What are the Critical Steps to Successful Digital Adoption?

This time last year, I pointed out that Malaysia and the rest of the world is rapidly making its way to the Fourth Industrial Revolution (now known as IR4.0).

Rapidly evolving technologies – such as artificial intelligence, robotics, the Internet of Things (IoT), autonomous vehicles, 3D printing, nanotechnology, and quantum computing – together with emerging new models and approaches are starting to help us unlock even more value and benefits from the digital revolution.

Leading industry players in Malaysia have started their digital adoption and transformation journey, but are yet to fully leverage digital technologies across the full breadth of their business, according to recent analysis by Accenture using its Digital Performance Index (DPI).

As an example, an Accenture analysis in Malaysia, published in ‘Faster Than Ever: Can Malaysia’s Top Companies Win in the Digital Age?’, examines 28 leading companies across more than eight industries. It found that although companies are aware of the importance of incorporating digital into business strategies, there seems to be a gap between planning and taking action. Up to 44 per cent of companies have digital strategies in place, but only 7 per cent have announced dedicated budgets to implement these strategies.

The research also revealed that most digital transformation initiatives are focused on customer-facing activities rather than internal operations and management structures. More than half (52 per cent) have launched new digital products and up to 44 per cent have digitalised current products. However, only 11 per cent use digital in their manufacturing processes or to manage the supply network.

With ASEAN’s digital economy projected to add US$1 trillion to the region’s gross domestic product during the next 10 years, Malaysian companies need to leverage digital innovation across all business activities, and they need to do this faster than ever.

In other words, it is about building upon a vibrant domestic ICT industry, transformative use of digital solutions by government, businesses and citizens, as well as the constant nurturing of robust enabling ecosystem. The vision of Digital Malaysia is aimed at enabling the country’s digital economy so that Malaysians and our country’s businesses can thrive within this new business environment.

Engine of Growth

Following the 29th Malaysia Implementation Council meeting (ICM) in October last year, Prime Minister Datuk Seri Najib Razak announced a new stream of initiatives to boost nationwide digital transformation.

“I really believe that digital economy can become the engine of growth for Malaysia,” the Prime Minister said after the meeting. “Although what we are experiencing today is amazing, I want to further challenge MDEC and all involved in driving the digital economy of the country and get it to supercharge our country’s economy. In fact, I want it to be one of the sectors that will power our growth.”

Vowing to take the government’s commitment to drive Malaysia’s Digital Economy to a higher level, Prime Minister’s wide-ranging announcements included a national artificial intelligence framework, digital accelerators, new company builder tech startup funds from Mountain Partners Europe and Bridge IP Japan, as well as new digital transformation acceleration programmes for mid-tier companies.

This stepping up of gear brings to mind the 2020 vision – which remains a major milestone of development for Malaysia – a year by which the nation is determined to achieve a digital, developed economy status.

Malaysian companies are stamping their mark globally; for example, Elsoft was recognised by Forbes Asia as ‘Best Under A Billion’ in 2015 and 2017. Among MNCs, we are already moving up the services value chain.

The Prime Minister noted that there has been a strategic shift in investments, where Malaysia used to be a base for shared services. Multinationals are now using Malaysia as a hub for catalytic digital technology and services. One such example is French company Dassault Systemes, a world leader in 3D design, who has chosen Malaysia to host their Global Development Centre for 3D Business Experience Platform.

The challenges Malaysia is addressing includes improving a structured approach, overcoming budget limitations, developing more digital workers as well as helping to clarify paths towards more efficient digital transformation.

To speed up the transformation, we are forming Digital Transformation Labs to provide consultancy and assist in prototyping new digital products and services. The labs will then match participant companies to digital companies. This programme intends to achieve three main outcomes – increased productivity, reduction in foreign labour dependency as well as a new business model or source of growth for the participant companies. This model has been tested on Top Glove and Gamuda with encouraging results.

