Chinese companies will spend a total of USD 256 billion on digital transformation initiatives in 2020.
This article was originally published on KrAsia.
“Who leads the digital transformation of your company? The right answer is not the CEO, CTO, or CFO, but the coronavirus,” reads a popular tweet, emphasizing the pandemic’s role in pushing companies to use digital technologies to transform and grow their business.
In China, many companies were able to quickly “go online” through online conference applications, livestreaming e-commerce, and other surface-level digital tools and services. However, COVID-19 has also exposed a lack of integrated digital capabilities in some areas, like production, operations, organization, and management, according to Accenture’s 2020 Research on Digital Transformation of Chinese Enterprises, based on a survey applied to 398 Chinese enterprises across nine industries.
Companies’ digital transformation can be categorized into “front-end”, or consumer-facing sectors like marketing and sales, and “back-end”, which includes supply chain manufacturing, management, and others, according to IDC.
“Chinese enterprises are leading in the front-end digitalization like mobile payments, digital marketing, and customer online services, thanks to internet companies and their various investments in different industries,” Wu Lianfeng, vice president and chief analyst of IDC, explained to KrASIA.
“But there’s a huge room for improvement in the back-end part for many industries, like banks, government institutes, retail, and manufacturing,” Wu added. Accenture’s report supports IDC’s findings, showing that many companies have failed to prepare on the back-end.
Supply chain processes, omnichannel operations, and AI-powered intelligent decision-making are the three top areas in need of digitalization, according to executives polled in the Accenture report.
IDC estimates that Chinese companies will spend a total of USD 256 billion on digital transformation initiatives in 2020, accounting for 39% of China’s total information and communications technology (ICT) spending, with an expectation to reach 50% of ICT spending by 2023. In comparison, digital transformation will only account for 28% of global ICT spending in 2020.
Expectations of quick returns
Realizing the importance of digital tools, Chinese management boards across different industries are willing to spend money to modernize their businesses in the next few years, but they also expect quick returns, said Accenture’s report.
According to the survey, 85% of the respondents want to see a payback on their investment in digital transformation projects within 12 months, and 43% expect a clear payback in six months. Successful digital transitions are measured by metrics including customer satisfaction, market share, and profits generated by new products and services.
Wu Lianfeng told KrASIA that patience is needed. “Digital transformation is a ten-year journey,” he said.
If a company happens to use the right digital tools to tap into the most crucial part of its current business, then digital transformation could bring an immediate effect, Wu explained. “Other than that, the impact would come slowly.”
“Think big, start small, and react fast,” is Wu’s recommendation to enterprises.
Image via KrAsia