An Ocean of Opportunity: The Digitalization of Small and Medium-sized Enterprises in Bitung, Indonesia

Abstract

Over the past ten years, numerous industries have undergone upheavals that have significantly altered how businesses interact with their clients and how goods are created and produced bySMEs. Many cutting-edge technologies have recently been created and implemented to enhance business models, facilitate sustainability features for organizations, and boost business capabilities. This essay seeks to understand how digital entrepreneurship functions in developing nations. The results of this study show the effectiveness of digital transformation in the context of SMEs is greatly influenced by aspects including the change of managerial intensity and the involvement and perception of workers, customers, and shareholders. One of the needs that business owners showcased in this study in terms of digitization is infrastructure resources to support digitization such as devices, the Internet, and funds, but also the ability to use digital media for business development. Practical skills that business people want to learn such as product design and management of their social media accounts. There are also aspects of time and self-motivation of the business actor that can speed up or slow down the digitization process. Finally, government support that is structured in encouraging MSMEs is also one of the supporters and drivers of digitalization in the blue economy.

1. Introduction

Over the past ten years, numerous industries have undergone upheavals that have significantly altered how businesses interact with their clients and how goods are created, produced, and distributed (Gersch & Goeke, 2007). Digital transformation is a strategy that businesses are using to not only rethink what their consumers want but also to build operational models that can fully use what is now feasible and set themselves apart from the competition. Innovation is still essential in this environment for societal advancement, business expansion, and keeping a competitive edge in markets. The invention process is also still iterative, ambiguous, interactive, path-dependent, and context-specific multitasking activity (Pinna et al., 2018). Finding the best methods for executing an innovation process, from the early stages of ideation to market dissemination, continues to be a crucial business subject (Brem et al., 2016). The single most prevalent example of market spread is digital entrepreneurship.

Global emphasis is being focused on digital entrepreneurship, which is the process of exploring “new enterprise prospects given by new media and Internet technology”. Exploring entrepreneurial possibilities by starting new businesses or marketing goods and services is comparable to conventional entrepreneurship. The fundamental distinction is brought about by the fact that “part or all of the entrepreneurial venture takes place online rather than in more traditional formats” in digital entrepreneurship. Enterprises that offer online accounting, software development, social computing, digital platforms for cataloging, e-commerce, and multi-media companies that sell digitized goods and services are some examples of digital businesses (Onetti et al., 2012).

Businesses in developing nations prioritize creating profit for themselves, their shareholders, and the communities where they operate, whereas organizations in rich nations are more focused on sustainable development. Many cutting-edge technologies have recently been released and implemented to enhance corporate capacities and business sustainability elements and improve business models. The organizational environment in which these cutting-edge technologies are used is related to digital transformation (hereafter DT). Due to the requirements for significant financial investment, talent management, adaptability, and a lean decision-making process that is affordable for SMEs, the DT process in business is connected to the organizational and strategic planning of major companies and multinational businesses (Crupi et al., 2020).

Governments in emerging economies want a supply of entrepreneurs who will start SMEs since they do not exist by themselves. There is a growing corpus of research on entrepreneurs, focusing on their psychological traits, motivations, and economic effect; however, it tends to be predominantly focused on industrialized economies. There is virtually little thorough empirical research on the emergence of entrepreneurs in emerging economies or the support systems for them. Entrepreneurship in emerging nations is likely the least researched economic and social phenomenon in the world today (Lingelbach et al., 2005).

The idea of the “blue economy” has also been taken up as a global social phenomenon. The blue economy is an economic model that no longer relies on the exploitation of the environment and natural resources for growth. This concept is being developed using a long-term, sustainable economic strategy that promotes a low-carbon economy. The integration of land and sea development, clean, inclusive, and sustainable development, increasing added value and product competitiveness via innovation and fostering a just, equitable, and suitable society are the four pillars that support the growth of the blue economy. The blue economy is still seldom covered in studies, nevertheless. As a result, the focus of this study will be on digital entrepreneurship in developing nations that are built on the blue economy (Rustomjee, 2017).

