27 November 2018

Is South East Asia ready for the Fourth Industrial Revolution? – What are the real opportunities to invest in in S E Asia

In the first two parts of this review on S E Asia, we were reflecting on their readiness for the Fourth Industrial Revolution from what does inhibit it, and the differences that need to be considered. The key is adapting to local needs, building a greater resource on the ground can offer that important key to “accelerating” solutions that do connect, connect locally, built on global expertise.

In the third part of this series here, I want to provide a perspective on several different business opportunity angles within S. E. Asia that give it a certain uniqueness and many opportunities to chase down. The key message is an adaptation to local needs and considerations is far more important than often realized.

Current readiness of S E Asian countries for the Fourth Industrial Revolution

When you look at the prospects of the Fourth Industrial Revolution 4.0 (IR4.0) going on, you do have to dig a little deeper to fully appreciate where the opportunities lie. Readiness is daunting in its complexity. The ASEAN block is no different (equally termed S. E. Asia). According to a World Economic Survey, Singapore is 2nd in the world for competitive IR4.0 readiness. Malaysia is 22nd, Thailand 32nd, Philippines 37th, and Indonesia 38th. Others within the ASIAN block are well-down the list, that includes Brunei, although it is sophisticated, along with Cambodia, Laos, Myanmar, and Vietnam. I was often constantly reminded that Singapore is an exception, it was not typically Asian, it was a gateway to Asia. This always got a few arguments going with many of my Singapore friends.

Where Asia sits in the world

The Asian Development Bank estimates the need for “huge” infrastructure investments across all of Asia will equate to USD 26b trillion in new investment between now and 2030. The large part of this infrastructure investments will be for power generation and transport infrastructure. The growth of cities is at a staggering rate; 50% of all megacities with more than 10 million people will be within the Asian region.

These are not specific to S E Asia but included in the general needs of Asia in total. S E Asia is an essential part of this growth phenomena. Just consider this: By 2030, the Asia Pacific region will account for 57% of worldwide consumption spending, 65% of the worlds middle class and the Asia Pacific will be spending USD 36 trillion.

Giving real S E Asia focus on the opportunities

For Siemens, like any other global company, it is to find the right balance for being a critical enabler of this transformation. To be a critical and essential partner in this transition but in a very specific local way, one of bringing global expertise, solution subsets, tailored to specific needs.

The reality of looking across separate markets is spotting all the boundaries, constraints and impediments to achieve a successful business and deliver outcomes and solutions that fit, yet there are common needs and real business opportunities to bring into the solutions for IR4.0.

Most S E Asia countries lack robust manufacturing value-add (MVA) industries, such as machinery production or building industrial good. To position themselves to significantly increase value-add production solutions needs IR4.0 so as to deliver to a very aspirational population. The different countries have either concentrated on the local market or export to neighbors. The export base still is more traditional such as textiles, footwear, electronic components. The exploitation of Oil & Gas and Chemicals is set to grow, Malaysia has been focusing on these.

The Industry Revolution 4.0 calls for Infrastructure, Digitalization and Innovation in potential and what fields of opportunity does this bring in this distinctive area of the world? How can we evaluate them?

ASEAN requires electrification (in abundance), automation and digitalization, all are SO IR4.0.

Siemens have these three of electrification, automation and digital as core to their business, they all are providing connected solutions required by IR4.0. As well as the offering of healthcare solutions and small business enterprise solutions that are equally needed across ASEAN they are highly relevant to contributing into S E Asian solutions required. The difference (and caution here) is the current state of economic development for each country, especially in manufacturing. They have growing populations determined to move up in wealth and opportunity.

These eight specific challenges have to be seized in S E Asia

The Education system needs to re-orientate becoming digitally savvy: This is not just in consumerism but in skills required for participation in the IR4.0. Much of the population lacks the required skills to take advantage of the IR4.0. The concept of apprenticeships applying on-the-job training gives such a vocational training. This needs to be entrenched within any solutions dealing with the transformation solutions of I4.0

Connecting IR4.0 holistically

If IR4.0 does not “take off”, S E Asian countries will lack the ability for exploring new digital business models, fail to build digital engineering skills, learn all that is need from integrations of operations and supply chains. They will miss out on higher value maintenance and service opportunities, they will not appreciate the need for establishing digital workplaces, will suffer from constrained sales and marketing because they are not digitally enabled and restrict their potential for collaboration and partnering. They need to seize the Fourth Industrial Revolution to transform their current positioning and global presence, so as to be sustaining in their growth and capitalize on fresh opportunities that offer higher value-add.

