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Digital Transformation in New Zealand
- 1. Microsoft Asia Digital Transformation Study 2018 In partnership with IDC Asia/Pacific
- 2. DIGITAL How is an organisation being digitally transformed? How is an organisation business model being digitally transformed? TRANSFORMATION
- 3. Every company is a software company. You have to start thinking and operating like a digital company. It’s no longer just about procuring one solution and deploying one. It’s not about one simple software solution. It’s really you yourself thinking of your own future as a digital company. SATYA NADELLA CEO, MICROSOFT
- 4. Digital Transformation economic impact on countries’ GDP Digital Transformation impact on organisation’s business What sets Digital Transformation Leaders Apart? Unlocking the Economic Impact of Digital Transformation in Asia Pacific Digital Transformation Impact on society
- 5. Digital Transformation impact on organisation’s business What sets Digital Transformation Leaders Apart? Digital Transformation Impact on society Digital Transformation economic impact on GDP Unlocking the Economic Impact of Digital Transformation in Asia Pacific
- 6. 2017 2019F 2021F Digital Transformation Contributed Non-Digital Transformation Contributed 55% 28% Impact on GDP derived from digital products or services created directly through the use of technologies by 2021 Asia Pacific 2017 2019F 2021F Digital Transformation-contributed Non Digital Transformation 60% 25% 6% 6% New Zealand
- 7. Forecast additional GDP contribution by DT based on projected GDP (nominal) growth by the World Bank, forecasted based on revenue growth projections by companies undergoing DT and discounted by percent of companies undergoing DT. Asia Pacific New Zealand’s DIGITAL TRANSFORMATION IMPACT ON ASIA PACIFIC GDP (US$ BILLION) Legend 2016 2021 4.9% CAGR forecasted growth 0.8% CAGR Digital Transformation will add to GDP 24,498 24,498 6,685 1,161 DIGITAL TRANSFORMATION IMPACT ON NEW ZEALAND GDP (US$ BILLION) 2016 2021 2.9% CAGR forecasted growth 185 185 28 0.7% CAGR Digital Transformation will add to GDP 7
- 8. What sets Digital Transformation Leaders Apart? Digital Transformation Impact on society Digital Transformation economic impact on GDP Digital Transformation impact on organisation’s business Unlocking the Economic Impact of Digital Transformation in New Zealand
- 9. Top 5 Benefits Base: All respondents (n=95) – respondents who indicated “no strategy but plans to build one” have been removed for this analysis. A5. What are the top 3 benefits that your organisation has observed from their current Digital Transformation initiatives? Please indicate the degree of improvement for these three. Improvement in profit margin #1 Improved customer advocacy, loyalty and retention #4 Improvement in productivity #3 Increased revenue from existing products and services #2 Increased revenue from new products and services #5
- 10. Challenges Base: All respondents (n=100) B1. What are the top 3 challenges your organisation has faced or is facing in its digital transformation journey? Siloed and resistant culture Lack of skills and resources #3 #2 #1 Lack of advanced analytics to develop actionable insights
- 11. Digital Transformation economic impact on organisation’s business What sets Digital Transformation Leaders Apart? Digital Transformation economic impact on GDP Digital Transformation Impact on society Unlocking the Economic Impact of Digital Transformation in New Zealand
- 12. Benefits to Society Base: All respondents (n=100) C2. in your opinion, which of the following areas do you think DT initiatives by companies and government has benefited citizens? Rank top 3. Increasing opportunities for individuals through better access to education and training, creating higher value jobs for individuals, and improving quality of education through better teaching tools were seen as top three benefits Create more higher value jobs in the future for individuals #2 Improved quality of education through better teaching tools #3 Increase opportunities for individuals through better access to education and training #1
- 13. Digital Transformation economic impact on organisation’s business Digital Transformation Impact on society Digital Transformation economic impact on GDP What sets Digital Transformation Leaders Apart? Unlocking the Economic Impact of Digital Transformation in New Zealand
- 14. Base: All respondents (n=1560) A1. Which of the following best describes your organisation’s digital transformation strategy? A6. What % of your revenues / fees / incomes / fundings are derived from digital products and/or services? A5. What are the top 3 benefits that your organisation has observed from their current Digital Transformation initiatives? Please indicate the degree of improvement for these three. LEADERS 7% FOLLOWERS 93%
- 15. Five Organisational Traits CULTURE & CHANGE “…are less risk-adverse and characterised by having transient organisations that adapt to changing needs, often automatically and without management intervention.” “They embrace fail/ learn-fast approaches.” ORGANISATIONAL BEHAVIOR “…display higher maturity in collaboration and agility in change cycle. Instead of focusing on individual efforts, teams self-organise across groups to achieve organisational success.” DIGITAL TRANSFORMATION APPROACHES LEADERSHIP & STRUCTURE BUDGETS “…display higher organisation-wide alignment in their DT efforts.” “Their strategies and metrics are interlinked to deliver digital products, services and experiences to customers.“ “has a key person leading their digital transformation efforts with an independent standalone digital business unit or with digital leads assigned to each LOB and functional groups to drive efforts” “…have allocated budget for digital transformation as a permanent part of the P&L to maximize resources, ensure organisation-wide alignment and better governance“ 41% 31% 78% 61% 80% 65% 84% 68% 70% 50% Leaders Followers % indicate respondents in group who agreed with statements across Asia Pacific
