A crisis is often perceived in business as a commonly occurring phenomenon which managers should be able to deal with. If we consider that crises are in fact uncommon, it helps to imagine solutions and responses which are better suited to the actual situations. Elements in a crisis may appear normal, but the overall situations are abnormal. Traditional thinking, procedures and rules, therefore, do not apply and normal solutions will more often than not be ineffectual. Covid-19 is unprecedented because it is a global health crisis which spawned a global economic crisis.
The acceleration of digitalization
Covid-19 has accelerated the implementation of digitalization with regard to artificial intelligence (AI), and while many have considered this a positive thing, it has also emphasized the need for reform and structural change in many sectors. Artificial intelligence was always threatening to create havoc. What has changed is the timeframe that governments and institutions believed they had to prepare for the changes.
In just two months of the pandemic, digital adoption leapt five years forward. A McKinsey Global Survey of executives published in October 2020 found that companies accelerated the digitization of their customer and supply-chain interactions and of their internal operations by three to four years and their share of digital or digitally enabled products by seven years.
The McKinsey survey found that in the Asia-Pacific region the average share of customer interactions that were digital rose from 32 percent in December 2019 to 53 percent in July 2020, which McKinsey concluded to be an adoption acceleration of four years. They also found that the average share of products or services that are partially or fully digitalized, again in the Asia Pacific, rose from 33 percent in December 2019 to 54 percent in July 2020, which McKinsey concluded to be an adoption acceleration of 10 years.
McKinsey found that firms achieved increases in remote working in an average of 10.5 days, compared to an estimated 454 days prior to Covid-19, an acceleration factor multiple of 43. They found that on average firms were able to increase demand for online purchases and services from the previous estimated need of 585 days to 21.9 days, which they concluded to be an acceleration factor multiple of 27. They determined that the use of advanced technologies in operations from pre-Covid increased from an estimated 672 days pre-Covid to 26.5 days, an acceleration factor multiple of 25.
Upsetting cultural norms
Change requires some very hard decisions because everything today is linked and in many of the countries in Southeast Asia the list of “too delicate to touch areas” has traditionally been long. Covid-19 has brought a sense of urgency to the already budding but not widespread acceptance across the region of remote work. The biggest challenge for institutions was the compressed timeframe in which it all happened. It was a problem of hardware, connectivity, systems and a lack of digitization but also a failure of planning, organization and initiative.
Ten to 15 years was the typical timeframe for digitalization that companies were planning on before Covid-19. Instead of dealing with issues which required structural change, as the pandemic unfolded, many institutions initially adopted a wait-and-see approach. The uncertainty of when and how the crisis would end has been and continues to be an impeding factor because the business models have fundamentally been built on certainty.
The situation in Southeast Asia was chaotic. Many governments left lockdown decisions to regional governors or to the firms themselves. For employers, continuing to keep offices open was often the least disruptive and cheapest option. In Indonesia, employees struggled with remote working arrangements. Most of the apartments in cities such as Jakarta are small and shared by extended family, making it difficult to concentrate and to avoid background noise in meetings. The biggest issue was poor internet connectivity and technological infrastructure. Many firms also lacked cloud computing systems.
Public and private sectors
The private sector has more of a vested interest in AI than the public sector, which will face greater challenges in implementing digitalization. The public sector in developing countries usually employs more people than they need. In some developing countries, the civil service also offers lucrative incentives to resist change due to inherent and tolerated systems of corruption, which those involved will endeavor to preserve.