asia pacific - info. · pdf fileas technology continues to pervade the social fabric of asia...

Charting digital transformation for Asia PacificMicrosoft Asia Digital Transformation Study: are organizations ready for disruptions in the 4th Industrial Revolution?

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Contents

Forward – the digital state in Asia Pacific ----------------------------3

Possibilities in the 4th Industrial Revolution --------------------------5

State of digital transformation in Asia Pacific ------------------------6

Barriers to digital transformation in Asia Pacific ---------------------8

Role of leaders in driving digital transformation ---------------------9

Prioritizing digital transformation outcomes in Asia Pacific -------- 10

Emerging technologies for digital transformation ------------------ 15

Conclusion ---------------------------------------------------------- 16

Appendix: market findings ------------------------------------------ 17

Australia findings at a glance --------------------------------------- 17

Indonesia findings at a glance -------------------------------------- 18

Malaysia findings at a glance --------------------------------------- 19

New Zealand findings at a glance --------------------------------- 20

Philippines findings at a glance -------------------------------------21

Singapore findings at a glance ------------------------------------- 22

South Korea findings at a glance ---------------------------------- 23

Thailand findings at a glance -------------------------------------- 24

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A guide to digital transformation in the 4th Industrial Revolution

The 4th Industrial Revolution is upon us – whether we like it or not. Klaus Schwab1, Founder and Executive Chairman of World Economic Forum, described the 4th Industrial Revolution as one that is characterized by a fusion of the physical, digital and biological worlds; one that is already dramatically disrupting traditional industries, business models, systems and governance.

He said that while the first three revolutions changed how we consumed, traveled, manufactured and communicate, the 4th Industrial Revolution “will fundamentally alter the way we live, work, and relate to one another. In its scale, scope, and complexity,

the transformation will be unlike anything humankind has experienced before.”

Consumers are rapidly and seamlessly transitioning to the digital world, creating innovative ways to engage them like never before. There are now over 2.7 billion mobile users2 in the Asia Pacific region alone, and Internet penetration for the region is estimated to be at 45.6%3. As digital becomes increasingly ingrained into the lives of customers, having a digital business model will become a necessity for Asia Pacific organizations to remain relevant in this new world.

1 Klaus Schwab, “The Fourth Industrial Revolution: what it means, how to respond”, 14 January 20162 Statista, “Number of mobile phone users in the Asia-Pacific region from 2011 to 2019”3 Internet World Stats, “Internet Usage in Asia”

Forward – the digital state in Asia Pacific

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Business leaders in Asia Pacific recognize that a failure to transform will eventually mean a failure to survive. This knowledge, however, does not always translate into clear and decisive action. Many businesses continue to struggle with forging a comprehensive digital transformation strategy, despite the risks of not doing so. A substantial number of business leaders feel daunted by the very real challenges of cybersecurity, talent shortages, and their own perceived shortcomings in decision-making. Some still feel they might maintain a “wait and see” approach to digital transformation, defining it based on specific technologies rather than a more holistic view of process, strategy, and culture.

This whitepaper brings together insights from the Microsoft Asia Digital Transformation Study which surveyed close to 1,500 business leaders from 13 Asia Pacific markets. The results suggest that Asia Pacific business leaders have a small and fast-closing window during which to implement enterprise-wide digital transformation strategies if they want to stay relevant and thrive in the coming years. They also, however, suggest that business leaders may be more aware and able to adapt to these changes than they might give themselves credit for - including several of our customers and partners whose work we have highlighted in case studies throughout this document.

Digital transformation must happen for businesses to make their way through the 4th Industrial Revolution. Not all business leaders in Asia Pacific have laid the necessary foundations for transformation – but they still have time, limited as it might be, to do so. I hope this whitepaper encourages you and your business to ask the question: how ready are we, really, for the seismic changes to business and economics that this Industrial Revolution poses?

JUSTIN SPELHAUGGeneral Manager, Marketing & OperationsMicrosoft Asia Pacific

Forward – the digital state in Asia Pacific

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In recent years, many innovations that were once the preserve of science fiction have become reality. Breakthroughs in the areas of 3D printing, nanotechnology, biotechnology, robotics, Internet of Things (IoT), autonomous vehicles, quantum computing and artificial intelligence (AI) have begun to fundamentally transform where and how we embed technology into our everyday existence. The 4th Industrial Revolution blurs the distinction between digital and physical worlds, enabling us to interface, interact and relate with digital technology in completely innovative ways.

What does this mean for business leaders in Asia Pacific? So far, the region’s business community has tended towards a more laissez-faire approach to digital transformation than it might afford. Business leaders have assumed that ad hoc adoption of certain digital technologies, introduction of digital customer channels, or simply industry momentum will transform their business models for them. No wonder, then, that although 80% of business leaders believe they need to digitally transform, 22% of them have built little or no strategy to do so.

Now, more than ever, Asia Pacific business leaders need to take far-reaching and forward-looking action on digital transformation. How comprehensively do they really understand the technologies that might disrupt, or are already disrupting, their industries? To what extent are their talent able to not only apply today’s technologies, but adapt to those of tomorrow? Where do they look to inform their decisions about strategy and culture for the future – data, gut feel, or a “me too” mindset?

As technology continues to pervade the social fabric of Asia Pacific and the world, the region’s business leaders must ask themselves these questions before the pace of change surpasses them. Doing so will help them formulate strategies that effectively deal with the three most transformative technologies of today and tomorrow:

• Cloud is now a staple – hybrid, private or public, businesses understand the benefits of cloud that empowers agility and flexibility – and the lower barriers to entry with “pay as you go” computing. Forrester4 predicts that the public cloud services market in Asia Pacific will grow from US$10 billion in 2015 to US$20 billion in 2018 at a compound annual growth rate (CAGR) of about 24%. In particular, cloud platform services will grow the fastest, from US$1 billion in 2015 to US$4 billion in 2018 at a CAGR of 69%.

• Mobility continues to evolve with the devices that power it, from smartphones and tablets to wearables and even Internet of Things hardware, putting pressure on businesses to incorporate them into their workflows for both enhanced productivity and new revenue-generating opportunities.

• Data – Many organizations are holding on to large amount of data that has the power to yield new business insights using power data available today. Gartner5 predicts that by 2020, 10% of organizations will have a highly profitable business unit specifically for productizing and commercializing their information assets.

