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Digitalisation in the
Malaysia Context

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By Kingsley Lye

What is Digitalisation?

According to Gartner’s IT Glossary, “digitalisation is the use of digital technologies to change a business model and provide new revenue and value-producing opportunities”. As simple as it may sound, the subject-matter gets complicated when terms such as “digitisation” and “digital transformation” get into the picture. 

To keep matters simple, these terms share one similarity, and that is to “digitalise” what is not digital, to put it crudely. Nevertheless, digitalisation is inevitable, and COVID-19 has only accelerated the digitalisation process.

Why Digitalisation?

There is a never-ending list on the benefits of digitalisation. The best explanation would come in the form of an analogy, and that is, what would the world look like without digitalisation?

To help illustrate the significance of digitalisation, think of all the inconveniences had digitalisation not taken place. For example, online banking has made it so much easier to send and receive money, and the need to visit the bank is starting to blur especially when electronic signatures are being touted as the future, though it is a heated debate especially from the regulatory/legal perspective; perhaps an article for another day. 

Nevertheless, businesses benefited most from digitalisation – from reducing operation costs to accessing new markets. Even before COVID-19, businesses benefited from digitalization as part of the digital economy. In fact, from 2010 to 2016, the digital economy grew by 9% per year, faster than the overall GDP of Malaysia and in 2017, e-commerce income was at RM447.8 billion

Fast forward to 2020, income for e-commerce was recorded at RM896.4 billion, an increase of 32.7% compared to 2019, which raked in RM675.4 billion. Suffice to say, the COVID-19 pandemic has accelerated the need to digitalize, and to capitalize on this up-ticking trend.
It is important to note however that digitalisation is much more than just e-commerce – key areas such as digital marketing, digital procurement, and so on improves efficiency and economies of scale, amongst other things – this makes e-commerce successful in the first place thus making businesses even more successful. E-commerce is simply a form of digitalization.
Unfortunately, e-commerce is a lifeline, not a silver bullet. Extended lockdowns are not helpful in the long run albeit with the support of e-commerce and digitalisation. For example, as much as businesses attempt to replace product sampling through virtual reality or augmented reality such as luxury car brands investing in digital showroom technologies, e-commerce cannot replace the physical experience
Photo by hienh.github.io on GitHub
On the bright side, this period of online shopping has shifted how consumers use e-commerce. With reference to the above hyperlinked article, this period of online shopping frenzy has shifted how consumers use e-commerce.
The majority of consumers previously used e-commerce to purchase discretionary non-essential goods. This has changed as a result of the pandemic. Consumers are now confident to buy fresh produce and even furniture online without first sampling it.
However, many existing businesses have high transition costs to migrate to e-commerce platforms. Businesses also have to factor the uncertainty over the returns they may or may not acquire when migrating to virtual marketplaces. 
Further considerations include competition among small businesses especially on platforms like Lazada or Shoppee where even large firms compete. Moreover, there is also the high costs associated with building a brand/trust and advertisements. In fact, there is also the unfortunate circumstance where digital platforms charge 20% – 30% commission, thus narrowing profit margins further. Most importantly, some businesses, and even some industries such as aviation, cannot transition online.
Ultimately, this is why e-commerce alone is not the solution. Although digitalisation has in some ways cushion the impact of the pandemic, and with government aids such as grants and subsidies, it is evidently not enough. The Malaysian Reserve reports that up to 580,000 businesses are at risk of closure by October.

Many firms now embrace digitalisation, and are trying to transform their businesses out of conventional norms. As a result, the demand for digital skills is evident – digital competencies are no longer a preferred skill but a required one. 

Only education can fill the gap to help businesses get from where they are, to where they want to be. There is a need for human capital competent enough to do what it takes to transform businesses and digitalise businesses. 

In addition, The Malaysian Digital Economy Blueprint (MyDIGITAL) estimates 500,000 digital jobs by 2025, but there are many that do not possess the competencies today. So what is the solution? An education that centres around digital skills.

Digital Way Academy is an education social enterprise which strives to empower individuals to make breakthroughs and realise their potential. In collaboration with UTMSPACE, the private wing of UTM, the academy prepares students for the digital era through Malaysia’s first, fully digital competencies-based education. Find out more here

The author thanks Digital Way Academy for advice and assistance with this piece. Any errors and oversights are the author’s alone.

Brought to you by Digital Way Academy

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