Digital transformation has been all the rage in Vietnam for the past months, but do you know what it entails exactly? Branded as the key to improve business processes, unlocking productivity gains and generally modernizing activities, this transformation evidently has its strong points. Especially in the Vietnamese context, going through deep transformations of its economy, it is important to consider the different ways to prepare for it strategically.
However, the term is used in many ways, often promising things that this strategy just cannot deliver. More worryingly, it is often branded as a miracle solution brought by tech which couldn’t be any more wrong!
Get to know more what digital transformation strategy truly involves and our reflections of its possibilities in the Vietnamese context.
Digital transformation aims to improve your business strategy with IT solutions
First and foremost, digital transformation is a business project, with business objectives and not an IT-centric project. It aims to leverage the digital assets of a company to enable business goals. It is therefore primordial to think first of the business goals before starting a digital transformation project!
Besides, it is not just merely modernization as it is often understood. Oftentimes, it is not even very technical, if at all! Undertaking digital transformation as an IT project is a sure-fire way to waste energy, time and money.
Digital transformation, more concretely, is the execution of a strategy to reach transformative business goals, by implementing, integrating or optimizing digital tools. The different projects composing this strategy can affect several aspects.
Optimizing existing tools for digital transformation
- Integration of the IT environment so that every piece of software work harmoniously with each other, rather than in isolated “islands”, avoiding costly repetitive tasks to transfer information from one software of another
- Accelerate your business decisions by getting statistics from all activities, rather than wait for man-made reports
Implementing new IT solutions for digital transformation
- Automating low-value tasks with the help of IT: invoice generation, order management, paperwork digitization…
- Offer an online experience to your target consumers, to reduce the costs of local implantations.
Using better integrated IT tools to change non-IT activities
- Detect redundant tasks and bottle necks through KPIs manageable through IT tools and optimize processes
- Allow for better efficiency by improving mobility and remote work by providing tools optimized for this sort of work
- Save time by limiting point of contacts through online paperwork processes
Better efficiency in existing processes
Better analytics across the board
An IT environment fit for business, not necessary to bend business to IT limitations
New markets and customers through a larger reach and more adapted offers
How to execute digital transformation in Vietnam?
In the context of the drastic development of digital transformation, the Vietnamese Government, and businesses is more and more proactively embracing and positively joining in digital transformation activities.
However, we are witnessing today the beginning of this move.
According to data from Enterprise, there is a number of 76% of Vietnamese enterprises have not started to convert digital, which is 1.5 times larger than the world. The biggest problem for these businesses is not knowing where to start the digital transformation and not finding an appropriate strategy.
The Government of Vietnam is promoting digital economic development through a series of regulations mechanisms. According to Minister Mai Tien Dung, the Government is very drastic to create the best conditions, foundations and environment for enterprises to develop in the digitalization era.
Strong efforts by the government push for digital transformation
The government’s decision to push for digital transformation in Vietnam is especially relevant to the country’s challenge and must be applauded. Indeed, after years of industrialization, helped by low wages, the country has lifted itself out of poverty, reaching middle-income status.
However, the economy needs to find new ways to develop to not rely only on competitive wages and this goes through productivity gains. These gains can be acquired by new high-value products and services, but also new ways to produce existing ones. All of these objectives are at the core of this transformation strategies.
One of the most outstanding results of the business community’s determination is the establishment of the Vietnam Digital Transformation Alliance on August 8, 2019. Founding members of this alliance include the largest IT in Vietnam named FPT, Viettel, CMC, VNG, and MobiFone. With a mission to inspire the entire society to go digital, they will proactively adopt digital transformation as well as create platforms, infrastructure and services to help businesses and the society to transform themselves digitally.
Digital transformation appears in Vietnam in all sectors, from trade, finance – banking to health, education, tourism and transportation. Below are the key areas for digital transformation:
Attracting more than 80% of FDI in Vietnam and representing 35% of the GDP, manufacturing is prime to be transformed. This sector suffers heavy costs if there is any latency. It can profit from significant gains with better integrated tools to streamline its processes: reduced stocks, faster production, optimize material orders, faster shipping.