• Ultimately, the convergence of cloud, data, analytics will result in the dawn of AI. According to Gartner6, artificial intelligence platform services will cannibalize revenues for 30% of market-leading companies by 2019; and through 2020, organizations using cognitive ergonomics and system design in new artificial intelligence projects will achieve long-term success four times more often than others.

Evidence: Gartner’s Strategic Planning Assumptions (SPAs), or predictions, are conceived throughout the year by Gartner analysts based on hundreds of client and vendor interactions, primary and secondary research, and in collaboration with analysts within their own areas and across research agendas. Gartner’s year-end collection of “Predicts” research notes gathers and elaborates further on these predictions.

Possibilities in the 4th Industrial Revolution

4 Forrester: Asia Pacific Tech Market Outlook For 2017 To 20185 Gartner: 100 Data and Analytics Predictions Through 2020, 24 May 2016, Douglas Laney, Ankush Jain6 Gartner: Predicts 2017: Artificial Intelligence, 23 November 2016, Whit Andrews et al.

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80%79%

6

In February 2017, Microsoft Asia released the results of the Microsoft Asia Digital Transformation Study to understand where companies in Asia Pacific are on that journey.

The Study found that digital transformation is a business priority for most organizations today.

Business leaders in Asia agreed that every organization needs to transform into a digital business to enable future growth80%79% Business leaders in Asia agreed that

new data insights can lead to new revenue streams

“It was interesting to learn that 79% of business leaders felt that new data insights would lead to new revenue streams. Yet, it is concerning to see that they are doing so incrementally. Leaders need to rethink business models, find new data insights which lead to new revenue streams, and embrace a different way of bringing together people, data, and processes. Then can they create value in a new digital business.”

ALBERTO GRANADOS Vice-President, Microsoft Asia Pacific

About the Study• 1,494 C-level business leaders from 13 markets were

surveyed: Australia, China, Hong Kong, Indonesia, India, Japan, Korea, Malaysia, New Zealand, Philippines, Singapore, Taiwan, and Thailand.

• Respondents also had to work in an organization with more than 250 employees.

• Survey was conducted by Asia Insight, a leading research agency headquartered in Singapore.

State of digital transformation in Asia Pacific

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Digital transformation refers to the process by which a traditional business incorporates digital technology into all facets of its organization. This goes beyond simply adopting certain technologies or remediating old practices in digital channels: it inevitably involves significant changes in habits and mindset at all organizational levels.

In September 2016, Microsoft partnered with Keystone Strategy to understand how companies across a range of industries are embracing digital transformation to grow and evolve their business—and we learned the leaders generate an average of $100 million more in additional operating income each year.7

Despite the clear benefits that organizations can reap from digital transformation, many Asia Pacific businesses have yet to fully embrace the process. More than 1 in 5 organizations still

have either no digital transformation strategy or only a limited one in place, despite 4 in every 5 agreeing that every business must “go digital” to keep growing. Business leaders in the region have a responsibility to translate digital transformation’s rhetoric into clear, practical plans that cover change throughout their organizations. Those who do will find themselves better able to sustain their market share and extend their competitive lead as disruption continues to accelerate.

In progress with specific strategy

Full strategy in place

Limited or no strategy in place22%

49%

49%

A larger share of businesses in Asia Pacific’s emerging markets has adopted a full digital transformation strategy than those in developed markets. While this suggests that countries such as Indonesia, the Philippines, Thailand and others could soon

“leap-frog” their competitors in more mature economies, even these markets have room to grow: no more than a third have developed a full digital transformation strategy thus far.

Developed Vs Emerging Markets In Asia Pacific

DEVELOPED MARKETS EMERGING MARKETS

Have full digital transformation strategy

In progress with digital transformation

Limited or no digital transformation strategy

27%

49%

23%

31%

49%

20%

Full

Progressing

Limited

Plan to build in next 12 months

A full strategy refers to having a mature and developed digital processes, people readiness, and support systems in place to enable new & timely ways of engaging with customers, employees and partners; enabling continued growth & innovation as a truly digital organisation

Progressing describes an organisation which has specific focus areas for digital processes, people readiness and their support system and see the organisation as already on a digital transformation journey

A limited strategy describes an organisation with some existing processes, people readiness, and support systems which may still be under development or the organisation may have just started embarking on projects to make digital transformation

An organisation in this stage has started to plan for the roll out of some processes, has planned activities to get their people ready and to build support systems. Some of these outcomes are expected to be in place within the next 12 months

STRATEGY LEVEL DEFINITION

State of digital transformation in Asia Pacific

4 Microsoft Blog: “Study: Data leaders consistently outperform peers in core business metrics” 21 September 2016

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CASE STUDY: RE-ENGINEERING THE DESIGN PROCESS FOR SMARTER BUILDINGS IN MALAYSIA

UEM Group, one of Malaysia’s largest infrastructure and engineering services firms, had realized the need to enhance its operations with new technologies including the Internet of Things and machine learning. The Group turned to Microsoft to aid it in transforming its design and building management processes, signing a Memorandum of Understanding with Microsoft earlier in 2017.

Many organizations have been hesitant to go deeper with digital transformation because of the various risks it entails.

Amongst the top concerns in Asia Pacific, cybersecurity and a shortage of digitally skilled workers proved the most common, with each being highlighted as a major issue by 27% of business leaders. A quarter of respondents cited a lack of sufficient government support and information & communications technology (ICT) infrastructure as their biggest hurdle, while 24% felt held back by economic uncertainty – the same number that said they were missing the right leadership skills for digital transformation.

Some of these risks, like cybersecurity, are not unfounded – but can be more effectively tackled by digitally transformed

organizations than those which hold back. The World Economic Forum estimated that US$3 trillion dollars in economic value can be lost globally if organizations delay in adopting cyber-security capabilities8.

Other risks, like economic uncertainty, actually provide opportunities and impetus for digital transformation, which helps businesses counter increasingly adverse and competitive market conditions. In every case, a well-rounded digital transformation strategy can mitigate or circumvent major risks felt by businesses around Asia Pacific – something most seem to recognize to some extent.

