In this episode of the Future of Asia podcast, we discuss the state-of-play of technological advances in Asia, significant leapfrogging opportunities for Asia, and the gaps in core capabilities that corporates need to address to achieve success. An edited transcript of the podcast follows. For more conversations on Future of Asia, subscribe to our podcast here.
Oliver Tonby: You are listening to the Future of Asia podcast by McKinsey & Company. I am Oliver Tonby, your host in today’s episode. In this series, we feature leaders from across the region to discuss the forces, the opportunities, and the challenges that are shaping the future of Asia.
Welcome everyone, today’s topic is how technological leapfrogging can turbocharge Asia’s economies. I am joined by several esteemed colleagues—Anand Swaminathan, senior partner and the leader of McKinsey’s digital and analytics sector across Asia, Noshir Kaka, senior partner out of India who leads the global analytics practice for the firm, as well as our Technology, Media, and Telecommunications (TMT) Practice globally. We also have Violet Chung, a partner out of Hong Kong and a leader in our digital and innovation and financial services across the region. Finally, we have Brant Carson, who is a partner out of Sydney and leads McKinsey technology across Asia.
Before we dig into the subject at hand, I would love to hear some personal reflections from you. Just how have the last eight, nine months been? And tell us an interesting episode or a positive experience you’ve had over that time period. Brant, do you want to kick us off?
Brant Carson: Sure, I think the biggest learning has been that we’re able to get so much done remotely that I don’t think we thought—and certainly I didn’t think—was possible before. From a personal perspective, it’s been a big unlock because being at home more and in Sydney has enabled us to get a dog, so that’s been a big new pastime and something that, of course, the kids were supposed to do, but has clearly become my responsibility.
Oliver Tonby: Exactly, thank you. Noshir?
Noshir Kaka: A lot of my biggest learnings in the last nine months are dreams are sometimes best left as dreams. You know, as consultants, we often—or at least I have for 25 years—dreamt, "Gosh, I would love to have spent more time on the ground at home with the family." And I think today if you ask the family, it’s kind of 50/50. They’d probably say, “We’d like Noshir back on a plane.”
Oliver Tonby: Wonderful. Violet?
Violet Chung: Thanks, Oliver. I think for me it’s being able to spend more time at home. I have two young daughters and bedtime stories are now their favorite with mommy. It used to be their grandparents’ roles, but now they need to have mommy’s bedtime story before they go to bed. It’s been quite sweet.
Oliver Tonby: Excellent. And last but not least, Anand?
Anand Swaminathan: I think over the last several months, Oliver, the connectivity around the world while we’ve been locked down—I’ve personally taken even more effort to say, ‘How can I connect with family and friends everywhere using technology and no longer thinking that a physical presence is what’s needed?’ So, whether it’s talking to my grandmother in India much more often now on video, because we all know that’s just the way we interact instead of being able to see her as often as I used to be able to, or it’s talking to my parents as they’re moving around and traveling, it’s been a great way to be connected, and frankly, even more inclusive with family around the world.
Oliver Tonby: Exactly, thank you all for doing that. To me, the takeaway is that whilst it has been tough, there are some glimmers of hope and there are some positive learnings that we’ve had during this period as well.
Let’s dig into the topic at hand, which is technological leapfrogging and how that can turbocharge Asia’s economies. I’m going to ask you, Noshir, to give us a little bit of a background on this because you have led the research that we’ve done on this over the last six to 12 months. Can you give us that background, Noshir?
Noshir Kaka: Sure. So Oliver, the research you referred to is, “How Asia can boost growth through technological leapfrogging”, the technology module of Future of Asia. And what we found is there are actually three or four areas we think are absolutely ripe for leapfrogging from an Asian perspective.
The first is everything to do around using digital artificial intelligence (AI) around consumers. We have the youngest and possibly the largest consumer body; they are incredibly digital savvy in our region, and the application of these technologies to improve convenience, experience, pricing—everything has been leapfrogging around the world. Anand, Brant, and I all work in this region, and I think we would absolutely say that what we see working in Asia is actually at the cutting edge when it comes to consumer personalization, demand, and so on.
