Digital transformation to contribute US$10 billion to Singapore GDP by 2021

 |   Singapore News Center

  • IDC study commissioned by Microsoft predicts that approximately 60% of Singapore’s GDP will be derived from digital products or services by 2021 
  • By 2021, digital transformation is expected to add 0.6% CAGR GDP growth annually
  • Digital transformation has increased profit margins, productivity, revenue from new products & services, customer advocacy, and more cost reduction. These benefits will also improve by at least 40% in three years.
  • Leaders in digital transformation reap double the benefits compared to followers.
  • Digital transformation in Singapore will benefit citizens with more educational and training opportunities as well as creation of higher value jobs

Singapore, 21 February 2018 – By 2021, digital transformation will add an estimated US$10 billion to Singapore’s GDP, and increase the growth rate by 0.6% annually, according to a new business study released today. The research, “Unlocking the Economic Impact of Digital Transformation in Asia Pacific[1]”, was produced by Microsoft in partnership with IDC Asia/Pacific.

The study predicts a dramatic acceleration in the pace of digital transformation across Asia Pacific’s economies. In 2017, about 10% of Singapore’s GDP was derived from digital products and services created directly through the use of digital technologies, such as mobility, cloud, Internet of Things (IoT), and artificial intelligence (AI).

“Singapore is clearly on the digital transformation fast track. Within the next four years, we expect to see approximately 60 percent of Singapore’s GDP to be derived from digital products and services,” said Kevin Wo, Managing Director, Microsoft Singapore. “At the same time, organisations in Asia Pacific are increasingly deploying emerging technologies such as artificial intelligence as part of their digital transformation initiatives, and that will accelerate growth even further.”

The survey conducted with 1,560 business decision makers in mid and large-sized organisations across 15 economies in the region highlights the rapid impact and widespread disruption that digital transformation is having on traditional business models.

The study, which included 100 respondents from Singapore, identified five key benefits to their bottom line from digital transformation:

According to the research findings, business leaders are already seeing 17% to 20% improvements across these benefits from their efforts today, and they expect to see more than 40% improvements in those key areas by 2020, with the biggest jump expected in customer advocacy.

Digital Leaders in Asia Pacific to Gain Lion’s Share of Economic Opportunities

The study indicates that while 98% of organisations in Singapore are in the midst of their digital transformation journey, only 7% in the entire region can be classified as Leaders. These are organisations that have full or progressing digital transformation strategies, with at least a third of their revenue derived from digital products and services. In addition, these companies are seeing between 20 – 30% improvements in benefits across various business areas from their initiatives.

The study indicates that Leaders experience double the benefits of followers, and these improvements will be more pronounced by 2020. Almost half of Leaders (48%) have a full digital transformation strategy in place.

“The pace of digital transformation is accelerating, and IDC expects that by 2021, at least 60 percent of Asia Pacific GDP will be digitalised, with growth in every industry driven by digitally enhanced offerings, operations and relationships. The study shows leaders seeing double the benefits of followers, with improvements in productivity, cost reductions, and customer advocacy. To remain competitive, organisations must establish new metrics, realign organisation structures, and re-architect their technology platform,” said Daniel-Zoe Jimenez, Research Director Digital Transformation Practice Lead, IDC Asia/Pacific.

The Study identified key differences between leaders and others in Asia Pacific, which contribute to the improvements tracked:

  • Leaders are more concerned about competitors and emergence of disruptive technologies: The digital economy has also given rise to new types of competitors, as well as emerging technologies such as AI that have contributed to the disruption of business models.
  • Business agility and culture of innovation are key goals: When addressing business concerns, leaders are focused on creating a culture of agility and innovation to counter competition. Followers, on the other hand, are more focused on improving employee productivity and profitability.
  • Measuring digital transformation successes: Organisations across Asia Pacific are starting to adopt new key performance indicators (KPI) to better measure their digital transformation initiatives, such as effectiveness of processes, data as a capital, and customer advocacy in the form of Net Promoter Score (NPS). As organisations realise the potential of data as the new oil for the digital economy, leaders are much more focused on leveraging data to grow revenue and productivity, and to transform business models.
  • Leaders are more aware of challenges in their digital transformation journeys: In addition to skills and cybersecurity threats as key challenges, leaders have also identified the need to bolster their data capabilities through the use of advanced analytics to develop actionable insights in fast-moving markets.
  • Leaders are looking to invest in AI and Internet of Things: Emerging technologies such as AI (including cognitive services and robotics) and IoT are areas where leaders are investing in for 2018. Besides these emerging technologies, leaders are also more interested in investing in big data analytics to mine data for actionable insights than others.

