Asia is on an upward trajectory with no end in site. Do we already have a new Silicon Valley in Asia? By Mike Saxton, senior VP, Software AG Asia Pacific & Japan
Is it time to be dramatic? Yes, it truly is. As the shock waves of digitalisation increasingly impact every enterprise and the entire global economy I do not think one can be over dramatic. I use terms such as paranoia, total disruption and the necessity for a strategy for the unknown to describe the issues and challenges haunting today’s executive boards – as they enter a battle for survival that is no longer on the horizon but only one or two mouse clicks away.
Just consider this, half of the Fortune 500 companies from the year 2000 have disappeared: Digital Darwinism is indeed in action we are already in the maelstrom.
But this fallout is nothing compared to the ‘tsunami’ (yes, I have used that too) that will engulf today’s manufacturers over the next decade. The industrial and manufacturing landscape of 2025 will be massively different from today and every single ‘traditional’ company has to digitally innovate, innovate, innovate if it is to survive. The case for immediate action and speed could not be overstated.
Countries in Asia, particularly developing economies, are currently undergoing industrialisation. China, India, Indonesia, Malaysia, Philippines and Thailand have been called ‘newly industrialised countries’ due to rapid economic growth. One way to ensure consistent growth and to remain competitive is by embracing the innovation capabilities of Industry 4.0, the most relevant aspect of digitalisation in Asia. Why? According to PWC, 40 percent of industrial companies in Asia Pacific rate their digitisation as high, and this value is expected to rise to 69 percent within the next five years. This is especially relevant to developing economies as they have the advantage to leapfrog ahead of developed economies due to their Greenfield starting positions and digital potential.
The Industrial Battleground
It is this innocuous term ‘digital potential’ that is the industrial battleground of the 21st century. The end goal of reaching true digital potential is when companies become truly digital enterprises, with physical products at the core, augmented by digital interfaces and data-based, innovative services. Ownership of this digitalisation layer must remain in Asia. We cannot afford to outsource the future of manufacturing innovation, the source of profit and the continent’s wealth, to faster moving competitors and faster moving economies, and focus solely on better wing mirrors or gear boxes.
However, the assets needed to both counter this threat of competition from other highly competitive regions outside of Asia and turn it into an opportunity, comes along once in a generation, if you are lucky, and we could not be closer to that opportunity in this current generation. It is in our own backyard. Singapore is an example of a country in the region that not only offers a highly educated workforce, an investment-friendly business climate, generous research & development incentives, a high-quality infrastructure and good governance, but the country also provides the ability to drive the region’s digital potential with its pioneering attitude to business and technology. Similarly, countries in the region with the technology expertise can work together with their neighbours to drive Asia’s potential to be a global economic powerhouse.
Building Regional Assets
I use the word asset judiciously. Silicon Valley is an asset that the world is trying to copy: Silicon Plateau, Silicon Gulf, Silicon Bog and Silicon Glen, to name only a few are all attempts to copy the American model but why copy when you can play to your own strengths, play to your own national strengths? And in Asia, we are lucky we have many diverse national strengths, in itself a foundation for collaboration and growth.
In Asia, we already have an industrial cluster, now, today. The 2016 Global Manufacturing Competitiveness Index highlights that this industrial cluster is driven by talent and innovation – China, Japan and Korea are currently the anchors of this cluster. This is further bolstered by Singapore and Taiwan, where both nations rank amongst the most competitive due to their focus in high-tech export according to the study. Interestingly Malaysia, India, Thailand, Indonesia and Vietnam have been labelled as the ‘Mighty Five’ by Deloitte due to being alternate lower cost manufacturing destinations. The region will only continue to dominate the competitive landscape and it is this that we must build on.
To achieve this, each manufacturing enterprise must go digital. Digital services are the future of manufacturing (and every other industry too may I add): future innovation, future revenue, future profit will all depend on software and the digital services it provides. Countries in Asia must learn to collaborate and co-innovate to remain competitive and solidify Asia’s position as the world’s next super economic region. The good news is that this collaboration, co-innovation model demanded by Industry 4.0, the integration of industry and IT, is already a business process. An example of this is the Chongqing Connectivity Initiative (CCI) between China and Singapore, where both countries continue to deepen cooperation, in a bid to create high-speed IT connectivity between Western China and Southeast Asia with a Singapore-Chongqing Digital Super Highway.
Finding Strength In Diversity
This co-innovation approach also plays to Asia’s strengths. Today, the software industry can no longer stand alone, outside the industries it has previously served – it must become an integral part of the industries themselves. It is, after all, the primary source of future revenue for each and every industrial sector. The primary source of future growth for the continent.
Asia’s varieties in traditions and experiences are its strength. Diversity in approach, diversity in thinking, diversity in innovation are all fundamental to providing enterprise unique, innovative Industry 4.0 capabilities. I am also sure the region’s diversity and increasing openness will grow in appeal to the global talent pool, independent from religion, geographic location or any other diversity aspects. Let us build on this great opportunity; the ‘war for talent’ is also happening now.
Time is of the essence, now is the time for execution, and not for endless discussions about risks and ‘why not’s’ or waiting and seeing. Now is the time for action and speed. The fact that Asia owes towards building this future, now, to our children and grandchildren is also dramatic, but not an exaggeration.