- 16. Recommendations Unlocking the Economic Impact of Digital Transformation in New Zealand
- 17. How to Become a Digital Transformation Leader? • Address organisational structure shifts required for digital transformation success • Encourage the use of data across all work processes and operations within the enterprise • Create a digital ecosystem–mindset with data-sharing with partners and third parties. CREATE A DIGITAL CULTURE BUILD AN INFORMATION ECOSYSTEM EMBRACE MICRO-REVOLUTIONS • Begin with the end in mind and include a plan with clear outcomes • Facilitate Data Capitalisation across the Enterprise and with Ecosystem partners. • Focus on small, quick projects that deliver positive business outcomes and accrue to a bigger and bolder digital transformation strategy • Enabling quick investments and trials in emerging technologies, especially AI • Create a balance scorecard that combines standard and new metrics for DT success. LEVERAGE AI TO ACCELERATE DIGITAL TRANSFORMATION OF THE ENTERPRISE AND ECOSYSTEM
- 20. Roger Jones, Chief Technology Officer, Auckland Transport Challenge • Nearly one-third of New Zealanders live in the Auckland metropolitan area, which houses 1.4 million people, and more move there every day. • The city’s population is projected to grow to 2.2 in next decade • An estimated 800 new cars on Auckland’s roads every week. • This means a lot of demand for transportation services. Strategy • Help make Auckland a digital city by using technology to help manage public transportation projects. • Implement a new system to allow AT to make real-time, informed decisions to improve travel for everyone. • Work with NZTA to implement MaaS that can be used for buses, ferries and trains. • Use Artificial Intelligence based on information about the commuter to predict in advance travel journeys. Expected Results • Considerable cost savings through operational efficiency gains. Estimated quantifiable savings of $3 million in the first 10 years, expected to continue to grow. • Main goal is to allow customers to make informed decisions about their best choice of transport on a daily basis.
- 21. Microsoft Asia Digital Transformation Study 2018 In partnership with IDC Asia/Pacific
- 22. 2017 2019F 2021F Digital Transformation Contributed Non-Digital Transformation Contributed 55% 28% Impact on GDP derived from digital products or services created directly through the use of technologies by 2021 Asia Pacific 2017 2019F 2021F Digital Transformation-contributed Non Digital Transformation 60% 25% 6% 6% New Zealand
- 23. Microsoft Asia Digital Transformation Study 2018 In partnership with IDC Asia/Pacific
- 24. Technology investments for Digital Transformation for 2018 Base: All respondents (n=100) B6. Relating to the use of technology for your DT initiatives, which of the following digital technologies are your organisation going to heavily invest on in 2018? Cloud Big data analytics Mobility Security eCommerce Social media AI/ Cognitive/ Robotics Internet of Things (IoT) Next Gen Interface Mixed, AR & VR Blockchain 20.1% 14.6% 14.6% 9.9% 8.4% 6.6% 9.5% 6.3% 2.4% 1.9% 1.5% CORE TECHNOLOGIES EMERGING TECHNOLOGIES
- 25. Microsoft Asia Digital Transformation Study 2018 In partnership with IDC Asia/Pacific
- 26. How to Become a Digital Transformation Leader? • Address organisational structure shifts required for digital transformation success • Encourage the use of data across all work processes and operations within the enterprise; • Create a digital ecosystem–mindset with data-sharing with partners and third parties.” CREATE A DIGITAL CULTURE BUILD AN INFORMATION ECOSYSTEM EMBRACE MICRO-REVOLUTIONS • Begin with the end in mind and include a plan with clear outcomes. • Facilitate Data Capitalisation across the Enterprise and with Ecosystem partners. • Focus on small, quick projects that deliver positive business outcomes and accrue to a bigger and bolder digital transformation strategy • Enabling quick investments and trials in emerging technologies, especially AI • Create a balance scorecard that combines standard and new metrics for DT success. LEVERAGE AI TO ACCELERATE DIGITAL TRANSFORMATION OF THE ENTERPRISE AND ECOSYSTEM
- 27. Microsoft Asia Digital Transformation Study 2018 In partnership with IDC Asia/Pacific
- 28. Jobs Transformation Outsourced, automated or made redundant 24% Unchanged 11% New roles created due to digital transformation investments 27% Retrained and upskilled 38% Base: All respondents (n=100) C3. To address the lack of skillsets in your organisation, what percentage of your organisation’s jobs in 3 years will be: a) Outsourced, automated or made redundant, b) New roles created given digital transformation investments, c) Retrained and upskilled #C3a:- Do you think young professionals within your organisation (aged 25 year-old and below) have future ready digital skills to meet the demands of digital transformation.? 89% of jobs in the next 3 years will be transformed 67% are confident that young professionals already have future ready skills that will help them to transition to new roles.
- 29. Microsoft Asia Digital Transformation Study 2018 In partnership with IDC Asia/Pacific
Editor's Notes
- Q&A Thank you.
