The world is going digital. Besides changing how we work and play, it also changes how products are used and demanded.

This is especially true in Asia Pacific, where there is a fast-growing middle class fueling an appetite for differentiated goods. In fact, it is forecast that two-thirds of the global middle class will be based in Asia by 2030.

For smaller manufacturers, this represents an opportunity take advantage of a market centered on mass customization. New tools now allow manufacturers to operate at much smaller scale, tapping into markets once the sole domain of far larger competitors.

At the same time, technologies such as additive manufacturing make possible quicker, more cost-effective manufacturing in smaller batches.

This sets the stage for smaller players dedicated to addressing increasingly diverse customer needs.

What should smaller manufacturers do to fully take advantage of these trends? Alex Teo, Managing Director and Vice President South East Asia, Siemens Digital Industries, shared some insights, strategies and tips.

What does the rise of mass customization in Southeast Asia mean for SME manufacturers in the region?

Teo: Southeast Asia is a highly interesting market as there is a great diversity in the technology maturity of the manufacturers across the different countries.

However, what is common is they are all impacted by the rise of mass customization. SMEs must transform quick enough in order to be competitive.

Those who are able to adopt innovation and transformation and increasing their efficiencies and flexibility and attracting talent and strengthening their product offering while lowering the cost will be most likely to thrive in the digital economy.

How is product development in the region changing?

Teo: The growing focus on producing goods faster and in greater variety has made product development and design some of the most important parts of operations for companies.

IDC’s recent report about opportunities in digital transformation (DX) for SME manufacturers found that improving product development and design processes were the top two DX goals cited by businesses.

This sets the stage for different technologies that can help with innovation along the supply chain, such as enabling greater collaboration among stakeholders and partners with cloud technology, or mobility solutions, which bring greater visibility to all parties involved in a project.

What are some key challenges and areas of opportunity for smaller manufacturers in the region?

Teo: Understandably, some of the key challenges for smaller manufacturers in the region include budgeting and resources to adopt new digital technologies. A recent IDC report found that just one in every 10 manufacturers with less than 100 employees had plans to add Industry 4.0 approaches to their operations within 12 months, while slightly more than half had no plans to do so, despite acknowledging that smart connected manufacturing would be an important component of digital transformation.

In contrast, almost three in 10 manufacturers with a company size of between 100 and 499 employees had plans to adopt Industry 4.0 approaches within 12 months, while 6.5% had already implemented smart connected manufacturing initiatives.

While the adoption of new technologies and capabilities could strain resources for smaller manufacturers, the opportunity cost of not doing so would be even greater.

Companies that are hesitant to spend all their funds on digital transformation can consider a ‘test the water’ approach of incrementally adding budget, reallocating funds and devoting staff resources to specific initiatives that are expected to produce short term ROI. As they gather more experience in implementation and resources, longer-term initiatives can be considered.

To address the needs of the market, there will also have to be greater focus on talent development.

This is also a particularly important area of note in Asia Pacific, where a fast-growing middle class and increasing ease of access to education creates vast opportunity for the region to become a leader in emerging technologies such as additive manufacturing.

Siemens Digital Industries works closely with education partners in various markets to foster talent in science and technology. One example is our partnership with the Ho Chi Minh City University of Technology, which recently appointed Siemens as its technology partner in a collaboration to develop the university’s Industrie 4.0 Lab.

What kinds of tools and technologies will smaller manufacturers need to succeed in the age of customizability?

Teo: One of the key technologies expected to make a large impact in this field is additive manufacturing (AM), which is already seeing steady growth in the ASEAN region. Globally, the AM market is forecasted to grow at a compound annual growth rate of 27% between 2018 and 2023, representing an increase of almost US$4 billion.

Asia Pacific in particular is expected to see the greatest growth in AM, being a hotspot for automotive production and printed electronics, two areas where AM adoption is set for exciting growth. The industry focus on modular manufacturing and high-volume custom production is also expected to be a key driver of AM, as demand for rapid prototyping solutions grow.

In a world of smart, connected products where the entire market landscape can drastically change with a single innovation, manufacturers must take a new approach to business. They need to closely watch how products are being used, and feed data back from product utilization into product ideation and development in order to anticipate trends.

The realization phase of innovation is vital in this new era.

It’s no longer enough to digitize — today’s manufacturers must weave a digital thread through ideation, realization and utilization. With a fully optimized “Digital Enterprise,” manufacturers are better equipped to initiate or respond to disruptive innovation.

SME manufacturers that can be agile and quickly leverage the right technologies to act as innovation accelerators for design and product development will be in a much better position to compete against larger companies.

With the help of the right technology, SME manufacturers will not just have a key role to play in serving growing customer needs, but will drive the market forward across areas such as innovation, efficiency and talent development.