Embracing digital in Asia: The Fourth Industrial Revolution

Introduction

We are now at the beginning of the Fourth Industrial Revolution according to Professor Klaus Schwab of the World Economic Forum1. Schwab believes that emerging technologies such as robotics, artificial intelligence (AI), nanotechnology, 3D printing and brain research are “fusing the physical, digital and biological worlds” and reshaping the way we work, live and behave. These futuristic technologies are no longer just science fiction, they are changing the way people consume information, interact with their surroundings and interpret the world.

The opportunities for Asia to advance its digital economy is tremendous. Research by AT Kearney2 shows that ASEAN, with a young and digitally engaged population, has the potential to enter the world’s top five digital economies by 2025. What does the burgeoning digital revolution mean for consumers and corporations in Asia? Here we identify four significant shifts that are transforming the digital playing field and questions organisations need to answer to propel the business forward.

The mobile revolution

Facebook, Instagram, Snapchat, Qzone, Twitter – all global household names. Less than 10 years ago social networks were seen as niche platforms for students or computer geeks; now these ubiquitous mobile apps are relied on for entertainment, news and communication. Asia- Pacific is the fastest-growing region and accounts for more than half of all social media users in the world, where users spend between two and four hours a day on these platforms3. As smartphone penetration accelerates, our lives are becoming ever more dependent on mobile devices.

Many people use social media to portray their digital identities; they read, post, comment, share, like and follow others across many different platforms. They project their thoughts, values, attitudes, behaviours and aspirations in the online world that is becoming a larger part of their reality. It is about a new way of existing and how they live their lives.

Social media platforms are also where their real and ideal selves intersect. With seemingly fewer regulations online, people have the freedom to build different personas, hashtagging themselves with different and, sometimes, even conflicting identities, such as #foodie, #photographer, #loner, #popular and so forth. This reinforces the very fragmented view of who they are. This fragmentation of personal identity means companies must carefully decipher the information to avoid a distorted view of their consumers.

Many businesses are taking the wealth of personal data that is publicly available on social media very seriously, using listening tools to help understand consumer behaviour. This entails using automated software to ‘listen’ in on public social channels, such as Twitter, for users who post certain keywords that identify them as potential customers. On a basic level, a sportswear company may listen for the words ‘gym’ or ‘run’, and a pet food brand may listen for ‘my dog’ or ‘my cat’. Then a users’ entire conversation history on that social channel can be analysed to build up a profile of potential customers and their personality and behaviours. However, there are certain limitations to bear in mind.

Social media conversations that many companies are tracking may or may not be representative of the general population. The ‘Spiral of Silence’ is the theory that minority opinions are often self-censored and therefore opinions that deviate from the accepted norm are rarely voiced. As companies start to make more decisions based on social data, they need to be sure that online conversations represent their customers’ true feelings. These risks can be mitigated by testing how consumers respond to content or product ideas designed to appeal to their specific needs before making strategic decisions based on the data alone.

Nonetheless, social media activities can be used to predict customers’ true personality traits. Psychologists from the University of Cambridge’s Psychometrics Centre4 revealed that our social media activities can indicate how extroverted, intellectual or prudent we are based simply on our Facebook ‘likes’. Combining this kind of behavioural data with conversational data can help to build more accurate audience profiles.

Customer-centricity

Automation, predictive technologies and big data analytics allow progressive companies to make faster and smarter decisions that translate into higher profits and happier customers. The digital revolution’s greatest impact is through personalisation – which allows brands to cater to each customer’s specific needs. Rich customer data allows marketers to understand what a customer’s preferences are and what makes them happy.

Customer segmentation is the practice of dividing customers into sub-groups characterised by particular attributes in order to target them with different marketing strategies based on their shared needs.

As we dig deeper to understand our customers, we realised that more often than not, situational factors and the roles that they take on, not stable demographic factors, are used to dictate customers’ preferences. This means that during data mining, companies need to understand the situational preference of the consumers for a particular brand instead of concluding that this reflects an enduring brand preference.

