Can the public sector spearhead digital transformation?

SUITS THE C-SUITE By Wilson P. Tan

Business World (11/26/2018 – p.S1/4)

(First of two parts)

In recent articles published in this column, we have highlighted the growing need for digital-ready leadership and the digital transformation of organizations. In today’s challenging environment, leaders must assume the main responsibility of fostering a company culture which is receptive to innovations in both internal methods and offered services.

The digital revolution has proven itself to be the way of the future, and companies need to keep up with their markets to stay competitive.

But when we talk about the bigger picture, we must realize that progressive and widespread digital transformation is not only a business or corporate concern. A large part of the success of digital leadership in the private sector is dependent on the digital readiness and inclusivity promoted in the public sector. Without the deep and proactive support of government, long-term digital leadership initiatives cannot achieve the momentum and wide dispersion necessary for mainstream adoption.

This idea was touched upon during the last ASEAN Outlook Conference 2018, as discussed in the recently released publication EY ASEAN Perspectives: Governance & Public Sector. Southeast Asia is considered one of the fastest-growing economies around the world, largely due to its expanding e-commerce industry and inventive digital technology. These have led to new and challenging ideas that were not as relevant to industries decades ago, such as online privacy, cyber-terrorism, and data security.

However, these indicators of digital progression do not necessarily apply to all economies in the region. According to the MasterCard-Fletcher School Digital Evolution Index, there are still significant gaps between developing and developed economies in Southeast Asia. These include differing local policies, varied consumer behavior, and most specially, the inconsistent digital infrastructure from country to country.

Thankfully, such hurdles are not impossible to overcome. But just as business leaders are called upon to adapt to digitally-savvy roles, the public sector must also meet the challenge of digital transformation by creating a local environment that is conducive to connectivity, promotes technological advancements leveraged for government use, and enables both businesses and the citizenry to actively acquire digital literacy. Primarily, leadership from this level must be spearheaded by local government if digital transformation and readiness are to reach regional levels of success.

It is only through this streamlined effort that we can maximize the growth potential brought about by digital technology — growth that could be worth up to $625 billion in increased efficiency, new products, and enhanced services by 2030. This is the estimate by the Masterplan on ASEAN Connectivity 2025, and it speaks volumes about the future expansion of the digital era.

Encouragingly for the Philippines, both public and private sectors are already implementing digital initiatives, although there is still much foreseeable work to be done.

First, there is clear merit in reviewing and harmonizing existing regulations and policies concerning digital infrastructure. Take for example the driving message from a recently concluded conference on digital future, organized by the Carlos P. Romulo Foundation. A pertinent talking point was that issues surrounding our digital infrastructure should be addressed sooner rather than later. A timely example of its urgency: the rate in which basic financial transactions are now conducted solely online, greatly increasing security risks.

Simply put, analog-era policies can no longer keep up with the digital trends and regulatory bodies are unable to predict what will arise next. Developments in technology are outpacing our country’s regulatory ecosystem for it, and this hindrance could devolve healthy competition and regional alignment with the rest of the ASEAN region.

The second concern that should be prioritized involves the actual building and scaling of digital infrastructure. In June, the Philippines went down one rank in the latest Ookla Speedtest Global Index. This monthly comparison of internet speed data from around the world has ranked the country at 96th place for mobile internet speed, and 83rd place for fixed broadband speeds. Government policies must address the margin of difference in our connectivity infrastructure as the country steadily moves towards a more digitally-inclusive economy. One such relevant instance exemplifying this was recorded back in 2017, where 3% of the Philippines’ gross domestic product (GDP) was from digital services such as cloud, Internet of Things (IoT), and artificial intelligence (AI). These findings, sourced from IDC and Microsoft’s joint research on Unlocking the Economic Impact of Digital Transformation in Asia Pacific, place the Philippines on the trajectory towards digital innovation in the next four years. If we are to meet such growth expectations, the public sector should no doubt double the effort in modernizing and institutionalizing basic, proper, and up-to-speed digital infrastructure for both businesses and citizenry.

Although these may seem like isolated incidents that hinder the expansion of a digital economy, they should be addressed as early as possible by the government. Touching upon the ASEAN goal of maintaining the region’s place as a fast-growing economy, it will be difficult for cross-country collaboration among our markets if one country does not properly regulate its digital infrastructure, or discourages new participants in the blossoming, new-age industry.

In the second part of this article, we will continue the discussion of the public sector’s role in facilitating, monitoring, and supporting the ongoing digital transformation in the Philippines.

This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinion expressed above are those of the authors and do not necessarily represent the views of SGV & Co.

Wilson P. Tan is the Vice Chairman and Deputy Managing Partner of SGV & Co.