The MOU has already seen UEM Group’s subsidiary UEM Edgenta adopt a data-driven approach to facilities management, using Microsoft’s Azure IoT Hub and Machine Learning services to gain real-time insight into the performance of buildings under its management. The solution enables UEM Edgenta to not only track, but analyze and optimize its chilling, power, and other building infrastructures, giving its customers increased visibility and control over their assets.

UEM Edgenta’s new solution has won praise from both new and existing customers as one of the first smart-building solutions to become available in Malaysia, helping the company further extend its competitive advantage over its industry peers. UEM Group has already begun applying Microsoft’s technologies to other parts of its business, including the development of a virtual facilities manager to automate the building optimization process.

Cyber threats and security concerns

Lack of digitally-skilled

workforce

Lack of supporting government policies and

ICT infrastructure

Lack of organization leadership to ideate, plan and execute digital transformation

Uncertain economic

environment

1 2 3

Barrier to digital transformation in Asia Pacific

5 World Economic Forum, “Increased Cyber Security Can Save Global Economy Trillions”, 20 January 2014

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Technology, without a doubt, is at the center of how organizations can transform themselves to be more agile and responsive to new market paradigms. However, Microsoft believes that digital transformation is not simply about technology — it requires business leaders to re-envision existing business models and embrace a different way of bringing together people, data, and processes to create value for their customers through systems of intelligence.

Digital transformation requires Asia’s business leaders to lead with rigor. The fact that less than 30% of business leaders in the region have a full digital transformation strategy9 suggests that the majority have taken a more ad hoc approach, relying on incremental changes in direction to maintain their growth trajectory.

To effectively engage customers, empower employees, optimize operations, and transform their products and processes, different leaders will have to work together in new, sometimes challenging combinations. Only by doing so can they meet the standards

Who should lead the charge in the 4th Industrial Revolution, and how? Amongst Asia Pacific business leaders, 30% believe the CIO should take the lead, even more than the 29% who believe digital transformation is ultimately the CEO’s responsibility. A growing amount will fall to new roles created expressly to lead digital transformation: 27% of Asia Pacific businesses believe in the need for a Chief Digital Officer to do so, with 18% already relying on such a role in their organization. But every member of the C-suite, not just IT, has their role to play: digital transformation affects all business functions in some way or another.

of customers and employees alike – for digital experiences that reflect the same personalization, flexibility, and convenience which they already encounter in their everyday lives.

CEO CIO

Chief Digital Officer

Chief Data

Officer

Senior IT leadership

below C-level

27%

18%

11% 11% 11%

26%29% 29%

8%

30%= Today = Future

8%

Chart 1: Who is leading the Digital Transformation charge today, and who should do so in the future?

Role of leaders in driving digital transformation

9 https://news.microsoft.com/apac/2017/02/20/80-of-business-leaders-believe-they-need-to-be-a-digital-business-to-succeed-microsoft-study/ #sm.0000xvjksv17xwdg1yao8420ztirl#Z7FZlAScmZqWeIrE.97

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Engage customers: give them new experiences they love The history of customer engagement has been shaped and reshaped by changes in the point of engagement, the nature of engagement, and now our ability to customize the engagement based on the ability to understand and interact with customers as individuals.

Business leaders are turning their focus to improve customer engagement by investing in breakthrough devices and

technologies that harness data spread across siloes, and then deliver intelligence that fuels new forms of experiences, such as IoT, smart machines and sensors, computer vision, digital agents, bots, and language and speech recognition.

Consumers are savvier than ever before, with access to data ensuring they are often educated on a product or service before engaging. To stand out, organizations will need to deliver a new wave of deeply contextual and personalized experiences, while balancing security and user trust.

Microsoft envisions four different digital transformation outcomes for organizations. They are:

Prioritizing digital transformation outcomes in Asia Pacific

Case study: cultivating a culture of data to better engage customers

Since commencing operations in 1999, New Zealand’s TradeMe has collected huge quantities of customer data drawn from the interactions of its 3.7 million customers with the company’s online classifieds and auction site. The company needed a way to effectively crunch this huge amount of data to understand its customers better and inform its future business decisions.

To do so, TradeMe developed a Business Intelligence (BI) unit to study the data and encourage its use amongst employees. The company used Microsoft’s Power BI, a cloud-based business analytics service, to translate numbers and data into a presentable graphics format – a key factor for the business’ visually-oriented and less technical decision-makers. To analyze customer behavior patterns, the BI team worked with Microsoft to deploy the Azure Machine Learning platform, allowing the company to formulate future predictions for opportunities and challenges.

Data now informs all decisions made by TradeMe’s business managers and product analysts, made accessible through the highly intuitive interface offered by Power BI. The company has digitally transformed the core processes of its business to put data at the front and center, allowing it to leapfrog ahead of its competitors and cater to customer needs proactively.

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Empower Employees: Reinvent Productivity and Enable A Data Driven Culture

The nature of how we work—and the workplace itself—has undergone a dramatic evolution. Individual and group workstyles are diverse and shifting with the ability for people to be mobile instead of tied to a single location. Growing volumes of data offer promise of greater insight, but accessing and making sense of the information can be nearly impossible. And truly safeguarding our organizations and people remains a major challenge.

Optimize Operations: Modernize Portfolio, Transform Processes and Skills

Emerging technologies like IoT have accelerated the potential for businesses to optimize their operations.

Field equipment, once isolated and siloed, can now be connected on a continuous basis, enabling businesses to gather data across a wide, dispersed set of endpoints, draw insights through advanced analytics, and then apply those learnings to introduce improvements on a continuous basis.

Organizations have a great opportunity to empower their people, to help them do their jobs better by re-engaging them in their work and transforming the workplace environment itself. Successful organizations leverage the power of mobility to empower employee collaboration from anywhere, on any device, providing easy access to the apps and data they need, while mitigating security risks. They draw insights and make decisions based on business metrics in living, dynamic dashboards, and leverage the power of social conversation to take the pulse of employee sentiment.

Organizations in manufacturing, retail, and even healthcare can shift from merely reacting to events to respond in real time, or even pre-emptively anticipate and solve customer issues.

Prioritizing digital transformation in Asia Pacific

Case study: unshackling employees with cloud-first workflows As a leading insurance company in the Asia Pacific region, AIA Group sought to improve collaboration and synchronize its working processes across its 18 markets. To do so, AIA adopted Office 365, a cloud-based productivity suite, as its default platform in all its offices throughout the region.

