Scott Russell, President and Managing Director for SAP SEA
Five months have passed since the historic landmark agreement came into effect, where the ten member ASEAN (Association of Southeast Asian Nations) countries consisting of Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Singapore, Philippines, Thailand and Vietnam signed their commitment to form the ASEAN Economic Community (AEC). With lower business restrictions and enhanced trade opportunities, this new economic bloc will make ASEAN more competitive. However, member countries will first have to resolve their local challenges before they can fully reap the benefits of this connected region.
As of 2014, ASEAN recorded a combined GDP of US$2.6 trillion, making it the 7th largest in the world and the 3rd largest in Asia. Consider the potential and combined strengths of the ten member countries – comprising 622 million people – if ASEAN operated as a regional entity rather than individual countries.
The beauty of ASEAN lies in its diversity. Yet this diversity also results in high barriers to entry for businesses. Across the region, businesses are operating on different regulatory frameworks and policies, and running on varying levels of infrastructure maturity.
For example, equity limitations and other local laws mean that a Singaporean food and beverage operator trying to enter the Philippines market must find a local joint venture partner and employ a Filipino in-house accountant. Other challenges include manpower issues, increasing population size that stress national industries, disagreements on key regional issues such as the haze, territory disputes as well as national security. If I were to describe what it is like running a business across ASEAN in a word, it would be “complex.”
In addition, while the creation of the AEC delivers abundant opportunities for the Southeast Asia (SEA) region, it also creates new business challenges and complexities, which must be managed by SEA companies of all sizes if they are to remain competitive in the integrated marketplace. Indeed, a recent survey by the Asian Development Bank and Institute of Southeast Asia Studies found that less than one-fifth of ASEAN businesses are AEC-ready.
There is only one way to resolve complexity, and that is to simplify through the use of digital technology. Digital technology is not only an enabler, but also a great simplifier that will level the playing field for businesses across the region. For instance, organizations can embed regulatory nuances into business processes built within the technological layer.
Malaysia’s National Heart Institute is a good example of how digital technology enables companies to drive better business outcomes and navigate regulatory changes. In 2015, they made the decision to digitize their processes to gain real-time insights into inventory levels and improve workflow efficiency, while effectively meeting the new Malaysia Goods and Services Tax (GST) Act 2014.
Another key example can be found in the Philippines. Ageas Insurance implemented the industry’s first end-to-end insurance software in the cloud to support their expansion plans into new markets in Southeast Asia. The integrated set of solutions, consisting of software-as-a-service offering, gives Ageas the much needed agility to establish themselves locally, whilst expanding region-wide.
Engaging Asia’s young demographic
Resolving complexity is not the only impetus that is driving businesses to go digital. ASEAN’s relatively young demographic and growing middle class area lot more technologically savvy and are using the Internet more ubiquitously. In a region where 50 percent of the population are under 30 years of age, and 90 percent of those under 30 have access to internet, digital is the future.
Traditional businesses are starting to feel the pressure to digitize their business.
These companies find themselves competing with both established and newer players alike. With technology levelling the playing field, younger organisations can have stronger digital capabilities and strategies to engage customers, partners, and employees much better than a multi-national company can. This is the reason established companies such as Indonesia’s leading garment producer, PT Delami Garment Industries, are investing in the latest generation of business applications to gain end-to-end visibility of their growing business network and complex supply chain.
The war of talent
Finally, businesses must not forget that employees are their biggest assets. The AEC is expected to increase labour movement across ASEAN countries, and the war of talent will only get tougher. Organisations should rethink many traditional employment relationships and take a more sophisticated approach to sourcing and managing talent. Talent management is both an art and science. The use of big data and analytics will grant companies the added advantage of being predictive rather than reactive, enabling them to manage the workforce with foresight rather than in hindsight.
Harnessing digital technology enables companies of all sizes to gain footholds in new markets, and provides the opportunity to establish a prominent global presence to realize their potential of becoming significant players in international markets. Digital technology will continue to play an increasingly crucial role in helping businesses innovatively differentiate themselves as national economies coalesce into the AEC community.
We know with certainty that AEC offers abundant opportunities for the Southeast Asia region but as business leaders, are we prepared for the challenges and complexities that follows? My advice is to start thinking about ways to run simple. More often than not, it starts with digitizing your business.