While customer segmentation may remain a useful tool by which brand owners can understand, brands that want to go deeper must advance beyond these simple audience segmentation to both understand and meet individual needs.

This customer-centric approach represents the current Holy Grail of marketing. An automated artificially intelligent system that has full knowledge of each individual’s lives – where they go, who they speak to, their preferences, their motivations and their personalities – and can create billions of personalised ads on the fly with minimum human input. This is not possible yet, but advancements in marketing technology and AI are edging the industry closer to personalised advertising.

The multi-device landscape

Many companies are now mobile first: optimising their customer journey for mobile, rather than desktop computers. According to IDC research5, 80% of people check their phone within 15 mins of waking up – and it is often the last thing we do before sleeping. Internet penetration in Asia, at around 40% in 2016, is growing rapidly. GfK’s Connected Asian Consumer study6 conducted in May 2016 also showed that across eight Asia-Pacific markets, 83% of online users access the internet via their mobile every day, with the Chinese (93%) leading the way.

We Are Social’s “Digital in APAC” report published in September 2016 also shows that mobile phones are leading the share of web pages served at 58%, followed by personal computers (PC) at 39% and tablets at 3% – year-on-year, access via a laptop is down by 17%, while mobile is up 18%.

It is still unclear whether the end of PCs is near; PCs are superior to smartphones in areas such as performance, customisation and usability. For cross-device users to switch to mobile-only, a major shift would be required for consumers who are familiar with multiple devices. Rather than mobile devices replacing PCs, they may be converging, with laptops becoming smaller and adding mobile features and mobile phones becoming larger and more powerful.

Nonetheless, devices are just a means to an end – to strengthen relationships with customers and keeping them loyal in this cross-device world. What is more important for brands is to work out how to join the dots between these multiple devices and form a better understanding of customer behaviour, rather than worrying about the death of the PC.

One such cross-device problem is ‘Dark Social’, coined by Alexis C. Madrigal, a senior editor at The Atlantic. If Light Social is the visible, trackable side of social media – where clicks on ads can be tracked through to a purchase – then Dark Social is the other side – sales that are misattributed because customers switch platforms or devices.

If a user clicks an ad on Facebook, copies the URL from a browser window, pastes it into a messaging service such as WhatsApp and then sends it to a friend who makes a purchase, the tracking is stripped out and the sale cannot be attributed to the ad campaign. According to Madrigal an eye-opening 69% of traffic from social media is thought to be Dark Social (just 20% is from Facebook) meaning that most advertisers do not really know how effective their campaigns are.

There are ways for advertisers to combat this, such as using a URL shortener – for example bitly.com – which preserves the tracking when users switch devices, but many advertisers are still unaware of the issue of Dark Social. Advertisers who fail to understand and track cross- device consumers will be left behind.

The robot invasion

Robots and AI now dominate tech news. We are now accepting the first autonomous robots, in the form of self-driving cars, and the first humanoid robots, in the form of customer service robots, into mainstream society. Robots that look and act like humans, such as Japanese bank Softbank’s Pepper, are currently greeting consumers across Japan and Taiwan.

There may come a time where every single movement and interaction we make is tracked by an army of robots, then computed and ranked to determine our rights and entitlements. The Chinese government is currently considering whether to use online data to evaluate the credit- worthiness of citizens7. The plan is to score each individual based on political, commercial, social and legal credit. This policy might affect citizens’ everyday lives – from their ability to borrow money to freedom to travel abroad.

Professor Schwab1 shares similar concerns. This digital revolution has the potential to do good – dramatically improving productivity, connecting billions more people through digital devices and improving our quality of life. However, the downsides are terrifying too. Millions of jobs displaced as human competences, seen as a mere resource, become ‘obsolete’ and overtaken by robots. We are at the mercy of cybersecurity threats and data privacy infringements as a result of our reliance of such technologies. Social implications such as income inequality and discontentment might persist.