The second area to look, at the other end of the spectrum, is manufacturing. In Asia, we think we already have some of the largest manufacturing bases in the world, and digitizing those manufacturing bases, leapfrogging, the scale of productivity, and so on are incredible. One thing that I would reference is how surprised I was that we did an entire manufacturing operations transformation right through till August 2020, without anyone from the team actually visiting the plant. That is the power of using digital in transforming operations remotely.
The third is services—we know 30 percent of the world’s technology services come out of Asia. And as you look at the demand going forward, one of the things we got completely wrong at the start of the pandemic was we all predicted technology spending would go down, or at least would pause. Surprise, surprise, it’s rebounded—and rebounded much faster than we’ve ever seen. And some of these are in the heart of actually changing the way services are deployed across the world.
The last, and possibly the most important one for our planet, is climate change. I think Asia has a huge opportunity in leading the world on sustainability and energy use. I think these will be the four I would call out.
Oliver Tonby: Excellent. Thank you, Noshir, and we’re going to come back to each of those four areas a little bit later in the conversation. But I want to take us back to pre-COVID-19 for a second, and let me ask you, Brant—can you give us a little bit more background on the state of play of technological advances in Asia prior to COVID-19?
Brant Carson: That’s quite interesting because when we started this work, I think we all had an inkling that Asia was on an upward trajectory. But as we looked at the facts, we saw that Asia had been deepening its technology capabilities over the past decade, such that we’ve gone from having zero companies in the top 10 globally back in 2010, to having four of the top 10 companies by revenue now. We also have had immense growth; 87 percent of the technology growth and patents are all in Asia. And now we see the kind of global company revenue related to technology has also increased by another 10 percentage points. So, what we were seeing coming into COVID-19 was actually a lot of acceleration and a lot of investment in technology, especially in Asia.
Oliver Tonby: And if we look at Asia, it is not one country. We can argue it’s even more than one region itself. Are there any big differences you would highlight, Brant?
Brant Carson: Yes—you could probably think of Asia as four different regions, one of them being Greater China. There is no question they produce a disproportionate number of the patents of the top four technology companies. In the top 10, three out of four are from China—so, there’s certainly a big difference there. I think the other one is India and the other parts of emerging Asia, they are also, as Noshir was talking about earlier with the explosion in technology services, disproportionately capturing some of that value and are on a real upward trajectory as well.
Oliver Tonby: Thank you. Anand, you also just moved to the region from Silicon Valley, California. How does the rest of the world view Asia and technology?
Anand Swaminathan: I think, Oliver, when we think about technology, there are a few factors we always look at. First, we talk about adoption and use of technology. I was quite fascinated by the adoption and usage in Asia and the fact there are hundreds of millions of users for any and all technology capabilities and services. For example, ecommerce—the fact that internet usage is driving things through ecommerce, and there are hundreds of millions of users at scale, using it every single day across dimensions. Even if we think about ecommerce and spending, the fact that by pre-COVID-19, it was already accounting for over 3 percent of Asia’s GDP. This meant the adoption was already there with technology in the region, and it was rapidly rising.
In fact, if we compare it to the United States, the total ecommerce volume in Asia is projected to reach 1.4 trillion in 2020, which is actually three times the volume in the United States. So, I think this adoption usage has been very impressive to see in the region, and frankly, that’s why leapfrogging is really possible.
Oliver Tonby: Thank you. Violet, you’re based in Hong Kong. Could you give us a little bit of a picture of what is happening on the ground in Hong Kong? And again, let’s take pre-COVID-19, we’ll get to what’s been happening recently soon.
Violet Chung: I would say pre-COVID-19, Greater China has had one of the highest adoptions in terms of digital means. If you look at Mainland China, for example, 74 percent of the population is considered digital savvy. Hong Kong is close to 90 percent, and Taiwan is close to 90 percent as well. An average individual has 1.4 smartphones—this gives you a bit of a picture of ‘mobile-led, mobile first’.
The second thing I would say is, if you look at Greater China, it’s seen as the emergence of Silicon Valley 2.0; people are looking to Greater China as inspiration for innovation. I think Brant mentioned earlier that three out of the 10 highest valued companies are actually based in China. So, you see a lot of emergence of excitement and you also see a lot of labor, especially on technology capabilities, on this front. So, it’s very exciting on the ground where technology is very close to our everyday life.
