Winners take all in this digital transformation race

 |   K Raman, Managing Director, Microsoft Malaysia  

By K Raman, Managing Director Microsoft Malaysia  

Every organization will need to be digital-first to be relevant both today and tomorrow – while such a viewpoint may have been controversial five years ago, it is certainly not the case today as digital transformation is now a key item on the agenda for C-suites, boardrooms, and even governments.

The Malaysian government, for example, has included digital transformation as a national goal under ‘Transformasi Nasional 2050’ (TN50), with a total of RM250 million which will be allocated to develop STEM (Science, Technology, Engineering, Mathematics) centers, improve computer science modules, and expand coding programs.

Also embraced by the business sector, BP Healthcare Group, the country’s leading primary healthcare provider has also been on a digital transformation journey since early 2017. “The ecosystem around us is evolving and we are cognizant of the efforts needed today to stay ahead of the curve. It is important for us to revolutionize our technological capabilities and respond to the needs of all our internal and external stakeholders,”¹ said Dato Beh Chun Chuan, Chairman of BP Healthcare Group.

Race to transform

Microsoft recently partnered with IT analyst firm IDC to map the digital transformation landscape across Asia Pacific. Titled “Unlocking the Economic Impact of Digital Transformation in Asia Pacific”, the study involved some 1,560 business and IT leaders from 15 economies.

The study clearly showed that there will be widespread disruption to the traditional business and operations models of all organizations – approximately 48% of South East Asia’s GDP will be derived from digital products and services by 2021, created directly through the use of technologies. In comparison, only 6% of South East Asia’s GDP today is derived from digital products and services. This is the speed of change that all organizations must grapple with.

Imagine that you are operating a fast-fashion clothing chain in Malaysia. This means that by 2021, half of your business will be derived from online or digital channels.

The study has shown organizations are seeing significant and tangible benefits from their digital transformation efforts today. The top five digital transformation benefits that organizations experienced include increased profit margins, productivity, customer advocacy, loyalty & retention, cost reduction, and revenue from new products and services. Even more interesting is that these digital transformation benefits are set to grow by 20% or more in Malaysia in three years.

Winners take it all

When I speak with industry leaders, I don’t get a uniform sense of urgency about their digital transformation journeys. Some leaders prefer for others to be the trailblazers, and then to learn from these digital transformation pioneers. The question that I often ask myself is this: “Is digital transformation a race where the winner takes all?”

The study also shows that the pace of transformation makes a difference, much like how an efficient pace is key in raising your chances of winning a long-distance marathon. We have classified the organizations participating in the study as ‘Leaders’ and ‘Followers’ based on a few factors: The maturity of their digital transformation strategies; proportion of their digital income; and level of benefits achieved from digital transformation initiatives. In fact, with these filters applied, only 7% of organizations in this study can be classified as leaders.

More importantly, the study has shown that leaders reaped the highest digital transformation improvements – to the tune of more than double the benefits from digital transformation compared to the followers – and the effect is expected to be more pronounced by 2020.

We are already seeing digital leaders in action in Malaysia. Financio, for instance, has been empowering micro SMEs in the country by providing a unique accounting platform designed for start-ups, small business owners and non-accountants. It’s the first freemium accounting application in Malaysia that has adopted Microsoft cloud services to provide end-to-end, scalable solutions for micro SMEs in the digital economy. Financio has been helping small businesses save over 384,000-man hours a year and powering more than 4500 small businesses across Malaysia since October 2017.

Learnings from winners 

So, what lessons can these digital transformation leaders provide from this study? These are three recommendations for organizations to help them succeed in their own digital revolutions:

  1. Create a digital culture: Culture is the multi-layered core at the heart of every successful organizational digital transformation. In an increasingly digital world, a digital culture cannot thrive if an organization operates in silos with disconnected or under-connected business functions. Importantly, digital transformation will not be optimized if organizations do not collaborate with external customers and partners. The study shows that leaders benefit most from a full digital transformation strategy in an ecosystem of customers and partners working together. Data must be embraced as part of every piece of work done in an organization. Data analytics can be used to take products and services to the next level. Companies that emphasize big data analytics, as the leaders are already doing, will build strong foundations for emerging technologies like Artificial Intelligence (AI) and Internet of Things (IoT) to accelerate their respective digital transformation efforts.
  2. Build an information ecosystem: In a digital world, organizations have access to more data than ever before from both internal and external sources. Both the opportunity and challenge are to bring all that data together, to analyse that data, and then use it in ways that contribute to better decision making and better outcomes. Data capitalization is key to success in the digital economy – to convert this data into capital assets and monetize them, there needs to be data sharing and collaboration not just within the organization, but also externally with customers and partners in a trusted manner. A proper data strategy that produces real and measurable data sets allows organizations to start taking advantage of the power of AI in identifying connections, insights and trends that are not yet obvious.
  3. Embrace micro-revolutions: In most cases, digital transformation efforts do not start with an organization-wide plan of change, but rather, with a series of micro-revolutions. These are small, quick wins that deliver positive business outcomes, and at the same time accrue to bigger and bolder digital transformation We see this digital momentum in leaders, who are less risk-adverse and even often embrace both fail-fast and learn-fast approaches. This mindset will ultimately enable organizations to be at the forefront of reaping benefits from emerging technologies such as AI.
  4. Develop future-ready skills for individuals and organizations: Organizations today must relook at training and reskilling its workforce so that talent is equipped with future-ready skill sets such as complex problem-solving, critical thinking and creativity for the digital economy. At the same time, they need to put in processes to not only retain and attract key digital talent, but also be open to creating a flexible work-source model that lets them tap into skills-based marketplaces.

This study has shown us that in this high-stake digital transformation race, leaders reap the greatest rewards, and will command stronger positions in the exciting digitally-fuelled world we are heading towards.

History has also shown that during these industrial paradigm shifts, old business models often become extinct, taking out entire organizations and even industries at the same time.

If there was only one question that you should ask yourself as a business leader, it should be this: “Is your organization in a position to be a digital transformation leader today?”

You can get more insights about the Microsoft Asia Digital Transformation Study 2018 findings here.  

  ¹ BP Healthcare’s Doctor2U partners with Microsoft for its Digital Transformation journey