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- IDC GDP forecast by IMF and World Bank. Analyst assumption that by 2021 what percentage of Agriculture, Industry and Services will be derived from digital products or services. Its highly likely that by 2021 that 2/3 of Services (e.g. banking, hospitality, healthcare, etc) will be driven by digital, over 50% of Industry (manufacturing, construction, etc) will be driven by digital but only about 10% of agriculture. Why is there such a significant jump in the projection of contribution of digital products and services from 6% in 2017 to 60% forecasted in 2021? Currently, majority of digital transformation initiatives are aimed at productivity improvements, i.e. using tablets to take orders in a restaurant. Companies have not created much new products and services that is dependent on digital, nor converted much of its sales or revenue yet. In fact, revenues (not gross merchandise value) from eCommerce only contributes approximately 2 to 3% of GDP in Asia Pacific. However, we are seeing Leaders starting to use data to create new products and services, and are spearheading the conversion of their business to be digital technology dependent. As we move towards 2021, we expect that the digital transformation momentum will accelerate rapid with more companies investing in big data, artificial intelligence, IoT and other digital transformation enablers to reach a state whereby 60% of total Asia Pacific’s GDP (and 55% of New Zealand’s GDP) will be derived from digital products and services. Going back to the restaurant example, the outlet may invest in a mobility solution that uses tablets to take orders. However, we cannot say that the restaurant’s sales are derived from digital products and services as that impact internal productivity only. By 2021, a physical restaurant may not exist. Orders are predicted by AI beforehand, and ordered via virtual reality, the cook will still cook the meal but assisted by robots, and the meal delivered by drones. This transformation can be then regarded as a contribution to digital revenues. IDC also looked at rate of change across different industries, and spoke to industry leaders on their aspirations, in which analysts were able to make predictions as to how fast and to what extent transformation will happen. For example, the rate of transformation is faster in the Services sector versus the Agricultural sector.
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- We have categorized the set of technologies surveyed into “core” and “emerging” simply because without investing in “core” technologies such as cloud, mobility, big data analytics and even security, “emerging” technologies will not make sense in the greater scheme of things. Without big data analytics, AI/Cognitive/Robotics will not be possible as these emerging technologies require data. Data acquisition, data sharing, data value development and realization are critical for AI-related technologies to be implemented. Without cloud, organisations will not have access to high-power computing and storage which supports big data analytics
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- These are four recommendations for organisations in becoming a digital transformation leader: Create a digital culture: Culture is a multi-layered core at the heart of every successful digital transformation of organisations. In our increasingly digital world, a digital culture cannot thrive if an organisation operates in silos with disconnected or under-connected business functions. Importantly, digital transformation will not be optimized if organisations do not collaborate with their external customers and partners. The study shows that leaders benefit from a full digital transformation strategy, comprising a vibrant and mature ecosystem of customers and partners working together. Data has to be embraced as part of every piece of work done in the organisation, where employees are using data in real-time to allow them to make better decisions, and ultimately, serve customers and partners better. Build an information ecosystem: In a digital world, organisations have more data being captured from more internal and external sources than ever before. The opportunity and challenge is to bring all that data together, analyze it and use it in a way that’s contributing to better decision making and better outcomes. Data capitalization would be key for all organisations to succeed in the digital economy, where leaders are able to convert data into capital assets. To achieve this, there needs to be data sharing and collaboration within the organisation and externally with customers and partners in a trusted manner. A proper data strategy allows organisations to start to take advantage of the power of AI in identifying connections, insights and trends that are not yet obvious. Without real measurable data, AI will not be possible. Embrace micro-revolutions: In most cases, digital transformation efforts do not start with an organisation-wide plan of change, but rather with a series of micro-revolutions. These are small, quick projects that deliver positive business outcomes and accrue to a bigger and bolder digital transformation initiatives. We see this digital momentum in leaders, where they are less risk-adverse and even often embrace fail-fast and learn-fast approaches. This approach will ultimately enable organisations to be at the forefront of reaping benefits from emerging technologies such as AI. Underlying the acceleration would be the need to leverage AI for DT of enterprise and ecosystem: organisations that have big data analytics in place are also able to build upon the platform for the development of emerging technology such as AI, cognitive and robotics, which will accelerate digitalization.
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- While digital transformation’s impact on organisations are clear, there have been plenty of discussions about its impact on the society at large, particularly to jobs: Respondents in this study felt that 89% of jobs in the next 3 years will be transformed. 65% of jobs will be redeployed to a new position and/or retrained and upskilled for digital transformation. It is a transformation, not a displacement: Many types of jobs will evolve and change. In past industrial revolutions, jobs were transformed, and workers were reskilled to deliver higher value output to meet increased market demands. In addition, only 67% of respondents in our study are confident that their millennial employees already have future ready skills that will help them to transition to new roles. Continuous learning and training will be important for transformation of New Zealand’s economy for the digital age.
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- Importantly, the study has shown that leaders reap the highest digital transformation improvements over followers. In fact, leaders are seeing more than double the benefits from digital transformation compared to the followers, and the effect will be more pronounced by 2020.
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