Oliver Tonby: Thank you. Now, we’ve heard about the large companies, let’s spend a minute at the other end of the spectrum: the startups and their growth. Who would like to comment on that ecosystem?
Noshir Kaka: Oliver, we’ve seen an incredible startup ecosystem and many of the geographies emerge, right? And I think these companies are appending much of our established norms and mindsets. I’ll give you one example. If you look at the largest online shampoo brand in a country like India, it’s probably not a brand that any of us have heard of. Now, if you take a category—and this is why I go back to one of our first leapfrogging consumer opportunities—growing up, we recognize certain familiar brands of shampoo. For an online, unknown brand to come up and be the number one brand in a country, it’s just incredible, right?
So, you see a raft of these companies coming up and launching almost entirely online. Of course, many of the successful ones have an online and offline business as well, but you see them innovating much faster, you see them coming up with new offerings, you see them creating new products and services that we never did. A few years ago, at least in India, we had created an ambition of 10,000 startups, which at that time many of us would have thought was virtually impossible. Today, I think we’ve probably crossed that number.
Oliver Tonby: Thank you.
Anand Swaminathan: Maybe I could just add a comment on this, Oliver, because what I find fascinating—especially coming from Silicon Valley, where early and growth stage companies are a part of everyday life—is I’ve absorbed what’s happening here in Asia. I find it fascinating that China, as an example, is home to 26 percent of all the world’s unicorns. That is a significant portion concentrated in one geography. And that’s actually very true as you start to look at the greater Asia region; there is a culture of innovation and a culture of acceleration in terms of what technology can really do. And we’re seeing this manifest with the early and growth stage companies and the startup ecosystem. It’s creating some of the most valued companies on the planet, housed right here in Asia, and creating that value for both consumers and businesses in the region.
Oliver Tonby: Thank you. Let’s shift now, as I want to go back to some of the things that Noshir teed up earlier on some of these opportunities. I think the overarching question is what are some of those most important, significant technological opportunities that you see in Asia? So, why don’t we start with the first one, which was around reimagining the consumer experience and the opportunities that come from that. Who wants to elaborate on what that means in practice?
Brant Carson: I’m happy to. We saw three big things in reimagining the customer experience, which were of course clearly accelerated during COVID-19. First, in terms of digital buying channels, we saw the digitization of things like health and a noteworthy number of startups or companies that have shifted to be able to offer more accessible remote services.
The second thing is cross sector platforms that continue to expand consumer offerings. And this is what Anand was just talking about—you have different companies like Alibaba, who have continued to expand their full set of offerings, and certainly through COVID-19, to double down on areas such as DingTalk and remote collaboration.
Thirdly, you’ve got digitization and value chains, which is something that’s been happening for quite a lot in time—certainly in financial services—for a number of years. But now you see, especially in Asia, we’ve got a lot of ecommerce players that are really digitizing end-to-end chains even further.
Oliver Tonby: Let me stay focused on this for a second here—Violet, I believe you spend quite a bit of time in financial services. What are the underlying drivers for why this is happening? And what can we expect going forward in this sub-sector?
Violet Chung: Thank you, Oliver. So, I would say there’s a few things we’re observing. I think especially in Greater China, we see that essentially, in the past, financial institutions (with banks as a lead) haven’t been working too hard on pleasing their customers. So, what you see is attackers like Alibaba and Tencent who are very, very customer centric and essentially have customers as the core of how they think about all their value propositions. They’ve essentially disrupted the value chain in a big way, and they have disrupted the service model in a big way.
Now, I can say any Chinese consumer who is digitally savvy—which as I mentioned is close to 74 percent—cannot leave the Alibaba system or Tencent ecosystem on a daily basis. Everywhere we go, the entertainment we use, the education we use, even the taxi rides that we use are all surrounded by their ecosystem. They truly have helped us reimagine the experience from a consumer standpoint, and they also made the pain points of how we traditionally interact with banks much more seamless. So, it’s really at your service: mass customization at your need, altering the product to every single sub segment, and so on. They’ve really taken this reimagining to the next level.
