Digital transformation imperative for industry 4.0

A leading fisheries exporter, it shipped its products to over 50 markets around the world, earning annual revenues of VND12 trillion (US$526,000).

As orders grew rapidly, the company was finding it hard to accept all of them.

“This … required us to increase our capacity by five-10 times,” CEO Le Van Quang said.

However, increasing its 14,000-strong workforce by five to 10 times was impossible and this forced the company to explore alternative solutions.

“For five years I went to many countries to study this issue and found that digital transformation was the best way for the company to survive and grow. It helps cut costs and improve efficiency.”

The company decided to invest in digital transformation by acquiring advanced technologies like artificial intelligence (AI) and using them in raising and processing shrimps.

Minh Phu is not the only Vietnamese company to embrace digital transformation in production.

With the fourth industrial revolution taking root, digital transformation is an inevitable trend that companies around the world and in Vietnam have to embrace sooner rather than later to remain in the race.

It means the use of the internet of things (IoT), big data, cloud, and AI to enhance production efficiency.

Prof Ho Tu Bao of the Vietnam – Japan International Institute for Science of Technology said: “Digital transformation is not just a change related to using technology. It is a change related to the business culture.

“Digital transformation is imperative. A company might fall in line sooner or later but they cannot avoid it.”

Tran Van Huan, APAC digital advisor at Microsoft Vietnam, said: “It is time to achieve your next digital business transformation.”

He quoted a report by IDC as saying that 70% of manufacturers would embrace digital transformation by 2020.

“In the digital era, the fast fish eats the slow fish,” he said, pointing to the success stories of Uber and Grab.

Digital transformation would help companies increase their revenues by 30% while cutting costs by 30%, he said.

A recent report by Microsoft showed that the GDP of the Asia Pacific including Vietnam would grow by an additional 1% every year if the region’s manufacturing sector embraces digital transformation.

Digital Transform: not easy

Digital transformation is obviously the way to go but not all companies in Vietnam, over 90% of them small and medium-sized enterprises (SMEs), are ready for it.

There are many factors that prevent them from digitising, with cost, data security and human resources being the three main ones.

Vu Kim Hanh, chairwoman of the High-quality Vietnamese Goods Business Association, said she has worked with many companies to study whether they are ready for digital transformation.

“I found that companies worry about money. They are afraid they do not have the money to buy technologies, machinery and software.

“They then worry about security and losing information and business secrets when using new technologies based on cloud or IoT.”

Human resources is also a concern as companies need to train and retain people for long, she said.

Lucky Gani, marketing and operation lead of Microsoft Vietnam, said three factors prevented companies from digitising: lack of skills and resources, cyber security and growing threats and a siloed and resistant culture.

For Bao, the biggest hurdle to digital transformation for Vietnamese companies is that they do not understand digital infrastructure as well as other infrastructure.

Furthermore, the country lacks a legal framework for a digital economy, he said.

Lack of human resources is another problem, he added.

Quang of Minh Phu Seafood, as an entrepreneur, saw a different problem.

The biggest obstacle, he said, is the fact whether a company can recognise its problem. If it can, it will surely embrace digital transformation.

Successful pioneers

However, there have been pioneers who went down the path of digital transformation and achieved fruitful results.

Minh Phu is a clear example.

Quang said in the early days he was worried about the cost of AI. He need not have, as it turned out.

The investment in technology and AI has been completely worth it, he said.

He cited one example. In the past the company needed several machines to assess the water quality in shrimp ponds by measuring PH, NH3, salt, and other, with each machine costing billions of đồng.

But thanks to AI, one machine now measures all parameters and precisely, and it cost just US$5,000.

AI would also help cut the company’s workforce by 50-70% in the next five or seven years, he said.

“With digital transformation, with AI, all problems can be solved.”

Quang said companies should embrace the trend of digital transformation and pioneers like him are ready to offer assistance and share their experience.

Phương Nam Yarntex Joint Stock Company is another success story in digital transformation.

Speaking to Viet Nam News, the company’s director, Luong Vu Ngoc Duy, said he studied in a foreign country and returned to manage his family business a few years ago.

When he came back the company’s data had been in a mess since his family had not cared to digitise it, he said.

It took him six months to persuade his parents to invest US$200,000 in technology.

Technology and machines have helped the company link up and control information, he said.

They provide the most efficient information on how to manage inputs and identify the right customers, Duy shared.

"In the past the company had been run based on people’s experience and relationships. Now, with new technologies, the company takes advantage of both humans and machines to achieve better business results.

"After it embraced digital transformation, the company’s revenues jumped by 80%," he said.

While there are many causes for this jump, digital transformation has been a major one, and his company would invest more in technology including AI, he said.