11 January 2021
Econ 4.0: Innovate or die?
This article first appeared in Digital Edge, The Edge Malaysia Weekly, on January 11, 2021 – January 17, 2021.
Here is a fabulous function-based fable: A young salesman is unable to close deals despite trying his best. He does everything his company recommends, including memorising the features of the products, honing his sales pitch, and donning his best suit to meet prospects. He is ready to quit when his manager suggests he speak with the company’s top salesman, who has just retired.
“I am doing everything I possibly can, but I’m just unable to close sales,” the despondent salesman tells the old man. “I’m a failure. I guess this just proves that you can lead a horse to water, but you can’t make him drink.”
The old sales wizard listens to the young man and shakes his head. “Let me give you some advice, young man,” he says. “Your job is not to make him drink the water. It’s to make him thirsty.”
Since Covid-19 struck earlier this year, most companies — and countries — have seen massive dips in sales and services, travel and transportation, and hospitality and human resources. People are thirsty to get back to work and play. They are also thirsty for new products and services — delivered online — in the so-called “new normal”.
The “new normal” presents a scary prognosis for many businesses. “What made a company successful historically may no longer be possible during or after the crisis,” notes a McKinsey study. “Customers may struggle to pay. Channels may have radically shifted to accommodate new needs or work around new constraints. A stable regulatory context may have changed, potentially creating opportunities. The assumptions that supported years of stable, predictable growth may no longer be valid.”
That is where digital innovation comes in, with the chief information officer (CIO) being tasked with being the chief innovation officer as well. So finds a recent Gartner poll of 1,877 CIOs from 74 countries who represent US$4.7 trillion (RM19 trillion) in revenue/public-sector budgets and up to US$85 billion in IT spend.
“Nothing, and yet everything, has changed for the CIO,” says Andy Rowsell-Jones, a distinguished research vice-president at Gartner. “The support for remote work might be the biggest win for CIOs since Y2K. They now have the attention of the CEO, they have convinced senior business leaders of the need to modernise technology and prompted boards to accelerate digital business initiatives. CIOs must seize this moment because they may never get another opportunity like it.”
Gartner’s survey uncovered two areas of customer digitalisation: the use of digital channels to reach customers, and the rate of introduction of new digital products and services. Up to 90% of the top performers are pursuing digital channels, and 75% are introducing digital products faster, the survey states. Asked about shifts in demand, 58% of top performers reported an increase in demand from new post-Covid customers — versus 49% for the typical group — and 37% for those trailing.
How can CIOs help? By enabling the enterprise to anticipate the surge in digital interactions. More than 75% of CIOs said demand for new digital products and services rose in 2020, with even more respondents (83%) reporting that it would keep rising in 2021. “This is a watershed moment for CIOs,” says Rowsell-Jones. “There is no going back to the way business used to be.”
The pandemic has proven that innovation does not happen by fluke or at random and that it is an iterative process with education and training at its core. The business of education has itself witnessed innovative shifts, according to a World Economic Forum (WEF) whitepaper issued in October.
“Education technology providers are increasingly embedding novel features into learning programmes such as gamification technology, micro-learning curricula and access to subject matter experts,” the WEF notes. “While there has been an increase in the volume of learning programmes developed, less research has been done on learner personas to understand effective modes of learning for a diverse workforce.”
Much of the learning has now gone digital. How is Malaysia faring? In October, the Malaysia Digital Economy Corporation (MDEC) introduced a Digital Skills Training Directory that lists 173 courses and certifications offered by 43 training partners. Unemployed Malaysians can get up to RM4,000 in training subsidy if they are selected for recruitment by Social Security Organisation-registered employers.
“The introduction of the directory is consistent with our focus on developing digitally skilled Malaysians,” says MDEC CEO Surina Shukri. “It will be the go-to guide for all Malaysians and the workforce on what to look out for when it comes to digital tech upskilling and re-skilling programmes.”
Training on digital technologies is an essential component for digital transformation (DX), which in turn can help create a robust digital economy. Companies that neglect to do so will not only lose market share but may even go out of business.
“By 2022, 40% of organisations will neglect to invest in market-driven operations and will lose market share to existing competitors that made the investments, as well as to new digital entrants,” notes IDC. “In 2021, DX spending will grow to over 55% of all ICT investments — up from 45% now — with huge growth in data intelligence and analytics as companies create information-based competitive advantages.”
That is where digital innovation can be leveraged. “By 2022, work practices will expand the functionality and effectiveness of the digital workforce by 25%, fuelling an acceleration of productivity and innovation at practising organisations,” IDC says. “By next year, we expect 35% of companies to align digital KPIs to direct business value measures of revenue and profitability, eliminating today’s measurement crisis in which DX KPIs are not directly aligned.”
Should you bet on digital innovation to survive? Absolutely. Here are two examples. The first is from Grab, which launched its service first in Malaysia in 2012, a year before Uber’s roll-out in Asia. In Malaysia, GrabPay joined the government’s ePenjana initiative, under which the government is channelling RM750 million to 15 million e-wallet users.
In Singapore, Grab tied up with Marriott International in late October. Under the deal, Marriott will leverage and integrate Grab’s platform for food delivery, payments, transport, loyalty and rewards, and advertising. The hotel chain will get access to Grab’s sizeable customer base via GrabFood, GrabPay and GrabAds, enabling it to serve customers who order online.
The second example is from the 111-year-old French beauty company, L’Oréal, which launched three innovative apps: The Virtual Makeup app uses augmented reality for users to envisage whether a specific makeup shade suits them; the Style My Hair app helps users choose the right hair colour; and the UV Sense app is a wearable device that measures ultraviolet radiation exposure to inform users how much sunscreen to apply on their exposed skin.
The bottom line: Innovate or die. That phrase was supposedly first uttered by management guru Peter Drucker. That dictum, however, is now more relevant than ever. Companies — and even governments — that fail to innovate in the way they connect with consumers and business are at risk of obsolescence.
To paraphrase William Shakespeare, some are born to innovate, some achieve innovation through hard work and insight, and some have innovation thrust upon them. In the current circumstances, it is not the CEO or the CIO but Covid-19 that has thrust innovation upon all of us.
Raju Chellam is vice-president of new technologies at Fusionex International, Asia’s leading big data analytics company