Digitalisation in the Malaysia context

Written by: Kingsley Lye

Introduction

In recent years, we’ve come to witness the dawn of the digital era. Technology has been progressing at an accelerated rate as massive tech companies continues to churn out products year after year. With new and exciting innovations each day, how has Malaysians been keeping up with the latest trends? Or have we been left in the dust? Let’s find out!

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 “digital” 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.

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!

The reality however, is not so sweet. Existing businesses may 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 receive when migrating to virtual marketplaces.

Further considerations include competition among small businesses especially on platforms like Lazada or Shopee 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 digitalization has in some ways cushion the impact of
the pandemic, and even 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.

This begs another question – what is there to do at this impasse?

Digital Transformation

‘Digital transformation is less of a digital problem than it is a transformation problem.’ – George Westerman | MIT Abdul Latif Jameel World Education Lab

In a recent webinar for MIT Sloan Management Review, Westerman argued that digital transformation is more of a leadership issue, and unless organizations relook into their strategies and fundamentals, technology will not do much for any business.

Taking AirAsia for an example, despite their many creditors, AirAsia has transformed their business from aviation, to becoming a super app, providing a multitude of services such as e-hailing, food deliveries, and so on.

Another example comes from Touch ‘n Go (TNG). It was once just a toll collection company but in 2017, TNG eWallet was launched and it soon became Malaysia’s largest e-wallet in 2019. Earlier this year, TNG also rolled out GO+ allowing users to access investments with capital as low as RM10. Earlier this July, users can also purchase car insurance from the platform. This is digital transformation; using technology as a means of transforming existing businesses to tap new opportunities, and this is done not by creating a super app, but by venturing outwards and diversifying business. Digital transformation cannot take place without digitalisation and this is a learnable skill, and evidently a skill in-demand and in shortage.

As and when lockdown eases, businesses will continue to prioritize digitization and digital transformation for what it is worth. Digital transformation for businesses and digitalization for other businesses will soon become, if not already, a job in itself.

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. The Malaysian Digital Economy Blueprint (MyDIGITAL) estimates to create 500,000 digital jobs by 2025, but there are many that do not possess the competencies to transform nor digitalize business.

This ultimately leads to the final question – what are the solutions to these problems?

Digital Way Academy…

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

Digitalisation in the Malaysia context

Published by thomasdwv on 21st September 202121st September 2021