Is there a way to navigate through this challenging period? Saigon Investment engaged in a conversation with Mr. NGUYỄN THANH LIÊM, a consultant supporting small and medium enterprises (SMEs) at the Vietnam Institute for Digital Economy Development (VIDE).
JOURNALIST: - After the prosperous period in 2021, there has been a sharp decline in capital flowing into Vietnamese startups in 2022 and the initial months of 2023. In your perspective, how should startups adapt to this situation?
Mr. NGUYỄN THANH LIÊM: - In my view, for an effective response, startups should follow a structured approach. They must analyze and identify the root causes of the situation, considering both external and internal factors (termed as assessing the business environment and internal resources of the enterprise in management language). Subsequently, they should brainstorm and synthesize solutions corresponding to each cause, utilizing a method known as "SWOT analysis" (Strengths, Weaknesses, Opportunities, Threats). This entails choosing a solution aligned with the unique competitive advantage of each enterprise. Finally, startups should plan and implement priority strategies gradually to ensure feasibility.
At the startup or SME scale, overcoming external macroeconomic factors is challenging. Therefore, proposed solutions primarily focus on leveraging advantageous factors from the internal resources of SMEs. In recent years, there has been significant discussion about the "VUCA world" (Volatility, Uncertainty, Complexity, Ambiguity) – signifying a world characterized by extensive and rapid fluctuations. To address this VUCA, administrators recommend employing another VUCA, which stands for Vision, Understanding, Communication, and Agile.
- Some argue that the deceleration in investment capital flows has a positive aspect. They contend that startups now have more time to construct more systematic models for long-term sustainability, rather than hastily pursuing business growth, which could lead to bankruptcy. How do you assess this viewpoint?
- The general principle is that within danger, there always lies opportunity. When businesses encounter challenges and experience a decline in competitiveness, it becomes an opening for enterprises with robust internal resources to overcome obstacles, establish dominance, and lead the market in the subsequent phase. As virtual values collapse, consumers and investors become more discerning about their spending habits. Consequently, the market tends to be healthier than before. During such times, only businesses that genuinely enhance the value of their products and services can persuade customers to make financial commitments. To elevate the added value in a product or service, one must leverage existing knowledge advantages or emphasize creative elements in the product or service creation process.
In the present reality, global giants like Apple, Microsoft, Amazon, Google, and Facebook consistently possess intangible assets that far surpass tangible ones. This underscores that the primary internal strength derived from intangible assets holds more enduring value than tangible assets. Therefore, enterprises should focus on establishing an efficient and competitive organizational structure, processes, standard forms, and operational data that require meticulous and rational digitization at each stage. This shift is crucial for a comprehensive "digital transformation" that enhances efficiency, ensuring competitiveness in today's "flat world."
Returning to the journalist's inquiry, I believe the pivotal aspect is not merely that "businesses have ample time to develop models," but rather that businesses now have the opportunity to recognize that sustainable development requires a methodical approach. It involves progressing steadily and securely or making breakthroughs through creativity, rather than relying on previous advantages. This necessitates a systematic approach to constructing a business model.
- Sir, why do numerous businesses find it necessary to scale down their operations or exit the market due to the current challenges? Are there still opportunities for new startups to enter the market?
- The difficulty leading many businesses to reduce their operations or exit the market is often multifaceted. Challenges may stem from economic downturns, increased competition, shifts in consumer behavior, or other external factors. However, it's crucial to recognize that market demand may fluctuate but is never entirely eliminated. I believe that businesses, by strategically offering products in which they hold advantages, can generate greater added value than before.
For businesses within the same industry, identifying the right niche market presents a continuous opportunity for development. Nevertheless, in the current era of Industry 4.0, the term "common customer" denotes individuals using smartphones. Therefore, businesses must adapt their marketing models to include elements of customer interaction through smartphones. If a business's marketing strategy lacks this smartphone-centric approach, it is highly probable that the model requires supplementation and adjustment to align with the preferences of contemporary consumers.
- For startup ventures, aside from seeking venture capital, they also require policy support. Does it appear that Vietnam still lacks policies for this group, sir?
- The government has implemented various policies aimed at supporting small and medium enterprises (SMEs), including startups. Recent initiatives are particularly focused on facilitating "digital transformation," fostering creative business initiatives, and encouraging participation in industry clusters and value chains. These policies come with special incentives, such as compensating for investment loan interest rates at a rate of 2%. Additional support is provided for digital transformation technology, covering 50% of the contract price for consulting on digital transformation solutions, intellectual property rights establishment, technology transfer, and more. Furthermore, there is consulting support ranging from 30% to 100% of the consulting contract price, delivered by a network of SME support consultants certified by the State.
- Thank you very much.
