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Atkearney soe digital transformation report present

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Atkearney soe digital transformation report present

  1. 1. A.T. Kearney XX/ID 1 SOE Digital Transformation Report
  2. 2. A.T. Kearney XX/ID 2 • Digital Transformation Trends in Indonesia and Required Investment • What Indonesia Needs to Do • Role of SOEs and the Ministry
  3. 3. A.T. Kearney XX/ID 3 ASEAN: Digital Economy has the potential to transform daily life and add ~ $1 Trillion1 to the region’s GDP by 2025 Borderless digital services 100% digital literacy • ASEAN’s digital revolution has potential to significantly transform daily life across the region • Digital Economy can add incremental ~$1T to GDP over next 10 years through a combination of: – Impact of increased broadband penetration; – New industries (e.g. eCommerce, mobile payments, etc.) – Increase in worker productivity ASEAN’s Digital Revolution 1. Based on current prices; uses 2015 as baseline to project future nominal GDP growth Source: ASEAN Digital Revolution, A.T. Kearney
  4. 4. A.T. Kearney XX/ID 4 Indonesian aspirations: Indonesia has a vision to become the largest digital economy in ASEAN by 2020 Indonesia’s Digital Economy Vision, 2020 1000 digital start ups valued at US $10B, and 50+ new digital companies each year Transactions of US $130B 8M SMEs to go digital Country wide broadband coverage Country wide mobile coverage Source: Morgan Stanley Digital Indonesia 2018
  5. 5. A.T. Kearney XX/ID 5 1 10 100 1,000 10,000 100,000 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0 Malaysia Singapore Thailand United States JapanIndonesia Vietnam Malawi Chad Global Digital Maturity: However today Indonesia lags ASEAN peers in digital maturity Country Digital Maturity Digital Readiness (2016) GDP(2016,$USBillions) Nascent Intermediate Advanced • Manual local engagement, low digital affordability • Focus on mobile platforms with rapid adoption of app based services • Seamless Omni-Channel experience with advanced personalisation • Low priority, exception of financial services • Point based application of digital and Focus on digital upskilling of w/force • Advanced use of analytics, automation and skilled workforce • Limited data infrastructure and connectivity concentrated in select areas • Focus on scaling infrastructure - focus on connectivity & devices • Focus on infrastructure upgrades, innovation and security Source: GMSA: Achieving economic growth and fiscal stability in Chad , Better than cash alliance, Gartner – Verticals Forecast WW 2017Q1, World Economic Forum – Networking Readiness Index, World Bank GDP Digital CX Digital Ops Digital Infra- structure
  6. 6. A.T. Kearney XX/ID 6 Digital Investment: Indonesia digital spend below ASEAN peers; spend concentrated in services Digital Spend in ASEAN (USD) Enterprise Digital Spending1 (2016/17, US$ per capita, % of GDP) Total Digital Spend by Industry (2017, USD M)1 3,513 142 424 64 148 32 45 26Productivity per employed person2 (2017, ‘000 US$) ICT spending as % of GDP 146 1,011 3,440 75% 22% 3% Services Industry Agriculture Total 2017 4,597 ICT spending per capita 6.6% 4.5% 2.4% 1.3% 1. Gartner "Forecast: Enterprise IT Spending by Vertical Industry Market, Worldwide, 2016-2022, 1Q18 Update“, excludes telecom and internal services. 2. The Conference Board “Output, Labor and Labor Productivity, 1950-2018” Source: Gartner; The Conference Board; A.T. Kearney
  7. 7. A.T. Kearney XX/ID 7 Investment Required: ~4x increase in investment (2017-22) needed with strong growth in advanced services Enterprise Digital Spend by Industry (2017-22, USD, M) Enterprise Digital Spend by Type (2017-22, USD, M) 1. Assumes 0.000073 IDR to USD Source: Gartner; A.T. Kearney analysis 29% 40% 49% CAGR (2017-2022) 2017 2022 12,152 5,363 1,066 4,597 146 1,011 3,440 Services Agriculture Industry (Includes Manufacturing) 18,581 29% 37% CAGR (2017-2022) 2017 2022 59% 41% 4,597 34% 66% 18,581 Foundational Advanced
  8. 8. A.T. Kearney XX/ID 8 Future Digital Trends: 10 digital trends are emerging across for digital transformation Digital Infrastructure Digital Customer Engagement Digital Operations Security Networking Cloud Data Analytics Digital Workplace Automation 21 43 7 56 8 109 Internet of Things (IoT) Omni Channel CX Deep Customisation Enhanced Responsiveness
