The COVID-19 pandemic has accelerated business transformation in ways not seen before. Beyond the surge in e-commerce and use of more online applications, digitalization has become a priority for businesses seeking to continue operations or enable remote working.
However, such digitalization efforts in pockets of the company are unlikely to address the larger imperative of achieving sustainable growth and profitability. Where the business needs to transform to work better, a coherent and cohesive digital strategy is needed. In other words, digital transformation is the means to business transformation.
A successful digital transformation requires an innovative culture and a clear vision from the top, which can then be translated into an actionable business strategy. Digital is and should be a part of the company’s DNA. Instead of having digital as an add-on, successful companies infuse digital capabilities throughout the business. However, the lack of digital talent is often one of the challenges that companies face.
As companies seek to level up their digital capabilities, leveraging M&A to acquire technology and talent for digital transformation is a viable approach. Acquisition has advantages in providing the speed and flexibility to capture emerging opportunities before the competition. However, there is also the risk of failure in post-merger integration. Additionally, for those acquiring start-ups, it is difficult to estimate the value of the start-up’s technology to arrive at the right price.
Corporates in Southeast Asia recognize the promise of digital transformation. However, many have yet to leverage opportunities in M&A to bolster technology acquisition, according to the 2020 EY Global Capital Confidence Barometer (pdf). Interestingly, the EY 2020 Global Corporate Divestment Study (pdf) found that as companies increase reliance on digital, divestment is becoming an attractive option to fund investments in digital.