AIA selected Office 365 based on how effectively it transformed already-familiar Microsoft Office tools into a shared, always-accessible digital working environment. The company took advantage of new features such as Delve, which organizes information based on users’ current projects or interests, to further streamline employees’ workflows and keep them focused on the top priorities at any

given time. Office 365’s inbuilt collaboration tools, ranging from communications channels like Yammer and Skype for Business to shared storage spaces like SharePoint Online and OneDrive for Business, have helped the company standardize its workflows and connect employees more seamlessly across geographies and timezones.

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Case study: re-energizing healthcare by embracing digital transformation

Ryman Healthcare is a New Zealand retirement village and rest home operator, operating 30 retirement villages in New Zealand with 6,000 village units and aged care beds. The business sought to reduce the risks of errors in and loss of its manually-documented records – made patently clear after Ryman lost its head office in the 2011 Christchurch earthquake.

Ryman Healthcare turned to a range of IT partners, including Microsoft, to develop “myRyman”, a tablet-based nursing app running on Microsoft Surface devices and Azure cloud services. The app digitizes staff processes ranging from rosters, schedules, and messages between nurses, helping to capture and analyse these vital interactions for ongoing reference. The combination of Surface devices and Azure proved ideal for Ryman, giving its nurses a fleet of robust and high-powered devices backed up by fast, responsive cloud processing power for the app’s real-time performance.

The myRyman project has helped Ryman Healthcare’s IT leaders gain greater cross-organizational acceptance for other digital transformation initiatives, including the use of its data to predict patient occurrences and outcomes. Ryman Healthcare has already begun exploring how the app may provide greater transparency to not only carers but also patients, further enhancing the high-quality experience that the care provider prides itself on.

Case study: how the internet of things helps oysters weather environmental uncertainty

Environmental challenges were threatening the livelihoods of Tasmanian oyster farmers and costing the Australian oyster industry AU$25 million in yearly revenue. From unpredictable rains that force oyster farms to stop their operations to prevent contamination, to crop-destroying diseases like the Pacific Oyster Mortality Syndrome (POMS) that propagate in warm water, oyster farmers needed a way to better predict the weather and monitor the water temperature of their farms.

The Yield, a world leader in intelligent and sustainable agricultural solutions, sought to make those predictions possible with data from the oyster farms themselves. Deploying a range of sensors throughout the oyster farms, The Yield collated the resulting data in Microsoft’s IoT Hub, hosted on Azure, for side-by-side analysis with national weather data. Azure’s processing power for high-performance Big Data workloads and analytics made it the go-to choice for The Yield, as did its seamless support for mobile-optimized

data visualizations – essential for the farmers whose primary means of accessing the data would be via smartphone or tablet while literally in the field.

The solution promises to save over AU$6.7 million a year and reduce oyster farm closures by 30%, while allowing farmers to prevent serious outbreaks of POMS. With the help of Microsoft’s Azure Machine Learning platform, the patented algorithms used in this solution have quickly improved over time, raising oyster farm productivity by 25% and giving oyster farmers more control and assurance of the quality of their crops.


Transform your products: Innovate Products and Business Models

The opportunity to embed software and technology directly into products and services is evolving how organizations deliver value, enabling new business models, and disrupting established markets. We have seen disruptors which are market leaders today

changing how they define their core business.

In this digital world, many modern enterprises are calling themselves data businesses, even though they do not sell data. Consider this: If every company was effectively a software or digital company, how would the nature of its products and its overall business model shift?

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Increasing security threats in today’s digital economies are real and cannot be ignored. There is a continued perception among business leaders that the cloud is less secure. However, they may be less privy to the advances being made in the cloud on security and privacy and need more exposure on how, with the current threat environment, it will be safer being in the cloud than relying on tradition forms of IT. In fact, a recent Microsoft Asia Pacific survey of 1,200 IT leaders10 conducted in September 2016 found that 87% believe the cloud will be safer than traditional IT infrastructure.

Significant technological advances such as ubiquitous computing, natural interactions, big data, and social experiences are changing daily life, and security and privacy will only become more important as these advances impact more people globally. Between today’s challenges and ones we haven’t yet imagined, we know that a steady, consistent approach to security and privacy will help us maintain and build customer trust.

Digital Transformation Must Be Built on Trust

People don’t use technology that they don’t trust. This is a golden rule that applies to organizations and individuals alike as we live in a mobile-first and cloud-first world.

Increasing security threats in in today’s digital economies is undeniably real and cannot be ignored.

According to this study, cyber threats and security concerns with businesses that are entirely linked to the digital world was seen as the biggest barrier to organization’s digital transformation. In fact, 59% of respondents feel the more that an organization moves to the cloud, the less secure it is. It is up to business leaders to ensure that their digital transformation strategies not only enhance security throughout the organization, but effectively communicate these improvements – and reinforce trust – amongst their customers.

10 Microsoft Asia Pacific survey of 1,200 IT leaders across 12 markets to understand how they are evolving their IT infrastructure strategies to meet the needs of a digital business. Read more here: http://news.microsoft.com/apac/2016/11/24/microsoft-survey-it-leaders-in-asia-are-prioritizing-hybrid-cloud-to-transform-it/

Across businesses, technology functions best where there is trust. Throughout history, at each innovation milestone, trust has always been a target for attack by those who seek to explain their own gain.

At Microsoft, we take our commitment to safeguard customers’ data, to protect their right to make decisions about their data, and to be transparent about what happens to that.

Our “Trusted Cloud Principles” articulate our vision on what enterprise organizations are entitled to expect from their cloud providers:

• Transparency: You understand how your data is being handled and used. This means we provide an appropriate level of transparency into security, privacy and compliance practices and actions to help protect your information.

• Privacy and Control: No one is able to use your data in a way that you do not approve. Microsoft prioritizes your data privacy; our commercial cloud customers own their data and we do not use it to deliver targeted advertising

• Compliance: You can meet your regulatory obligations. This means we support you with certified compliance credentials, backed by third-party audits.

• Security: confidentiality, integrity, and availability of your data is secured. Microsoft cloud services are designed, developed, and operated to help ensure that your data is secure.

