Indonesia’s abundant but overlooked ingredient to digital success: people

June 19, 2019

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As a sprawling tropical archipelago renowned as a holiday destination, Indonesia hasn’t always been considered a beacon of technological innovation. Yet, a booming digital market has arisen across the Southeast Asian nation, driven by a combination of entrepreneurial spirit and consumer demand from a burgeoning middle class. And it is showing significant signs of success.

With the largest economy and population in Southeast Asia, it’s no surprise that Indonesia is home to four of the region’s seven unicorns – Go-Jek, Tokopedia, Traveloka and Bukalapak – all start-ups whose value have surpassed US$1 billion.

The country is also well on the way to becoming a digital epicentre for Southeast Asia. The International Data Corporation notes that Indonesia is poised to become the largest digital economy in the region by 2020, with 61 per cent of GDP expected to be digitalised by 2022.

Indonesian businesses confident in their digital transformation

Amidst such buoyant growth prospects, how do Indonesian companies fare in terms of their approach to digital transformation? To uncover insights into strengths and weaknesses around digital transformation programs and decision-making, Telstra’s Disruptive Decision-Making research recently polled 3,810 respondents across 14 locations around the world.

The findings show that Indonesian companies believe they are more advanced in their digital transformations than their international counterparts, with respondents ranking their nation third globally. More than a quarter (26 per cent) of Indonesian businesses described their company as digitally ‘highly mature’, compared with an average of 21 per cent around the world.

This market is demonstrating higher confidence in digital competency – 27 per cent of Indonesian business leaders report that their organisation makes digital transformation decisions ‘extremely well’, above the global average of 23 percent.

When it comes to digital transformation, there’s more to do…

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While heartening, this optimism also raises questions on the implications for Indonesian businesses’ digital transformation journey. As digital disruption accelerates at an unprecedented rate, the way in which Indonesian companies respond has become critical to their future. Digital transformation is no longer a maybe – it’s a necessity. The conversation has shifted from ‘why’ digitisation is important, to ‘how’ it can be successfully implemented.

Telstra’s research shows that Indonesian businesses’ confidence and optimism is helping to drive investment and company buy-in for these vital programs.We found that a third of companies (33 per cent) invested more than US$500,000 in digital products and services over the past year, while almost one in 10 (8 per cent) spent more than US$5 million. That investment is set to increase with four in ten (40%) of Indonesian organizations expecting their company’s total spend on digital transformation to increase by more than 10% in the next three years – above global levels (32%).

Building digital integration beyond technology

In spite of this, our research found that many businesses in Indonesia had yet to realize the financial impact of their investments. When it came to measuring the impact of digital transformation, showing financial returns of this investment was difficult. When ranking the effectiveness of digital transformation outcomes, increased profit margins and streamlined business costs ranked as two of the bottom three results.

To understand how to achieve these goals, the research asked respondents to rate their digital decision-making ability across four factors for success – people, processes, technology understanding and partnerships. Indonesian businesses ranked ‘technology understanding’ as the area where they have the most ability in digital transformation, and people last.

Yet the research showed the most successful global organizations take a different approach. The most digitally advanced companies around the world show a greater focus on people and processes than technology as an enabler.

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Digital transformation: technology-enabled, but people-led

What are the key takeaways for Indonesian companies from Telstra’s research?

First, the confidence we see among Indonesian respondents must be balanced with the realities of the country’s digital ecosystem. For example, Indonesia ranked11th out of 11 markets for nation-wide digital capabilities and environment, in Telstra’s Asian Digital Transformation Index study last year conducted byThe Economist Intelligence Unit (EIU). This suggests there may be a gap between perceptions and actual conditions on the ground. To ensure regional and domestic competitiveness, Indonesian firms should be careful to avoid over-stating progress and underestimating the complexity of transformation project.

Next, the importance of people in digital transformation cannot be over-stated. Telstra’s 2017 Connecting Commerce research conducted by the EIU showed Indonesia’s toughest digital challenge being a shortage of ‘people and skills’, while the Disruptive Decision-Making research shows that successful organisations know it’s their employees who are driving success. Given the low ranking of ‘people’ as a success factor in digital decision-making ability, it’s clear employees are not being given the attention they warrant when it comes digital transformation in Indonesia.

The most successful examples of digital transformation are enabled by technology, but led by people. To this end, it requires the right culture, the right people and the right processes to support them. It is an all-of-company approach that involves upskilling employees, adapting structures and ways of working, and creating teams that can maximise the new technologies being introduced.

Having worked in Indonesia for well over two decades, I’ve seen how the country has overcome numerous obstacles to become Southeast Asia’s leading economy. There’s tremendous potential in terms of its human capital, with more than a million fresh graduates from higher educational institutions entering the workforce every year.

With its large population providing the impetus for the development of high-skilled talent, a greater focus on people could well be what it takes to turn Indonesia into a digital powerhouse – and fertile breeding grounds for even more unicorns.