  9. 9. A.T. Kearney XX/ID 9 • Digital Transformation Trends in Indonesia and Required Investment • What Indonesia Needs to Do • Role of SOEs and the Ministry
  10. 10. A.T. Kearney XX/ID 10 Need a national digital vision supported by 4 structural anchors DIGITAL INFRASTRUCTURE CONSUMER AWARENESS & TRUST FUTURE READY WORKFORCE INNOVATION ECOSYSTEM Open Policy Healthy Industry National Projects Consumer Education Data Privacy Cyber Security Industry- University Engagement Expanded National Curriculum Private Sector Skill Building Ecosystem Facilitation Intellectual Property Laws Funding & Exit Options Digital Roadmap
  11. 11. A.T. Kearney XX/ID 11 Current Digital Framework: Indonesian digital initiatives are split across a number of different national roadmaps Roadmaps/ policies in Indonesia influencing digital Not Exhaustive Ministry Roadmaps Digital Initiatives Infrastructure Consumer Demand Stimulation Future proof workforce Innovative Digital Ecosystem Advanced/ Industry specific Technology Individual SOE Roadmaps RIPIN 2015-2035 KIM 2015-2019 Vocational match program Sectoral roadmaps Vision Indonesia 2045 Vocational Roadmap E-commerce Roadmap Cybersecurity IoT blueprint SOE Industry National Planning Info & Comms. Manpower Non Digital Disparate roadmaps drives high risk of gaps and potential duplicated efforts
  12. 12. A.T. Kearney XX/ID 12 National Digital Vision: Digital roadmaps like Singapore’s ‘Smart Nation Program’, critical to realising full potential • Objectives: Economically competitive global city, improve living and encourage businesses to innovate and grow • Government Investment: S$2.4B2 over next 4 years (from Nov 2017) into the digital economy • Strategic National Projects: National Digital Identity, e-Payments, Smart Nation Sensor Platform, Smart Urban Mobility, Moments of Life • Ecosystem priorities: Open Data, living laboratory, cybersecurity and data privacy, computational capabilities and digital inclusion United Kingdom - UK Digital Strategy2 • Objectives: To make Britain the best place in the world to start and grow a digital business, focusing on digital productivity benefits • Government Investment: £ 4.7B+ in gov. spending, including £450M over 3 years for the Government Digital Service, £1.9B investment in cybersecurity over the next 5 years, £1B investment into IT Infrastructure • Strategic National Projects: Digital Skills Partnership (including in schools), Cybersecurity uplift, Next Generation IT Infrastructure (including full fibre and 5G) • Ecosystem priorities: Establishing technology hubs, investment in R&D, Cybersecurity, IoT, data protection regulation Singapore – Smart Nation1 1. https://www.smartnation.sg/about/Smart-Nation 2. https://www.opengovasia.com/, www.gov.uk/government/publications/uk-digital-strategy
  13. 13. A.T. Kearney XX/ID 13 Solid Digital Infrastructure Consumer Demand Stimulation Future Ready Workforce Digital Innovations Ecosystem • Inconsistent quality of digital infrastructure • Low private sector investment • Sub-optimal technology use • Insufficient consumer protection regulation • No national cybersecurity framework • Low levels of e-literacy • Setting up workforce entrants with right skills • Re-skilling existing workforce • Poor access to skilled resources • Limited access to global knowledge and to market leaders • Limited access to larger deals • Healthy industry with 3 key players • Substantial national projects working with the industry • Clear consumer protection, privacy and cybersecurity frameworks • Nationwide e-literacy training programs • National skills, education roadmap • Incentives for enterprises to upskill existing workforce • Eased temporary global experts • Incubator hubs and partnerships – showcase local champions • SOEs/ government to support local champions Structural gaps 1. Workforce management; 2. Robotic process automation; 3. Natural language processing Source: A.T. Kearney KeyActions 1 2 3 4 Issues Structural Anchors Structural gaps: further action required to close gaps
