By Luca Yazdanpanah
Imagine you are looking to buy a new apartment in Dubai or lease some office space, but you are thousands of miles away? If you are buying property from Al Futtaim, a leading UAE conglomerate, you can do a virtual walk-through ahead of your visit to help inform your decision. As you contemplate your next move, you might turn to your HSBC app on your phone to explore the myriad financing options for your next step.
Both of these actions are a direct result of the rapid technological advancements that have impacted every aspect of human life. Well-established brands – as well as start-ups making their way in the world – have been able to attract new customers and improve efficiency by leveraging technology. Ultimately, this increased adoption of technology in business is known as digital transformation.
Digital transformation, according to McKinsey, helps build a competitive advantage by deploying technology to improve customer experience and lower costs. Moreover, businesses embark on this transformation as a long-term effort to rewire how the company continuously improves and changes. Businesses in every sector have been using technology to cut costs, collect invaluable data, and operate in a more efficient manner.
The six countries of the Gulf Cooperation Council (GCC) – Bahrain, Kuwait, Oman, Saudi Arabia, Qatar, and the United Arab Emirates – have been leaders in digital transformation.
Beyond the buzz word, what does digital transformation really mean?
Essentially digital transformation is where businesses focus on implementing technology into various aspects of their products/services. To pull this off, companies need employees who specialize in technology. Furthermore, there should be sufficient digital literacy skills on an organization level. Having the technological know-how allows companies to embark on their transformations. These plans are centered around analyzing and using data to make the company more efficient and maximize revenue. Overall, data is key in digital transformations and drives the decisions a company makes.
Consumers also benefit from digital transformation. Namely, increased customer satisfaction. Businesses can offer users a more efficient and personal experience through the use of data analytics. In turn, users encounter a better and more tailored experience.
Due to the GCC’s use of technology and strategic initiatives aimed at diversifying economies, digital transformation is very prevalent in the region; however, as PWC points out in a report on the state of GCC digitalization, there are some flaws as well. First of all, there is a lack of organizational vision and leadership. While many businesses recognize the value of technology, there is a lack of long-term vision for businesses’ technological ecosystem (this defeats one of the goals of digital transformation). Companies should “approach this challenge holistically by creating the building blocks for digital transformation.” Essentially, companies must have a long term view of how technology will be used in their organization, and require the right leadership team to do so.
Next, members of the organization must develop strong IT skills, and currently many do not have sufficient expertise to fully utilize the technology that the business has implemented. As a result, the new technology becomes useless if its potential cannot be maximized. Therefore, businesses must also invest in educating employees and consumers, not just the technology itself.
Digital transformation will likely become more widespread and effective in the GCC’s near future. This is indicated by the promising investment into technology and a few big-name examples that prove how beneficial digital transformation can be if done effectively. There are a few key players in the GCC that have been heavily investing into technological development. The United Arab Emirates estimates that it will allocate $23 billion USD by 2024 to Information and Communications Technology (ICT) spending. Furthermore, Qatar is expected to spend around $9 billion USD in a similar timeline.
It is also important to mention that GCC countries have also made significant investments in 5G technology. Such networks will allow higher speeds and increased network capacity. This will help businesses handle more website traffic and allow them to develop technologies and services that use more computing power. Furthermore, by 2024, it is expected that 77% of UAE SMEs will have invested in cloud computing technology. The heavy focus on investment “is a testament to the remarkable progress in digital transformation.” Ultimately as investment into technology becomes more prevalent so will the ability to implement technology, and as a result it is likely we will see even more digital transformations in the region.
There have been a few big-name examples of successful digital transformations in the GCC that have outlined the value in it and serve as examples to other businesses that aspire to embark on the same journey. One such example is the digital transformation of UAE-based conglomerate – Al Futtaim. The mega business adopted cutting-edge technologies and had a user-centric vision. By implementing technology in their business they were able to provide personalized experiences that increased customer loyalty. The Chief Technology Officer stated in an interview, “We wield the power of data to make informed decisions, personalize experiences, and supercharge our performance.”
Al Futtaim used the data they collected to gain new consumer insights and attract new customers. They used groundbreaking augmented and virtual reality technologies to provide their real estate business with a platform for virtual walkthroughs. The core of their vision was to increase customer satisfaction, and through the strategic use of technology, they were able to do so.
Additionally, HSBC in the Middle East has undergone a digital transformation that has yielded very impressive results and has given them a competitive advantage over other banks in the region. After undergoing this transformation, 82% of their clients have rated their experiences as excellent, and onboarding new clients takes a maximum of 3 days – this is significantly less than the maximum of 120 days it could take at some banks. All of this was enabled through technology. HSBC was able to create value and provide new services such as a digital information portal that gives clients access to liquidity management and global market solutions.
Evidence has shown that digital transformation is a valuable way to enhance business performance and customer experience. Through strategic implementation of technology, businesses can lower costs and improve efficacy, thus improving customer retention and satisfaction. While the benefits are clear, there are some obstacles that the GCC must overcome so that digital transformation can become more widespread and successful. It is essential that businesses have a long-term digital plan, and that they do not go through a digital transformation just for the sake of it.
Additionally, analysts say that companies must work on finding the right talent to pull off a transformation and must make sure that it is clear to employees and customers alike how they can use the new technology to their advantage. It is likely that due to the heavy investment spending by countries in the GCC on digitization, that transformations will become more prevalent in the coming years. This coupled with the big-name examples of HSBC and Al Futtaim demonstrates an upcoming shift towards digitization in a wide range of industries in the GCC. Going forward, digital transformations will not be a novelty, they will be essential.