Now, what does that mean for traditional financial institutions? They have to change. In the past, what we’ve seen is, especially with COVID-19, there’s been a fundamental shift on how traditional financial institutions have been investing in their capabilities. There’s a fundamental shift on how they’re doubling down on online capability and customer management. One of the banks I’ve worked with mentioned that in the past, for their credit card, they spent 80 percent of their energy on offline versions and offline transactions. Now, it’s the other way around: 80 percent online, 20 percent offline. That tells you a little bit of how this has really changed the industry in a very fundamental way.
Oliver Tonby: And given what has happened in the last week I also have to ask you, the AliPay IPO that was halted, what does this mean as a business opportunity? Is it going to slow down? Or how does it change?
Violet Chung: In the past, the Chinese regulators have been quite open on how FinTechs develop their capability. With the situation the past two weeks, I think going forward, the regulators are going to start treating these FinTech firms like traditional firms. It’s a much more controlled risk environment and they have to go back to the fundamentals of doing financial services.
What this means for the traditional financial services like banks is they essentially have another two to three years’ time to be better and get better at managing customers and the core capabilities around that. So, I think what the regulators are saying is now, essentially, we still want the underbanked to be banked, but in a much more controlled way. The banks need to get better at managing customers and servicing them. So, I think this is actually better in terms of the overall health of the financial industry. And I think in the end, regulators essentially still want to see a healthier, high growth, but well-controlled and well-serviced customer.
Oliver Tonby: Thank you for that, Violet. So, one topic here is reimagining the consumer journey, so to speak. Unless anybody has any other thoughts on that topic, I want to shift us to the next one Noshir mentioned, which is turning manufacturing strengths into technology advances. You want to take that one, Anand?
Anand Swaminathan: Yes, I think this is quite an intriguing area. Manufacturing in Asia has a type of scale that’s quite impressive, and there’s a lot of learnings that come with that. Now, when we take that scale and the learnings from manufacturing here in the region, and couple that with the role of technology—that is, to drive things such as automation, to drive things such as changing the way we gather data and insights in how we do our manufacturing and our capabilities—it actually becomes an interesting topic. Because fundamentally, technology advances in the manufacturing or heavy industry space means we can serve more customers, produce more products and services, and actually beat the time to market.
And that’s where the crux of the technology advances will be in Asia, and that’s already happening today. The fact that we’ve got digitization in plants allows for more products manufactured at a faster pace, which are able to reach more customers in record time. I think this is what we will see as the clock speed of innovation of technology advances in manufacturing, and in the digitization of end-to-end processes that happen in the region. It is going to allow for an overall acceleration and advances in how we serve our customers as well.
Noshir Kaka: Oliver, I want to pick up on what one of the points Anand made, which is for a long time, when we looked at technology in manufacturing, we over-indexed on automation as one lever. What I see increasingly happening is we are now actually pulling on another lever, which is in my opinion, even more important or more impactful: insight and decision making.
So, to give you an example, as we start going back to this plant I talked about, if you look at a plant, even a process bond or a discrete plant, you make thousands of decisions on the shop floor every day. Each of those decisions actually has an impact on yield energy, throughput, quality, etc. This one plant produces one of the largest numbers of glass vials in the world, both for vaccines and for perfumes, and so on.
We use anomaly detection at two of our companies, QuantumBlack and Element AI. Because, for example, when a human eye looks at a glass vial, you can’t really detect a bubble or a crack or a splinter. But interestingly, to a reasonably high-powered camera in the right lighting, you can actually see that in the thousands. Suddenly, you start correlating what was a defect that you saw at the end of the line to a small change you made in, for example, furnace temperature. And suddenly, you dramatically improve yield, energy, throughput, quality, cost, etc. This application of decision science to manufacturing is the piece I’m most excited about because that order of magnitude improves output, throughput, quality, and helps retain jobs as well.
Oliver Tonby: Thank you, Noshir. I’m going to go to Brant because I know you’ve spent a lot of time thinking about the core technology that is behind this, as well as the change management challenge that lies in moving from the old to the new. I would love for you to comment a little bit on that, please.
Brant Carson: Happy to, Oliver. I think you put your finger on something that’s just absolutely crucially difficult. What Noshir was just describing is exactly how that kind of advanced analytics and data can be increasingly leveraged. The challenges actually are that in many cases, some of our larger companies really struggle to get the data together needed to make those decisions. And a big challenge is that it’s stored across many different systems; what they’re trying to do is figure out how they can consolidate them in a logical way.
