Beyond the hype of Malaysia’s ‘new economy’- the critical steps

Malaysia new economy
Image by Jakub Jirsak | Bigstockphoto

Despite the setback of the pandemic-induced recession in 2020, a recent World Bank report – Aiming High: Navigating the next stage of Malaysia’s development – holds that Malaysia is likely to make the transition from an upper-middle-income economy to a high-income economy within the next five years.

Among several analyst firms expecting a continued surge of transformation projects in Malaysia in 2021, Forrester’s principal analyst Achim Granzen recently told media that one of its surveys found that only 46% of polled companies in Malaysia were engaged in digital transformation initiatives. Countering this, COVID-19’s impact has pushed digitalisation activities in 2021 of 34% of the surveyed firms.

However, the pandemic has fuelled an upsurge in the rate of digital adoption, which has helped ICT spending to show a positive outlook in 2021. According to the latest release of Worldwide ICT Spending Guide Industry and Company Size, IDC forecasts AsiaPacific ICT Spending to grow by more than 4.9%, to reach USD924 billion in 2021 and is expected to reach US$1 trillion by 2024.

The lifting of lockdowns across the region has helped increase consumer demand. As vaccines begin to be rolled out, economic activities are taking the spotlight.

“Government bodies within the region have launched various initiatives to revive the economy, indirectly allowing enterprises to allocate budgets to improve both product offerings and digital adoption,” says Mario Allen Clement, a senior market analyst for IDC IT Spending Guides, Customer Insights & Analysis.

These are underpinned by a general democratisation trend, infrastructure technologies, and a continued surge in consumer behaviour towards eCommerce and online tools.

The new economy today

Some commenters have over the years summarised this confluence of factors as the new economy largely buoyed by seeking out opportunities from digital technologies.

In 2010, the OECD [Organisation for Economic Cooperation and Development] released a report entitled A New Economy? that cited the shifting role of innovation and information technology to drive growth. This year, the new economy is the experience economy: the current apotheosis of a rapidly disrupting and disrupted environment.

A new industry study – Digital, resilient, and experience-driven: How enterprises in Southeast Asia can prepare for the new economy – points out that enterprises in Southeast Asia are gaining steady momentum by prioritising growth and customer experience.

Conducted by Oxford Economics in collaboration with SAP, this study surveyed 600 senior executives across six Southeast Asian countries – Singapore, Malaysia, Indonesia, Philippines, Vietnam, Thailand – including 400 from small and midsize enterprises with less than $500 million revenue and 200 from larger organisations.

Those surveyed cite difficulty competing with larger organisations (50%), lack of technology for analytics (43%), lack of capable and motivated workforce (40%), lack of adequate data (38%), and difficulty scaling for growth (33%).

Tipping point

“Having gotten a foothold on the pandemic’s disruption, businesses across Southeast Asia are at a crucial transformative point to achieve long-term competitive growth,” Verena Siow, president and managing director, SAP Southeast Asia, commented.

Verena Siow

Customer experience is now a strategic imperative for survival and growth, the survey suggests. More than a third (35%) of the executives note that service excellence is now their primary source of value and differentiation.

Positive customer experiences have also become the foremost strategic consideration for businesses in the region, with key factors being personalisation for the customer (59%), providing high-quality products and or services (55%), ensuring data protection and privacy (53%) and offering competitive pricing (51%).

“Regardless of industry, businesses must embrace true business transformation into intelligent enterprises while keeping in mind that customers are the lifeline to survival and sustainable growth.”

Speaking on the SME picture, Hong Kok Cheong, managing director of SAP Malaysia, said that by transforming their business models into becoming intelligent enterprises, local organisations would be able to respond to individual customer needs, engage talent in new ways and create disruptive business models that are critical industry imperatives.

Hong Kok Cheong

He said that SMEs in the region continue to experience an uphill struggle amid an uncertain environment with crisscrossing challenges. Respondents reported difficulty adapting to a rapidly changing marketplace (40%, vs. 29% of larger enterprises), keeping up with changing customer wants and needs (38% vs. 43%), and difficulty retaining customers or driving repeat business (34% vs 30%) as top challenges to meeting their strategic priorities.

