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Microsoft Digital Transformation Study 2018

In partnership with IDC Asia/Pacific

DIGITAL

How is an organization being digitally transformed?

How is an organization business model being digitally transformed?

TRANSFORMATION

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 NADELLACEO, MICROSOFT

Digital Transformation

economic impact on countries’ GDP


economic impact on organization’s

business

What sets Digital Transformation Leaders Apart?

Unlocking the Economic Impact of Digital Transformation in Asia Pacific


Impact on society



business in monetary terms



Impact on societyDigital Transformation

economic impact on GDP

Unlocking the Economic Impact of Digital Transformation in Asia Pacific and Australia

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 Australia’sDIGITAL TRANSFORMATION IMPACT ON ASIA PACIFIC GDP (US$ BILLION)

Legend

2016

2021

4.9% CAGR forecasted growth

0.8% CAGRDigital Transformation will add to GDP

24,498

24,498 6,685 1,161

DIGITAL TRANSFORMATION IMPACT ON AUSTRALIA GDP (US$ BILLION)

2016

2021

3.0% CAGR forecasted growth

0.5% CAGRDigital Transformation will add to GDP

1,205

1,205

194

35



Impact on society





business

Unlocking the Economic Impact of Digital Transformation in Australia

Top Benefits

Base: All respondents (n=94) – 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 organization has observed from their current Digital Transformation initiatives? Please indicate the degree of improvement for these three.

Improvement in profit margin

#1

Increased revenue from new products and

services

#4

Cost reduction#3

Improvement in productivity

#2

Increased revenue from existing products and

services

Improved customer

advocacy and loyalty

#5

Top benefits: Improvements now and in three years

Base: Respondent counts vary across all options as this is a top 3 question so not all benefits are chosen by all respondents.A5. What are the top 3 benefits that your organization has observed from their current Digital Transformation initiatives? A5b: Please indicate the degree of improvement from last year. A5c: Please indicate the expected improvement in 3 years

• Top 5 benefits of digital transformation contribute significantly to bottom-line today, and will see even greater improvements by 2020

• By 2020, organizations will see at least 40% improvements tracked in every of the key benefits identified

23%

33%

% improvement in productivity

2017 2020

22%

40%

% increased revenue from new products

and services

2017 2020

20%

29%

% improvement in profit margin

2017 2020

20%

34%

% increased revenue from existing

products and services

2017 2020

N=44 N=20N=46 N=29

23%

33%

% cost reduction

2017 2020

N=36

1.5X 1.4X 1.4X 1.8X 1.7X

21%

37%

% improved customer advocacy, loyalty and retention

2017 2020

1.8X

N=25

Challenges

Base: All respondents (n=100)B1. What are the top 3 challenges your organization 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

Lack of thought leadership in driving digital transformation

#3

KPIs

Base: All respondents (n=100)B11. When measuring overall DT journey success, which of the following key performance indicators/metrics (KPIs) are you using? Please select all that apply.

Surprisingly, organizations in Australia today are already using non-standard business KPIs to measure digital transformation outcomes

Process/Service Effectiveness

Customer Advocacy Employee Advocacy

47% 46% 40% 31.3%

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 organization going to heavily invest on in 2018?

Cloud Mobility Big data analytics

Security Social media

eCommerce AI/ Cognitive/Robotics

Internet of Things (IoT)

Next gen interface

Mixed,VR, AR

Blockchain

17.8% 17.8%16.9%

9.3% 8.9%

6.9%

8.9%

4.4%2.8%

2.0%0.8%

CORE TECHNOLOGIES EMERGING TECHNOLOGIES

INTELLIGENT CLOUD

INTELLIGENT EDGE

ADVANCED ANALYTICS

IOT EXPLOSION

ARTIFICIAL INTELLIGENCE



business


Impact on society





NOTE: No country breakdown for this section as leaders only formed a total of 103 respondents in the total sample

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%

full digital transformation strategy ecosystem centric approach

47.6%

17.3%

% of Organizations with Full Digital Transformation Strategy

Leaders Followers

• Almost half of all Leaders have a full digital transformation strategy in place• Leaders also benefit from an ecosystem-centric focus on customers, employees and partners

• A full strategy refers to having mature and developed digital processes, people readiness, and support systems in place.

• This enables new & timely ways of engaging with customers, employees and partners; enabling continued growth & innovation and ultimately, reap higher benefits as a truly digital organization.

30%

14%

41%

22%

Leaders Followers

% improvement in productivity

33%

15%

46%

28%

Leaders Followers

% improvement in customer advocacy, loyalty and retention

2.2 X

Highest Digital Transformation Improvements

Base: Respondent counts vary across all options as this is a top 3 question so not all benefits are chosen by all respondents.A5. What are the top 3 benefits that your organization has observed from their current Digital Transformation initiatives? Please indicate the degree of improvement for these three.

33%

14%

45%

23%

Leaders Followers

% improvement in cost reduction

33%

13%

45%

22%

Leaders Followers

% improvement in profit margin

27%

14%

39%

23%

Leaders Followers

% increased revenues from new products and

services

• Leaders experience double the benefits of followers, and these improvements will be even more pronounced for leaders by 2020

2017 2020

2.1 X 2.4 X 2.5 X 1.9 X

competitors emerging disruptive technologies

Base: Leaders (n=103), Followers (n=1457). Respondent counts vary across all options as this is a top 3 question so not all business concerns are chosen by all respondents.A2. What are your CEO’s/organization’s top 3 business concerns other than meeting financial goals?

