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Digital transformation to add $8B to GDP by 2021

BY 2021, digital transformation will add an estimated $8 billion to the Philippines’ GDP, and increase the growth rate by 0.4% annually, according to a new business study released recently. 

The research, “Unlocking the Economic Impact of Digital Transformation in Asia Pacific”, was produced by Microsoft in partnership with IDC Asia/Pacific. 

The study predicts a dramatic acceleration in the pace of digital transformation across Asia Pacific economies. 

In 2017, about 3% of the Philippines’ GDP was derived from digital products and services created directly through the use of digital technologies, such as mobility, cloud, Internet of Things (IoT), and artificial intelligence (AI). 

Hans Bayaborda, Managing Director of Microsoft Philippines

“The Philippines is clearly on the digital transformation fast track. Within the next four years, we expect to see approximately 40% of the Philippines’ GDP to be derived from digital products and services,” said Hans Bayaborda, Managing Director of Microsoft Philippines. “At the same time, organizations in Asia Pacific are increasingly deploying emerging technologies such as artificial intelligence as part of their digital transformation initiatives, and that will accelerate growth even further.”

The survey conducted with 1,560 business decision makers in mid and large-sized organizations across 15 economies in the region highlights the rapid impact and widespread disruption that digital transformation is having on traditional business models. 

The study, which included 100 respondents from the Philippines, identified five key benefits to their bottom line from digital transformation:

According to the research findings, organizations are seeing significant and tangible improvements from their digital transformation efforts across these benefits in the range of 6% to 12% today. Business leaders expect to see more than 50% improvements in those key areas by 2020, with the biggest jump expected in profit margin and productivity.  

Digital Leaders in Asia Pacific to Gain Lion’s Share of Economic Opportunities 

The study indicates that while 93% of organizations in the Philippines are in the midst of their digital transformation journey, only 7% in the entire region can be classified as Leaders. These are organizations that have full or progressing digital transformation strategies, with at least a third of their revenue derived from digital products and services. In addition, these companies are seeing between 20 - 30% improvements in benefits across various business areas from their initiatives.

The study indicates that Leaders experience double the benefits of Followers, and these improvements will be more pronounced by 2020. Almost half of Leaders (48%) have a full digital transformation strategy in place.

“The pace of digital transformation is accelerating, and IDC expects that by 2021, at least 48% of Southeast Asia’s GDP will be derived from digital products and services, with growth in every industry driven by digitally enhanced offerings, operations and relationships. The study shows Leaders seeing double the benefits of Followers, with improvements in productivity, cost reductions, and customer advocacy. To remain competitive, organizations must establish new metrics, realign organization structures, and re-architect their technology platform,” said Daniel-Zoe Jimenez, Research Director Digital Transformation Practice Lead, IDC Asia/Pacific.   

The Study identified key differences between Leaders and Followers in Asia Pacific, which contribute to the improvements tracked:

• Leaders are more concerned about competitors and emergence of disruptive technologies: The digital economy has also given rise to new types of competitors, as well as emerging technologies such as AI that have contributed to the disruption of business models.

• Business agility and culture of innovation are key goals: When addressing business concerns, Leaders are focused on creating a culture of agility and innovation to counter competition. Followers, on the other hand, are more focused on improving employee productivity and profitability. 

• Measuring digital transformation successes: Organizations across Asia Pacific are starting to adopt new key performance indicators (KPI) to better measure their digital transformation initiatives, such as effectiveness of processes, data as a capital, and customer advocacy in the form of Net Promoter Score (NPS). As organizations realize the potential of data as the new oil for the digital economy, Leaders are much more focused on leveraging data to grow revenue and productivity, and to transform business models.

• Leaders are more aware of challenges in their digital transformation journeys: In addition to skills and cybersecurity threats as key challenges, Leaders have also identified the need to bolster their data capabilities through the use of advanced analytics to develop actionable insights in fast-moving markets. 

• Leaders are looking to invest in AI and Internet of Things: Emerging technologies such as AI (including cognitive services and robotics) and IoT are areas where Leaders are investing in for 2018. Besides these emerging technologies, Leaders are also more interested in investing in big data analytics to mine data for actionable insights than others.  

Topics: Digital transformation
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