Ready for Indonesia’s Digital Future?

Indonesia is rapidly emerging as an economic powerhouse. Tackling its opportunities does not mean replicating what works in China or other emerging markets.

To succeed in Indonesia, businesses will have to deeply understand the surprising extent to which the economy is driven by consumers. They will also have to match—indeed, exceed—the expectations of a growing cohort of digitally enabled citizens in the nation’s rapidly growing cities as well as its countryside.

Compiled by Accenture, this report looks at what it will take to thrive in the digital Indonesia of 2020.

There are four key factors behind the digital surge in Indonesia:

• The rise of Indonesia’s ‘”mass-consuming class”—those households with incomes between US$5,000 and US$30,000 a year.

• Indonesia is urbanizing at a rapid rate. Currently, the population of about 240 million is split roughly half and half between country and town but by 2020, the split will be much closer to 60-40 in favor of the cities.

• Indonesia’s youthful population—today, almost 30 percent of Indonesia’s population is under the age of 15.

• The phenomenal growth in use of mobile phones—to a significant extent, mobile technology is shaping the digital landscape.

At the same time, the rapid removal of digital bottlenecks tomorrow will have an outsized impact on Indonesia’s digital standing. Large-scale public investments in both hard and soft infrastructure, like the Palapa Ring initiative, will address the voices clamoring for better Internet and communications infrastructure nationwide—not only in Indonesia’s fast-growing cities. And improvements in price-to-performance ratios will make smartphones accessible to and affordable for many more users.

As a result, the Indonesian consumer’s digital experience is going to become rapidly richer and more varied in terms of digital access, devices and content. While today mobile phone use dominates the digital experience of most connected citizens, tomorrow it will also involve digital TVs, tablet computers and PCs, and even digital household appliances. As consumers diversify their device usage, this may decrease the strain on the country’s mobile Internet capacity, whose limited bandwidth has become increasingly overloaded by demand that is fueled by cheap data plans.

In looking anew at opportunities for growth in Indonesia, many business leaders may be tempted to rip a page or two from earlier “emerging markets” playbooks. That would be a mistake. Indonesia will follow a different course from that of other emerging markets.

Accenture’s detailed research has uncovered three areas where digital will have the greatest impact on business growth there:

• It’s seen to strengthen all important community ties: While community is cherished in many nations, it occupies a special place in Indonesian society. People tend to identify themselves as members of a community before describing themselves as individuals.

  Traditionally, the core community has been the first point of reference for daily decision-making. When it comes to purchasing decisions in particular, Indonesians’ personal connections have enormous impact; they place a lot of trust in people they know, and will regularly refer to those in their communities on product and brand choices, and to stay updated with information about products and brands.

  But with the onset of digital, Accenture observes that the Indonesian consumer’s purchase journey will be significantly influenced in the future by digital interactions. For example, when making choices about products, we fully expect that recommendations from consumers’ online social networks and interest-based communities will become important complements to offline recommendations from friends, family, and colleagues.

• It’s not just about clicks—it’s about bricks with clicks: Indonesians love shopping—not catalog shopping or shopping online, but actually going to the physical stores. Shopping is very much a time for family bonding and it is a huge leisure activity. But that should not lull businesses into thinking that traditional in-store interactions will suffice for the future. Indonesia’s digital surge will have a profound effect on shopping there, following a markedly different trajectory from that taken in the Western world.

  Digital’s biggest impact will be to enhance the consumer store shopping experience. Indonesians are already treating shopping as an experience and not just as a series of functional purchase transactions. Accenture’s projections are that shoppers will be immersed in a new environment that blends the realities of the physical world with the discovery and entertainment facets of the digital world.

• It’s social, but for far more than fun: Indonesians are arguably the world’s most assertive users of social media. For most digital consumers there, “Internet” translates as “social networking.” Nielsen reports that Indonesia is the only ASEAN country where four out of five of its top online activities involve social networking.

  So whereas other markets have been progressing to social “Web 2.0” in stages, Indonesia’s digital consumers are leapfrogging ahead, largely because of their cultural traits of readily exchanging and sharing information with their communities and because of the interrelated importance of maintaining gengsi, or status, within the community.

  With such precocity in social media come higher expectations for more collaborative and inclusive relationships with consumer brands. Sixty percent would like to see companies getting directly involved in contributing to discussions in a social media environment—and 56 percent of Indonesian consumers are “more likely to do business” with such companies.

As Indonesia’s consumers become more digitally empowered, the nation’s businesses need to substantially ramp up their digital efforts. Yet most are overwhelmed by the challenges that the digital upsurge is creating. New research from Accenture shows that half fear losing control over their brands. More than a third worry about meeting customer service expectations. And more than a quarter fret about tailoring products and services to their customers’ changing needs. Among the companies that are taking action on the digital front, the actions are too often ad hoc and piecemeal.

Accenture recommends the following five strategic moves to help Indonesian companies position themselves for digital success:

• Ensure that digital has an impact on business functions beyond IT. Although digital strategies are a consideration for 94 percent of Indonesian companies, in practice the greatest impact of digital is most felt within the companies’ IT divisions.

• Look beyond traditional mediums of online customer engagement. Indonesian companies are active across digital channels, but they still focus on traditional mediums of online customer engagement.

• Start putting growing volumes of customer data to strategic use. Excluding their customer-facing websites, only a small minority of Indonesian companies collect customer data and use it to its maximum efficacy.

• Begin measuring the impact of increased spending on digital strategies. Nearly two-thirds of Indonesian businesses plan to increase spending on their digital strategies, but more than half are not yet measuring its impact.

• Cultivate a pervasive digital culture across the company. Accenture’s study shows that 63 percent of Indonesian companies have created internal digital teams, but these teams are not encouraging the use of digital to its full potential across their companies.