  14. 14. A.T. Kearney XX/ID 14 Consumer protection: Indonesia can leverage global reference frameworks as a starting point A.T. Kearney Privacy & Data Protection (PDP) Framework Source: GDPR, Expert Interviews, A.T. Kearney Leverage learnings from global examples who have already formalized or are ahead in formalizing their data governance, e.g. EU, Canada, China, OECD, … 2 Sovereignty / Geo FrameworkRegulation / Legal Framework Governance / Organizational Framework Scope / Subject of Protection Process Framework Purpose Quality & Assurance Consent Future Processing Security Anonymisation Breach Notification Compliance Principles Personal Data Non-Personal Data Legislation Guidance Regulator/Authority Licensing Entity & Sector Legislation Country Global Functions Committees Roles Structure
  15. 15. A.T. Kearney XX/ID 15 Cyber-Security: Framework for policy makers to operationalize Cyber-Security: Operationalization Framework Source: A.T. Kearney Cybersecurity Example Establish a national-level agency to drive the cybersecurity agenda Establish sector-level dialogue Adopt sector-level risk assessment and maturity profiling Develop a coherent national strategy with an implementation road map Develop a law to address cybercrime Enact or update cybersecurity legislation Establish incident reporting mechanisms Establish incident response capability Raise community awareness Identify global standards and soft-steer regional adoption Identify and address skills gaps around cybersecurity through a national talent strategy 1 2 3 6 7 8 9 10 11 12 4 5 Governance Cybersecurity law Cybercrime law Information sharing and incident response Standards adoption Awareness building Capacity and capability building Cyber- security strategy 2 Identify critical information infrastructure
  16. 16. A.T. Kearney XX/ID 16 Future Ready Workforce: Indonesia is facing talent development challenges as an emerging economy Human Capital Trends Government education spending (2014)1 1. Korea in 2015; 2. GDP per capita at constant 2010 USD; 3. Indonesia (Jakarta) Source: World Bank, Survey of Adult Skills (PIAAC) - 2015 % of GDP Per Capita (USD) 2 <1 1 4 <1 <1 Missing % adults by literacy proficiency level (2015) Key: SpecialisedBasic 3 3 5.7 5.4 5.3 5.2 5.2 5.1 3.4 3.3 3.3 1.9 2,661 2,938 1,933 3,251 581 1,369 1,395 67 114 21 13 13 16 17 19 28 29 37 33 33 37 42 39 42 36 34 35 26 17 8 13 12 10 3 Level 1 & Below Level 2 Level 3 Level 4 & 5
  17. 17. A.T. Kearney XX/ID 17 • Increased emphasis on training for displaced workers • Encourage foreign talent mobility program5 • Centers of excellence in collaboration with private partnerships Existing initiatives: the government is committed to upgrading Indonesians’ technological capabilities 1. Including primary school (Sekolah Dasar) / junior high school (Sekolah Menengah Pertama) and equivalent (i.e. madrasahs) 2. Including high school (Sekolah Menengah Atas) / vocational school (Sekolah Menengah Kejuruan) and equivalent (i.e. madrasahs) 3. Including bachelor / master / PhD degrees, diplomas and equivalent 4. Including adult learning / upskilling or other programs to improve companies’ access to skilled labor 5. Foreign talent mobility program can be launched only for a specific period of time and specifically intended for passing skills & expertise to local talents Source: World Bank, OECD, Asian Development Bank, A.T. Kearney Masterplan for National Education Curriculum Redesign 3 Basic education1 High school / vocational school2 Universities3 Mobility programs4 Focus areas Select studies • Improve participation in basic education, particularly for lower income segments • Early exposure to 4IR foundational topics such as science and mathematics • Improve coordination with employers; Vocation education should be industry-driven to ensure that students have the requisite skills for 4IR (i.e. engineering, coding, manufacturing) • Review / redesign national education under 4IR era • Concentrate on educational areas aligned to 4IR needs (i.e. STEM, ICT fields) • Philippines: Recently reformed the K-12 education system with focus on learning & innovation, communication and information, media & technology • Singapore: Introducing courses on IoT, advanced manufacturing and other 4IR- relevant courses in vocational schools (polytechnics and ITEs) • Malaysia: Currently redesigning education for 4IR; launched policies such as 2u2i (a work / learning program in universities), and CEO@Faculty (trainings on-campus by CEOs) • Singapore: Offered comprehensive adult training and skilling through SkillsFuture, offering credits for mid-career learning programs
