tips To Get Back Your Customers For Malaysian Businesses During COVID-19 Pandemic

6. Go online – operate digitally


The COVID-19 pandemic has forced many businesses to expedite their digital transformation journey. 

A few years back Xerox machines and cheques were considered innovative, but those times have changed. The existence of cloud services have allowed documentation to be done and saved digitally, reducing paperwork to a great extent.

The decreasing reliance on papers helps reduce the wastage of paper, and could also save time and money, and improve efficiency.

Now there are tools to automate various tasks and processes like employee management tools to track working hours and attendance, and spend management and budget systems to streamline your procure-to-pay process, project management and task management tools to assign and manage tasks and deadlines.

Business automation allows your business to do more with less and scale up to compete with bigger players, a thing that was almost impossible many years ago.

Though traditionally, bigger corporations have more resources than smaller corporations but business automation levels the playing field as now even smaller brands can react to new trends faster than their larger rivals.

We found a cool list of business automation tools we figured would be helpful for you. Check it out here.

7. Reduce errors and increase accuracy


Up to 90% of workplace accidents are caused by human errors. It can cost money, create a loss of time, and interrupt workplace productivity, according to HumanErrorSolutions

The implementation of automated systems allows for more efficiency as there’s a higher chance of reducing human error from tedious tasks like data collection.

Digitalization can help your organization eliminate errors at every operational stage and process. This can help you boost overall accuracy and reduce rework.

As use of data gets exponentially larger, so do the chances of human error, and automated monitoring would be the key to significantly reducing these errors.

Gartner, a global advisory and research firm, reported that the leading cause of network outages are due to human error.

8. Encourage agility, innovation and collaboration

In business, being agile and able to adapt quickly is the key to your business success or failure. (agility refers to the ability of your business to improve and develop quickly).

In the digital age, the rapid development and constant changing of the digital landscape leave no time for businesses to sit back and relax, – around 68% of companies rank agility among the top three considerations when it comes to digital transformation initiatives.

Even big players like Apple and Microsoft have continuously needed to innovate in order to stay competitive – Apple always tries to innovate and diversify their product offerings every year despite the existing ones already considered “innovative.”

There will always be new trends, new innovations, new tools popping up every now and there, and being attentive to these changes is crucial.


The scrum methodology allows employees to focus on delivering the business value in the shortest time.

But it’s not only the competition that businesses need to be aware of – sometimes being adaptable and agile is necessary when there’s a catastrophe like the COVID-19 pandemic, which has forced many businesses to go digital even before they are ready.

And on top of that, building a strong foundation for digital transformation requires digital congruence within the organization – a situation where all departments are aligned on the cause  of digitalization, this indirectly builds a strong company culture in order to enable that digital transition.

Bottom line – if your business is riding on the digital transformation wave, you are more likely to be more agile and adaptable than other businesses, and have a higher chance of building a strong, unified team.

Need a headstart but not sure where to turn to?

Here some programmes you could try looking into for your business to take off on its digital transformation journey.

MDEC’s Digital Transformation Acceleration Programme (DTAP) aims to provide Malaysian companies with the necessary tools to help kickstart their digital transformation journey.


Here are the steps to applying for a DTAP Pilot Grant. (Image source: MDEC)

Top Glove, Gamuda and KPJ are some of the brands that have benefitted from DTAP to achieve their digital transformation.

United Overseas Bank (Malaysia) (UOB) and The FinLab recently launched The FinLab Online, a regional digital platform to help local SMEs and start-ups implement digital solutions to transform their businesses.

Additionally, their Jom Transform Programme aims, according to The Star, to aid at least 100 Malaysian SMEs embrace digitalization to achieve one of the following outcomes: increase revenue, reduce business cost, improve process time cycle, reduce man hours or creation of new sources of growth.

Founded in 2015, The FinLab is an innovation accelerator powered by UOB and SGInnovate, it aims to help businesses scale across ASEAN by providing support via: connection to industry experts, mentors and facilitating the right technology solutions to power their growth.

Or you could head over to 5G OpenLab in Cyberjaya – it’s a collaboration between Digi and Cyberview to facilitate, build and nurture the development of a potential 5G ecosystem in a live but controlled environment.

The lab offers individuals and/or corporates to develop solution(s) to be tested using the 5G network.

Another option is to take part in the MY Digital SME initiative, a program aimed to aid SMEs in their digital transformation journeys by providing access to workshops, networking, and certifications.

Malaysia 5.0 is the future and digital transformation is the driver

As customer experience and expectations transform, so does the need for businesses to shift towards digital-specific initiatives and adopt digital technologies.

This may require businesses to evolve their strategies and models to keep up with the changing times and demands.

Businesses must first identify key trends in their industries and the tools that they could leverage on to improve their digital engagement, though it’s not a one-size fits all approach, businesses would be good to do their own research to figure out what approach suits their business best.

With the right digital solutions, even SMEs can refine their business, scale up their businesses, fulfill changing customer needs, and build a more versatile SME of the future.