2. Literature Review

2.1. Digital Entrepreneurship

Digital entrepreneurship is built on the use of digital media and other information and communication technologies to hasten changes in the marketplace. In essence, digital entrepreneurship offers a range of options via the use of technological platforms and other information and communication technology. Therefore, by utilizing cutting-edge digital technology, digital entrepreneurship creates new ventures and updates existing enterprises to fit the modern business landscape. The global business environment and organizations have undergone a metamorphosis and change toward a situation where gadgets, apps, big data analytics, and the internet’s sophisticated digital platform and applications have been made possible. The goods and services provided by a business can be connected to adjust and react to market changes and consumer expectations (Moldabekova et al., 2021). Moreover, the fastest-growing sector of the ICT industry is e-commerce, which may be a result of human capital development and nurturing an innovative ecosystem (Alibekova et al., 2020).

The business must be ready to deal with interruptions to its regular operations, procedures, and effective interactions with stakeholders to retain adequate support for the DT journey. These operations, which modernize large-scale information management systems, technologies, and applications, often persist for several years (Crupi et al., 2020). To accomplish continuous strategic transformation, the DT journey also necessitates considerable human, financial, intellectual, and technical skills that must be coordinated (Hoang et al., 2022). Last but not least, corporate executives who are also DT advocates are seen as being significant forces in establishing future courses, figuring out the best place to compete in the digital age, persuading important stakeholders to embrace DT, and making decisions throughout the transformation.

2.2. Blue Economy

The idea of a blue economy is one alternative strategy that might structure sustainable growth based on natural resources. Sustainable resource management and conservation, particularly of marine resources, are the foundation of the blue economy. Pauli (2010) is the principal proponent and creator of the blue economy. Pauli believes that this idea should be implemented to manage resources efficiently, guided by a zero-waste approach, social inclusion, social fairness, and possibilities for the disadvantaged to find work, as well as innovation and adaptation and multiplier economic benefits. At summits of world leaders, particularly among senior members of the Asia Pacific Economic Cooperation, discussions regarding the blue economy have grown commonplace (APEC), or the Asia Pacific Economic Cooperation, a Pacific Rim economic conference to boost regional economic growth. Because it was understood that the Brunland commission’s notion of sustainable development would not be able to preserve the natural environment for future generations of humans, this idea became a crucial one. According to Pauli (2010), there are four principles of management and utilization of resources in addition to efficiency issues, which are the main focus of the blue economy approach. One of these principles is zero waste, which emphasizes the cyclical system in the production process to create clean production. There is always waste or leftover output throughout every industrial process or resource extraction.

3. Methodology

The sampling methodology applied in qualitative research involves selecting a sample that is not based on probability, as it is not representative of the statistically targeted population, as is the case with quantitative research. In qualitative research, the richness and quality of the information from the sample are considered to ensure the representativeness of the information obtained (Hennink et al., 2016). The size of the sample used for qualitative research is influenced by several factors, including the resources available to the researcher (Hennink et al., 2016). So in this study, together with the cooperation assistance from the Office of Cooperatives for Small and Medium Enterprises of Bitung City, researchers got access to interview micro and small business actors in the city of Bitung.

The purpose of this study is to analyze and explain perceptions, opinions, and attitudes as well as identify internal factors that hinder and support MSME entrepreneurs’ efforts to digitize. The conceptual framework used to inspire this research is based on Guo (2020), which argues about the digitalization process in crisis conditions (Figure 1). This is by the context of the conditions at the time this research was conducted during the COVID-19 pandemic.

This study uses a purposive sampling method based on the knowledge or expertise of researchers about certain groups to select subjects that can represent a certain population (Wiltfang & Berg, 1990). Samples selected from the population were analyzed with the help of certain criteria. The criteria for informants in the sample for interviews were selected to meet the objective needs related to the conduct of the research, namely:

• Micro and or small business actors located in the city of Bitung.

• Micro and/or small business actors who have been operating for at least 2 years;

• The actor holds an executive position as the owner or manager of a small and/or micro business.

• The type of business involved is related to marine/ water products by the subject of this research.

• The actor has no conflict of interest of any kind with the people on the research team (cooperation contracts, consultations, joint projects or partnerships, etc.);

• The actor is in good financial health and a stable position in micro and or small business.

• Perpetrators provide express written consent to participate in interviews in accordance with research ethics and methodological norms.

