What Drives Digital Transformation in Asia?
An Analysis of the Key Success Factors for Digital Transformation
If there is one thing we learnt from Charles Darwin, it is that neither the strongest nor the most intelligent survive, it is the ones that adapt the best to change. Today, “Digital Darwinism” is making more and more companies struggle for survival, as many have not understood the threat through the rapid shift to digital business. Digital transformation has been identified as one of the key drivers for innovation and development and will shape the economic landscape over the next years.
The global research and advisory firm Gartner describes digital transformation generally as “the process of exploiting digital technologies and supporting capabilities to create a robust new digital business model”. However, there exists no uniform definition of the phenomenon, nor a common understanding about which underlying success factors foster digital transformation or enable companies to leverage on and grow through DT.
Over the last years, it became apparent that Asia has somehow leapfrogged the West when it comes to digital tools and transformation, as we have been entering the Asian century. Digital products and services are introduced at a much faster rate than anywhere else and the impact of digitalization is far-reaching. These companies are revolutionizing access to data, offering full customization, achieving lower acquisition costs or reducing information asymmetry.
To understand the drivers of digital transformation, it therefore is indispensable to analyse Asia, a region that is at the forefront on leveraging on digital transformation, with an expected 60% of the region’s GDP to be deriving from digital products or services by 2021. Therefore, the question arises, which underlying key success factors have enabled Asia to become a digital champion and leapfrog in the field of digital transformation.
5 underlying key success factors have been identified and are described in the descending order of their importance. The results are based on a mixed method research including secondary research, webinars, panels, expert interviews as well as the the evaluated responses from 65 digital startups in Japan, Singapore, Indonesia, the Republik of Korea and the People’s Republik of China.
- Customer Centricity: Several researchers have identified CC to be an underlying success factor for the digital transformation of a company, as customers are the main beneficiaries of digitalization. Customer centricity is the proclivity of an organisation to focus on the organisational and interdisciplinary challenges associated with managing and designing the customer experience successfully. To provide their consumers the most convenient customer journey, Asian companies utilize DT to reshape the value chains, sharpen market intelligence, improve efficiency and reduce time to market. “They really care about the customer (…) on a different level than we experience it in the rest of the world.”
- Adaption readiness: describes the company’s abilities to adapt successfully to changing customer demands by leveraging on their ability and speed to innovate, and can be measured by the rate, in which innovations are introduced into the market. Several studies have confirmed that the speed of technological innovation and the adoption rate of new emerging technologies is a key reason for DT and the resulting economic growth in Asia. Operating in a society which is characterized by a highly digitally native mindset and a fast innovation acceptance rate, Asian companies have learnt to constantly adapt to their customer’s changing demands, in a timely matter that is unparalleled to any other region in the world. “People get very quickly used to new technologies that are surrounding them, and adapt quite quickly.”
- Government: To reap the benefits and address the challenges of the digital transformation, the gap between technological developments and policy frameworks requires to be tackled. In the quest to develop advanced technologies, shape a supporting environment and foster digital transformation, many Asian governments leave no stone unturned regarding policy and direction by minimising unwarranted implications while promoting diffusion of technology and industry development. All in all, governmental influence to foster a business-friendly digital economy is one of the key drivers for DT. “Asian economies are also benefitting from supportive government policies to encourage regional cooperation and to promote growth.”
- Digitally Native Mindset: This KSF was discovered in scientific research and mentioned throughout all expert interviews and describes the higher acceptance rate for advancements in the digital economy, i.a. the population’s digital mindset. Some experts even call this phenomenon “customer pressure”, as the consumers in Asia are prone to follow the newest trends, have the latest technology and expect the companies to adapt to their needs. This DNM, which influences the adoption rate in which consumers and businesses adapt to new digital products, paired with a strong internet economy and the availability of being constantly connected via internet devices, is an enabler for digital transformation and Asia, making that region a digital champion. “In some ways, Asia has leapfrogged the West in adopting of digital technologies.”
- Education: Research agrees, that the impact of human capital is a main differentiator. This makes the education system to one of the key drivers for a successful DT of a country. Asian countries have understood the necessity of educating their talents throughout all stages of their lives and thereby, the influence of the national education system becomes fundamentally significant. Asian universities try to develop specific digital strategies, to follow the massive trend towards DT and digital technologies. However, education and training is not only a core priority during school, but continuous to be an essential asset to attract and retain managerial, technical and entrepreneurial talent in the companies and to tackle issues related to digital literacy.
After we have gained a better understanding of the Key Success Factors on Asia, it is interesting to deduce recommendations for other regions across the world.
When it comes to government initiatives, support and policies, the quest for new implications has gained more approval over the last years. Many policies are still ill-adapted to close the gap between ‘Technology 4.0’ and ‘Policy 1.0’, a legacy from the analogue era. This might include building a robust digital ecosystem for startups and SMEs, fostering cross-border investments, digital trade and inter country collaboration or even making the tech industry one of the key national growth areas to ensure a faster adoption of new and emerging technologies.
Looking at the education system, the school’s syllabus, university programs and profession trainings are often outdated and forgoes to teach about digitalization or new technologies. Continuous learning with a focus on new technologies should be fostered including such things as cross-border exchange programs or research labs to enhance the skillset and lay the foundation of hands-on experience.
The Key Success Factors digitally native mindset, customer centricity and adaption readiness are deeply anchored in the behaviour, belief and way of living of the population and therefore influence the way that companies do their business. Thereby, customer centricity and adaption readiness are heavily influenced by the amount of data companies gain from their customers. The openness to share information, to gain an enhanced customer experience is conversely affected by the digitally native mindset of the country’s population. If there is a fast and well-developed feedback funnel, information about new products and services can be evaluated and adapted to match the customers’ needs.
To sum up, it is highly interesting to investigate the underlying success factors that drive digital transformation. Obviously, the single drivers also differ slightly across the examined focus countries. Further research in this area is indispensable to expand the presented research findings and to enhance our understanding of the key drivers in the field of digital transformation.