Taking Malaysia as an example, the vital role that SMEs must play was echoed in the first phase of MyDigital – Malaysia’s recently announced 10-year plan to revitalise its digital economy growth. This prioritises strengthening the foundation to drive digital adoption, includes encouraging some 875,000 micro, small and medium enterprises to use eCommerce as an avenue for growth.

Meanwhile, Malaysia’s larger enterprises placed an even higher focus on service excellence at 39%. Meanwhile, emphasis on improving customer experience, service excellence, and product excellence was 45%, 39%, and 27%. The percentages were at 66% and 81%, respectively, on the data protection and privacy and competitive pricing fronts.

“In an ever-increasing digital economy, the enterprises that thrive are those that adapt the quickest. There is a strong need to shift mindsets while constantly seeking new ways of working and redesigning processes. It is only by doing so that businesses can find a way that works best and stay ahead of the competition,” added Siow.

Democratising digital transformation

Digital democratization or the digital universe, fit for current and future possibilities of the experience economy, demands additional key fundamentals: digital infrastructure.

As the Oxford Economics/SAP survey found: automation and digital technologies are believed to support business goals by increasing process efficiency and reducing error, risk and cost (56%). This is followed by reducing overhead costs (45%), allowing employees to focus on higher-level business tasks (39%), and increasing productivity through transformation and intelligent process automation (37%).

Resilience, security and balance are among the priorities in building the new economy through digitisation, said TM ONE’s executive vice president and CEO Ahmad Taufek Omar, during a recent online gathering of business leaders.

Ahmad Taufek Omar

Cloud is a key enabler and component of digitalisation, Ahmad Taufek has said recently. “In the next normal, we must be agile: we need to take advantage of the cloud to innovate at scale, to respond rapidly to the market; the ability to store and derive insights from data will open up opportunities for growth and new business value. Ask yourself whether your assets and infrastructure is robust and flexible enough to pivot and scale rapidly to address different scenarios.”

Only 30% of digital transformation projects are successful. A mindset shift is essential. Together with the right Cloud platform, he stresses that the technology-people balance presents today’s critical challenge.

Ahmad Taufek has said: “Transformation is much more than just about process and technology; it’s about human transformation; it’s about people sharing an agile mindset that embraces change. Resistance from within your organisation will hamper any transformation initiative. The is where we are most needed as business leaders, to become chief evangelists, building the culture and driving change throughout our organisation.”  In addition to inadvertently fuelling a surge of digitalisation this year, the pandemic has brought into sharp focus an opportunity to redefine work-life balance, he said.

“The needs of people is what drives meaningful digital transformation,” he said, adding later: “We have got to focus on real needs in the real world – and proactively address what people need. This is the challenge in the changing business landscape. It’s a huge opportunity for recovery, but even But more importantly, it is an opportunity to rebalance our work-life balance.”

Ahmad Taufek’s prioritisation of people in the new economy has been echoed by a fresh wave of talent and reskilling initiatives in Malaysia.

K Raman

For example, Microsoft Malaysia managing director K Raman recently stressed an inclusive approach to growing talent in the nation’s drive to economic recovery. “People are the most important renewable resource that we must continue to invest in.”

Microsoft, which recently announced a USD 1 billion worth of investments centred around hyper datacentre growth, highlights a need for digital skills. In addition to its datacentre plan, the company will help to skill a further 1 million Malaysians by the end of 2023.

Oxford Economics/SAP’s survey points out that even as enterprises forge ahead towards business recovery, many recognise that their workforce is crucial to driving success.

Upskilling talent is cited as the top internal challenge by one in three (35%) of enterprises surveyed to meet strategic goals and the evolving organisational and customer needs.

All concluded that Asia’s experience economy, which is an aspect of the dynamic new economy, must today ride on large-scale efforts to gather and unlock the value from information and by encouraging digital upskilling and talent growth.

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