Taiwan

Index performance

Survey highlights

• 50% say their business unit uses data analytics to a large extent

• 60% of surveyed firms have five or more digital partnerships

• 88% say their organisation needs to become better at leveraging their digital partnerships

#5

Overall

#4Digital

infrastructure

#5 Human capital

#3

Industry connectivity

Overview

Taiwan is at mid-table in the Asian Digital Transformation Index, ranking 5th overall behind Singapore, South Korea, Japan and Hong Kong. Strengths are offset by weaknesses in each of the three Index pillars. A well-developed technology industry, especially in hardware, as well as high-quality and affordable network infrastructure and a large pool of skilled engineers provide Taiwan with distinct digitisation advantages in comparison with some of its regional neighbours. Talent gaps exist in advanced digital fields, however, constraining Taiwanese organisations from making faster progress in digital transformation.

Overall Score

Average 45.8

1. Singapore 75.6

2. South Korea 72.5

3. Japan 70.7

4. Hong Kong 65.7

5. Taiwan 65.1

6. Malaysia 42.0

7. China 33.9

8. Thailand 23.9

9. India 19.3

10. Philippines 18.8

11. Indonesia 16.0

The environment for digital transformation

Taiwan ranks 4th in the digital infrastructure category, but its ICT networks, services and device penetration are not significantly inferior to those of the category leaders. Issues with broadband connectivity and other ICT infrastructure are low on the list of impediments to digital transformation cited by Taiwan-based executives surveyed by The EIU (only 17% say this is the case).

Jamie Lin, who is a founding partner of AppWorks, a start-up accelerator, describes Taiwan’s digital infrastructure as excellent, comparing it well with that of other rich countries he has worked in, including the US. The high-speed broadband access enjoyed by businesses and consumers is affordable in a regional context, and networks are relatively secure as measured by the number of secure Internet servers. Penetration of smartphones and coverage of 4G mobile networks are amongst the highest in Asia, notes Mr Lin, a factor which helps drive innovation in fields such as mobile app development.

Taiwan’s report card is mixed when it comes to developing talent to support digital transformation. On the one hand, its universities and technical institutes produce a fair amount of engineers, programmers and other IT specialists. Supply is short, however, when it comes to talent with skills in advanced digital fields, such as data science and analysis, web development and UX (user experience).

Asked where the solution lies to rectifying this, Mr Lin is clear: “Education, education, education. Right now there is a very big gap between what schools teach and what the new industries actually practice. The gap is not narrowing, it is widening.” He acknowledges, however, that this situation is not unique to Taiwan; the gap exists throughout Asia as well as North America and Europe.

The frontline: digital transformation of businesses

A majority of Taiwanese executives in the survey report clear returns from their digital transformation efforts thus far. More than seven in 10 (72%) say their investments in such initiatives have already proven their value. Nine in 10 state that their firms have changed their business models in one way or another as a result of their transformation efforts.

For the majority of companies, the chief returns have come in the form of cost savings. Digital’s greater transformation potential, however, lies in areas closer to the front office. In this context it is encouraging that 43% of respondents say their digital initiatives have helped them identify and develop new customer segments. The same number report gains in terms of expanding their reach into new markets.

The use of social media has been a major focus of companies’ digital initiatives to date, which is consistent with the above findings. Mobile devices and infrastructure have been another focus area. Looking ahead, big data and analytics will garner greater attention from companies in the survey, as will mobile apps and services. Taiwan businesses already make considerable use of data analytics

– half of respondents say their business uses analytics tools extensively.

Cloud-based services are also readily available to Taiwanese businesses, and they make considerable use of it, judging by the survey. Over one-third of respondents (37%) say their business unit stores most or all of their data in the cloud. Nearly as many (35%) say their unit accesses most or all of their applications there. Very few in the survey (12% or less) report making little or no use of cloud for both purposes.

The chief benefits currently being gained from digital transformation initiatives (top responses)

Digital connections

Taiwan’s highest rank in an Index pillar comes in that of industry connectivity – the ability and willingness of organisations to collaborate with others to build their digital capabilities. Judging by the survey responses, Taiwanese businesses appreciate the value of digital partnerships: 60% report being involved in five or more of these. Almost 30% are involved in more than 10.

