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Only one quarter of Southeast Asian firms ready for digital leadership

Nearly one-quarter of Southeast Asian businesses are Digital Leaders, a new study by SAP SE  and Oxford Economics, the“ Leaders 2020 study” shows. This is higher than the global average of 16%; this new class of high-performing companies is reporting stronger profit growth, higher employee engagement, and cultures that are more inclusive.

These high-functioning organizations have executives who communicate a company-wide digital strategy, keep management and worker skills up to date, and streamline organizational structure.

Analysis of Southeast Asian firms in the Leaders 2020 study also affirms the business benefits of diversity, showing a correlation between those who are leading in digital transformation and those who have a heightened understanding of the importance of diversity.

Digital Leaders around the world and Southeast Asian respondents are both more likely to recognize diversity’s positive impact on culture (66%and 62%, respectively), but only Digital Leaders are more likely to see the benefits in financial performance (37% vs. 25%).

Companies have become more diverse in Southeast Asia than in other regions over the past three years. Three-quarters of Southeast Asian respondents saw diversity improvements in the general workforce of their organization, and 42% saw an increase in board and senior leadership, compared with 67% and 34% globally. However, less than 40% in Southeast Asia state that their company has effective diversity programs in place, signaling more could be done, especially at the senior executive and corporate board levels.

The Leaders 2020 study also found that only 61% of Southeast Asian executives (vs. 55% globally) are making data-driven decisions, a key factor that makes a Digital Leader. It is of little wonder that only 62% of Southeast Asian executives (vs. 59% globally) feel that employees are equipped with the skills necessary to keep up with digital technology.

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“A diverse workforce encourages bold, innovative ideas to flourish and in turn, presents insights which are only made possible through that diversity. It is of little coincidence that these two capabilities – leveraging data for decisions and maintaining a diverse workforce – both occur for high-performing organizations,” said Scott Russell, president and managing director, SAP Southeast Asia.

The Leaders 2020 research findings for Southeast Asia revealed at SuccessConnect 2016, the premier conference held by SAP SuccessFactors for HR and C-suite executives in Singapore, shows that it pays to be a Digital Leader:

  • Stronger financial performance: 76% of executives characterized as Digital Leaders report strong revenue and profit growth, compared to 60% of all other Southeast Asian executives.
  • Satisfied and engaged employees: Effective digital leadership drives more than financial performance—it also creates healthier cultures. 87% of Digital Leaders have employees who are more satisfied, compared with just 51% for respondents in Southeast Asia. 75% of Digital Leaders also have employees who are more likely to stay in their jobs if given the chance to leave, as compared to 45% in the region.
  • More mature talent strategies: Digital Leaders are more likely to invest in talent and have much more advanced strategies for talent recruitment, development and retention. For example, 56% of Digital Leaders mainly fill roles from within the company, as compared to just 33% for the rest of the region.

The study also found that millennials are quickly occupying corporate leadership positions, as 22% of the executives in the Leaders 2020 study from Southeast Asia are classified as millennials, compared with 17% worldwide. Despite the higher percentage of young executives in the region, only 45% of Southeast Asian executives say leadership works with employees to develop their careers—an important step in cultivating millennial talent. Young executives are more focused on diversity and its benefits, and they tend to come from companies that value diversity and take steps to build it.

“According to a PwC report “Millennials at Work: Reshaping the Workplace”, millennials will form 50% of the global workforce by 2020.

Listening to what young executives have to say may be a shortcut to digital leadership—as long as the experience of their older peers is not ignored in the process. Striking this balance requires generations to listen to each other. Generational diversity is as important as the other forms of workplace diversity. The Baby Boomers, Gen-Xers and Millennials all bring varying perspectives to the table, which is crucial in sustaining a dynamic organization. Our belief in working closely with the millennial generation has resulted in having five unique generations, all working together at SAP to help our customers Run Simple,” Scott Russell added.

“The pace of change in today’s digital economy shows no sign of slowing down, and organizations that do not continually update their approach to digital leadership risk falling behind. Technology continues to remain the key enabler to drive growth, promote innovation, enable transformation and level the playing field for companies of all sizes,” concluded Russell.

Despite having a promising digital business landscape, leaders at these companies should not rest on their laurels—survey results from the Leaders 2020 study indicate that these companies in the region are not devoting enough resources to developing future leadership, employee skills or employee engagement. The research identifies several areas where companies can improve their leadership skills—and their business performance—through the following:

  • Communicate a company-wide digital vision – sharing a digital direction company-wide is demonstrative of a good leader.
  • Continuously update executive and employee skill sets – a necessity to adopt new digital skills in the digital economy.
  • Flatten the organization – reduce bureaucratic bottlenecks.
  • Emphasize diversity – cultivating a diverse workforce drives success in a global economy.
  • Listen to young executives – as they form the key workforce of the future, their advice would be essential for digital transformation.

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