Government Private Company Engagement

There has been a very high reliance on Government policy and significant support. Private industry still has much higher levels of dependence on Government. There are still too many legal protections, barriers of red tape, lacking suitably educated people that have a digital background, and the infrastructure still is not as suitable dues to a lack of sustained investment to bring it to a certain IR4.0 readiness.

South East Asia has many challenges and decisions to make over the next few years. It faces increasingly tougher competition from those that are making the IR4.0 investments. They need to avoid that economic squeeze, being caught in the lower value producing trap, unable to make all the required infrastructure steps to become a region of digital economies, with the notable exception of Singapore today.

The need for Intelligent Buildings

If solutions can be specifically tailored, there is a very bright future in Intelligent Buildings as it is suggested 40 percent of total electricity globally is consumed by buildings and presently 30% of this energy is being wasted. In these tropical countries smart intelligent building design solutions can redirect these losses to further heat, cool or contribute to optimizing solutions that are “integrated platform solutions” for controlling, monitoring and optimizing all building services.

Smart Infrastructure & Transportation

Each of these countries needs solutions to their transportation constraints with a lack of roads, train lines, airports, harbors, power plants and generation and transmission lines, on which this growing population will increasingly rely upon to move up the value chain.

The need for “Smart Infrastructure”, where buildings and power grids can merge together so through IR4.0 enablement buildings become smarter, more networked, where they can store and distribute energy by having closer relationships of exchanges of energy and data.

The explosion of car ownership across S E Asia will continue but will equally be replaced by electric cars, this will further require greater investment in infrastructure and electricity generating solutions. The demand for mobility solutions will be as great as Asians are always keen to be early adopters. Developing countries will, I believe, adopt electric solutions faster than many Western Countries.

Smart Solutions that relate to Urbanization

The potential of combining solutions will eventually achieve a greater business impact, especially in S E Asia. The need to jump in advancement means that smart technologies, connectivity, and computing need combining (electrification, automation, and digitalization).

For instance, the greater understanding of applying the combination of pervasive technologies (AI) with Advanced solutions (sensors). The understanding, use, and application of robots applying advanced material (Nano) and additive manufacturing (3D) all need showcasing, demonstrating. A center to demonstrate the value of this applying all application design would greatly accelerate identification and engagement. This goes beyond having ‘simple’ or solution centers but dedicated research and technology adaptation ones.

Legacy is a huge issue- this will inhibit IR4.0 in S E Asia

The ability to step up to being digital is held back even more in S E Asia. It is holding IR4.0 back significantly When you apply the same message to a developed country as a developing country you often greatly miss the mark. The need of many S E Asia companies is to modernize their existing systems, they are the critical point of focus. I know this is a problem all over the world over, I recognize that, but it is more relevant in Asia. Many organizations have the three stages to go through of 1) Moving from pure legacy into 2) Web Enabled to eventually get to 3) being Digitally ready.

Digital transitioning- rapid application development

To get manufacturers to address their legacy issues there are emerging solutions. The value of the type of solution that Mendix offers is one idea. Mendix with its low-code platform focus might have more potential in the short to medium term than Mindsphere. The value of rapid application development and focusing on delivering API’s that build out the integrity of the existing systems would be a way to quicken the move to longer-term digital solutions and recognition of the value of platforms, ecosystems, the use of clouds and big data.

The Mendix matrix of solutions based on innovation, customer-focused, operation efficiency, and solving legacy can be highly rewarding to move up the digital maturity chain. Platforms and cloud offerings will be a closer step to the realization of IR4.0 from this transition and focus on legacy solutions.

In Summary

S E Asia does have some very specific opportunities to tackle. How digital solutions are applied to their specific problems of managing their legacy issues, there need for rapid application development, the need to build platforms and ecosystems that build on trust and a radically different value proposition needs specific evaluation and the application of use cases that are highly relevant to business operating in S E Asia.

Read the other parts of the series “Is South East Asia ready for the Fourth Industrial Revolution?”:

Part 1: How big is the challenge really?

Part 2: The application of innovation, the Asian way

Part 4: The Roadmap for the Digital Revolution

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