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October 03, 2019
A decision for CTOs in Malaysia –Transformation or Evolution?
By: Adrian Lim

My first home computer was a Commodore64 and what I realised even back then in the early 1980s was the transformative nature of technology – from playing Frogger to having the ability to write simple programs – until that itself was disrupted by personal computers in the early 1990s.

Today, the transformative potential of technology is a critical factor not only for companies but nations as we move towards the future. Leading companies embrace the future faster than others by changing their core business while scaling new ones – before they are forced to.

Compared to the 80s however, the sheer pace and scale of technology innovation today is unimaginable and will only get faster in the next 10 years. For example, it took Commodore64 10 years to sell 17 million units and only 3 years for the iPhone to hit the same number with 100x the computing power. Also consider the mobile game Pokemon Go that only took 19 days to hit 50 million users and subsequently lost 15 million in a month.

No wonder then, most companies in Malaysia struggle with their technology investments and decisions. The Wise Pivot survey by Accenture showed that only 11% of companies here are confident they have the right level of investment capacity to transform themselves compared to ASEAN’s 33%. Companies in Malaysia often face the challenges of articulating a strong value case to their Board and managing the risk of failures.

In the same survey, they were found to be investing more in upgrading existing technology and processes (56% of technology investment vis-à-vis 40% in ASEAN), and yet only 29% of those same companies surveyed are investing in Cloud. This again is a reflection that known technology investments are viewed as “safe bets” in their slow evolution to the new. However, with “safe bets”, comes low returns.

This technology “inertia” limits companies’ potential to grow and transform themselves as continuous improvements in digital and related technologies are creating value faster than companies can absorb it - trapped value. This trapped value is the gap between what is technologically possible for the business and what the business is actually capturing.

So what should companies in Malaysia do? There are 5 value triggers or measures that can guide their technology adoption:

  1. Value Potential

    Technology investments to keep the lights on will not help companies pivot to the future. Each investment and transformation must be underpinned by a strong value proposition, with leadership courage to pivot again if the potential value is not realised. A perfect example of this is Slack. Slack, a workplace messaging platform, was a nearly accidental creation. It started off as an internal collaboration channel for Tiny Speck to keep its distributed team communicating while building a game called Glitch. When Glitch and Tiny Speck got shut down, the co-founder did a “pivot”- he took the channel and built it into Slack. Slack’s market cap is now around $20 Billion

  2. Talent Readiness

    Does the company have access to the requisite talent pool, either internally or externally to apply the technology successfully within both the industry and your company’s context?

  3. Capital Adequacy

    The level and intensity of investments (e.g. VCs, M&A) for a particular vendor or technology is a good proxy to understand the potential success it. One could see the shift with Commodore64 where the number of games studios producing games for it dwindled to only 3 by the early 1990s. In this era, if you have doubts on the maturity or benefits of Artificial Intelligence (AI) to your business, look no further than the fact that Microsoft is investing USD 1 Billion in OpenAI, a startup company.

  4. Ecosystem Maturity

    Are there open standards, protocols or governing bodies for the technologies? Is the technology proprietary or open source? Which are the major vendors that support it? For example, in 2015, Microsoft pivoted its business strategy to “Microsoft Loves Linux”, a competing Operating System as Linux was winning significant market share. LINUX today accounts for more than 60% of all web servers running globally.

  5. Adoption Intensity

    What are your competitors or companies in the same industry investing in? Adoption or technology spend benchmarks are good indicators of where technology investments should be made. The other option is to evaluate the growth of a particular technology over the years. For example, AWS Cloud revenue has seen an average 43% y-o-y growth in a market that is worth USD 215 Billion in 2019, up from 182 Billion in 2018.

Companies in Malaysia must aim to transform the core business, then enable that core business to grow – creating a multiplier effect on the value creation of a company. This will require a new way of looking at technology, not as a way to drive incremental benefits, but to pivot to the new. A perfect example of this is Best Buy. Seven years ago, people thought that Best Buy would go down the path of Blockbuster or Kodak and become extinct. Instead, they invested heavily in their digital transformation to enrich their customers’ lives. The business results? A stock price increase from USD 23.70 in 2012 to USD 74 in July 2019. So the question is, will companies in Malaysia be the next “Best Buy” or the next “Kodak”?

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