Qualitative research was conducted in an in-depth interview format based on a semi-structured interview guide. Interviews are a very effective method of gathering information for gathering information that is oriented toward the need to understand perceptions or determine how sources interpret different phenomena and events (Noblit, 2020). The in-depth one-on-one interview method used to collect data is ideal for obtaining sensitive information. Then the results of the interview will define a conceptual code that refers to the literature with effective coding that can fully capture the meaning of the code found. In this study, the final sample was selected consisting of 5 micro and/or small business owners/actors in Bitung city who were willing to participate in the interview. A total of five female business owners that have micro to middle-scale businesses are involved in this study (Table 1).

Table 1: Owner Profiles

The data generated through the research are notes and audio recordings, which are then transcribed according to the interpretation and coding of the topic (Sutton & Austin, 2015). Interviews were conducted during the period from April 2022 to July 2022. All interviews will be transcribed and analyzed during August 2022. After that, information will be compiled by highlighting the general description of the interview and certain perspectives proposed by the perceptions of each MSME actor.

The information is grouped into several different thematic categories according to the purpose, so the semi-structured interview guide is:

• How are the awareness and understanding of business actors about digitalization?

• How is the digitization process experienced by micro and or small businesses in Bitung?

• How are you likely to measure the digitization of their business?

• What do the informants think about the drivers of digitalization in business

• What is the opinion of the informants about the barriers to digitalization in business

• What is the opinion of the informants about digitization before and during the COVID19 pandemic;

• How can digitization be a potential competitiveness strategy for businesses?

• What do business people think about the need for government support and other factors in digitizing their business?

The author tries to avoid being subjective in interpreting the assumptions made by the informants about how business people experience digitization in their respective businesses. For data interpretation, this study will consider the literature guidelines on digitization and pay attention to the level of reflexivity established in the literature (Mauthner & Doucet, 2003; Malterud et al., 2016). To ensure proper methodology and analysis of the information obtained, this study will also use the comprehensive checklist COREQ (Consolidated Criteria for Reporting Qualitative Studies) (Tong et al., 2007), which is considered an appropriate method for maintaining quality in qualitative research using interviews (Buus & Perron, 2020).

4. Findings

The five business owners in Bitung all have products that are related to fishery products. All respondents expressed that COVID-19 has had a significant effect on their businesses. Many owners noted their business’s operational change and temporary closing during COVID-19, such as Owner 1:

“Since there was COVID-19, the business has changed from what it was before. Yes, you could say my business was stopped. Before COVID-19 I produced 3 times a week but afterward, I only went into production after an order’s been made.”

Owners used the words “had to” when explaining how their businesses had to adjust due to COVID-19. Owner 2 mentioned:

“…we had to work from home so we had to “try to make it” because we don’t know what else to do anymore, all the places being locked down, and most shops are also closed.”

Furthermore, the pandemic has accelerated the digitalization process with some owners describing it as “like we’re being forced to digitize everything.” Others expressed that they would never have thought of selling online through marketplaces, since,

“… my understanding is that for example, the seller sells a product when they have a store offline, I had no idea about the concept of selling online, what are the opportunities there. Now it’s like we’re being forced because of this pandemic, it’s like we’re being forced to digitize everything, if possible, all the transactions don’t use cash, we use QRIS, Shopee pay, and so on.”

All business owners expressed their understanding of what digitalization is through their perspective. Digitalization does not seem to be a new concept to them, as one owner expressed:

“I’ve been tech savvy since my early years in school however I have never thought of becoming a seller myself in the marketplace.”

4.1. Definition of Digitalization

All owners share a similar definition of business digitalization is when a business simply starts selling or posting its products onto a digital platform or through online media (Table 2).

Table 2: Owners’ Understanding of Digitalization

Based on the owners’ responses definition there are several platforms being mentioned as part of that definition of digitalization. The highest count was in the use of “Facebook” as a means to their business digitalization (Table 3).

Table 3: Platform Keyword Count

All owners agreed that digitalization has become very important to their businesses, especially for businesses in Bitung. Digitalization becomes a channel to the outside city and outside market in Indonesia. One owner expressed:

“Now it’s very important to digitalize because it provides the fastest sales and it’s the smoothest process through cyberspace. Through digitalization, for example from online sales, we can reach more markets. a lot more, not only in Bitung in Manado but can be in Jakarta and even abroad.”

