connecting the dots in asia pacific: how business leaders are preparing for a world where everything...

Connecting the dots in Asia-PacificHow business leaders are preparing for a world where everything is connected

Commissioned by

A report from The Economist Intelligence Unit

1© The Economist Intelligence Unit Limited 2014

Connecting the dots in Asia-Pacifi c How business leaders are preparing for a world where everything is connected

Contents

About the report 2

Introduction 3

1. Preparation is everything 5 Talent strategies are becoming more aggressive 7

2. Barriers to adoption 8 For more profitable companies, speed and the complexity of data are the next frontiers 9 A complacent view of cyber security 9

Conclusion 11

2 © The Economist Intelligence Unit Limited 2014


Connecting the dots in Asia-Pacifi c is a report from The Economist Intelligence Unit, commissioned by Cisco. It assesses corporate attitudes towards the rise in “connectedness” (see defi nition, below) across Asia-Pacifi c and the level of business readiness in the region.

The report draws on a survey of 532 executives across 11 countries in Asia-Pacifi c, conducted in May, June and July, 2014.

About half (49%) of survey respondents are board members or C-level executives, including 165 CEOs. All respondents are based in Asia-Pacifi c with a majority located in India (15%), Australia (14%), China (14%), Japan (10%) and South Korea (10%).

About one-half of the survey respondents (49%) work for companies with annual global

revenues exceeding US$500m. There are 19 different industries represented in the survey sample, led by manufacturing (15%), fi nancial services (14%), and information technology (IT) and other technology (11%).

The primary functional roles of respondents are general management (46%), strategy and business development (36%), and marketing and sales (25%).

The survey fi ndings are supplemented by desk research. All fi gures are in US dollars. Kim Andreasson was the author and Charles Ross was the editor. The Economist Intelligence Unit bears sole responsibility for the content of this report and the fi ndings do not necessarily refl ect the views of the commissioning organisation.

About the report

For this report, “connectedness” is defi ned as the unprecedented number of people and devices connected to the internet and to one another; the growth in data these connections

create, and the ability of organisations to benefi t from the opportunities created through the confl uence of business trends, technologies and increased insights from connectedness.

Defi nition of connectedness



1 Source: ITU World Telecommunication/ICT Indicators database; note: data for 2014 projected

2 IDC: http://www.idc.com/getdoc.jsp?containerId=AP2670103V

Within the last decade, the number of individuals using the Internet in Asia-Pacifi c has almost quadrupled—from 344m in 2005 to over 1.3bn users in 2014.1 Meanwhile, the market for big data in the region is forecast to increase fourfold in half the time (from $548m in 2012 to $2.38bn in 2017).2 Thus, companies are increasingly looking to link this rising Internet connectivity and technological development with greater customer insights and internal improvements in their people and processes.

Such “connectedness” can make a difference in a competitive landscape. In the survey conducted for this report, more than 4-in-5 executives in Asia-Pacifi c agree that investments aimed at capitalising on the potential benefi ts of greater

connectedness may separate successful fi rms from failing ones. A similarly large majority of executives believe their organisation’s ability to adapt its people, processes and technology is important to take advantage of this greater connectedness (Figure 1).

Nonetheless, perceptions are not always the same as reality. The results of our survey set out in this executive summary show that while many companies in the region are investing in connectedness, progress is far from uniform. At the same time, as executives look to exploit new opportunities, there are signs of complacency with regard to the risks that come with greater connectedness.

Introduction

Importance of an organisation’s ability to adapt its people, processes and technologies to take advantage of connectedness(% respondents)

Figure 1: All change

Important

Undecided

Unimportant

86%11%

3%



Corporate preparations in some countries will create competition for talent: Firms in emerging markets, such as Vietnam, are actively looking to poach staff from competitors.

Progress across the region is developing at two speeds: Some companies worry about accessing consumer data quickly enough to inform decision making. For others, a lack of telecommunications infrastructure is hampering their ability to even reach consumers in the fi rst.

Connectedness is the difference between success and failure: A willingness to invest in connectedness will separate successful fi rms from failing ones, say executives.

A signifi cant minority of companies are disconnected: One-third of executives believe that Asia-Pacifi c is not well-prepared for dealing with a world where everything is connected.

C-suite executives are switched-on to the revenue potential: Board members and C-level executives see greater opportunity for improved revenue growth from connectedness than other less senior executives.

Five things businesses should know about connectedness in the Asia-Pacifi c region



Preparation is everything 1The perceived importance of connectedness varies across industries. Respondents in data-driven sectors like IT and technology (51%) and healthcare, pharma and biotech (50%) are far more convinced that their organisation’s ability to adapt its people, processes and technologies to take advantage of the potential value of increased connectedness is very important than those in traditional industries like construction and real estate (28%) and manufacturing (33%).

