WHY DIGITALISATION?

Before we start, is it digitalisation or digitisation?

Apparently, digitisation is “the process of converting information from a physical format into a digital one. When this process is leveraged to improve business processes, it is called digitalisation” while the results of this process are called digital transformation (Source: https://workingmouse.com.au/innovation/digitisation-digitalisation-digital-transformation).

Here we will be talking about the latter context or digitalisation.

The Covid19 pandemic has effectively changed the landscape of our economy and the way we lead our lives. Unlike anything else that we have experienced as a nation in the past such as the Emergency, the financial crises of 1997 and 2008 and previous epidemics such as SARS/MERS/H1N1, Covid-19 has tested the Nation’s ability to function like no other catastrophe we have seen before.

From demand and supply shocks causing chaos to the economy, to stressing the ability of the country’s healthcare, transport and communications infrastructures. Covid-19 is clearly a catastrophe of gargantuan proportions, but at the same time it also represents opportunity of the same scale. It is perhaps the single most compelling argument for the country to institute change. It can no longer be ‘business as usual’ for Malaysia.

The ability of businesses to absorb shocks and to come out better than the competition has become key to survival and long-term prosperity. In fact, companies now need to rebalance priorities and must now consider resiliency in all its forms. Resilience has become just as important as cost and efficiency.

One striking outcome of Covid-19 has been the ability of online or digitally native businesses being able to stay in operation while others were shut down. Some even thrived as brick and mortar shops were forced to close and people sheltered and worked from home.

In response, the Government’s PENJANA initiative has focused on digitalisation as a core theme and is designed not only to get people back on their feet but also to facilitate Malaysian businesses and the public sector achieve the resilience required to face a new normal.

The push towards digitalisation is also consistent with one of the major global trends of our time. As we know, e-commerce has for some time now been eating into the sales of brick-and-mortar businesses. Covid-19 has simply accelerated this change. As consumer attitudes towards physical distance and health are impacted by Covid-19, digital and low-touch activities are expected to grow. A digital future is not only ideal but it has also become inevitable.

With smartphone penetration at 131.4% (80% of which utilising 3G/4G), broadband penetration at 127.1% (Q1 2019 data, MCMC), internet users at 87.4% and rapidly rising and the impending rollout of 5G services all indicate Malaysia’s readiness to transition to a digital future.

The focus to get more people connected and well informed is a key priority, especially in rural areas. Under the Communications and Multimedia (Universal Service Provision) Regulations 2002 which is designed to promote the widespread availability and use of network and applications services throughout Malaysia there is as much as RM3.8 billion in the USP Fund  (as at 31 December 2018), dry powder to borrow a VC parlance in terms of available funds for the roll out of communications infrastructure and services to as many Malaysians as possible (Source: MCMC).

Moving forward, more USP funded initiatives are being planned and implemented to meet the targets set out under the National Fiberisation and Connectivity Plan (NFCP) a 5-year plan (2019-2023) which aims to put in place robust, pervasive, high quality and affordable digital connectivity for the well-being of the people in rural areas, underserved communities and the urban poor (Source: MCMC).

The negative impact of Covid-19 is so comprehensive and complete that it is quite impossible to ignore and will likely influence key (investment) decisions for years to come. The market therefore is already primed for change. The plan is to move the country to become more resilient with a more efficient economic engine, vastly better at managing shocks, while still able to create value for the wellbeing and safety of all Malaysian’s. The Government just needs to lead the charge.