Connecting the dots in asia pacific how business leaders are preparing for a world where everything is connected

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 nu

everything is connected

Commissioned by

A report from The Economist Intelligence Unit

Talent strategies are becoming more aggressive 7

For more profitable companies, speed and the complexity of data are the next frontiers 9

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

1

The 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 abuse Improved organisational

regulatory 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%

67%

46%

45%

22%

7%

7%

56%

64%

Enhancing internal development of current staff Hiring people away from competitors Hiring 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 adoption

2

Despite 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 frontiers

The 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 security

Being 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