KEY DIFFERENCES IN BUSINESS CONCERNS

While all respondents shares similar concerns, leaders are more concerned about competition and emerging disruptive technologies.

Emergence of disruptive technologies

More competitors entering my market

Leaders Followers

business agility culture of innovation

Base: Leaders (n=103), Followers (n=1457). Respondent counts vary across all options as this is a top 3 question so not all priorities are chosen by all respondents.A3. To address these concerns, which of the following will be your organization's top 3 priorities for 2018?

TOP 3 PRIORITIES TO ADDRESS CONCERNS

Improving employee productivity and profitability

Developing a culture of innovation and continuous learning

Leaders Followers

Improving business agility to respond quickly to market trends and opportunities

Data Strategy Leaders place a greater emphasis on data and leveraging it to improve business decision-making, enhance product & services and create new business models.

Base: All respondents (n=1560)B11. When measuring overall DT journey success, which of the following key performance indicators/metrics (KPIs) are you using? Please select all that apply.B6. Relating to the use of technology for your DT initiatives, which of the following digital technologies are your organization going to heavily invest on in 2018?

Business KPI Data as a capital asset for growing revenues, business model and productivity

Leaders Followers

51% 43% 15.8%18.6%

Technology InvestmentsBig Data Analytics will form the foundation for AI/Cognitive/Robotics implementation

9.9%11.7%

Five Organizational Traits

CULTURE & CHANGE

“…are less risk-adverse and characterized by having

transient organizations that adapt to changing needs, often automatically and without management

intervention.”

“They embrace fail/learn-fast approaches.”

ORGANIZATIONAL BEHAVIOR

“…display higher maturityin collaboration and agility in change cycle. Instead of

focusing on individual efforts, teams self-organize

across groups to achieve organizational success.”

DIGITAL TRANSFORMATION

APPROACHES

LEADERSHIP & STRUCTURE

BUDGETS

“…display higher organization-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



business





Impact on society

Unlocking the Economic Impact of Digital Transformation in Australia

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.

The creation of higher value jobs, smarter, safer and more efficient cities, and enhance healthcare through better prediction and management of individual health were seen as top 3 benefits

Smarter, safer and more efficient cities

#2Enhance healthcare

through better prediction and

management of individual health

#3Create more higher

value jobs in the future for individuals

#1

Jobs Transformation

Outsourced, automated or made

redundant29%

Unchanged17%

New roles created due to digital

transformation investments

24%

Retrained and upskilled

30%

Base: All respondents (n=100)C3. To address the lack of skillsets in your organization, what percentage of your organization’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 organization (aged 25 year-old and below) have future ready digital skills to meet the demands of digital transformation.?

83%of jobs in the

next 3 years will be transformed

66% are confident that young professionals already have future ready skills that will help them to transition to new roles.

Recommendations


Why do Organizations in Asia Pacific Need to Accelerate their Digital Transformation Journeys?

IMPROVEMENTS IN BUSINESS PERFORMANCE INVISIBLE REVOLUTION

• Leaders who have a full digital transformation strategy enjoy double the benefits compared to Followers.

• Embracing a full digital transformation strategy enables organizations to see improvements of up to 30% in:

• Productivity• Profit Margins• Customer Loyalty• Revenue Growth

• This will grow to close to 50% in a 3-year horizon

• 2018 will mark the year of mass adoption of Artificial Intelligence. Leaders are focused on building the foundation for this emerging technology today by investing in big data analytics.

• Companies need to focus on:• Capitalizing on own data• Data-sharing in an open

and secure manner

How to Become a Digital Transformation Leader?

• Address organizational 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 withdata-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 Capitalization 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

in a personal and relevant way

ENGAGE YOUR CUSTOMERS

To deliver differentiated service

EMPOWER YOUR EMPLOYEES

To evolve forecasting and react faster

OPTIMIZE YOUR OPERATIONS

And deliver new value to customers

TRANSFORM YOUR PRODUCTS

SECURITYECOSYSTEM

Addressing Skills Needed for Digital Transformation

• Complex problem solving• Critical thinking, system analytics• Creativity, active learning• People & communication skills,

cultural agilityINDIVIDUAL

ORGANIZATION

• Focus on rebalancing the workforce to attain key digital talent. • Place higher emphasis on attracting and retaining the best

talent, and retraining and outsourcing others in the workforce. • Focus on creating a flexible work source model

Future skillsets ABCs of Digital Skills*• Artificial Intelligence• Big Data• Cloud computing

*Source: LinkedIn, The Digital Workforce of the Future. Data as of August 2017.

Australia

(250–999 employees)

(>1000 employees)

67% C and C-1 levels

(C–level i.e. CIO, COO, CEOC-1 level i.e. VP/Director)

33%

(i.e. senior managers)

100

C-2 level

MANUFACTURING RETAIL FSI

GOVERNMENT EDUCATION HEALTH

Microsoft Asia Digital Transformation Study 2018

In partnership with IDC Asia/Pacific

MSFT Digital Transformation Australia · 7rs ehqhilwv ,psuryhphqwv qrzdqg lq wkuhh \hduv %dvh...

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