Digital Transformation: Gaps and Opportunities in Southeast Asia

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The economic benefits of digital transformation in Asia-Pacific will occur faster and on a more massive scale than anything seen before. According to the Asian Development Bank, the region will gain an economic dividend of more than $1.7 trillion yearly over the five years to 2025, with 65 million new jobs created annually in the same period from the increased use of digital technologies.

Southeast Asian businesses certainly can’t ignore the new digital reality. Even before COVID-19 arrived, the region’s internet penetration rates were among the highest in the world. And growth is accelerating, spurred by the impact of pandemic lockdowns and social distancing.

In 2020, 40 million people across Singapore, Malaysia, Indonesia, the Philippines, Vietnam and Thailand came online for the first time. That pushed the total number of Internet users in Southeast Asia to 400 million.

These figures make Southeast Asia primed to become a significant player in the e-commerce and other digital sectors. Businesses here can no longer consider digital transformation something to plan for in the future; they need to get it underway now.

This article looks at the challenges for Southeast Asia and businesses in the region to keep up the momentum in digital transformation. What are the gaps and opportunities that lie ahead?

Closing the digital divide 

Firstly, one has to consider the bigger picture. The key challenge to enabling Southeast Asia to benefit more widely from digital transformation is to close the so-called “digital divide”. Many people among the region’s non-urban communities in developing markets don’t have the same access to digital resources as those based in cities. Global consultancy Roland Berger’s Digital Inclusion Index 2020 states that around 150 million adults in Southeast Asia – or nearly a third of the population – remain excluded from digital technologies. 

If the gap remains unaddressed, many citizens will miss out on the opportunities that digital technology presents. HealthTech and Education Technology (EdTech), two sectors that sectors played critical roles during the pandemic, can deliver enormous social benefits to connected communities.

While the digital divide can hinder the growth plans of Southeast Asian firms seeking regional growth, it also presents an opportunity for startups to design products and services that will help SMEs digitise and bridge the gap.

Building a pipeline with the right skills

Despite increasing advances with robots and artificial intelligence (AI), the fundamental building block for digital transformation remains people, not tech. In reality, companies need skilled and experienced workers to leverage these advanced tools. 

A pipeline of talents with technology and digital skills is essential to deliver future business growth. But it’s important not to focus on developing just one or two areas. According to experts, assembling the right team primed for digital change requires strength across four inter-related domains — technology, data, process, and organisational change capability.

Apprenticeships and work-based learning can help companies fill the needs of next-generation jobs in the longer term, but startups that want to scale rarely have the luxury of time. 

In Southeast Asia, for example, many tech companies and startups are aggressively hiring to pursue regional and global ambitions, driving up costs. But what happens if the talents aren’t available where a company is headquartered? Importing talents isn’t easy, especially with travel restrictions during the pandemic, while tightened local employment rules can also be a barrier. 

Firms can consider employing remote teams or individuals with the required tech skills based overseas. This solution demands efficient use of technology tools for communication and job tasks and a rethink of company workforce strategy and operations. Another important consideration for this working model is ensuring the well-being of isolated team members. Southeast Asian startups that can design products and services to address the needs of dispersed operations to boost productivity will be in demand.

Enhancing the customer experience

As more people adopt home-centric lifestyles and shopping for meals, groceries, clothing, electronics, and furnishings online, creating a quality experience through technology has become essential. With Southeast Asia now largely mobile-first when purchasing via the Internet, consumer expectations are high, and more shoppers want a seamless omnichannel experience where they can move fluidly from one type of buying experience to another. Ecommerce businesses can’t get away with just having an online presence – it has to offer a rockstar customer experience that’s fast, secure and reliable. Fail to do this, and shoppers will quickly take their online custom elsewhere. 

High-quality customer experience is a strategic necessity for future business growth, with service excellence now a primary source of value and differentiation. Innovative B2B fintech firms are already stepping in to address the pain points for businesses. For instance, Singapore-based Thunes makes cross-border payment processes more straightforward and more efficient.  

Another essential part of the e-commerce ecosystem that needs addressing is logistics and transportation. These infrastructure services are crucial for a digital economy, and they present many opportunities for disruption across areas such as last-mile delivery, warehousing solutions and inventory management.

Profiting from opportunities

The digital transformation of Southeast Asia heralds a tremendously exciting era that can improve the lives of millions and benefit many businesses. Businesses that best navigate and address shortfalls in digital infrastructure, skills and online customer experience are most likely to emerge the strongest.

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