Indonesia, a country of 268 million people, has 185 million Internet users, the fourth-highest number in the world. One of South East Asia's digital economies that is expanding the fastest is Indonesia. Realizing the full potential of Indonesia's digital economy has become a top priority for both the government and businesses in recent months, especially as the COVID-19 pandemic continues to drive digitalization across all sectors.
Predictions indicate that Indonesia's digital economy is poised to grow to a size of about USD133 million within the next five years. To ensure that all Indonesians, especially the most disadvantaged, have access to diverse digital technologies and services and may profit from them, action must be taken.
”One of South East Asia's digital economies that is expanding the fastest is Indonesia.”
The digital landscape today
The young generation, digital natives who were born in or are growing up in the current technological era, known as Millennials and Generation Z consumers, make up a sizeable section of Indonesia's population and are increasingly taking the lead in driving the country's digital economy's growth. In another way, the lack of basic connectivity, though, continues to be Indonesia's biggest challenge.
While the gap between urban and rural connections has not decreased, over half of the adult population still does not have access. In 2019, 62 percent of Indonesian adults in urban areas and 36 percent in rural regions had internet access.
With a large population in Indonesia with most of the young generation who are very technology literate, it appears that Indonesian customers are ardent Internet users. According to one research, 20 percent of Internet users spend eight hours or more each day online, with nearly one-fifth of users, or 58 percent spending between two and eight hours.
”Millennials and Generation Z are increasingly taking the lead in driving the country's digital economy's growth.”
During the COVID-19 pandemic, Indonesia emerged as one of the highest adopters of e-commerce and mobile e-commerce: in the month of October, roughly 78 percent of Indonesia's Internet users made an online purchase using a mobile device; when this is extended to any device, the figure rises to 87 percent (Source: We Are Social — Digital 2020). Indonesia's digital economy appears to be ready to take off given its tech-savvy consumers, the expanding e-commerce industry, and the thriving start-up environment.
However, Indonesia needs to make a deliberate effort to promote all line sectors, particularly micro, small, and medium-sized businesses (MSMEs).
The usage of artificial intelligence (AI) has grown quickly due to Indonesia's enormous population and has become increasingly necessary. This trend accelerated during the pandemic. Massive volumes of data are processed using machine learning, deep learning algorithms, and models to enable quicker, wiser, and better decision-making. For the industry that has long been the custodian of vast data sets, tech-enabled forecasting, holds great promise.
When paired with data, analytics, and automation, emerging AI technologies like machine learning and natural language processing can help businesses achieve their goals, such as enhancing customer service or streamlining the supply chain. Businesses should have a strong understanding of what AI implies for their industry before recognizing the value it offers. The concepts of skill set and multiculturalism are important.
”The usage of AI has grown quickly due to Indonesia's enormous population and has become increasingly necessary”
To handle data insights, content, and digital marketing, the proper collection of digital tools is crucial. With this information, businesses may develop a plan for involving their target consumer segments across the whole customer experience. For instance, businesses can use personas, conversion rate optimization, insights into consumer behavior and trends, and many other digital indicators to predict client demands and provide the most appropriate goods and services.
These days, technology has taken on a significant role, and many predict that within the next few years, it will completely transform the majority of global sectors. It seems that a lot of business failures result from failing to adapt to the most recent technology landscape, rather than from a failure to digitally change their business. Many businesses have recently expressed a desire to digitally alter their operations by building websites or mobile apps, but the larger goal of this process is to focus on the demands of the customer.
Additionally, a lot of Indonesian local players have developed their own websites and mobile apps, however, the influence is not very large. Why is it the case? They don't innovate because they don't understand how customers' behavior is changing.
