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This article first appeared in The Edge Malaysia Weekly on October 23, 2017 - October 29, 2017

THE maxim of the decade seems to be this: Businesses have to embrace digital technology or they will die. But to Maxis Bhd CEO Morten Lundal, that is simplistic thinking.

“It is tempting to answer with the cliché that you have to go digital or you will die. But I find that to be a rather shallow observation,” he tells The Edge.

“That said, I think most companies and government agencies need to have a clear and ambitious [digital] strategy. If not, they will be at a disadvantage over time. While you won’t die, in the coming few years you would feel the pain of not being at the forefront of the field.”

Businesses are at a crossroads of the digital revolution with many still in wait-and-see mode. Lundal believes that mindset has to change.

“Some people say it is too early to start and it is true that no company has reached a digitally mature stage yet. However, that mindset should change to ‘let’s start this journey, experiment and learn’. It can no longer be only about what the financial returns of investing in digital technology are or when one asks too early for proof that the investment will pay off,” he remarks.

“There are so many ways to start and engage [with digitalisation] in an affordable way. You shouldn’t have all these burdens of showing the returns on investment too early on. You should start this journey and learn as you go along.

“For traditional telecommunications products, we compare ourselves to competitors when we assess our performance. But when we are looking at going digital — like in our transformation programme — we don’t think about competition but about our own ambition. We set a stretch target and dream what Maxis can be in the mid-term and our progress is measured against our own happiness with this benchmark.”

Lundal is also against the mentality that if it works well today, why change? “That’s because what we do today would probably be bypassed by something in the next decade or so, if not much earlier.”

He notes that competing head-on with the internet represents an “enormous and formidable” challenge.

Indeed, the growth of over-the-top (OTT) services, such as instant messenger WhatsApp and Facebook — which provides an alternative communications channel to traditional SMS — has impacted the traditional revenue stream of local telecommunications companies like Maxis.

“Around 15% of our revenue used to be from SMS. Now it is close to zero. You are talking about a billion-plus ringgit disappearing over just a few years,” Lundal points out.

Though he declines to say whether the government should move to regulate OTT service providers, he believes they should adhere to the same licensing, regulatory, legal and tax regime as the local telcos.

“At present, there is very little regulation of international OTT players. [For instance], we (local telcos) have to adhere to the regulation of SMS services while internet text-based services are unaffected,” he says.

“Of course, we have been tremendously impacted [by the internet], but at the same time, we now generate revenue from selling data services. Our own transformation in the last five years has been tremendous with our revenue model shifting from SMS and voice to data services.

“At the same time, technology and the internet provide so many ways to empower you to work differently. So, yes, you can feel threatened if you are trying to compete with the internet and the global winners in each category. But if you look at your company and strength and you think hard about how the internet can empower you, there are many ways you can innovate yourself to a position despite all these threats.”

As for the fight for software-oriented manpower, Lundal believes the old-fashioned hierarchical organisation will no longer work.

“For Malaysia, in general, attracting skilled and talented software engineers and managers will be tough because we are competing with international companies that offer very attractive propositions. It is already a challenge [to recruit them]. First of all, our best people are already in high demand. Even though we, at Maxis, already have an ambitious (digital) programme and we invest huge resources in it, it is still tough to attract these talents. Imagine how it is going to be for modestly ambitious companies. And it is going to be much more difficult in the future,” he says.

On whether Malaysia can do more and move faster in digitalisation, Lundal says it would be a good opportunity to galvanise all the positive forces in the country towards one transformative ambition.

“There are so many competing interests in Malaysia but everybody would benefit if the country is really strong in its digital capabilities. I think there is an opportunity for Malaysia to have a truly ambitious digital vision and then delegate a lot of responsibilities and tasks to move organisations, businesses, the government and people’s usage towards this one vision.

“Whether we are doing enough, I don’t know. But gone are the days when natural resources, logistics, transport and basic communications gave a country competitive advantage. To be digitally enabled is going to be as important a few years from now. Over the next two decades, how digital you are is going to be important in determining how competitive a country is,” he comments.

“I don’t know of a country that can be a benchmark for having a completely integrated and ambitious strategy around digitalisation. However, the UK, the US, Singapore and the Nordic countries, for example, have progressed a lot in terms of going digital.”

Lundal, who has been Maxis’ CEO since Oct 1, 2013, thinks the current digital age is the most challenging.

“If you look back in time, like the last 20 years, the telecommunications industry’s challenge was basically a technical one — of how to apply voice and data services over 3G and 4G. But now, besides still facing technological challenges, we also need mindset and business model changes to continue being relevant.

“Looking back five years from now, we will see this time as a period of massive change that was probably more challenging than we thought and probably more challenging than the previous transformations that we have done in our industry. It is not capital-intensive but brain-intensive,” he says.

Lundal admits he cannot determine how much revenue digitalisation will bring to telcos like Maxis. “[But] digital gives us more opportunity to differentiate from other people who are doing what we do, but slower. I think it will sustain our business model because we can differentiate from our competition. Exactly how margins are going to be in the future, we don’t know, but will it help going digital versus not doing anything? Absolutely!” he says.

 

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