Reference no: EM132682830

DIGITAL TRANSFORMATION IN MALAYSIA SEEING RETURNS, BUT COMPANIES ARE STILL FAILING MALAYSIA is now all about that digital transformation. Just this year, local government has announced commitments to digitalization and driving the Malaysian digital economy forward. The good news is that we're seeing some positive results. A study by enterprise technology provider Workday has found that Malaysian companies are leading the Asia Pacific in quantifying the return from their digital transformation initiatives. Fifty-eight percent of C-level executives in Malaysia responded to Workday's "Digital Dysfunction in Asia Pacific" study saying that their digital transformation initiatives are seeing measurable returns. By comparison, only 47% of companies in Singapore and 34% in Japan are seeing returns. The study, conducted in partnership with IDC Asia Pacific, aims to look at the barriers to digital transformation from the perspective of 1,000 C-level executives and business leaders in Human Resources (HR), Finance and IT. But how full the glass is depending on perspective. Looked at another way, this means that 42% of companies surveyed are not seeing returns from their initiatives. It appears that there are still a lot of barriers to be surmounted. Digital transformation is the vital key towards staying competitive in today's business world. Workday Asia president Rob Wells certainly believes this is so. "It [digital transformation] is inevitable. It's an amazingly changing world, and if you're not transforming all the time, you're probably going to die," he says. It's not to say that Malaysian companies are not aware of its importance. Workday's study found that 93% of human resource (HR) leaders and 80% of finance leaders agree that an integrated HR and finance technology solution is needed for greater visibility. As Wells points out, Malaysia's focus on the subject is not lacking. The problem is more towards the execution of digital transformation itself. The biggest barrier to that, according to Workday's study, is organizational siloes - an environment where a company's departments do not share operational information with one another. Forty-nine percent of C-level executives surveyed say that organizational silos are a key challenge. Additionally, 73% of HR leaders and 54% of IT leaders in Malaysia similarly highlight this as a key barrier to transformation. Wells says that silos happen through various reasons but feels that one way to overcome this is through strong leadership. "If there isn't commitment from the senior team, and if there isn't constant communication from the senior team on the importance and urgency of [digital] transformation, it's unlikely to be successful," he tells Digital News Asia. Investing in the right technology may also help. "Investments in technology can help companies disassemble information silos and reimagine the business in a way that allows an organization to stay competitive in a disrupt-or-be-disrupted world. The advent of cloud technology in financial and HR management will allow business planning to be more strategic, collaborative and real-time." Technology can also help with the measurement of a company's digital transformation process. According to Workday's study, more than twothirds (69%) of C-level executives say they do not have a balanced scorecard approach to align and measure digital transformation initiatives. To add to the statistics, 52% say their digital transformation initiatives are uncoordinated, with 73% of HR departments lacking implementations plans for digital transformation, while 50% of finance teams and 38% of IT teams feel the same. On the aspect of balanced scorecards, Wells says that it can help executives get a view of their business in a more easily digestible and accessible manner. "What's disappointing is that the statistics show how few of them have that dynamic data that allows them to drive their businesses," he says. "If you want to be agile, then you have to have the ability to have a dynamic planning environment. "In the study, 47% of the executives also cite a lack of common technologies and share metrics as key barriers to cross-functional collaboration, and only 34% are saying their organizations need to invest in more technology. Wells says that companies typically purchase (or build) solutions for various aspects of their business - they may, for instance, purchase a finance system, then a HR management system and the like. A company may have hundreds of them - some may even be running systems that are decades old, overlaid with layers of another system in order to make it functional. The problem is that these tools don't integrate very well with existing platforms, which makes digital transformations difficult. "So, you get this horrible mess of things band-aided together that creates a systems architecture, and you can see it breaking in most companies," Wells says. Investing in the right technology can help overcome this. At the very least, Workday's solutions are meant to address these issues. But if high-level executives don't execute digital transformations in a holistic manner, the notion will only be a shiny light in the dark to chase. It may not get you anywhere.

a) Discuss two issues concerning the barriers to digital transformation among the companies.

b) Elaborate your view on the absorptive capacity as a way to address the shortcomings in catching up with digital transformation at company level.

c) Based on your understanding of network externalities, propose a way to manage the issues in the Malaysia business environment.