By digitising the chemical testing line, Top Glove managed to completely remove the need to allocate labour for this task, as well as reduce unplanned downtime by 100 percent. Similarly, Gamuda’s mall management were able to reduce man-hours by 50 percent, while fully digitising their processes. The next step for Top Glove and Gamuda is to scale this approach to their other production lines and properties respectively.

Another major factor to grow the nation’s Digital Economy is building the right talent pool: our forecast reveals that Malaysia needs one million digital workers, such as coders, application developers and software engineers by 2025. We are pleased for the support for Digital Maker Movement, i.e. the initiative to identify and nurture young talents to be future digital innovators. It includes the move by Ministry of Education to incorporate computational thinking and computer science in schools, and for more collaboration with the private sector as well as support from academia to further nurture these bright young talents.

Catalysing AI

Malaysia introduced the ‘Cloud First’ Strategy to the national agenda, starting with the public sector. Cloud adoption can enable the government to rapidly deliver innovative public sector services to the Rakyat without incurring high levels of capital expenditure to invest in the IT infrastructure, such as data centres, servers and storage.

In a hyper connected world, it is becoming abundantly clear that artificial intelligence (AI) is the defining force of the fourth industrial revolution. AI is the natural progression from data analytics, and as such, Malaysia will develop a National AI Framework. This will be an expansion of the National BDA [big data analytics] Framework, and its development will be led by MDEC. AI could well be a ‘game changer’ in improving the lives of Malaysians.

In January this year, Malaysia introduced a high-impact initiative to catalyse the AI ecosystem and open up the path for collaborative innovation: The Malaysia City Brain. This is an open data-driven, artificial intelligence platform adapted from Hangzhou City Brain, which has been designed to meet local needs. It uses artificial intelligence as a platform to start to address urban challenges and offers intelligent solutions to the community in Kuala Lumpur. The platform uses Alibaba Cloud’s AI programme as well as big data analytics capabilities to produce real-time traffic predictions using its video and image recognition technologies.

The Malaysia City Brain operates as an open platform whereby it can plug in new and existing solutions from other platform by leveraging off pre-built intelligent tools, incorporating artificial intelligence and Machine Learning, and utilising existing data sets as well as additional data sets from external sources.

Global icons

On the startup side, the Malaysian tech scene is growing and vibrant. There are several Made-in-Malaysia regional champions that we see today: iflix, a three-year-old startup that managed to roll out services to 30 countries and five million customers, while having access to data analytics, artificial intelligence and machine learning. And it is intriguing that iflix does not own servers or data centres. Cloud and digital adoption allows them to be agile and scale fast to meet growing demands while keeping capital expenditure low. Presently, iflix has 179 million in the latest round of funding. We need to see more rapid growing start-ups like iflix in Malaysia.

It is increasingly important for local companies to become global icons. We do have wonderful potential here – with the likes of Silverlake, a renowned solutions provider for the global financial industry, Fusionex, a multi-award winning Analytics and Big Data company that is based in Malaysia.

In this light, the MDEC Global Acceleration Innovation Network (GAIN) initiative aims to identify companies that have the potential to be accelerated into major global icons, such as Sedania Innovator and iPay88. Through MDEC’s Silicon Valley office, we have successfully connected more than 20 of such companies to the SV ecosystem of mentors, accelerators and venture capitalists (VCs). Hence, there is a critical need to “fast track” local MSC companies to enter and compete in the global marketplace.

That said, it is also important that we help smaller local companies with technologies to scale up. Smaller-range companies can leverage the biggest by adopting eCommerce in their operations. Companies like Speedminer, a pioneering machine learning company, are amongst those that MDEC has successfully nurtured. Other numerous successful startups we have in Malaysia with the world at their feet include iMoney and ServisHero, together with companies such as KFit and iflix amongst many others.

Another initiative called the Malaysia Tech Entrepreneur Programme (M-TEP) is attracting interest from entrepreneurs from all across the world and shows that our initiatives have global appeal. It is encouraging to know we have received applications from entrepreneurs from more than 10 countries, including Germany, India, Australia, Singapore, the UK and the US.