And so, the biggest thing that we’re encouraging companies to be very thoughtful about is not to embark on these large, seemingly never-ending journeys to consolidate and pool all the data together and consolidate systems into one. But to do it, thinking very specifically about the analytical insights and decisions you’re trying to drive, which is what I love about Noshir’s example right there. The key is, from a change management point of view and for your organization, is you want to be able to layer on here the most critical decisions, and then create your roadmap from a core technology perspective to be very much in alignment with that. So, you’re always delivering real value to the organization.
Oliver Tonby: Yes, do you have anything to add to that, Anand?
Anand Swaminathan: The complexity of core technology transformations is what Brant is highlighting. But the outcome and the impact that we can actually achieve through core technology transformations is really where the value ends up being. There are a significant number of applications and infrastructure associated with manufacturing that we have to reimagine—whether it’s reimagining for efficiency and effectiveness of those platforms or reimagining for new uses and new sources of value that weren’t done before. And frankly, whether we have to reimagine the way in which technology will become far more modular in the future state.
This is the reimagination with core technology that we’re having to do now. And I think in sectors like manufacturing, it’s placing a significant value in fundamentally changing the efficiency and effectiveness of those organizations, if they undergo core technology transformations.
Oliver Tonby: Thank you. So, I’m going to move us on to the third opportunity—the first one being reimagining the consumer experience, the second one was turning manufacturing strength into technology advances. I think the third one that Noshir mentioned right at the start was expanding business technology services. I know this is an area you spend quite a lot of time thinking about, Noshir. Why don’t you elaborate on that, please?
Noshir Kaka: Of course, Anand is the one who crafted one of the most successful plans so he should say it as well. But when we started in April with this pandemic, we actually, as I said earlier, thought that technology services spending was going to collapse. Interestingly, if you look at the quarter two (Q2) results of most companies, it’s actually rebounded and most of the companies are showing record order books.
And we’re seeing opportunities in four primary areas: number one, we’re seeing opportunities across any vertical stacks. For example, Brant talked earlier about telehealth or remote patient management in healthcare, or in retail, and you think ‘store of the future’. With contactless coming in, we’re seeing dark stores emerging. What is the concept of a dark store? In insurance, how do you do B2B selling without actually meeting your customer? How do you reimagine B2B selling? Or in telcos (telecommunications companies), where we are seeing all our operators coming up and saying, “Okay, how do I build new businesses with McKinsey’s Leap offering? How do we build completely new things enabled by Internet of Things (IoT) connectivity, and so on?” So, we’re seeing a whole range of vertical offerings.
On the basis of it, as Brant said, we’re seeing these massive horizontal offerings, whether it was technology-enabled supply chain, cloud migration—this entire cybersecurity has become a huge area to think about. That’s the second one.
Third, we’re seeing product engineering. So, as we described earlier, a number of clients are now going in combining services, products, new attributes, new features, bundling this together—as Violet described with the ecosystems in China—and creating an entirely new product or service, a battlefield that we’ve seen.
And finally, I should point out governments have been central to using technology and service centers in combatting COVID-19. If you look at some of the work that’s been done in Asia so far to combat or stop the spread of COVID-19, some of these governments have been so progressive that they can actually predict the number of patients into a hospital for COVID-19 on a given day, plus or minus 10 percent. And that’s been hugely helpful to managing the supply chain of patients, doctors, medicines, and so on.
If you look across those four stacks vertically on virtually every industry, horizontally across three—at least in the very big areas of cybersecurity, cloud migration, and supply chain resilience—you look at specifically product engineering and new product creation. And you think about government enablement, across a whole range of services, be it social or battling COVID-19.
Brant Carson: Maybe just picking up, Noshir, where you were leaving off—I think what is really exciting and was a big learning as we ran the numbers and really thought this through is what an opportunity there is for Asia on this front. Because if you think about it, we’re going to see 70 to 80 percent growth in services and digital services. If you think about what Noshir just talked about and some of the different horizontals, in particular, Asia’s very well set up to actually have the talent basis. I mean, the fact that over three quarters of all science, technology, engineering, and mathematics (STEM) graduates come from Asia today, and the fact that we do have such a large number of these big technology companies and governments really investing in people and universities. I think that is something that is going to make Asia a very attractive location.