We face the same challenges along with many of our customers, but because of the scale of technology we build and operate, we are able to capture a massive amount of security related-signal This new understanding helps us to build new solutions and inform our security approach across three critical elements: Platform + Intelligence + Partners.

Today, we build security into Microsoft products and services from the start. That’s how we deliver a comprehensive, agile platform to better protect endpoints, move faster to detect threats, and respond to security breaches across even the largest of organizations.

Learn more about Microsoft Security here: https://www.microsoft.com/en-us/security/default.aspx

TAKING TRUST SERIOUSLY

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Interestingly, transforming products using data and digital technologies to create new revenue opportunities was the lowest ranked priority among business leaders today (at 11%). That highlights both a gap and an opportunity for business leaders in the region. Those who do invest in new profit-making opportunities, whether through R&D or greater incentives for employee-led innovation, are more likely to gain a critical

Priorities for Digital Transformation in Asia Pacific

The Microsoft Asia Digital Transformation Study shows that Asia Pacific organizations are adopting a people-first approach to their digital transformation strategy. 33% of respondents highlighted customer engagement as a priority and 31% prioritized empowering employees as a key pillar in their journey. Asia Pacific business leaders should continue to place their focus not upon technologies in isolation, but how these technologies shape their customers’ and talents’ behaviors, steering these in directions that improve outcomes for both them and the organizations that serve them.

first-mover advantage and create new, stable markets for their products and services. In a time where technologies like cloud and mobile have become the norm, not the exception, applying digital in innovative ways matters more to business success than ever before.

Digital Transformation Outcomes: Where They Are Now Vs Where They Want To Be

The survey found that only about 30% of respondents have achieved the desired outcomes of digital transformation. When asked about the 10 key desired outcomes (see Fig XX / chart below), the study found that the top three most developed areas, albeit at fairly low levels, are: 1. Enabling employees to work from anywhere (32%)2. Integrate data across businesses to enable personalized

customer experience (30%)3. Collaborate and share knowledge digitally amongst

employees to increase productivity & idea sharing (28%)

Asia Pacific business leaders must take responsibility for the cultural change necessary for realizing these priorities. Apart from defining the new working models and practices that employees can – and should – adopt, leaders should also lead by example, embracing more mobile and collaborative practices in their own daily workflows.

Other key desired outcomes that businesses in Asia Pacific want to achieve through digital transformation include:

Digital Transformation Priorities for Developed vs Emerging Asia:

• Engage customers better (34% vs 32%)• Empower employees (30% vs 33%)• Optimizing operations (26% vs 24%)• Transforming products and services (10% vs 11%)

Analytics capabilities to understand specific customer needs

Adjust product or price strategy based on customer data

Integrate data for personalized or customized service or product

Using technology to allow employees to be connected and be able to work anywhere

Collaborate and share knowledge digitally for greater productivity and idea sharing

Automate repetitive tasks

Using digital initiatives to enhance customer touchpoints

Creating new ways to reach/sell through digital channels

Real-time operation improvement using a wide range set of data points

Establishing new digital governance, transformation processes and management

27%

27%

30%

32%

28%

27%

27%

27%

24%

25%

= Optimizing Operations= Empowering Employees

Chart 2: Digital Transformation Desired Outcomes and where business leaders feel they are today

= Transforming Products= Engaging Customers


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Most employees and consumers have already grown accustomed to digital technologies once considered disruptive or even dangerous. Cloud computing, the platform supporting everything from mobile services to IoT, has become ubiquitous in everyday life for most consumers. A majority of the respondents (81%) in the study said that cloud computing and decreasing cost of devices have made it more affordable for companies of all sizes to embark on a digital transformation journey. In fact, 78% said that cloud computing is an essential part of their digital transformation strategy.

Interestingly, respondents from emerging markets in Asia Pacific view cloud computing as driver of digital transformation: 86% of respondents said that cloud computing and decreasing cost of devices have made it more affordable for companies to

embark on a digital transformation journey (vs 76% in developed markets). 84% of respondents in emerging markets view cloud computing as essential part of digital transformation (vs 83% in developed markets)

However, nearly 60% of Asia Pacific business leaders still feel that organizations become less secure the more they migrate to the cloud. Asia Pacific’s business community must ensure that concerns about the cloud’s security, while often justified, do not restrain them from making the most of its potential to transform their operations.

According to the study, these are the emerging technologies that business leaders are interested to explore in the next 12 to 18 months:

Artificial Intelligence: Expanding Human Potential

Artificial Intelligence (AI) uses self-learning computing processes to translate today’s vast amounts of data into meaningful real-time actions and responses to human inquiries. AI has numerous applications, from self-guided robots to intelligent voice-enabled assistants – all made possible by its understanding and analysis of far more data than humans can process. While most AI technologies are still in their early stages of development, they have already begun to transform everything from customer service to the use of robots in hazardous situations – and their potential will only continue to grow.

Internet of Things: Drawing Data Everywhere

IoT is about embedding data sensors in computing devices to collect and analyze data in new ways to uncover actionable insights. IoT isn’t new, though every other day we’re discovering

innovative ways of how a network of sensors can solve real business problems.

Wearable Technologies: Seamless Computing Everywhere

Wearable technologies can also help digitally transform the workplace. Global engineering firm Laing O’Rourke, for example, leveraged Microsoft IoT technologies to design a “smart hardhat” that uses a sweatband sensor and data-collection array retrofitted in a conventional hardhat. By assessing the environment’s temperature and humidity according to acceptable thresholds, the hardhat can detect if workers are being exposed to potential onsite risks – and alert them, or other personnel, to ensure their continued safety.

Quantum Computing: Next-generational Computational Leap

Quantum computing can usher the next level in computing

MOST RELEVANT EMERGING TECHNOLOGIES

#1 #2 #3 #5#4

Emerging technologies for digital transformation

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unimaginable even with today’s super-computers. This will enable organizations to unleash even more possibilities with massive amount of data, where quantum computers can crunch insights in mere seconds instead of the hours or days needed by today’s computers.

Microsoft today is investing heavily in quantum computing research. The Microsoft Research lab, located on the campus of the University of California, called Station Q Santa Barbara, is focused on studies of topological quantum computing. The lab combines researchers from mathematics, physics and computer science and collaborates with academic researchers both locally and around the world to understand how topological phases of matter can be used to build a robust, scalable quantum computing architecture.