What sets leaders apart from others are their ability to ride on the digital transformation wave from an organisational culture perspective. The study found that leaders have these traits:

“There is a pressing need for organisations to adopt a leaders’ mindset to fully build their digital ecosystem—from employees, to customers, to partners—in order to grow their value chain,” said Kevin. “In this regard, Microsoft is uniquely positioned to help organisations across in Singapore and across the region succeed in their digital transformation journey. We say this with confidence because we, as an organisation, have also undergone digital transformation, and we understand what it takes to make these digital initiatives successful.”

Digital Transformation in Singapore Will Ultimately Benefit Citizens

According to the business leaders surveyed, digital transformation will bring about these top three benefits to society:

  1. Increased educational and training opportunities
  2. Creation of higher value jobs
  3. Potential increment to personal income through freelance and digital work

Respondents in Singapore felt that 93% of jobs will be transformed in the next three years due to digital transformation, and 62% of the jobs in the market today will be redeployed to higher value roles or reskilled to meet the needs of the digital age.

“The rise of digital transformation in Singapore will affect the labour market where many types of jobs will evolve and change. What is encouraging is that 83 percent of the study’s respondents are confident that their young professionals already have future-ready skills that will help them transition to new roles. Governments and organisations should still focus on reskilling and upskilling, because continuous learning will be important in ensuring a successful workforce transformation for the digital age,” said Kevin.

In Singapore, Microsoft has recently partnered with the Infocomm Media Development Authority (IMDA) to support its Industry Transformation Map (ITM) to prepare the market for the digital economy. The initiative aims to grow the Infocomm Media Sector’s value add by around 6% annually and expects to employ more than 210,000 workers. As part of IMDA’s Strategic Partners Programme (SPP), Microsoft will partner with IMDA to help local tech companies to scale up and build digital capabilities through joint development.

Riding the Wave of Digital Transformation

Organisations in Asia Pacific need to accelerate their digital transformation journey to reap the full benefits from their initiatives, and to address the invisible revolution brought by the mass adoption of AI.

Microsoft recommends organisations to adopt the following strategies to become a digital transformation leader:

  1. Create a digital culture: An organisation needs to build a culture of collaboration where it is connected across business functions. It should have a data strategy in place and begin with the end in mind, having a plan with clear outcomes. Importantly, a proper data strategy will allow businesses to start their AI initiatives to identify connections, insights and trends. Data capitalisation would be key for all organisations to succeed in the digital economy.
  2. Build a digital ecosystem: Digital transformation will not be optimised if organisations do not collaborate with their external customers and partners. The key to becoming a leader is for organisations to enable data sharing and collaboration internally and externally in an open yet trusted manner.
  3. Embrace micro-revolutions: In most cases, digital transformation efforts do not start with widespread change, but a series of micro-revolutions. These are small, quick projects that deliver positive business outcomes and accrue to bigger and bolder digital transformation initiatives.
  4. Bet big on AI: Organisations need to integrate AI into its business and identify areas where it can be used to augment higher-value activities.
  5. Develop future ready skills for individuals and organisations: Organisations today must relook at training and reskilling its workforce so that workers equipped with future ready skill sets such as complex problem solving, critical thinking and creativity for the digital economy. More importantly, they need to rebalance the workforce to attain and attract key digital talents, as well as be open in creating a flexible work source model where they tap into skills-based marketplace. From a digital skills perspective, LinkedIn’s latest study[2] outlines the ABCs of digital talents required for future economies in the region – artificial intelligence, big data and cloud computing. In Singapore, the top in-demand skills are big data, artificial intelligence, and cloud computing.
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[1] Unlocking the Economic Impact of Digital Transformation in Asia Pacific conducted with 1,560 respondents in 15 markets:

  • 15 Asia Pacific markets were involved: Australia, China, Hong Kong, Indonesia, India, Japan, Korea, Malaysia, New Zealand, Philippines, Singapore, Sri Lanka, Taiwan, Thailand and Vietnam.
  • Business and IT leaders from organisations with more than 250 staff were polled.
  • Industries polled included education, financial services, government, healthcare, manufacturing and retail.
  • Respondents are decision makers involved in shaping their organisations’ digital strategy.

[2] LinkedIn, The Digital Workforce of the Future. Data as of August 2017.

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