How Asian firms are taking a different approach to digital transformation
Businesses everywhere are now committed to seeking new value by digitalising and enhancing the customer experience. But new research from DBS suggests that executives in Asia are taking a different approach to digital than their counterparts in Europe and North America.
Although western businesses are more likely to have completed their enterprise-wide transformation plans, a larger proportion of companies in the east are integrating finance and treasury into their digitalisation process. This greater integration is essential during periods of uncertainty and increased investment risk.
What can east and west learn from one another about innovation and digital change?
Firms in the West have bolder innovation goals
In terms of scale, western businesses appear to be making more progress on transformation than their peers in Asia.
While most organisations are prioritising digital transformation of customer engagement, western respondents to the DBS research are more likely to also be developing new digital-enabled business models:
- 60 per cent are taking a structured approach to new product and service development, compared with just 46 per cent in Asia
- 65 per cent are carrying out strategic transformation of their supply chain and procurement, compared with 57 per cent in the east.
These efforts are working for them. Nearly two in three western companies say they are satisfied with the upgrades they have made to the customer experience, and around six in 10 are pleased with the results of new product development. In contrast, the proportions in the east are 55 per cent and 39 per cent, respectively.
On a broader level, these findings align with a higher overall level of satisfaction among western businesses when it comes to the contribution that digital is making to their competitiveness. A takeaway from this for eastern companies could be that setting more ambitious goals for transformation, particularly with respect to product and service innovation, could help secure an advantage in the market.
Eastern firms are prioritising internal partnerships to unlock efficiencies
When it comes to collaboration between the functions engaged in transformation, Asian organisations enable more open and supportive idea-sharing between finance and treasury executives and their people in customer-focused roles. Their overall top goal for transformation is greater efficiency.
“All stakeholders have to work together,” says the former head of finance at a major retailer based in India. “Commercial teams need to see finance people as their partners in transformation, and it is equally important that finance understands the operational side of the business.”
Their transparent communication means that Asian businesses can align internally on digital change. Less than a third of eastern respondents (32 per cent) say they are concerned about competing internal priorities when it comes to digitalisation, while 40 per cent of western respondents consider this a key challenge.
Moreover, more than half of eastern respondents to the DBS survey say that their treasury and finance teams are getting more involved in early-stage discussions around commercial initiatives, to which they will inevitably bring deeper financial knowledge and understanding. Just 44 per cent of western respondents say the same.
This increase in collaboration is progress, says Mehran Nikkhoo, CFO for Asia Pacific & Latin America marketplace at Nike: “The old model was more intuition-based. You designed a cool product and ran these massive marketing campaigns and hoped it stuck.
“We are much more data-driven now,” he says. “That allows for a much more agile strategy. We have tapped into our data analytics to become more responsive.”
East and West need to combine ambition and understanding
Whichever hemisphere they are in, businesses will need to unite their teams around a shared vision, or ‘north star’, in order to pursue digital transformation in the face of economic headwinds. The particular risks posed by inflation and geopolitical uncertainty, however, also demand a stronger role for finance and treasury.
Asian businesses in the research are less likely than businesses in the west to favour the adoption of a single vision or to accept widespread innovation and risk-taking. But they are twice as likely as western businesses to want to improve their back-office functions’ understanding of innovation in order to accelerate transformation.
In the west, 55 per cent of western businesses are prioritising data analytics in support of transformation, compared with 47 per cent in Asia, and therefore greater involvement of finance and treasury would be helpful here.
Eastern thinking on transformation appears to rest on the idea that an understanding of the financial pressures facing the business is as important as the use of digital technologies. Western firms could consider adopting priorities based on this principle, while those in Asia might ask whether this is the time to explore a bolder approach to digital innovation across the enterprise.