The trillion dollar reason to take AI seriously in 2018

By Ralph Haupter

President of Microsoft Asia shares what government leaders must focus on to help countries leverage digital and build future skills.

If you were asked in 2010 whether every organisation would be a digital one in the near future with Artificial Intelligence at the centre of everything we do, would you have agreed?

Fast track to 2018 – what would be your answer?

Digital transformation is the mainstay of boardrooms and even governmental agendas today. There is an acknowledgement now that digital transformation brings forth a competitive advantage to organisations and even nations in a fast-evolving digital world.

This is especially exciting with the emergence of AI as the cornerstone of digital transformation efforts. A good example of this is Ricacorp Properties in Hong Kong. Ricacorp has launched Rica+, an AI-powered service to help its property agents take advantage of predictive capabilities to provide better real-time recommendations to customers. The company expects AI to significantly increase the conversion rate from prospect to sale, which will result in a 40%-50% increase in profits in 2018. (Read the case study here.)

So, while we are seeing companies and even nations gaining a competitive edge with digital transformation, what’s the tangible economic impact that it can bring to Asia Pacific?

The US$1.16 trillion opportunity

Microsoft recently partnered with the leading technology advisory firm IDC to assess the digital transformation landscape across the region. Titled “Unlocking the Economic Impact of Digital Transformation in Asia Pacific”, the study involved 1,560 business and IT leaders from 15 economies.

Through an economic modelling exercise by IDC, the study aimed to find out the economic value that digital transformation can unlock in Asia Pacific. What’s interesting is that digital transformation of economies and companies in Asia Pacific could contribute an additional US$1.16 trillion to GDP by 2021.

The top five digital transformation benefits that organisations experienced already last year: Improvements in (1) profit margins; (2) productivity; (3) customer advocacy, loyalty and retention; (4) cost reduction; and (5) increased revenue from new products and services.

Overall, organisations are already seeing significant and tangible improvements from their digital transformation efforts across these benefits in the range of 15% to 17% in 2017 - and these benefits will grow by 50% or more in three years.

From my conversations with CEOs in the region, most of them understand that digital initiatives and a new data culture are needed to drive growth. However, they underestimate the technological and organisational disruptions that are truly needed to transform.

The study has clearly shown that there will be widespread disruption to the traditional business and operations models of all organisations. By 2021, approximately 60% of Asia Pacific’s GDP will be derived from digital products or services created through the use of technologies, which is a ten-fold increase from just 6% today.

CEOs need to commit today to digitising more than half of their current businesses or create new ones. This requires significant transformation to the leadership, capabilities, culture and technologies required, while continuing to run their traditional businesses in the meantime.

CEO’s priorities in a digital world

There are three things that the CEO need to focus on in order to transform their organisations successfully and be competitive in a new digital world:

1. AI will go mainstream this year, and it can only be enabled by the cloud and data.

What’s exciting this year is that AI has stepped forth as the most transformational technology in accelerating our progress to a digital world. With large amounts of data now made ubiquitous by cloud, AI now has the ability to go mainstream.
IDC predicts that by 2019, 40% of digital transformation initiatives will be supported by AI or cognitive capabilities providing timely, critical insights for new operating and monetisation models in Asia Pacific (excluding Japan).

2. CEOs need to reskill jobs and transform the organisation’s digital ecosystem.

Our study shows that 85% of jobs in Asia Pacific will be transformed in the next three years. I expect organisations to partner with governments and education institutions to massively reskill their workforce so that talents are equipped with future-ready skill sets such as data-oriented complex problem-solving, critical thinking and creativity for the digital economy.

CEOs also need to ensure that their organisations’ ecosystems, such as supply chain, is digitally transforming too. Growing this ecosystem is crucial for organisations to increase speed to market, share data and insights to fully realising their digital transformation ambitions.

3. CEOs need to create a data-driven culture and one that accepts micro-revolutions.

An organisational culture that embraces data is needed to optimise digital transformation initiatives. Digital transformation leaders are more focused on using data as a capital asset. Leaders understand the importance of data capitalisation, and are obsessed with their data analytics capabilities.

As such, leaders have listed in the study that the lack of advanced analytics to develop actionable insights as one of their biggest digital transformation challenges. Every AI or IoT story is about leveraging data. Companies truly need to further invest in this.

Lastly, CEOs need to create a culture that embraces micro-revolutions - small, quick wins that deliver positive business outcomes, and at the same time accrue to bigger and bolder digital transformation initiatives. A fail-fast and learn-fast attitude is needed to reap the benefits from emerging technologies such as AI.

At the end of the day, CEOs need to understand that they are swimming upstream in what the World Economic Forum has pegged as part of the Fourth Industrial Revolution. Those who will succeed are the ones that act with urgency.

Adding context to why there needs to be a sense of urgency with organisations accelerating their digital transformation efforts, Claus Schwab, Founder and Executive Chairman of World Economic Forum Geneva, recently said: “The challenge, however, is that we don’t have a decade to slowly shift mindsets before moving to act on the challenges surfaced by the Fourth Industrial Revolution.
"We don’t have a decade to slowly shift mindsets before moving to act on the challenges surfaced by the Fourth Industrial Revolution."
"The speed, scale and scope of change that is underway today, coupled with the fact that entrepreneurs, companies and policymakers are already creating rules, norms, techniques and infrastructure around new technologies, means that in ten years, it will be too late.”

This blog post is authored by Ralph Haupter, President, Microsoft Asia and was originally published here.