Virtual Reality: Reinventing Computing Experiences

Virtual, augmented, or mixed-reality technologies can enable the merger of real and virtual worlds into new and immersive experiences. Devices like Microsoft’s HoloLens as well as consumer-facing Virtual Reality solutions like HTC’s Vive and the Oculus Rift, are already capturing the imaginations of organizations to transform sales & marketing to staff training.

Using Microsoft HoloLens, Japan Airlines (JAL) developed two internal programs to provide supplemental training for engine mechanics, and for flight crew trainees who want to be promoted to co-pilot status. Using HoloLens, they will have a detailed hologram in front of their eyes that will display cockpit devices and switches that they can operate themselves, with visual and voice guidance provided through HoloLens. The experience helps flight crews build up muscle memory well before they advance into the cockpit, making for faster and more effective responses once they take to the sky.

Conclusion

The 4th Industrial Revolution has begun to change not only the technologies we use but the ways in which we behave and think. However, technologies like cloud, mobile, and IoT must be directed by a clear vision for creating value – one which requires board-level consensus on the goals and steps of digital transformation. Asia Pacific’s business leaders must take up the responsibility for creating such a vision, and supporting it with clear and practical strategies to digitally transform their entire organizations, not just certain parts.

Many businesses in Asia Pacific have already taken the first steps on their digital transformation journey. To stay relevant and competitive in the 4th Industrial Revolution, they must focus on what they want to transform into: enterprises that engage their customers, empower workers, optimize operations, and imbue new life into products and services.

Doing so requires not just a strong grasp of disruptive technologies, but constant dialogue and feedback with the various individuals and groups who influence the well-being of any business. Like its predecessors, the 4th Industrial Revolution promises to transform the relationships between man and machine. Asia Pacific’s business leaders will do well to remember the importance of both elements as they forge a more comprehensive approach toward digital transformation.

Emerging technologies for digital transformation

17[ ]

In Australia, over $1.1 billion has been channelled toward digital transformation under Australia’s National Innovation and Science Agenda.11 At the same time, a growing number of national public- and private-sector organizations have taken major steps to embrace more digital business models.12

Among the 126 Australian business leaders interviewed, 83% agreed that going digital is the path for organizational growth in the near future. Among the factors that aid this growth is the creation of fresh revenue streams, where 85% agree that the ability to study data insights are crucial to achieve this.

Australia’s business community has made relatively deep inroads into implementing digital transformations within their organizations. Over 41% have a full digital strategy already in place, and a further 48% are in the midst of implementing a specific strategy for their businesses.

Australian organizations focus their digital transformation efforts primarily on engaging their customers and empowering their employees toward adopting digital best practices, in order to grow a more digital-savvy workforce for the future.

The continued support of the board of directors, the C-suite and executives is cited as a crucial factor toward overcoming the barriers of digital transformation in Australia. The lack of support from government policies and a solid ICT infrastructure feature as prominent hurdles that need to be overcome, alongside a constant demand to cultivate a more digitally-savvy workforce.

“The Study reaffirmed the importance of steadfast leadership. To harness the power of the latest trends in data, analytics and cloud computing, leaders need to embrace the possibilities they offer and re-imagine their entire business models – or invent new ones. Australian organisations typically expect their chief digital officer to lead this transformation, however it is clear that support from all leaders in an organisation is crucial for progress.”

Steven Worrall Managing DirectorMicrosoft Australia

Australia Findings at a Glance

Appendix: Market Findings

11 http://www.theaustralian.com.au/business/technology/opinion/enabling-digital-transformation-for-australias-future/news-story/04d1e7a2d6e95756c7b97403a9f0a85912 https://blogs.msdn.microsoft.com/auspartners/2016/11/24/digital-transformation-in-australia-and-what-it-means-for-our-partnership



Limited or no strategy in place

48% 40%

12%

Fig 1.1: State of digital transformation in Australia

Empower employees

Transform products & enable new

business models

Engage customers

Optimize operations

#1 #2 #3 #4

Fig 1.2: Digital transformation priorities among business leaders in Australia

Lack of leadership from Board of

Directors & Executives

1


workforce

2


ICT infrastructure

Uncertain economic environment

3

Lack of organization leadership to ideate,

plan and execute digital transformation

5

Fig 1.3: Current barriers to digital transformation in Australia

18[ ]


Indonesia aims to become the biggest digital economy in Southeast Asia by 2020 and one of the sectors that has been identified as a major contributor to the goal is e-Commerce. In 2016, Indonesia’s Ministry of Communication and Information Technology launched an e-commerce Roadmap, which aims to create 1,000 technopreneurs with a total valuation of US$10 billion by 202013.

The urgency for digital transformation is echoed by a majority of the 113 Indonesian business leaders interviewed, with over 51% working toward implementing a specific digital strategy for their organizations. Over 27% already have a full strategy in place, but 22% only have a limited or no present plans to implement digital transformation at all.

When it comes to challenges in transformation, cybersecurity concerns, an unskilled workforce, a lack of technology partners, and economic uncertainties continue to drag at the pace of digital transformation for organizations in Indonesia.


13 http://www.opengovasia.com/articles/6907-indonesia-aims-to-become-the-largest-digital-economy-in-southeast-asia

In Indonesia, implementation of digital strategy focuses mainly on empowering employees and integrating technologies to better engage customers.

“Indonesia is expected to become the largest digital economy in Southeast Asia by 2020, therefore organizations need to evolve fast enough to be more competitive amidst the continuous disruptions in each industry. Microsoft is committed to empowering every person and organization in all sizes to embrace future opportunities and transform to a digital business to enable the future growth of Indonesia.”

Andreas Diantoro Microsoft Indonesia

Indonesia Findings at a Glance

1


workforce

2

Lack of supporting government policies and ICT infrastructure


3

5


business models

Optimize operations

Engage customers

#2

Empower employees

#1 #3 #4

Fig 2.2: Digital transformation priorities among business leaders in Indonesia




51% 22%

27%

Fig 2.1: State of digital transformation in Indonesia

Not having the right technology partners

4

Fig 2.3: Current barriers to digital transformation in Indonesia

19[ ]

Malaysia is one of Asia Pacific’s fastest growing adopters of advanced digital technologies and trends. Its 2017 National Budget places emphasis on transitioning the nation into a more digitally-focused economy14 and the recently launched Digital Free Trade Zone15 is expected to bolster the nation’s digital economy and benefit SMEs or organizations doing business online.