  18. 18. A.T. Kearney XX/ID 18 Digital Ecosystem: cooperation required between government, universities and global vendors • Influence and educate policy makers on resolving the digital divide • Jointly develop specific solutions to resolve issues faced by businesses in accessing fast, affordable, reliable broadband • Be champions to test new technologies and share thought leadership • Joint digital investment funds focused on education, workforce upskilling and digital infrastructure • Form CEO-CIO leadership councils • Sharing of global thought leadership • Oversee national Digital strategy / ecosystem and stakeholders • Build long term public sector capabilities • Provide financial support • Set and enforce regulations Smart Nation & Digital Government Office, under the Prime Minister’s Office A central digital government agency required with a mandate to govern and coordinate US $1.8 B + investment in Country Digitization Acceleration programs with governments globally UK business connectivity forum: (includes providers, manufacturers, operators, etc.) Indonesian R&D ecosystem 4 Masterplan for National Innovation Ecosystem Not Exhaustive Source: Ranga and Etzkowitz, WEF, WIPO, US National Science Board, WSJ, Desk research, A.T. Kearney
  19. 19. A.T. Kearney XX/ID 19 • Digital Transformation Trends in Indonesia and Required Investment • What Indonesia Needs to Do • Role of SOEs and the Ministry
  20. 20. A.T. Kearney XX/ID 20 Indonesia GDP (2016 US B) Digital Vision Digital Infrastructure Consumer Demand Stimulation Future Ready Workforce Digital Innovation Ecosystem SOE Role: SOEs are a big part of the overall economy, and have a critical role to play in driving the country’s digital agenda SOE contribution to overall economy Company Market Cap. (in trillion IDR) BCA 490 PT Telkom 459 HM Sampoerna 451 BRI 383 Unilever Indonesia 382 Astra International 315 Bank Mandiri 305 BNI 138 Gudang Garam 131 United Tractors 114 What role should SOEs play in Digital? Listed SOEs as % of total stock market capitalization (2017, USD B) • Vision based on leading edge practices embedded into individual SOE roadmaps • Aligned infrastructure roadmaps to enable digital progress i.e. communications (Telkom), electricity (PLN), logistics (POS), etc. • Leverage platform to educate consumers in digital applications e.g. using online banking, self-service • Upskill employees through partnerships • Embed innovation into ways of working • Build networks to develop innovative ideas with other SOEs, global vendors SOE Revenue Other GDP 810 (87%) 123 (13%) 2016 GDP SOE (74%) (26%) 337 SOE Other 932 1. Assumes 0.000073 IDR to USD Source: Gartner; A.T. Kearney analysis
  21. 21. A.T. Kearney XX/ID 21 SOE Challenges: however structure, investment and skills around digital remain challenges Feedback from SOEs “Long term initiatives aren’t a priority right now, due to potential structural changes” - Utilities “We take our directions from the top” - Manufacturing “We have the tools, but everyone uses paper anyway” - FSI “We are running digital adoption programs” - Utilities “We mainly use paper processes” - Logistics “We would like to develop our analytics capabilities, but there are no data scientists” - Manufacturing “Most advisers just sell us boxes, they struggle with solutions” - Logistics “We expect our digital advisers to lead by example” - Logistics “We usually just ask for vendors from the leaders (magic) quadrant” - Manufacturing “We just look for best of breed, cost isn’t a concern” - Utilities “fast tracking for rapid cycle experiments tends to be a challenge” - FSI <0.5% of revenue on IT Capex and Opex - Manufacturing <0.3% of revenue on IT - Utilities <1% of revenue on IT - Logistics Unclear top down direction on digital Low workforce adoption of digital tools Difficult access to digital skill sets Less mature digital advisers Procurement not adapted to digital age Low investment Source: SOE Interviews
