$517b boost to Asia-Pacific GDP if manufacturing transforms digitally

A domestic appliance factory in China. A Microsoft-IDC Asia/Pacific study that polled 615 leaders from the manufacturing sector shows that digital transformation could lead to a better bottom-line performance, thanks to gains in productivity, increas
A domestic appliance factory in China. A Microsoft-IDC Asia/Pacific study that polled 615 leaders from the manufacturing sector shows that digital transformation could lead to a better bottom-line performance, thanks to gains in productivity, increases in profit margins and cost reduction.PHOTO: AGENCE FRANCE-PRESSE

Gross domestic product (GDP) in the Asia-Pacific region could add a further US$387 billion (S$517 billion) by 2021 and grow by an extra 1 per cent annually if its manufacturing sector embraces digital transformation.

The view stems from a study by Microsoft in partnership with research firm IDC Asia/Pacific that surveyed 615 business leaders from the manufacturing sector across 15 markets in the region.

The findings were based on estimates these leaders provided of the impact of digital transformation on their growth in the present and in three years. They were then extrapolated to the wider economy.

They do not take into consideration sudden market changes and are based on nominal GDP growth projection from the World Bank, said IDC Asia/Pacific.

Digital transformation for manufacturers is about going beyond simply automating, optimising and improving productivity but also "re-imagining how an organisation can bring together people, data and processes to create value for their customers and maintain a competitive advantage in a digital-first world", said the research firm.

Other findings noted that such digital transformation could lead to a better bottom-line performance, thanks to gains in productivity, increases in profit margins and cost reduction. Long-term benefits include revenue from new products and services and improved customer advocacy.

NEW DAWN

As manufacturing organisations realise the value of data in the long term, they are likely to unlock the potential of digital transformation in helping them create new business models.

MR SCOTT HUNTER, regional business lead for manufacturing at Microsoft Asia.

"It is no surprise that businesses are still focused on tracking process effectiveness as the manufacturing sector is one that relies heavily on time-to-market strategies for first-mover advantage," said Mr Scott Hunter, regional business lead for manufacturing at Microsoft Asia.

"However, as manufacturing organisations realise the value of data in the long term, they are likely to unlock the potential of digital transformation in helping them create new business models."

The survey noted that 44 per cent of respondents said tracking how data is being used as a capital asset counts as one of their key performance indicators used to measure digital transformation currently.

But the survey also found that leaders in the manufacturing sector are less likely to have an allocated budget set aside for digital transformation as part of their existing profit and loss statement.

Other barriers identified include the lack of skills and resources - with respondents saying they expect 85 per cent of jobs within the sector to be transformed in the next three years - cyber security threats, and a "siloed and resistant culture".

The study recommended a three-pronged strategy for companies seeking digital change: investing in big data analytics and Internet of Things solutions to manage structured and unstructured data; optimising processes using big data analytics; and using machine learning and artificial intelligence to create new value chains and services.

A version of this article appeared in the print edition of The Straits Times on May 03, 2018, with the headline '$517b boost to Asia-Pacific GDP if manufacturing transforms digitally'. Print Edition | Subscribe