A high need for statistics can also leverage productivity gains and optimization, by implementing well-designed KPIs along its processes.
The agricultural sector has known great gains of productivity in the past decades in Vietnam but has not leveraged these through innovation yet. With high costs if any process suffer latency, agricultural actors can gain a lot from digital transformation: stock reduction, better yields from optimized statistics, acquisition and combination of data (atmospheric, GPS, etc.) to aid for decision…
Smart analytics and business intelligence can also help to produce higher-revenue crops.
Banking and insurance, historically process-heavy with a lot of local agencies, is prime for change through digital transformation. Several gains can be reached:
- New products through the growing mobile market
- New customer experience via app
- Better business intelligence through big data analysis
- Paperless processes and automation to gain productivity.
For instance, Timo by VPBank is a great example of successful digital transformation. VP Bank accessed a new audience, providing their traditional services thanks to an IT solution (digital banking, application).
A quickly growing sector, smart cities are taking their place in large and medium-sized cities in Vietnam. Smart cities are a digital transformation project by nature, aimed to better the life and efficiency of a city services, mostly helped by digital solutions.
It can take the shape of integrated overview of a city, with well-designed statistics. For an already-launched project for example, Smart Dubai , a Dubai government officed, has launched over 130 projects with private and public actors to improve the emirati city such blockchain-powered statistics, paperless processes, a direct interface between suppliers and government offices, digitized ID,
Ho Chi Minh City authorities have announced in 2019 to be working to set up a regulatory framework to help the inclusion of AI solutions for their own smart city project.
The Ministry of Science and Technology has announced in 2019 its goal to include blockchain in its smart cities projects, promoting promising blockchain-based startups, via its “Support Support a National Innovative Start-up Ecosystem by 2025” program.
How to proceed for the digital transformation of your company?
By being such a high-level business project, it is crucial to set up a good plan before executing a digital transformation. Indeed, over 80% of digital transformations fail due to a lack of planning and understanding by the managing team.
Here are some of the points to keep in mind while preparing for a digital transformation:
Strong lead by the management team
Again, digital transformation is a business project first and foremost. It needs to be led by the CEO, CFO, CMO teams, not only the CTO! The CTO is only responsible for the implementation of its technical components, enabling the decisions taken by the business teams. Do not be afraid of technicality as they will be a core part of your future business!
Being innovative and not afraid of technology with limits
A good digital transformation shall not have for goal to digitize everything! Such a decision goes against good business sense as it would incur extra costs, delays and needless complexity. Paper, after all, is also an IT tool and can be a very powerful tool used appropriately. Over-digitization is a mistake made by companies around the world that led to unmanageable operational issues. For instance, entirely automatized customer services led to massive customer disengagement from older generations in western markets.
Well-understood planning and objectives for digital transformation
Due to digital transformation being a new practice and affecting the entire company, many definitions and objectives of it are not well-understood by the stakeholders of the project themselves. This results in inappropriate projects, abandoned objectives and misled teams. It also takes time to properly prepare the business aspect of the digital transformation, before working on the IT projects taken from there.
Most of the stakeholders do not have an IT background and might be scared off by the technical aspects. This fear is not necessarily founded as they are to carry the business aspects, the technical parts being carried by the IT teams. It is, however, crucial to ensure they adopt the terms, objectives and planning and do not reject the whole project from the get-go.
Our strategy recommendation
Here is a typical strategy layout used by Viettonkin to plan strategically for a digital transformation:
- 1Define a clear business strategy: existing and objectives
- 2Audit your current IT environment
- 3Set a target IT environment
- 4Conceive scenario based on different priorities to reach the target (gap analysis)
- 5Select one and detail concrete projects to reach it
- 6Choose timeframe: 2 to 4 years to reach the target