The biggest expected benefi ts of connectedness cited by survey respondents are greater access to customer data and better understanding of

customer habits (42%), followed by enhanced products or services (39%) and improved internal effi ciency (37%). In addition, almost all (93%) executives agree that an increase in connectedness is likely to spur a new wave of innovation in terms of products and services. Board members and C-level executives see greater opportunity for improved revenue growth (37%) than other executives in the survey (22%), although most executives acknowledge the diffi culties in attempting to value the return on investment resulting from greater connectedness (Figure 2).

C-suite and below expected benefits of increased connectedness(% respondents)

Figure 2: Broad agreement on benefits from top to bottom

0%

10%

20%

30%

40%

50%

Reduced cost

Enhanced products or services

Better understanding of customers

Improved transparency

Decreased rates of fraud and abuseImproved organisationalregulatory compliance

Increased innovation

Improved revenue growth

Improved internal efficiency

C-level Non C-level



So what changes do executives plan to make in order to make the most of these opportunities? When it comes to technology, the single largest group of executives cite mobile devices as the most important trend today. But this is all set to change.

During the next three years, the focus for technology investment will shift to big data and analytics (Figure 3). This trend is particularly strong among data-reliant sectors such as professional services (53%), IT and technology (47%), and fi nancial services (43%) compared with traditional industries like construction and real estate (35%) and manufacturing (39%).

Overall, fewer organisations cite additional investment in mobile devices (33%), which suggests a maturation of connectedness—moving beyond the initial stages of connecting with customers to focussing on the secondary benefi ts of what such connectivity can bring: more customer data.

But exploiting greater connectedness goes beyond technology. Internal organisational improvements to people and processes must also be made.

When asked in which of fi ve areas their organisation will focus to reap the potential benefi ts of greater connectedness, the leading answer—cited by 49%—is enhancing employee productivity (i.e. achieving the same output with fewer man hours). Geographically, this is a particularly strong trend in Singapore (cited by 69%), Australia (58%), and the Philippines (58%). But executives do not expect this to be easy, since raising employee productivity is also the second most (24%) cited challenge facing organisations (surpassed only by the customer experience at 25%).

In terms of business processes, most respondents believe in improving coordination between departments (38%); however, among companies with stronger corporate profi tability, there is a tendency to also focus on improving coordination up and down the management structure (38%

Technology trends which companies will invest in now and over the next 3 years to prepare for increased connectedness(% respondents)

Figure 3: Investing in information

Mobile devices

The Internet of Things

Big data and analytics

Cloud computing

Social networking

33%36%

41%41%

17%17%

44%

Cyber security

33%

Software-defined networking (SDN)

24%20%

17%21%

8%7%

Now In 3 years



vs 25%) and centralising decision-making (20% vs 12%). The presence of such counteracting forces illustrates the complex challenges facing companies trying to adapt to a new reality and shows that there is no silver bullet to adoption.

Talent strategies are becoming more aggressive As companies prepare for greater connectedness, with new technology, working practices and business processes, executives recognise the need to develop the requisite knowledge and skills among their workforce. Three years from now only 11% say their hiring policies will remain the same as today, although the route that

People issues organisations will focus on in the next three years to prepare for greater connectedness(% respondents)

Figure 4: Talent strategies vary across Asia-Pacific

Vietnam

India

China

Australia

Malaysia

Japan

Indonesia

South Korea

Thailand

Singapore

Philippines

12%

12%

10%

10%53%

15%

13%

14%

29%

3%

9%

9%

25%52%

29%

8%

16%

20%44%

32%

61%

6%53%

67%

46%

24%39%

45%22%

7%

7%56%

64%

Enhancing internal development of current staff Hiring people away from competitorsHiring people from abroad

companies plan to take to plug skills gaps can vary from market to market.

Most organisations believe in enhancing internal development of current staff (53%). In Australia, for instance, two-thirds of executives prefer internal development, much more so than hiring people away from competitors (7%). By contrast, in Vietnam, one-third of executives plan to take the latter approach (Figure 4). Across the survey sample, leading organisations tend to take a more aggressive approach: companies with stronger corporate profi tability are twice-as-likely than their less profi table counterparts to say they will hire people away from competitors (21% vs 12%) three years from now.



There are numerous external and internal challenges for companies seeking to leverage the advantage of greater connectedness.

Overall, the most commonly cited ‘external’ barriers to organisations are technology infrastructure and standards (40%) (Figure 5). Digging deeper, however, this is less of a problem in developed economies such as Japan (cited by 26%) compared to emerging markets, such as Thailand (55%), India (49%) and Vietnam (48%). Although this points to differences in existing infrastructure, it also suggests many developing economies have a tremendous opportunity if they can bridge such gaps.