  22. 22. A.T. Kearney XX/ID 22 Assessment: SOE digital maturity has room for improvement before reaching the same level as local and global leaders Dimensions Nascent Standard Advanced Leading Edge Digital Vision Customer Facing Application Internal Digital Operations Digital Infrastruc- ture Workforce Capabilities 12-18 month view of initiatives, part alignment in biz./digital strategies Clear long term (24 months+) digital strategy to drive growth Seamless integration between digital & corporate objectives Early experimentation with alt. channels & payments e.g. online, apps True omni-channel CX, strong digital & physical offerings (Banks) Customised, insights driven experiences e.g. DBS, Westpac Initial experimentation with customer analytics (particularly in FSI), limited deployment of digital for efficiency purposes (e.g. IoT in plants) Digital to improve quality (risk mgmt., 100% paperless, etc) E2E automation of processes e.g. RPA, remote mining, etc. Issues in upskilling workforce & access to certain skills e.g. data science innovation hubs pulls some talent, challenges remain (Digital players) Situated in markets with strong talent, however access to STEM skill sets remain a challenge (US, UK) New to hybrid cloud, varying maturity in BCP & future proofed solutions Established digital infra. with strong BCP & redundancy (Banks) Self-designed/customised infrastructure (e.g. Google, Facebook), architecture considers existing as well as future use cases SOEs: Indonesia: Global leaders: Comments Indonesia SOEs Indonesia Digital Leaders Global Digital Leaders Source: SOE Interviews, desktop research, A.T. Kearney analysis
  23. 23. A.T. Kearney XX/ID 23 Spending Gap: SOEs need a ~3x increase in investment (2017-22) to meet ASEAN benchmarks CAGR 2017-2022 SOE Enterprise Digital Spend by Industry (2017-22, USD, M) CAGR 2017-2022 1. Assumes 0.000073 IDR to USD Source: Gartner; A.T. Kearney SOE Enterprise Digital Spend by Type (2017-22, USD, M) Others Manufacturing EPI Finance & Insurance 2017 2022 28% 23% 2017 2022 Advanced Foundational 28% 33% 45% 20%
  24. 24. A.T. Kearney XX/ID 24 • Security: Trusted custodians of wealth • Omni-Channel: Understanding and responsiveness to customer needs • Safety: Target zero, everyone goes home everyday • Yield: Reducing waste and ensuring longevity of natural resources • Yield: Reduce waste and downtime, improve quality • Automation: Increase productive hours, reduce errors • Remote Management: Improve productivity • Services: revenue uplift through understanding customers • Logistics: optimised loads, routing and Just- In-Time • Agricultural: Improve yields, and increase productivity • Productivity: leveraging technology to increase output • Efficient resource use: Reduce waste through optimised allocations and reduced errors SOE Investment by Industry: Financial Services & EPI close to ASEAN peers, however other sectors are significantly behind Current vs Spend equal to ASEAN benchmarks (2017, USD B) Finance & Insurance Energy Processing Industries Manufacturing Other Total 1. Assumes 0.000073 IDR to USD 2. Other includes: EPI, Transportation and Warehousing Construction, Trade and Retail, Agriculture, Forestry and Fishery, Mining and Excavation, Professional, Scientific, Technical Services, Water Management, Raw Material and Waste, Hotels and Real Estate, Source: Gartner; A.T. Kearney Spend equivalent to ASEAN benchmarks Industry Example Oppor- tunities 100% 79% 7% 20% 43% 0.8 21% 93% 80% 57% 2.7 1.3 0.5 0.1 0.8
  25. 25. A.T. Kearney XX/ID 25 • Work with Telkom and identified industry champions to define overall SOE digital outcomes • Develop model guidelines by industry for individual SOEs to adhere to when developing internal digital roadmaps • Establish a central forum to support SOE roadmaps and to sponsor cross- sector pilot programs (Cybersecurity, Integrated data center etc.) • Hold monthly steering committees, to ensure SOEs are delivering digital initiatives as per roadmaps and enable knowledge sharing • Ensure SOE policies are conducive to fostering digital progress including: – Digital procurement processes, Support 2-speed IT investment – Diverse recruitment policies with cross-SOE synergy; Set up a Center of Excellence for select skills such as Cloud architecture, Security etc. • Drive culture for digitization and asymmetric SOE synergies (where benefits are realised by a different SOE to the one that has to invest) • Foster local ecosystem through preferential treatment e.g. tax exemptions for pre-approved R&D investments, prioritized selection of local vendors Ministry of SOE: 5 actions to drive SOE digitization Action Imperatives

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