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Asia-Pacific GDP could add US$387b by 2021 if manufacturing sector digitally transforms: Study
GROSS domestic product (GDP) in the Asia Pacific could potentially add another US$387 billion by 2021 and grow by an extra 1.0 per cent annually if the region's manufacturing sector embraces digital transformation - with China contributing almost 50 per cent.
This is the case according to a study by Microsoft in partnership with research firm IDC Asia/Pacific, which surveyed 615 business leaders from the manufacturing sector across 15 markets in the region.
The finding was based on estimates these leaders provided of the impact of digital transformation on their growth in the present and in three years, and extrapolated to the wider economy. It does not take into consideration sudden market changes and is based on nominal GDP growth projection from the World Bank, said IDC Asia/ Pacific.
For the manufacturing sector, digital transformation is about going beyond simply automating, optimising and improving productivity but also "reimagining how an organization can bring together people, data, and processes to create value for their customers and maintain a competitive advantage in a digital-first world," said the research firm.
Other findings released on April 23 found that such digital transformation could lead to better bottom-line performance, thanks to gains in productivity, increase in profit margins and cost-reduction.
Long-term benefits include revenue from new products and services and improved customer advocacy.
"It is no surprise that businesses are still focused on tracking process effectiveness as the manufacturing sector is one that relies heavily on time-to-market strategies for first mover advantage. However, as manufacturing organizations realize the value of data in the long term, they are likely to unlock the potential of digital transformation in helping them create new business models," said Scott Hunter, regional business lead for manufacturing at Microsoft Asia.
Forty-four per cent of respondents said tracking how data is being used as a capital asset counts as one of their key performance indicators (KPIs) used to measure digital transformation currently.
But the survey found that leaders in the manufacturing sector are less likely to have an allocated budget set aside for digital transformation as part of their existing profit and loss statement.
Other barriers identified include the lack of skills and resources - with respondents saying they expect 85 per cent of jobs within the sector to be transformed in the next three years - cybersecurity threats, and a "siloed and resistant culture."
The study recommended a three-pronged strategy for companies seeking digital change: investing in big data analytics and IoT solutions to manage structured and unstructured data, oprimising processes using big data analytics, using machine learning and artificial intelligence to create new value chains and services.