Out of the 133 Malaysian business leaders who were surveyed, 80% believe that organizations need to make the jump to digital in order to grow in the future. 88% believe that businesses can benefit in terms of revenue growth through informed study of data insights for their industries.

The progress toward digital transformation varies within organizations in Malaysia. Over 34% already have a full digital strategy in place, with 47% working their way towards completion. Only 19% have incomplete or no digital strategy for the foreseeable future.

A lack of leadership to lead the digital transformation process remains a primary barrier for digital transformation in Malaysia, while prevailing concerns for cybersecurity, economic uncertainties

and a lack of digitally skilled workers continue to challenge the digital transformation efforts of Malaysia’s business leaders.

Like most of Asia Pacific, digital transformation in Malaysia is focused on adopting technologies to better engage customers and empower their employees.

“Digital transformation is an opportunity for organizations to engage customers, empower employees, optimize operations and transform products. Malaysia’s business leaders should quickly leverage the power of information technology to derive at new solutions and ride on the transformation wave.”

K Raman Managing DirectorMicrosoft Malaysia

Malaysia Findings at a Glance


14 https://www.digitalnewsasia.com/business/budget-2017-focus-malaysia%E2%80%99s-digital-economy15 http://www.thestar.com.my/news/nation/2017/03/22/najib-malaysias-digital-free-trade-zone-is-a-worlds-first

1


workforce

2


3

5






47% 19%

34%

Fig 3.1: State of digital transformation in Malaysia

Empower employees


business models

Engage customers

Optimize operations

#1 #2 #3 #4

Fig 3.2: Digital transformation priorities among business leaders in Malaysia


ICT infrastructure

4


Fig 3.3: Current barriers to digital transformation in Malaysia

20[ ]

While business leaders in New Zealand are receptive toward digital change, many are still wary about adopting the latest technologies, such as the cloud.16

Among the 100 New Zealand business leaders surveyed, over 75% agree that New Zealand businesses need to be present in the digital world in order to survive in the future. 88% see the potential of digital transformation and a data-focused culture to opening new revenue markets for their businesses. Additionally, 83% did agree that cloud computing is an essential part of their digital transformation journeys.

However, when it came to their current state of digital transformation, only 36% of New Zealand businesses have future-proofed their organizations with a full strategy in place. 47% are in the midst of integrating digital into their organizations and around 17% have made limited to no progress at all.

The demand for skilled digital workers continues to exceed supply in the country, and proves to be a considerable challenge for business leaders. Tight government regulation also slows

digital progress and is compounded by a lack of business-savvy technology leaders and advocates to drive digital adoption within the business community.

New Zealand businesses focus on engaging their customers and empowering employees when considering areas to focus their digital strategy on. “The opportunity for New Zealand businesses to capture growth locally and globally is real – but we need to move faster. Business leaders need to should rethink business models, uncover and use data insights and embrace a different way of bringing together people, data, and processes which create value in a new digital business.”

Barrie Sheers Managing Director Microsoft New Zealand

New Zealand Findings at a Glance


16 https://news.microsoft.com/en-nz/2017/03/10/research-shows-say-do-gap-is-hindering-the-digital-transformation-of-new-zealand-businesses/#sm.0001hciq2p1dp3dtksphihd5shakw #eTyE2oAxqCQWmPCq.97

1


workforce

2

3

45





47% 17%

36%

Fig 4.1: State of digital transformation in New Zealand

Fig 4.3: Current barriers to digital transformation in New Zealand

No urgency or need to counter industry disruptors


ICT infrastructure

Empower employees


business models

Engage customers

Optimize operations

#1 #2 #3 #4

Fig 4.2: Digital transformation priorities among business leaders in New Zealand

Lack of a business-savvy technology leader

Tightly-regulated industry that limits ability to transform digitally

21[ ]

The need to integrate digital technologies and update the processes of their organizations in order to keep up with the ever-increasing needs of digitally-savvy consumers is not lost among business leaders in the Philippines. Recent surveys by Microsoft have shown that leaders are making small starting steps, such as the consideration of hybrid cloud systems, while still juggling with legacy infrastructure and systems within their organizations.17

Based on answers from 111 of Philippines’ business leaders, 86% agree that digital transformation plays an important role in an organization’s growth. The same percentage also agreed that going digital would uncover potential new revenue opportunities for their businesses.

In terms of organizational readiness, 32% of Philippines’ organizations are digitally prepared for the future, while 43% are attempting to implement a focused digital strategy. 25% have a limited strategy or no strategy in place at all.

A lack of leadership to plan, ideate and transform their organizations from the ground up remains a significant barrier for many of the nation’s business leaders. Cybersecurity threats, an

unskilled workforce and unsupportive government policies also tend to delay the trajectory of digital transformation.

Like the rest of Asia Pacific, organizations in the Philippines are transitioning to a digital business to better engage their customers and empower their employees with full mobility to collaborate.

“The Philippines continues to be one of the leading countries to adopt regulations that promote the use of technology. Recently, the Philippine government through the Department of ICT adopted one of Asia’s first cloud-first policies in government. This is great news for the Philippines and both public as well as the private sector should quickly follow the lead of the government and quickly embark in their digital transformation journey to achieve progress and development.”

Karrie Capellan-Ilagan General ManagerMicrosoft Philippines

Philippines Findings at a Glance


17 http://www.megabites.com.ph/business-leaders-in-the-philippines-prioritize-hybrid-cloud-for-digital-transformation

1


workforce

2

3

5






43% 25%

32%

Fig 5.1: State of digital transformation in Philippines

Empower employees


business models

Engage customers

Optimize operations

#1 #2 #3 #4

Fig 5.2: Digital transformation priorities among business leaders in Philippines

Lack of supporting government policies and ICT infrastructure

4




Fig 5.3: Current barriers to digital transformation in Philippines

22[ ]

Singapore is one of the most technologically-advanced markets in Asia Pacific, where its government constantly pushes digital technologies to be at the forefront in redefining socio-economic developments. It recently unveiled an ambitious blueprint for Singapore’s next lap of growth based on recommendations from a specially-formed group consisting of business, governmental and community leaders called the Committee on the Future Economy. In this blueprint, digital transformation has been identified as critical to the competitiveness of its industries.

