- Don’t be scuttled by cost concerns, it’s disrupt or be disrupted
- 4 challenges are strategy, culture, capabilities and company organisation
THE saying ‘if it ain’t broke, why fix it?’ cannot hold these days, especially among traditional businesses, according to UEM Group Bhd group managing director and chief executive officer Izzaddin Idris.
“There is no choice – as an engineering-based infrastructure and services group, technology is affecting the way we do business as well,” he told participants at the What’s Next 2016 conference organised by Digital News Asia (DNA) in Kuala Lumpur on July 28.
It is not only the cost of technology that is an issue, but organisational culture – trying to change “the culture of an organisation where people are used to the way they do things,” he said.
“Change is difficult … yet it shouldn’t be ‘if it ain’t broke, why fix it?’ but ‘if it ain’t broke, we still need to fix it,’ ” he added.
Izzaddin also noted that when technology comes into play, the immediate reaction of traditional business leaders is to talk about cost.
“Remember how we used to think that mobile devices are expensive? Look at us now – some of us even own more than one mobile device,” he said, adding that the actual price to pay would be the disruption of the business, especially in a sector like banking.
“Hardware and software are the easy part,” said Izzaddin. “The challenge lies in customer acceptance as they might be reluctant to spend more to get higher quality standards and … longer-term savings.”
The four barriers
McKinsey & Co senior partner Nimal Manuel expressed a similar sentiment as RHB Banking group chief operating officer Rohan Krishnalingam from an earlier talk: That a business strategy trumps a digital strategy.
“I hate the concept of a digital strategy … it has to be a business strategy,” he said. “44% of companies have a digital strategy but what is really needed is a business strategy.”
Besides strategy, the culture, capabilities and company organisation are also common barriers to overcome in a digital transformation, according to Nimal.
“The cultural barrier is where managers and employers are not comfortable in taking risks, thus preventing a ‘test and learn’ culture.
“84% of executives don’t see support for risk-taking while 40% like to test more and run rapid cycles but don’t have the right skills to do so,” he said, referring to McKinsey research.
“Most organisations recognise capability gaps, especially in technology, but lack a roadmap to build critical digital capabilities. Based on our data, 80% struggle to modernise technology.
“The fourth barrier is the organisation of a company. Very few companies have a digital budget and key performance indexes (KPIs) where they use existing talents for their digital initiatives,” he added, pointing to coffeehouse chain Starbucks’s success story in digital transformation.
But as a developing country, Malaysia has the advantage of being able to learn from other developing and developed countries, said Izzaddin.
Nimal concurred, saying that looking at several markets in South-East Asia where disruption is happening, some markets appear to be experiencing it at a much faster rate than even those in developed markets.
“We see a lot of growth in the region and it’s not just gross domestic product (GDP) growth either,” he said.
Aspirations and innovations
Nimal pointed to three sectors where disruption is happening at a rapid pace: Telecommunications, financial services, and retail.
“Need is the biggest driver for innovation,” he said. “The telco sector … is ahead because companies are forced to be ahead due to consumer demand.”
But he also argued that aspiration plays a part. “The aspiration and need to innovate need to be there.”
Pointing to the UEM Group which has been looking into investing in the Internet of Things (IoT) as an example, Nimal said that he doesn’t see similar South-East Asian players in the industry doing the same.
“We see a lot of interest in taking a piece of it [the IoT], but we don’t see many of the players in the region stepping up and getting ahead of it,” he said, adding that this stressed the ‘aspiration’ and ‘need’ factors.
Nimal and Izzaddin agreed that talent is also an ongoing challenge but could also be an opportunity.
Nimal argued that a company with a well-crafted digital vision would be able to attract more talents and provide more job satisfaction for such individuals.
Izzaddin said he views human resources (HR) as an important asset, and the HR department’s talent acquisition function is key.
“If HR makes a mistake in recruiting someone, you don’t see it until six months later,” he said.
“It is also important to create a right environment for like-minded people to work together” and for business leaders to “stay relevant and listen to ideas,” he added.
Other What’s Next 2016 stories:
Tycoon Vincent Tan on his costly failures
The generational clash, and sharing vs privacy
A digital strategy? You’re behind the times
How to make corporate-startup collaboration work
What’s Next 2016: Focus on SEA’s basic needs, forget Silicon Valley
Digital disruption not a key concern for Valiram Group
The third digital disruption wave is here
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