The other thing that I would just add on—the other topic that is interesting in the set of horizontals—is around legacy modernization. In fact, a fifth of the $550 billion we expect to spend in services is in legacy modernization around core technology. I actually think this is an imperative across all large and existing companies. It requires a pretty broad set of skills to be able to do it. So, I do think that as much as there is continued demand for these skills, it will absolutely continue. And this will continue to be an escalating priority for companies, particularly as Anand was talking about, reimagining what their core should look like.
Oliver Tonby: Got it, thank you. I’m going to shift us to the fourth opportunity that you talked about, which was being at the forefront of the energy transition. Who wants to pick up on that one?
Anand Swaminathan: I’m happy to make a couple comments on that, Oliver. I think in the energy space, here’s fundamentally what we’re seeing: we understand that both consumption of energy as well as production of energy is going to be rewritten. The way in which we are operating here in terms of Asia’s demand, but also globally, is just increasing rapidly. So, what we need to know is, what role can technology fundamentally play in driving, once again, the infrastructure that is needed to be optimized to be efficient, and to be able to get access to energy and consumption needs in a more effective manner? But it also means, what do we have to do to reinvent new sources of energy? What is technology doing to create the right renewable energy sources? How should we be thinking through this? And what should we be thinking about, again, production of renewable energy sources here in Asia, and also scaling that rapidly given the demand is not going to be shrinking anytime soon?
Now, you know Asian countries lead in market share in a few types of renewable energy, which is very impressive. When you look at solar, wind, hydrogen, or biofuel fuels, we actually have in Asia the highest share of production of these types of energy sources. Immediately, it triggers the thought, “Great, if we’ve got those sources, how do we drive scale using technology and analytics, but also how do we drive distribution of that to the different regions, to the different populations, especially where we’re seeing the outcome?”
But we need to be doing all of this with climate risk in mind—what is happening from a planet perspective? And how do we want to lead the charge? Noshir had a great point early on that in Asia, we have the opportunity to reframe the discussion around climate risk, using technology as the enabler to drive some of that change. How do we think about that, and how do we scale that right here in the region?
Oliver Tonby: And also, because Asia just has huge needs for future investments and all kinds of infrastructure. So, how do you actually think about making that more climate resilient and contributing in a positive way to reducing carbon dioxide?
I’m going to shift us into a different question now—what are some of the attributes that companies need to achieve success? Now, I’m not sure we can call it post-COVID-19 but at least in the next normal, what are some of those attributes? Who wants to kick off that conversation?
Anand Swaminathan: I’m happy to go first, Oliver. I think one of the core attributes in the next normal has got to be the speed at which organizations and governments fundamentally drive technology adoption and technology transformations. We need people to be skilled in that, and we need to be applying this—whether it’s to change the way we think about business models, or whether it’s the way we think about giving access to technology to the population in the region—and we have to move at speed. It’s no longer about being very contemplative about how we should think about technology and where we might want to deploy it. It’s everywhere, and it needs to be there now. So, I think speed is going to be the name of the game.
Brant Carson: Yes, and I think on the speed front—just to take that one step further, Anand—COVID-19 forced organizations at all levels to make decisions far faster. Part of that has forced organizations to behave in much more agile ways, whether it was initially intended or not, and I think organizations are starting to see the benefit of that.
I think the real question is going to be, are successful companies going to harness this energy, harness the rapidity of decision making, and the quality of decisions that can be made at all levels, to allow for more autonomy and more decentralization? The companies that take advantage of that and empower their employees are going to be some of the ones that will come out and through the pandemic as changed companies, and some of the more successful ones.
Oliver Tonby: Got it. So, topic number one, speed. What else do the companies need to do or need to have?
Noshir Kaka: Oliver, I’d go back to a piece of research we did almost two years ago, as I think the numbers haven’t changed that much. The numbers are 90, 17, and 2 percent. The challenge was: as you think about how we get scale, speed, and adoption in companies, or when you talk to the CXOs, boards, or management teams of these companies, 90 percent of them will say that technology and digital is really going to reshape my future, the industry, the company, etc. That’s never the problem. The problem comes in the 17 and 2 percent.