In addition, it was also important for a business to showcase or give attractive visualization to its potential customers through an online platform. In particular to build customer awareness of the brand, marketing their products, and showcasing the safety and authenticity of the product, especially during this pandemic climate. Owner 4 expressed:

“So, it all started when we introduced the product online. So, visually, people can see, oh yes, this is where they produce, this is how they process it, then this is how they pack it properly.”

4.2. Drivers To Digitalization

Through the research analysis of the collected qualitative data, several themes and sub-themes are identified as drivers of digitalization in the owners’ business, as shown in Table 4.

Table 4: Themes and Subthemes Drivers of Digitalization

4.3. Hurdles To Digitalization

However, it should be noted that there are also several hurdles to digitalization. One respondent pointed out the difficulties in getting a network connection in the area:

“This is the problem, we’re in the Valley, so if we intend to use mobile phone network connections, we will be hindered by the mountains. So, if it’s a regular network, we have to look for a signal by going up the mountain again.”

Although most areas in the city of Bitung already have got an Internet connection, other remote areas where business owners are from still lack good internet access. Furthermore, not owning a mobile phone was also mentioned as part of the hurdle in the process of learning about business digitalization.

“Oh, the thing is, at that time, I didn’t have an Android cell phone, so after training, I couldn’t implement or develop afterward. After owning a device then I just started using this digitalization process.”

There are also issues dependent on the availability of electricity in certain areas of Bitung.

“… if there are often blackouts, there’s no network. As long as the light is on there is a network internet, then we are good.”

Owners also expressed that getting training or searching for information online is different from actually knowing how to implement the techniques themselves. Owner 4 mentions:

“Yes, that’s right, because many people now misuse social media accounts, because they don’t know how to use them wisely, so back again, if we are users and we market on it, it means we have to have techniques. But as a non-professional, I don’t know.”

Owner 2 also points out the lack of ability to execute those training optimally to get the desired results.

“So that’s the problem, for now, we only take training from Shopee like Bukalapak, but in my opinion, it’s still lacking in implementation. I also want to go into Alibaba, but I don’t know how to join them … or I want to make a website, yesterday I tried it but used WordPress. But it’s not optimal.”

4.4. Support for Digitalization

Some business owners demonstrate a commitment to learning new platforms and applicationsthat will enable them to grow their operations in the future. Owner 4 expresses:

“I need support for promotion through social media (through like the Hospitality Department) so to promote certain products”

In addition, the role of government seems to be a prominent needed support in the digitalization of these businesses, including changing the mindset of entrepreneurs. Owner 4 mentioned the role of government:

“Right here, there have been several pieces of training, so the role of the government, in this case, is the relevant agencies, and making these training is very helpful to someone like me so I know: “Oh yes, this is the correct technique like this”, “oh the right way is like this”, so the influence of the digitalization training is very large to be able to change the mindset of these small entrepreneurs to be able to use digitalization in marketing.”

Furthermore, specialized techniques in design are also of interest noted:

“I’m still curious about the design, what is a product design, and how can it be in the form of a video or an image, so that I can post it on social media because all this time I am very amateur.”

5. Conclusion

Drawing from a study on large international professional business-to-business service companies, this paper has both empirical and theoretical concerns: the interrelations of privilege and silence among high-intensity knowledge professionals in specific knowledge-intensive organizations; and, the more general relations of privilege. The results of qualitative research have collected research information and identified through case-by-case learning from MSME owners in Indonesia. One thing that emerged in the research was the awareness of business actors about the importance of digitalization. Understanding digitization is also often associated with marketing through social media accounts, including selling and interacting with loyal buyers. In addition, as shown in previous studies, motivation and namely the business owners’ mentality, plays a crucial role (Muafi et al., 2021). Much of the learning the business owners showcased stemmed from their characteristic to improve and learn new ways of digitalizing their businesses. Competition intensity is also an integral part of digital transformation (Layman, 2022).

The needs that business actors want in terms of digitization are infrastructure resources to support digitization, such as devices, internet, and funds, and also the ability to use digital media for business development. Practical skills that business people want to learn such as product design and management of their social media accounts. There are also aspects of time and self-motivation of the business actor that can speed up or slow down the digitization process. Finally, government support that is structured in encouraging MSMEs is also one of the supporters and drivers of digitalization in the blue economy.