About 118 business leaders in Singapore participated in the Microsoft Asia Digital Transformation Study. Some 75% of business leaders in Singapore agreed that every organization needs to transform into a digital business to enable future growth. 73% of business leaders in Singapore agreed that new data insights can lead to new revenue streams.

Like the rest of developed markets in Asia Pacific, Singapore has some way to go on the digital journey, where Only 34% believe that they have a full strategy in place and are well on their way to digitizing their business; while 50% are progressing in their digital transformation journeys, and 16% have a limited or no strategy today.

Cybersecurity concerns, along with lack of digitally skilled workforce, leadership and data strategy are seen as key barriers among business leaders in Singapore.

Interestingly, Singapore is one of the few countries in Asia Pacific that has ranked optimizing operations as their top two digital transformation priorities.

“In our current volatile economic environment, innovation and transformation will form the backbones of Singapore’s economy. Organizations will continue to face rapid changes, disruption and uncertainties with technological advancements, and organizations must transform to stay relevant in the digital age.”

Kevin Wo Managing DirectorMicrosoft Singapore

Singapore Findings at a Glance


17 http://www.megabites.com.ph/business-leaders-in-the-philippines-prioritize-hybrid-cloud-for-digital-transformation

Lack of digitally-skilled workforce




50% 16%

34%

Fig 6.1: State of digital transformation in Singapore

Empower employees


business models

Engage customers

Optimize operations

#1 #2 #3 #4

Fig 6.2: Digital transformation priorities among business leaders in Singapore




Fig 6.3: Current barriers to digital transformation in Singapore

Lack of organization leadership to ideate, plan and execute

digital transformation

23[ ]

In South Korea, the adoption of innovative new technologies and practices has helped elevate the nation to a global powerhouse status, and business leaders are currently beginning to see a similar growth opportunity through digital transformation and adoption of new technologies.18

Of the 119 South Korean business leaders surveyed, 79% agree that digital transformation is essential for their organization’s growth. 74% believed that their businesses could create more revenue streams from data insights collected digitally.

South Korea’s businesses are in different stages of digital transformation, with only 18% having a full digital strategy already in place. 50% are progressing toward implementing a specific strategy, but a surprising 32% have a limited or non-existent digital strategy for the near future. This is definitely alarming for an economy that has relied on building its technology capabilities to propel its growth over the last decade.

It could be very much due to the nation’s sluggish economic growth, which has persisted into 2017,19 that has created caution and dampened progress around digital transformation. Other

challenges and barriers include the lack of a push from the upper leadership, cybersecurity concerns, a digitally unskilled workforce, the lack of governmental policies, and an inadequate ICT infrastructure which often discourages the transition toward digital.

The digital transformation strategy of South Korean companies is focused primarily on adopting CRM technologies that will help organizations engage customers; and digital technologies such as the cloud that will empower their employees.

“Business leaders shouldn’t let uncertain economic environment hinder their organizations’ digital transformation progress. In fact, we urge business leaders to develop greater urgency in transforming their organizations during times of volatility to drive future growth.”

Al Koh General Manager and Chief Executive OfficerMicrosoft South Korea

South Korea Findings at a Glance


18 https://news.microsoft.com/apac/2017/03/02/accelerating-digital-transformation-in-korea-and-across-asia-pacific/#sm.0001hciq2p1dp3dtksphihd5shakw#QJmeiJFMP7LFWLmM.9719 http://www.cnbc.com/2017/01/24/south-korea-economic-growth-retreats-further-in-q4-on-weak-construction-consumption.html

1


workforce

2


3

5






50% 32%

18%

Fig 7.1: State of digital transformation in South Korea

Empower employees


business models

Engage customers

Optimize operations

#1 #2 #3 #4

Fig 7.2: Digital transformation priorities among business leaders in Malaysia


ICT infrastructure

4


Fig 7.3: Current barriers to digital transformation in South Korea

24[ ]

Thailand is a leading light amongst Southeast Asia’s fast-growing economies, with significant investments being made by both private organisations and governmental bodies20 to propel the country to equal footing with its regional neighbours. The implementation of governmental efforts such as Thailand 4.021 focuses on shifting the Kingdom towards a value- or knowledge-based economy, with emphasis on research and development, science, technology and digital innovation.

Among the 117 Thai business leaders surveyed, 89% agree that businesses in Thailand need to go digital in order to sustain growth. 81% believed that the transition would help organizations to uncover market opportunities through data.

Digital transformation for Thailand continues at a fast, albeit unsteady pace. Already 29% of organizations are confident that they have a digital strategy in place, 41% are working toward implementation, but a troubling 30% are in early stages or have no digital strategy at all.

For business leaders in Thailand, the primary barrier toward digital transformation for the nation is the lack of a digitally-skilled

workforce. The lack of leadership commitment toward digital implementation is also a barrier, while outlying challenges include cybersecurity concerns, rising operational costs, lack of policy and infrastructure, as well as a non-urgency within organizations towards dealing with early signs of disruption within their industries.

Much of Thailand’s organizations are focusing their digital shift toward empowering their employees to do and collaborate more. “The adoption of new technologies has been identified as key drivers required to enhance the efficiency of state operations in Thailand. With the right technology partners and leadership, organizations in Thailand can drive digital transformation successfully and ensure continued growth.”

Tatiana Murushevskaya M&O Lead Microsoft Thailand

Thailand Findings at a Glance


20 https://www.pressreader.com/thailand/the-nation/20161201/28185723314940521 https://www.thailand-business-news.com/economics/54286-thailand-4-0-need-know.html

1


workforce

2

3

4





41% 30%

29%

Fig 8.1: State of digital transformation in Thailand


Fig 8.3: Current barriers to digital transformation in Thailand

Rising costs

No urgency or need to counter

industry disruptors


business models

Optimize operations

Engage customers

#2

Empower employees

#1 #3 #4

Fig 8.2: Digital transformation priorities among business leaders in Thailand


ICT infrastructure

To learn more about how Microsoft is powering our customers’ digital transformation journeys,

visit: https://enterprise.microsoft.com/en-apac/customer-stories

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