Collaboration with technology startups could result in exponential, scalable growth for MSMEs

MSMEs (Micro, Small & Medium Enterprises) are one of the largest employment generating sectors in India with over 6.3 crore enterprises that provide opportunities to over 110 million people.

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The tech startups and the ecosystem in India could be great enabler in supporting the MSMEs expand, scale and growth their business.
By Sriram Narayanasami

As I pen this article, the high frequency economic indicators are pointing to a slowdown as seen in different sectors as automobiles, real estate, consumption-related metrics or industrial production. However, I am sanguine about growth after what we are all hoping would be a cyclical blip. There are many reasons to be optimistic like a stable government, consumption-led demand, innovation, entrepreneurial spirit, access of capital and a favorable demography.

MSME and technology startups are two distinct and very vibrant ecosystem

History of economic development across many countries like Japan, Korea, Spain, and China suggests that when the working-age population as a relative to total population is large enough, it results in period of sustained growth over the long term. India has just entered this favorable situation in 2018 and will last another 35 years. This augurs well for India’s economic growth. It is fair to say that age demography will provide strong economic tailwinds over the next decade.

MSMEs (Micro, Small & Medium Enterprises) are one of the largest employment generating sectors in India with over 6.3 crore enterprises that provide opportunities to over 110 million people. In terms of trade, this segment caters to almost a quarter of the import and export of goods, 40% towards exports and an overall 30% towards the country’s GDP. One must expect that MSME(s) will have significant growth opportunities over the coming period.

Then, our technology startup ecosystems are very vibrant and constantly growing. This is aided by an excellent support system to incubate and nurture startups, some sharp minds with an entrepreneurship bent, young graduates having a freer mind and latitude to experiment besides access to capital. This has meant that we have at least 7000 plus technology startups and number is growing 35-40% each year. An estimated $ 33 billion has been invested into the Indian startup ecosystem since 2014. The technology startups are actively looking for business problems (called as use cases) to solve and exhibit their skills. It is common for us to get a reach out every week from a startup in niche Technology spaces and wanting to work with us.

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Technology could be the catalyst and enabler
A great opportunity beckons the MSME(s) in terms of growth. But we need an enabler. To grow MSMEs must scale. Scale comes from reaching a wider customer base, wider range of services and products. Digital technologies can be a great catalyst for this growth. Increasingly, companies need to think about both the physical products/ services and their digital presence.

We must think that we live in two worlds i.e. the physical world where value is created and the digital world which enhances and enables this value creation. A wider customer base can be reached through digital marketing. It is inexpensive these days to have a digital presence through cloud technologies which are reliable and safe. Sales outreach can be expanded (without feet on the ground) using digital marketing efforts. Tracking of goods and services could be enabled through IoT (Internet of Things). Automation of order handling, invoicing, payments could help scale and grow. High speed internet could mean virtual offices and work from home could enable expanding presence without costs associated with maintaining and developing offices. For the more adventurous and advanced MSMEs, AI (artificial intelligence) and blockchain could enable decision making and integration with customers systems or the digital market places.

When one plus one becomes eleven
Technology will continue to get democratized. However, it will still be daunting for MSMEs to embrace the technology and make it an integral part of growing their businesses. The tech startups and the ecosystem in India could be great enabler in supporting the MSMEs expand, scale and growth their business. The tech startups are constantly looking for exciting problems to solve and this might allow for low-cost innovation. This could also be exciting for the startups too as they have an opportunity to solve real-life problems at a manageable scale. For the tech startups, this could be worthwhile addition to their library of use cases.

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Overall, there would be significant potential and opportunities in what are two distinct ecosystems (MSME and tech startups) to be more interconnected and collaborate to enable mutual growth.

( The writer, Vice President, Commercial, Maersk Global Service Centers)

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(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
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