Barriers to adoption2Despite uneven Internet adoption rates across Asia-Pacifi c, greater consumer connectivity is viewed only as the fourth greatest challenge overall. One reason could be that with a lack of infrastructure in the fi rst instance, companies have low expectations for online adoption among consumers. However, among companies who consider themselves ready to seize the potential opportunities of connectedness, about twice as many cite consumer connectivity as a particular challenge. This may indicate that companies ahead of the curve are unable to seize the full benefi ts without greater digital inclusion among consumers.

Barriers to taking advantage of greater connectedness(% respondents)

Figure 5: Poor connection

32%

28%

21%

37%

40%

21%

26%

15%

People: employee technology skills

People: remote connectivity and mobility

Processes: production of products or services

Processes: business process management(eg internal efficiency)

Technology: infrastructure and standards

Technology: data analytics

Finance: budgeting

Finance: revenue opportunities



For more profi table companies, speed and the complexity of data are the next frontiersThe primary ‘internal’ challenge facing organisations in terms of harnessing greater connectedness to make better decisions are complexity of data (37%), cost/funding (34%), organisational culture (34%), and lack of employee skills (32%)(Figure 6). However, companies with stronger corporate profi tability are less likely to say organisation culture is a primary challenge (cited by 29% compared with 40% for those from less profi table companies). Instead, more profi table companies are more likely to cite the volume of data (24% vs 14%) and complexity of data (40% vs 32%) as their primary challenges to make better decisions. This means they have likely ventured beyond the initial barriers frequently cited by others and are now facing the next wave of challenges towards greater connectedness.

Challenges faced in leveraging the value of greater connectedness vary by profitability(% respondents)

Figure 6: More profitable, different challenges

29% 24% 40%

30%

25%23%

30%26%

24%

14%

22% 15%

40%

14%32%

35%

23%

28%

39%

25%

15%

13%

18%

16%

Organisational culture

Volume of data

Complexity of data

Lack of employee skills

Lack of senior management awareness

Lack of processes

Cost/funding

Risk

Regulation

Lack of technology standards

Lack of country infrastructure

Lack of organisational connectivity

More profitable Less profitable

This is reinforced by the notion that more profi table companies are far more likely to view accessing information in a timely manner as their biggest challenge (48% compared with 37% for less profi table companies) while less likely than average to see extraction of information as a challenge in making use of data (30% vs 37%) or in analysing it (32% vs 39%).

A complacent view of cyber securityBeing prepared to reap the benefi ts of greater connectedness is only one half of the equation, however. Failing to address the associated risks of greater connectedness could ultimately prove more costly.

Following a spate of high-profi le incidents, the importance of cyber security has risen rapidly on global corporate and policy agendas in recent years. In the survey conducted for this report, three-quarters of executives in the Asia-Pacifi c region agree that security concerns limit the full potential of increased connectedness.



Even so, only one-fi fth rate cyber security as a key area in which their organisation will invest over the next three years. Similarly, cyber security is considered one of the least important technology trends by organisations in Asia-Pacifi c (see Figure 3). This widespread complacency could prove costly.

Although a lot of attention so far has been on cyber attacks affecting large US companies, Microsoft predicts the world’s highest enterprise losses from such incidents will come in the Asia-Pacifi c region in 2014 (estimated at $138bn).3

In part, the complacency surrounding cyber security concerns in Asia-Pacifi c may be attributed to a lack of awareness. For instance, executives representing data-reliant sectors such as fi nancial services (49%) and professional services (40%) are far more concerned about external data intrusions than those in traditional industries like construction and real estate (31%) and manufacturing (29%).

Yet, as companies from all sectors become more data-reliant the current level of cyber security complacency in Asia-Pacifi c is concerning. In a world where connectedness is the norm, securing it must be a priority.

3 Microsoft: http://www.microsoft.com/apac/news/PlayItSafe.aspx



21 2

Companies in the Asia-Pacifi c region are aware of the opportunities of connectedness. The focus is shifting to data, although there is a gap in implementation which is particularly evident between companies that are more profi table and their counterparts.

A lack of prioritisation appears to be a root cause of slow adoption, while complacency about cyber security issues that come with greater

connectedness is a concern moving forward, particularly among traditional industries

At a broader level, the private sector must work with the public sector to improve ICT infrastructure and digital inclusion in order to reap the full benefi ts of the information society. The opportunities to compete in a global environment are simply too great to be of low priority.

Conclusion

While every effort has been taken to verify the accuracy of this information, The Economist Intelligence Unit Ltd. cannot accept any responsibility or liability for reliance by any person on this report or any of the information, opinions or conclusions set out in this report.

This report was commissioned by Cisco.

To learn more about the Internet of Everything, click here

http://internetofeverything.cisco.com

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connecting the dots in asia pacific: how business leaders are preparing for a world where everything...

Technology

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defi nition of connectedness