On a wider industry-level, we hope to accelerate digital adoption by establishing the Digital Transformation Acceleration Programme (D-TAP) for large and mid-tier companies, who contribute 63.4 percent of the GDP, according to the Prime Minister at ICM.

Major eCommerce Boost

As I mentioned earlier, with a view to becoming a high-income knowledge-based society, MDEC has spearheaded high-impact government initiatives as well. One such move is the establishment of the country’s Digital Free Trade Zone (DFTZ). DFTZ is an initiative by the Malaysian Government, implemented through MDEC that aims to capitalise on the confluence and exponential growth of cross-border eCommerce activities that are happening within digital economy. First announced in March 2017, DFTZ facilitated seamless cross-border trading and eCommerce, which enabled Malaysian SMEs to export their goods internationally.

On Friday, 3 November last year, Malaysia’s Prime Minister and Jack Ma opened the first ever eWTP (electronic world trade platform) hub outside of China at a Kuala Lumpur ceremony, which also flagged off 1900 export-ready small and medium enterprises (SMEs). Malaysia marked a new milestone with the celebration of DFTZ’s one-year anniversary recently with 3,000 local SMEs now onboard onto the DFTZ programme.

On the public-sector perspective, the Malaysian Government has introduced a new category of certified locations called the Malaysia Digital Hubs for the start-up community in the digital economy. This is achieved through multiple public-private collaborations to offer unique value propositions such as ubiquitous hyper-speed broadband, hot-desking, mentoring and coaching services.

The BDA “Dance floor”

Another thing we must do from the fundamentals – human capital, investments – concerns the ecosystem. One of the most critical ecosystems that we are putting our focus on is – as I put it last year – the “dance floor”. The BDA “dance floor” is one of the most important and it’s really anchored around talent development; data scientists, data modellers, and analysts. At the end of the day, though, whatever transformation needs to happen needs to be driven by the private sector. As a government agency, we can only create the “dancing floor” – the actual dancing still remains within the grasp of the private sector.

In an ever-changing innovative world, Malaysia needs to remain steadfast on the Digital Malaysia road and to ensure we become the lead in key areas of enabling fundamentals. We are extremely inspired that we are moving in that direction with the Malaysian Government focused on accelerating growth and enhancing the wellbeing of the rakyat.

Looking ahead, Malaysia’s Digital Economy is envisioning 20 percent of GDP by 2020. With a sustained push by all stakeholders, the Digital Economy contribution has good potential to reach the targeted value of RM324.9 billion by 2020, as set out in the 11th Malaysia Plan.

An important part of MDEC’s championing of the digital economy embraces digital inclusivity across all communities. We are passionate about inspiring everyone to use of digital within our Digital Malaysia journey so that the digital economy’s success can be shared by all.

The eRezeki and eUsahawan initiatives were launched in 2016 year to target key communities such as youth, SMEs, digital entrepreneurs and the B40. These initiatives include eRezeki, which is a programme for Malaysians to earn supplementary income online, while eUsahawan is a digital entrepreneurship programme helping the general public with basic business fundamentals to enhance their online sales.

So to amplify the nationwide impact of the eRezeki and eUsahawan initiatives, we developed our #YouCanDuit multichannel campaign using carnivals, roadshows, with other musical and entertainment components. Close to 200,000 people attended the on-ground events, while our multiple channel campaign included a successful partnership with not just Astro, but with other stations as well such as TV3 and RTM, and succeeded in creating a phenomenon in building the awareness of #YouCanDuit programmes. We have consistently reached out to a 10 million viewership in the past two years.

2018 will continue to see the growth of digital economy, as indicated in the budget announced in 2017. The vision is to turn Malaysia as a regional hub for digital economy. The Government, together with MDEC, are gearing up towards turning that vision into reality as we steadfastly activate our plan.

I am delighted to reaffirm the message that these times are among the best of times for us Malaysians, to ensure we are part of the Digital Malaysia journey and so share in the success of the dawning Digital Economy!

Dato’ Ng Wan Peng is Chief Operating Officer of Malaysia Digital Economy Corporation (MDEC).

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