DIGITAL TRANSFORMATION: MSME INNOVATION STRATEGY IN INDONESIA'S STARTUP ECOSYSTEM

Abstract

Digital transformation has become a crucial factor in enhancing the competitiveness of Micro, Small, and Medium Enterprises (MSMEs) in Indonesia. Despite their significant contribution to the economy, many MSMEs are not fully aware of and have not adopted digital technology, resulting in low competitiveness in the market. Objective: This study aims to identify effective innovation strategies for MSMEs in carrying out digital transformation and to explore the challenges they face in the process within Indonesia's startup ecosystem. Method: This research employs a mixed-method approach combining qualitative and quantitative designs through case studies. Data was collected via surveys and in-depth interviews with 100 MSMEs that have undertaken digital transformation. Results: The findings indicate that approximately 75% of MSMEs have adopted digital technology, with digital marketing and collaboration with startups as the most effective strategies. However, challenges such as a lack of technological understanding and high investment costs continue to hinder the transformation process. The conclusions of this study emphasize the importance of educational support and government policies in assisting MSMEs to overcome these obstacles in order to achieve sustainable digital transformation