So, when we ask that same set of people, CEOs, CXOs, “Have you moved management and resources in line with that ambition or that aspiration?" Only 17 percent said, “Yes, we have.” In other words, there’s a huge gap between what you know is important and going to happen, versus the actual act of allocating capital and management to that action.
The 2 percent, obviously, are the ones that actually succeed in scaling this. It’s between 2 percent and 5 percent today. So, if you want to start changing this, and Anand has been the author of this wonderful piece of research we’ve put out, which is around the five attributes you need.
So, number one, you have to know what you’re looking for. In other words, you need the strategy of knowing where value creation is. Going back to the example of manufacturing and going for insights as opposed to automation in Asia, which is making the biggest difference. But you need four additional sets of capabilities. You absolutely need the core technology platform and you absolutely need data; you need talent—and talent is actually typically the breaking point for most organizations. And you need a method; you need a process, whether you call it agile or something else, by which you actually execute this across the organization. And lastly, you need a way to institutionalize this across the company in an execution manner that is relentless. These are the five attributes. As the author of this, maybe Anand has something to add?
Anand Swaminathan: I think these attributes are going to be essential to ensure that we understand what the future really holds. I think, Noshir, you’ve said it great. And my view is, we need to embrace it now. We don’t have the time to think through this for too much longer. It needs to be embraced now and frankly, be activated now. So, that’s what I’d close with on that.
Oliver Tonby: Violet, your thoughts on this question?
Violet Chung: I completely agree with what Noshir and Anand have said. The other thing I would add is corporations need to acquire a new set of skills surrounding collaboration. So, collaboration or partnership is not just having a bunch of bees going out there and trying to sell their stuff through channels, because that is—at least from where I come from and other financial institutions—how they thought about collaboration and partnership.
A new way of partnership actually requires one to think about, “What is my positioning in the value chain and what are the values to be captured? Hence, who do I need to work with and what do I offer so that it’s a win-win-win for myself, for my partners, and for the consumer?” It requires a lot more deeper thinking and a very different type of skill set. That’s not just signing a Memorandum of Understanding (MOU); it actually requires one to understand and get deep into the partners’ operating model and be able to act quite agilely so that you find a winning solution for all parties. That—I think at least for many financial traditional institutions—requires a very new way of working or a new way of thinking about their organization.
Oliver Tonby: And just building on what I heard you all speaking about earlier, Violet, it also sounds like it requires a much larger ecosystem of players that you collaborate with.
Violet Chung: That’s completely correct. I think you hit on a very important point, Oliver. Traditionally, how financial institutions have thought about ecosystems is very much, “I partner with folks who can give me customers.” So, they think of partners as channels.
A new way of working is to break that down a lot deeper, and you need different types of partners. There are data partners, there’s marketing partners, there’s partners that you could do product innovations with, there’s partners that you can trial with adjacent verticals that could add value to your customers, there’s partners on the middle platform, there’s partners on the core technology platform, and so on and so forth. You have to think of partnership in a much more granular way to really think about, again, the win-win-win proposition.
Oliver Tonby: Excellent, thank you. I want to round us out because this has been a fascinating conversation. My takeaway is there are big opportunities for technological leapfrogging especially in Asia—if I’m allowed to say it that bluntly—because we have an underlying unmet need and demand in many different verticals from consumers.
That’s what is driving this amongst other things, but I want to ask each of you the same question: what one piece of advice do you have for the senior executives that are listening to this podcast? One sentence of advice that you have for each of the listeners.
Violet Chung: Sure, the one piece of advice I would give is: act now, fight for talents.
Oliver Tonby: Clear. Brant?
Brant Carson: I would say, now is the time to be bold and to look for the leapfrogging opportunities, and to be decisive and use this time to invest in your technology.
Oliver Tonby: Very good. Anand?
Anand Swaminathan: I do believe it’s extremely important to invest in talent, in addition to acquiring talent. It’s also important to identify where technology can fundamentally play a role in every dimension of what every organization has as their core business.
Oliver Tonby: Thank you. Noshir?
Noshir Kaka: That talent point starts with you. When was the last time you took your course?
Oliver Tonby: Wonderful. And we’re going to let those be the final words from our four panelists here. Thank you so much to all four of you. I hope you had an interesting time listening to this podcast. Take care and have a great day. Thank you, everyone.
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