Even though we are unsure of the direction and magnitude of this revolution, all of us need to prepare for such worse-case scenarios. Government bodies, developers and businesses need to assess how such inventions can benefit mankind and strive to mitigate the negative effects. One thing for sure is that the speed of change will continue to gather speed. What used to be ‘sustainable’ competitive advantage will not last. Nokia’s downfall during the rapid shift to smartphones and Kodak’s missteps during the shift to digital cameras are testament to the importance of understanding and embracing emerging technologies. Corporations need to make business agility their corporate mission. This includes prioritising flexibility over mere efficiency, restructuring corporate hierarchies to networks that foster empowerment and giving emphasis, not simply to solve today’s problems, but to fuel tomorrow’s possibilities.

The opportunity

In Asia, there is a unique opportunity to embrace this revolution and develop the digital economy in the region. Asia is driving much of this growth in digital, especially in social media penetration and mobile adoption. Throughout Asia, the digital revolution is already opening doors for small start-ups, big business and governments to collaborate and help the region take a seat at the top table in the global digital economy. Leading this drive, Asian leaders formed the ASEAN Economic Community (AEC) on 31 December 2015 with a vision to create a single, competitive and highly-integrated ASEAN market by harnessing the digital revolution.

The winners will be businesses with the speed to adopt technologies, centered on seamless integration. Businesses that operate in Asia must seize this opportunity and stay relevant in the digital age, or risk being left behind.

References

1 Schwab, K. (2016). The fourth industrial revolution: What it means and how to respond. World Economic Forum. Retrieved from https://www.weforum.org/agenda/2016/01/the- fourth-industrial-revolution-what-it-means-and-how-to-respond/

2 A.T. Kearney (2016). The ASEAN Digital Revolution. Retrieved from https://www.atkearney.com/innovation/asean-innovation/asean-digital-revolution/full- report/-/asset_publisher/VHe1Q1yQRpCb/content/the-asean-digital-revolution/10192

3 Lee, M. K. (2015, November 19). Millennials in Singapore spend almost 3.4 hours a day on their mobile phones: Study. The Strait Times. Retrieved from http://www.straitstimes.com/tech/smartphones/millennials-in-singapore-spend-almost- 34-hours-a-day-on-their-mobile-phones-study

4 Chamorro-Premuzic, T. (2015, September 24). How different are your online and offline personalities? The Guardian. Retrieved from https://www.theguardian.com/media- network/2015/sep/24/online-offline-personality-digital-identity

5 Stadd, A. (2013, April 2). 79% of people 18-44 Have Their Smartphones With Them 22 Hours a Day [STUDY] Adweek. Retrieved from http://www.adweek.com/digital/smartphones/

6 Wee, S. (2016). Over four in five APAC online consumers access the internet daily on their smartphones: GfK. GfK. Retrieved from http://www.gfk.com/en-sg/insights/press- release/over-four-in-five-apac-online-consumers-access-the-internet-daily-on-their- smartphones-gfk/

7 Denyer, S. (2016, October 23). China wants to give all of its citizens a score – and their ratings could affect every area of their lives. The Independent. Retrieved from: http://www.independent.co.uk/news/world/asia/china-surveillance-big-data-score- censorship-a7375221.html

About the Authors

Koh Juan Zhen is a Research Assistant at ACI. Prior to joining ACI, she integrated marketing campaigns and partnership initiatives to drive reach and sales. Her was an Assistant Marketing and Business Development Manager in the tourism industry and led various research interests lie in the area of consumer behaviour and how emotions and subconscious mental processing influence decision-making.

Professor Gemma Calvert is the Director for Research & Development at the Institute for Asian Consumer Insight and Professor of Marketing at the Nanyang Business School, NTU. A pioneer of neuromarketing, she helps companies to break into Asian emerging markets through deeper understanding of Asian consumers using brain and psychology-based research methods.