Articles > Modernising Traditional SMEs – The Second Generation Offers These 4 Keys to Succeed

Modernising Traditional SMEs – The Second Generation Offers These 4 Keys to Succeed

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The FinLab

The only constant in life is change. We have seen it especially so in 2020 with the COVID-19 pandemic fundamentally reshaping customer behaviour and shifting how businesses operate. In particular, the pandemic has accelerated the adoption of digitalisation. What was once an optional benefit has now become essential just to be able to reach and serve customers.

While digitalisation has become a necessity, implementing technology can still be a major challenge –especially when it comes to traditional family-run businesses. Here, modernisation efforts can face heavy resistance from business owners who are entrenched in their ways.

In short, change is hard – but it is also a must. Reconciling the two is the key for SMEs to survive and thrive.

There are no easy “one size fits all” answers for businesses struggling with this dilemma. However, the insights of those who have “been there and done that” can be informative.

Introducing Sigma Trading Transport and Markaids

The first business is Sigma Trading Transport, a logistics and transportation service provider that has been in business since 1988. From humble beginnings, the business now boasts a total fleet size of 53. Today, the second generation is actively involved, with the founder’s daughter, Ashley now heading business development, and Ashley’s brother and cousin running operations and finance.

The second business is Markaids, which develops, markets, and distributes specialised food ingredients . In business since 1977, they have since expanded from Kuala Lumpur to several other states in Malaysia and also to Singapore. They focus heavily on using a scientific approach to create innovative and more nutritious food ingredients. The founder’s son, Kasey, is now in charge of both marketing and commercial development.

We interviewed both Ashley and Kasey to get their thoughts on pushing through change and the key challenges they faced.

Modernising and Digitalising – What They Did

For Sigma Transport, the focus of their modernisation efforts centred around their accounting and fleet management systems. Their accounting system was 20 years old and had no built-in digital functions – everything had to be done manually. Meanwhile, their fleet management was haphazard. They could not effectively monitor where the money spent on fleet management was going, or whether it was being used efficiently.

Markaids’ efforts were broader, examining the whole business from the ground-up to identify where operational improvements could be made. They had recently moved to a bigger warehouse in January 2020 and quickly realised the need to implement real-time systems to centralise and manage the different information flows, such as on inventory levels of raw ingredients.

These were all badly needed changes. However, putting them in place was easier said than done.

Facing Common Barriers

Although Sigma Transport and Markaids are very different businesses, both Ashley and Kasey ran into similar challenges when trying to modernise the business. In particular three stood out:

Entrenched Thinking

It should come as no surprise that it takes a lot of convincing the first-generation founders to change the way they do business. As Ashley puts it, “The learning curve is very steep for a traditional Chinese company to transform its business processes.”

The reason comes down to how they perceive risk.

Perception of Risk

Change always comes with risk. And for some traditional and conservative businesspeople, this can prove to be a hurdle to taking action. Ashley continues, “A wrong or a rash decision could cost us fortunes whether in the short term or in the long run. Not forgetting the efforts to rectify the problems.”

But even after the first generation is convinced, there remains one final challenge.

Winning Over Staff

Second-generation executives must be keenly aware of how they are perceived by the staff. Fortunately, both Ashley and Kasey started at their companies in relatively junior roles, which helped their perception. Still, implementing changes typically require employees to learn new skills or change their day-to-day processes. This first requires a certain level of respect from the staff in order to ensure enthusiastic compliance.

How can businesses overcome such challenges?

The 4 Keys to Successful Change

Both Ashley and Kasey managed to successfully steer their businesses into executing these changes. They shared four common lessons that were learnt along the way.

Lesson #1: Open dialogue is crucial

Both Ashley and Kasey stressed the importance of open dialogue and finding common ground when broaching ideas to the first generation. After all, both generations want what is best for the business. And that is powerful common ground.

Kasey said it best, “It doesn’t matter if the cat is black or white, as long as we catch the mouse.”

Lesson #2: Be able to support your ideas

While open dialogue is important, being able to present good and workable ideas is even more so. However, that only comes through knowledge and experience. When Ashley first started working in the business, she accepted her role as that of the newcomer learning the ropes.

Once she obtained the necessary experience, she started taking charge of projects. When conflicts arose, she made sure she could always support her ideas with hard data and numbers. She recalls sifting through stacks of invoices to determine the exact labour costs for lorry maintenance – all to convince the first generation to adopt the new fleet management system.

Lesson #3: Involve the employees in the process

While there are clear hierarchies within their companies, driving major change needs the help of their staff. Simply providing orders and expecting total compliance is a recipe for failure – especially when you are the founder’s children.

That’s why both Ashley and Kasey made sure to involve the team in the process as much as possible – seeking their buy-in from the start and showing how the changes would benefit them. For example, Kasey involved management and team leaders from the beginning in setting out guiding principles, goals, and objectives. He also ensured there was sufficient training provided to get everyone up to speed.

As for Ashley, she solicited her team’s feedback on the current system and asked what improvements they would like to see. That way, when new solutions were implemented, the staff were more than supportive – because it was also their idea, and they knew it would make jobs easier.

Lesson #4: Don’t be hesitant to ask for guidance

Asking for guidance isn’t a weakness, it’s a strength. It shows humility in acknowledging that you might not have all the answers, and respecting the value of external expertise. Both Sigma Transport and Markaids recognised this, which is why they both participated in The FinLab’s Jom Transform Programme to get support and inputs on their own digitalisation journey, learning form experts and fellow business owners.

The Jom Transform programme is designed to help Malaysian SMEs better compete in today’s digital economy – equipping them with the tools, know-how, and confidence they need to transform digitally.

For Sigma Transport, the programme offered them various options for their fleet management system. In addition, the company also benefited from a thorough review of their business model. As Ashley said, “The programme was meticulously curated to make sure that it was easy to follow and understand. Most importantly, the solutions offered were honest and professional. Communication between parties were helpful to ensure we got the solutions best suited for our business needs and goals.”

Markaids already had plans to digitalise prior to participating in the Jom Transform programme. However, with so many moving parts, they suffered from “paralysis by analysis”. The programme gave them clarity – helping them identify the critical areas they should focus their digitalisation efforts on. Plus, they also got connected to relevant experts and solutions for their current and future needs.

How The FinLab Can Help You To Digitally Transform Your Business

Sigma Transport is now on top of their fleet management costs, and are currently looking for other ways they can use digitalisation to boost their efficiency even further. Markaids has invested in a modern Enterprise Resource Planning (ERP) system to remove a process bottleneck and obtain real-time feedback on various processes. Looking forward, they are examining ways to further reduce manual tasks through digitalisation.

The FinLab can help your business in the same way – and go beyond guidance and training on digitalisation strategies and solutions. This year, in partnership with the Malaysian Digital Economic Corporation (MDEC), The FinLab helped more than 270 businesses through masterclasses, tech matching sessions and mentorship. In these changing and challenging times, The FinLab continues to support businesses on their digitalisation ambitions. If you think your business can benefit from digitalisation, reach out to us to find out more about how we can help you.

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