This article first appeared in Forum, The Edge Malaysia Weekly, on June 27 - July 3, 2016.

Malaysian companies face a clear need to embark on a digital transformation journey. Internet penetration has reached a healthy level of 67% and many customers are now demanding digital products and services from businesses.

Despite this, a 2015 International Data Corp (IDC) report, commissioned by Malaysia Digital Economy Corp (MdeC), found that fewer than 6% of Malaysian companies had aligned their digital strategies with long-term business goals. Management teams at such digital laggards should apply lessons learned from successful early digital adopters to rapidly build their digital capabilities. In their efforts to catch up, speed will be more critical than perfection. Leading Malaysian companies offer role models for how to adapt to this digital revolution.

One such role model is Malayan Banking Bhd (Maybank), which began its digital transformation programme by focusing on social media strategy. First, the bank removed hundreds of unauthorised social media pages to cut down on intellectual property infringement and build reliability. Next, it analysed consumer online behaviour and found that consumers in Asia-Pacific were most likely (63%) to make a purchase of financial products based on social media reviews.

This is the highest percentage found in any region; the next highest percentage was found in the Middle East and Africa (52%). By updating its presence on the top social platforms with promotions and offers, Maybank managed, in one year, to increase its follower base by 543% and engagement by 71%.

Following this initial success, Maybank also invested in tools to analyse its brand mentions, conduct consumer sentiment analysis, escalate important messages and observe a real-time dashboard of service standards. Soon, within a year, with an average response time of 38 minutes and a response rate of 91%, Maybank was ranked the top socially devoted brand in all categories within Malaysia.

AirAsia, Malaysia's largest low-cost airline in terms of fleet size, has led the way in using data and analytics to improve operational efficiency through fuel management. The airline has targeted bottom-line operational savings of US$30 million to US$50 million over five years.

It has also managed to cut 40% from its contact centre costs by integrating customer service into its social media platforms through Eptica's multichannel self-service portal. In addition, its mobile app has been downloaded more than nine million times across both iOS and Android platforms and was nominated for "World's Leading Low-Cost Airline App” at the World Travel Awards in 2015.

Malaysian companies are pursuing ambitious initiatives like these amid the rapid growth in digital connectivity occurring throughout Southeast Asia. From March until November 2015, the number of active internet users in the region grew by as much as 12% and the number of mobile connections grew by 4%, largely driven by increased adoption in less-penetrated markets such as Cambodia and Myanmar. The region’s booming digital economy has been supported by large foreign direct investment from companies like Alibaba, Rakuten, Softbank and Rocket Internet.

The late digital adopters among Malaysian companies generally recognise that they need to take action, but some say they are hindered by legacy IT systems or do not have the necessary capabilities in place. Others spend months studying the market and getting bogged down in large-scale conceptual considerations, believing — incorrectly — that they need to understand in the greatest level of detail how and where the journey will end before they can take the first step.

Given the pervasiveness, low cost of entry and potential impact of digital technology, it is imperative that late adopters act today to launch new digital products and services and digitise internal processes. To succeed, companies need to embrace the concept of “fail fast and fail cheap” and build up their digital capabilities through direct experience, according to Boston Consulting Group’s Digital and Technology Enablement Center (DTEC). And rather than making a single big bet, they need to manage multiple initiatives, trying out new business models with low sunken costs, killing off the losers and scaling up the winners.

DTEC's experience with companies in virtually all industries shows that success with this kind of trial-and-error approach requires a structured transformation methodology built around three steps: (i) securing quick wins at the outset; (ii) scaling up successful initiatives; and (iii) leading and sustaining change.

Before launching a transformation programme, a company should first assess its digital readiness by looking at the availability and quality of data, its IT architecture (including the degree to which it is digital-ready), its capabilities in innovation and its overall culture and readiness for change. Together, these steps can help management teams determine where to start, how to manage the process, and how to generate sustainable progress with their digital transformations.

Securing quick wins at the outset: Regardless of how ambitious a digital transformation effort is, companies should start with quick wins in at least one of several areas: improving the customer experience, offering new digital products and services, and digitising internal processes.

Whether a company prioritises one of these areas for quick wins or pursues a combination of them, speed is critical. Instead of taking the traditional, linear approach to rolling out new initiatives, companies should quickly bring new ideas to market, gather customer feedback and refine the concept iteratively using an agile methodology.

Many accomplish this by means of the minimum viable product process of prototyping, which is based on the idea of the “good enough” product. Rather than trying to perfect new products or services internally during the development stage, the company instead aims to get them to market quickly, with just enough features included to make them functional.

Scaling up successful initiatives: Once the company has identified its most important digital priorities and launched some quick wins, it faces the challenge of scaling up the most promising ventures.

The fastest way to scale up digital initiatives is to acquire digital talent on a temporary basis and then bring it in-house over time. As the company embeds talent, it can create digital units that serve as a centre of excellence and an internal repository of its current thinking on technology.

A second, and bolder, approach is to create an internal incubator to leverage capabilities already developed by another company — preferably, an entrepreneurial one. This can be done through early-stage funding of start-ups (the corporate venture-capital model), a joint venture, or an outright acquisition.

Leading and sustaining change: The third step in our digital transformation methodology requires the right set of internal resources. Even successful pilot projects and prototypes will not achieve their potential without organisational support. Companies need to nurture these projects to make sure they become sustainable at scale.

Most important is leadership. The company’s digital agenda needs to be driven by executive management, with visible support and accountability. (Bottom-up approaches usually do not last.) Talent and culture are critical as well. The company must build a trial-and-error mindset that not only tolerates failure but understands that failure is a critical part of the process.

The company also needs to determine how IT can best support its digital initiatives and whether to house its digital capabilities within the business units or in a corporate centre of excellence (either within or outside the company). Many companies also need to break down institutional barriers and silos in order to foster a more collaborative approach between IT and the business units.

Finally, companies should adopt strong change-management processes. A key challenge is meshing digital initiatives with the company’s established operations and ensuring that employees and managers on both sides continue to collaborate so that digital successes can spread throughout the organisation.

By following these three key steps with the guidance of enablement centres such as DTEC, Malaysian companies can position themselves to take advantage of the latent demand in the economy for digital products and services, and truly transform into digital organisations.

C F Ong is partner and managing director at the Boston Consulting Group, Kuala Lumpur. For more information on these steps, please refer online to the bcg.perspectives article titled How to Jump-Start a Digital Transformation.

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