Digital Transformation to Contribute US$7 Billion to New Zealand GDP by 2021

• IDC study commissioned by Microsoft predicts that approximately 55% of New Zealand’s GDP will be derived from digital products or services by 2021

• By 2021, digital transformation is expected to add 0.7% CAGR GDP growth annually

• Digital transformation has increased profit margin, revenue from new and existing products & services, productivity, as well as improved customer advocacy. These benefits will also improve by at least 40% in three years.

• Leaders in digital transformation reap double the benefits compared to Followers.

• Digital transformation in New Zealand will benefit citizens with increased access to better education, training and creation of higher value jobs

By 2021, digital transformation will add an estimated US$7 billion to New Zealand’s GDP, and increase the growth rate by 0.7% annually, according to a new study released today by Microsoft in partnership with IDC Asia/Pacific.

The research, “Unlocking the Economic Impact of Digital Transformation in Asia Pacific [1]”, predicts a dramatic acceleration in the pace of digital transformation across Asia Pacific’s economies.

The study found that in 2017 about 6% of New Zealand’s GDP was derived from digital products and services created directly using digital technologies, such as mobility, cloud, Internet of Things (IoT), and artificial intelligence (AI).
“New Zealand is clearly on the digital transformation fast track. Within the next four years, we expect to see approximately 55% of the market’s GDP to be derived from digital products and services,” said Russell Craig, National Technology Officer, Microsoft New Zealand.

“At the same time, organisations are increasingly deploying emerging technologies such as artificial intelligence (AI) as part of their digital transformation initiatives, and that will accelerate growth even further.”

The survey conducted with 1,560 business decision makers in mid and large-sized organisations across 15 economies, including 100 New Zealand respondents, highlights the rapid impact and widespread disruption that digital transformation is having on traditional business models.

The study identified five key benefits to their bottom line from digital transformation, including:
1. Higher profit margins
2. Increased revenue from existing products and services
3. Greater productivity
4. Improved customer advocacy
5. Increased revenue from new products and services.
Organisations are seeing significant and tangible improvements from their digital transformation efforts across these benefits in the range of 18% to 21% today. By 2020 business leaders expect to see more than 40% improvements in those key areas, with the biggest jump expected in customer advocacy.

Digital Leaders in Asia Pacific to Gain Major Share of Economic Opportunities
The study indicates that while 95% of organisations in New Zealand are currently on their digital transformation journey, only 7% in the entire Asia Pacific region can be classified as Leaders.

Leaders are defined as organisations that have full or progressing digital transformation strategies, with at least a third of their revenue derived from digital products and services. In addition, these companies are seeing between 20% to 30% improvements in benefits across various business areas from their initiatives.

The study indicates that Leaders experience double the benefits of Followers, and these improvements will be more pronounced by 2020. Almost half of Leaders (48%) have a full digital transformation strategy in place.

“The pace of digital transformation is accelerating, and IDC expects that by 2021, at least 55% of New Zealand’s GDP will be derived from digital products and services, with growth in every industry driven by digitally enhanced offerings, operations and relationships. The study shows Leaders see double the benefits of Followers, with improvements in productivity, cost reductions, and customer advocacy. To remain competitive, organisations must establish new metrics, realign organisation structures, and re-architect their technology platform," said Shane Minogue, Analyst, IDC Asia/Pacific.

The Study identified key differences between Leaders and Followers in Asia Pacific. Leaders are more concerned with competitors and the emergence of disruptive technologies, business agility and a culture of innovation, and measuring digital transformation success. Leaders are also more aware of challenges in their digital transformation journeys and are looking to invest in emerging technologies such as AI and IoT.

“There is a pressing need for organisations to adopt a leader’s mindset to fully capitalise on the potential of digital transformation in the next few years. To do so, organisations need to grow their value by gaining new insights through new data sources, expanding their digital products and services, and ultimately monetising their data,” said Russell Craig.
“Microsoft is uniquely positioned to help organisations in New Zealand to succeed in their digital transformation journeys today through our agile platforms and solutions that prioritise flexibility, integration and trust. As an organisation that has also undergone digital transformation, we understand what organisations will need to make their journeys a successful one.”

Digital Transformation in New Zealand Will Ultimately Benefit Citizens

According to business leaders, digital transformation will benefit society through increased educational and training opportunities, creation of higher value jobs, and improved quality of education through better teaching tools.

Respondents in New Zealand felt that 89% of jobs will be transformed in the next three years due to digital transformation, and 65% of the jobs in the market today will be redeployed to higher value roles or reskilled to meet the needs of the digital age.

“The rise of digital transformation will affect the labour market where many types of jobs will evolve and change. What is encouraging is that 67% of respondents are confident that their young professionals already have future-ready skills that will help them transition to new roles,” said Russell Craig.

“According to business leaders 27% of new jobs will be created from digital transformation, while 24% will be automated. Despite this showing a slightly positive effect for job creation, organisations must stillbe proactive and focus on reskilling, upskilling and continuous learning to ensure a successful workforce transformation,” added Craig.

Riding the Wave of Digital Transformation

New Zealand organisations are well placed to accelerate their digital transformation journey to reap the full benefits of their initiatives, and to address the invisible revolution brought about the mass adoption of AI. More importantly, companies need to focus on capitalizing their own data in order to gain new market insights, create new digital products and services, and monetize data through data sharing securely, and in collaboration with its ecosystem.

. Microsoft recommends organisations adopt the following strategies to become a digital transformation Leader:
1. Create a digital culture: An organisation needs to build a culture of collaboration where it is connected across business functions and has a vibrant and mature ecosystem of customers and partners. Data can then be embraced across organisation and functions, where better decisions can be made and ultimately better serve the needs of customers and partners.

2. Build an information ecosystem: In a digital world, organisations are capturing more volumes of data internally and externally. The key to becoming a Leader is for organisations to be able to convert data into capital assets and enable data sharing and collaboration internally and externally in an open yet trusted manner. In addition, a proper data strategy will allow businesses to start their AI initiatives to identify connections, insights and trends.

3. Embrace micro-revolutions: In most cases, digital transformation efforts do not start with widespread change, but a series of micro-revolutions. These are small, quick projects that deliver positive business outcomes and accrue to bigger and bolder digital transformation initiatives.

4. Develop future ready skills for individuals and organisations: Organisations today must relook at training and reskilling its workforce so that workers are equipped with future ready skill sets such as complex problem solving, critical thinking and creativity for the digital economy. More importantly, they need to rebalance the workforce to attain and attract key digital talents, as well as be open in creating a flexible work source model where they tap into skills-based marketplace. In New Zealand, the top in-demand skills are big data, mobile development, as well as software and user testing.

[1] Unlocking the Economic Impact of Digital Transformation in Asia Pacific conducted with 1,560 respondents in 15 markets:
• 15 Asia Pacific markets were involved: Australia, China, Hong Kong, Indonesia, India, Japan, Korea, Malaysia, New Zealand, Philippines, Singapore, Sri Lanka, Taiwan, Thailand and Vietnam.
• Business and IT leaders from organizations with more than 250 staff were polled.
• Industries polled included education, financial services, government, healthcare, manufacturing and retail.
• Respondents are decision makers involved in shaping their organizations’ digital strategy.

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