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Jakarta Post

Prepare to be disrupted in digitalized world

  • Casper Klynge and Märtha Rehnberg

    The Jakarta Post

Jakarta   /   Sun, September 11, 2016   /  07:34 am
Prepare to be disrupted in digitalized world A report recently predicted that, at this rate, Indonesia will have 215 million internet users by 2020, making it the fourth-largest globally. ( Shutte)

Anybody who has ever set foot in Indonesia’s capital will know that the perspective of having self-driving cars is intriguing.

Imagine how time spent behind the wheel could be used on something productive instead of building up frustrations from endless macet — the infamous Jakarta traffic jams. Also, imagine that self-driving cars could automatically find the shortest way to your destination and even suggest the optimal departure time.

And last, imagine that all of those cars would be electric, thus reducing pollution in cities.

All of this would have been science fiction just a few years ago. Today, it is a reality coming to a city close to you soon, literally.

Earlier this month, Singapore began trials with self-driving taxis. This is an excellent example of the new wave of technological advances that many believe will bring revolutionary changes to the world as we know it.

Digitalization, automation, artificial intelligence and the “internet of things” are buzz-words accompanying the trend that is based on the notion of exponential development of technology, including raw computing and processing power.

And Asia is where the transformation could very well have the most dramatic impact. The reason is that the continent is leapfrogging into the digital era.

Between 2009 and 2013, the share of the Thai population with access to mobile internet skyrocketed from 1 percent to 56 percent. In Indonesia, 100 million people own smartphones, a number that will almost double before the end of the decade.

In a recent study, McKinsey estimated that a tech-powered ASEAN could experience 30 percent growth in gross domestic product. The same study, however, also revealed that 40 percent of existing companies might not survive in their current form.

What we are seeing on a global scale is a combination of disruption and gradual evolution. There is no doubt that the application of technology brings opportunities.

For any private or public organization digitalization holds the potential for efficiency gains and releasing resources for other priorities. But it can also bring risk and potentially harmful developments with it.

In Indonesia, GoJek is a textbook example of how the application of new technologies can disrupt a market. Thanks to the introduction of an app for motorcycle taxis, GoJek has experienced astonishing growth, cramping out competitors. Today, GoJek draws on 250,000 drivers who can move people, and now, through its platform, also food and groceries.

Another example is energy. Indonesia is in the process of building plants to produce 35,000 MW of additional energy. It requires massive investment, but the question is, of course, which solution will be best in the long term? Enter solar and photovoltaic technologies, which are currently developing at exponential speed.

Every 22 months the effect of solar panels doubles. If this continues, global energy demands could be covered by solar power alone — in less than 19 years if energy storage is solved as well.

It is a mind-blowing development with enormous potential. It could bring energy to even the most remote areas. And it could reduce poverty and starvation.

Add to that the fast evolving 3D printing technology. In the not too distant future, the need to move goods and spare parts will be significantly (if not completely) reduced.

Instead of ordering a new spare part in Jakarta for a fishing vessel in Papua, fishermen could have it printed in the local 3D print shop, saving time and money on transportation.

From a societal point of view, it is simply a good business model. The list of good business models enabled by digital technology continues: demarcation of land ownership and response to forest fires, improving productivity in shrimp farms, peer-to-peer lending, extremely precise fertilization in agriculture, etc. can all happen through new apps on a simple, low-cost smartphone.

But not everything is rosy. For many countries, disruption also brings a number of challenges that need to be addressed. Let’s take the three most obvious ones.

First, middle-class jobs. For many parts of Asia, economic growth is middle-class driven. As the salary levels in China rise, many countries are hungrily awaiting the establishment of domestic production industries.

But the problem is that many middle-class jobs are the very jobs in risk of being lost due to automation. Disruption in other words has the potential to undermine the one thing many transition economies have going for them: demographic development and a booming middle class.

Second, infrastructure investment. Without embracing new technology and the required infrastructure investment, such as sufficient mobile internet coverage, disruption can create new barriers, inequalities and new winners and losers between countries. Or perhaps even more precise, between regions.

Those who invest now will gain the most. But not all Asian countries have the resources (or the political will) to do so.

Third, regulation. “Maximize opportunity, minimize harm” will be the mantra for anyone trying to regulate tech developments. But two challenges exist.

First of all, technology development happens at a pace where it is often difficult if not impossible for public regulators to keep up. Consumer protection, monopolies and ethical standards are examples of potential challenges. At the same time, complexities surrounding ownership and cash flows could result in dwindling tax revenues for states, which in turn would exacerbate point 1 and 2.

The temptation to respond to those challenges by introducing protectionist regulation is not necessarily the right way forward; it could escalate competitive headaches.

Second, but related, technology transcends national boundaries. Regulatory efforts will be close to impossible for one country to impose effectively. Multilateral organizations, be it ASEAN or the EU, will have to step up to the plate.

For regions, countries, governments and businesses alike, disruption is a word we need to wrap our heads around. Technology policy is already becoming the combined trade, security and foreign policy of the 21st century. It will influence how countries behave. It will influence how we organize ourselves. And it will determine where growth and prosperity will emerge in the future. For companies, the question is how to utilize technology in order to innovate, evolve and adapt.

The very definition of the word disruption, however, underlines one important aspect, namely that we cannot predict and therefore not completely prepare for what is coming our way. But the coping strategy should not be complacency and reactiveness.

Instead it is the development and nurturing of specific competences and skill sets in order for any organization to think hard about how to prepare for what comes next. Machines will continuously and increasingly beat humans in frequent high-volume tasks. What machines will not be able to do is to beat humans in tackling novel situations. Innovation, in other words.

In this light, disruption can be seen as a strategy that is about creating, rather than avoiding, change. Because despite the uncertainty, one thing is guaranteed: today will be less complex and challenging than tomorrow. We better prepare ourselves for that future and partake in its conception. Agility, courage and vision will be key.


 Märtha Rehnberg is a 3D expert and associate partner at DareDisrupt. Casper Klynge is Danish ambassador to Indonesia, ASEAN, Timor Leste and Papua New Guinea.

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