KUALA LUMPUR: Asia Pacific’s GDP stands to gain an extra US$387 billion by 2021 and grow by extra one per cent annually if the region’s manufacturing sector embraces digital transformation, according to the new figures released by Microsoft.
The results for manufacturing are outlined in the Study, ‘Unlocking the economic impact of digital transformation in Asia Pacific’, which was produced by Microsoft in partnership with IDC Asia/Pacific.
It was based on the survey of 615 business leaders from the manufacturing sector across 15 markets in the region.
“The study finds that escalating costs of operations are a number one concern among C-level executives within the sector.
“At the same time, they are increasingly aware of the need to develop new business models to grow the business to counter the rise of growing number of competitors in markets,” said IDC Asia/Pacific vice president Victor Lim, in a press statement.
“Embracing digital transformation is a critical imperative for manufacturers,” added Lim.
“Those organisations that had already embarked on their digital transformation journeys gained improvements in the range of 13 per cent to 17 per cent the last year. They will see at least 40 per cent improvements in three years, with customer advocacy registering the highest improvement rate,” he said.
Aside from that, the study identified the top three benefits of digital transformation that have a direct impact to bottom line performance which include improvement in productivity, improvement in profit margins, and costs reductions
However, Microsoft noted that these businesses are also seeing long-term benefits when they embrace digital transformation.
It added, increased revenue from new products and services and improved customer advocacy rounded up the top five benefits tracked from digital transformation.
Microsoft Asia Regional Business lead Scott Hunter, said: “Looking ahead, digital transformation in Asia means moving the focus from process automation, optimisation and productivity improvement efforts into developing new business models to stay competitive.”
The study also found that manufacturing organisations realise the importance of data today.
In fact, it noted that 44 per cent of respondents pointed out one of their key performance indicators (KPIs) used to measure digital transformation today is tracking how data is being used as a capital asset.
“It is no surprise that businesses are still focused on tracking process effectiveness as the manufacturing sector is one that relies heavily on time-to-market strategies for first mover advantage.
“However, as manufacturing organisations realise the value of data in the long term, they are likely to unlock the potential of digital transformation in helping them create new business models,” said Hunter.
The study also reported that manufacturing organisations are going to invest in cloud and big data analytics, followed by AI, Cognitive and Robotics and Internet of Things solutions this year.
By 2019, IDC predicted that 40 per cent of digital transformation initiatives will be supported by Artificial Intelligence/Cognitive capabilities providing timely, critical insights for new operating and monetisation models in Asia Pacific (excluding Japan).
“Digital transformation should be viewed as a team sport, not an independent business operation. Manufacturing organisations need to address culture and skills challenges through developing a digital culture and address organisational shifts required for a change to happen,” added Hunter.
“First and foremost, organisations need to address the skills gap within the industry.
“In fact, respondents highlighted that they expect 85 per cent of jobs within the sector to be transformed in the next three years,” Hunter said.
“Ultimately, manufacturing organisations need to move from process automation to a holistic, enterprise-wide transformation in order to attain competitive advantages,” shared Lim.
“There are three approaches to this – first, the organisation needs to develop a digital culture, followed by having a structured approach to the use of data, which is supported by introducing new technologies into the workstreams.
“Ultimately, a successfully transformed manufacturer will see the development of a digital supply chain whereby there is a fully automated feedback loop within the ecosystem to allow for full control, coordination and visibility across all parties.
“Additionally, working with a trusted technology partner is crucial for the success of organisations in their digital transformation journeys,” he added.