Their digital partnerships have helped surveyed companies in numerous ways, the chief of which, according to 77% of respondents, has been identifying the means to achieve cost savings. Just as many, however, say their partnerships have helped their firms provide better support for customers. And only slightly less (71%) credit their partnerships with helping to develop innovative ideas for new products and services. The survey also suggests that companies have been able to commercialise many such ideas.

A willingness to engage in open innovation, based on the sharing of data and ideas, is another indicator of industry connectivity. Taiwan scores higher than other Asian countries when it comes to open data availability, which assesses the extent to which governments make data available to innovators. Businesses themselves gain from open innovation; nearly half (48%) of respondents say their organisation has benefitted to a large extent from involvement in open innovation communities.

1. Digital Infrastructure

Average 47.9

1. Singapore 80.1

2. South Korea 74.4

3. Hong Kong 70.7

4. Taiwan 66.5

5. Japan 63.5

6. Malaysia 53.7

7. China 36.4

8. Thailand 22.5

9. Indonesia 19.3

10. Philippines 18.8

11. India 17.9

2. Human Capital

Average 46.0

1. South Korea 82.2

2. Japan 80.2

3. Hong Kong 76.1

4. Singapore 74.5

5. Taiwan 68.0

6. Malaysia 42.5

7. China 28.9

8. Thailand 20.6

9. Philippines 16.3

10. India 10.8

11. Indonesia 5.7

3. Industry Connectivity

Average 39.7

1. Japan 78.9

2. Singapore 64.7

3. Taiwan 57.8

4. South Korea 55.2

5. Hong Kong 40.4

6. India 33.6

7. China 33.3

8. Thailand 31.9

9. Philippines 20.5

10. Indonesia 11.0

11. Malaysia 9.2

0

10

20

30

40

50

60

55%

33%

30%28%

43% 43%

Greater cost savings

Expanded reach into new

markets

Developm

ent of new custom

er segments

Producitivity im

provements

Access to new data

More innovative ideas / IP for new

product / new

services

Find out more connectedfuture.economist.com

Agree or disagree: “My organisation needs to become better at leveraging digital partnerships”

Agree Disagree

10%

88%

Don’t know

2%

Taiwanese executives have a clear idea of the importance of digital partnerships for their future competitiveness. Two-thirds believe their digital partners will be integral to the success of their digital transformation efforts. And almost nine in 10 believe that companies going it alone (without digital partnerships) “will soon be a thing of the past”.

Find out more connectedfuture.economist.com

The power of partnerships and communities

A central premise of the Asian Digital Transformation Index is that organisations cannot pull off the enormous undertaking of digital transformation working in isolation. An overwhelming majority (86%) of Taiwan survey respondents agree with this. Generally speaking, the larger and more established the company, the more it needs small digital partners – especially start-ups – to help it improve its digital capabilities, through genuine collaboration or sometimes by acquiring them. Digital start-ups have not flowered in Taiwan to the same extent as in Singapore or China, but entrepreneur Jamie Lin is looking to change that. In 2009 he launched AppWorks, an accelerator which has helped 305 technology start-ups get off the ground.

Mr Lin believes that one of the biggest things its existing and alumni start-ups have going for them – in addition to the energy and brilliance of their own teams – is the collaborative network they are part of. AppWorks, he maintains, has been instrumental in building this. “AppWorks was built on open innovation,” says Mr Lin. “From day one we wanted all of our start-ups to be in the same community so they can learn from each other’s successes and failures and become better innovators. For example, in our Facebook community, all our founders post observations all day long about how they are addressing certain challenges, so everyone benefits from each other’s innovation trials.”

The success of AppWorks and other Taiwan accelerators is, Mr Lin maintains, convincing talented people with an entrepreneurial bent to leave

the comfortable surroundings of the country’s technology giants and launch ventures of their own in app development, gaming, machine learning, cyber security and other emerging technology areas. The start-up communities originated by AppWorks and its counterparts will only benefit. “Even if you are not doing direct business with other community members,” he says, “you can learn from each other’s experiences and stay ahead of digital changes, which is crucial for the long term success of Internet companies.”