”A lot of business failures result from failing to adapt to the most recent technology landscape”
So what do customers actually need? Customers are becoming more spoiled as a result of the technological change, which has led to increasingly specialized customer needs and shifting customer pain points. Customers in the digital age are looking for these four things:
These days, security and dependability can also be improved by using the digital footprint. Any activities that are safely stored in the cloud can serve as an additional layer of protection for the user. It's true that some people might believe that these digital corporations are violating their privacy and selling their data in some way. Why does that important, though? These details can guide you in making a more informed purchase and provide you with more personalized insights and interests. Additionally, it may be of assistance to you in case of an emergency.
2. Relatively Cheap
The idea of "premium" or "luxury" is no longer very significant for die-hard digital users. Grab and Gojek is one good example. Its pricing approach has contributed to the company's remarkably rapid expansion. The development of technology has made it possible for services like Grab, Gojek, Uber, Airbnb, Shopee, or any other major digital company to be less expensive than their traditional rivals like taxis or hotels.
Where they don't actually need to buy an asset, operating a business with relatively little operational and capital expenditure, and providing clients with comparatively lower prices are other ways to avoid doing so. To cut expenses and improve revenue, it is preferable for micro, small, and medium-sized businesses (MSMEs) to work together with large digital-based businesses.
The goal of digital accessibility is to eliminate obstacles that can prohibit a person from engaging with digital content. Both the platform being used to communicate or interact with the content and the material itself may contain barriers. The best services and products are without a doubt those that are easily accessible and within reach. This means that everything should be reachable from any handheld device, whether a smartphone, computer, or any kind of IoT (Internet of Things).
Users' expectations are rising as the world changes at an ever-increasing rate. Convenience has a very different meaning today. You can quickly order and pay for your item with a tap of your phone screen, and an expedition or delivery courier can shortly deliver the item to your door without you having to leave the house. Every firm must be responsive since the majority of services—including food, transportation, and medical needs—must be provided on demand.
How to accelerate the digital economy in Indonesia
1. Digital Strategies and Regulations
The digital economy necessitates concentrated effort, specialized techniques, and policymaking. The different elements and technological enablers of the digital economy should be covered by such strategies and regulations. The development of the digital economy will, for instance, be facilitated by strategies and projects focusing on FinTech, e-commerce, Industry 4.0, and emerging technologies like AI, IoT, the cloud, robotics, and cybersecurity. The National AI Strategy of Singapore is a great example of this.
2. Digital Infrastructure
The digital economy depends on strong, reliable, responsive, secure, and scalable digital infrastructure, including data centers and the cloud, sensor, and camera networks, applications, and platforms. This is necessary for organizations and individuals to connect seamlessly regardless of where they are.
Two major trends—the shift to the edge and the use of cloud platforms—define the evolution of infrastructure. 60 percent of network resources will move to the network edge by the end of 2022 to provide flexible and agile connectivity services to a population that is widely dispersed in terms of where they live, work, and play. At the same time, enterprises are achieving infrastructure modernization and application modernization objectives thanks to the move to the cloud.
The economy of the digital age is essentially data-driven. Data is, in fact, the most valuable resource in the digital era and a key enabler of automation, industry ecosystems, and individualized customer experiences. A critical differentiator in the digital economy is an organization's capacity to gather data, combine information, learn continuously, and apply the resulting insights at scale.
The data value chain is the result of the spread of intelligence from the edge to the core and the transformation of data into value using a combination of networks, devices, IoT platforms, AI and ML tools. Today's top firms in their fields work to master this data value chain.
”The economy of the digital age is essentially data-driven.”
4. Digital Transformation
Digital transformation is essential to maintaining and growing the firm despite the many difficulties brought on by the pandemic. The majority of MSME players—according to research by Google, Temasek, and Bain & Company—in 2021, have undergone digital transformation.
For instance, they use digital marketing (69%), websites (45%), digital operating systems (49%), digital analytics (43%), cloud storage (44%), and collaboration software (38%). Additionally, nearly all (98%) internet shops were found to accept digital payments from customers. This means that to grow their enterprises, MSME actors must provide them with comprehensive, secure, and convenient digital payment systems.
5. Innovation and Collaboration
MSME actors must prioritize innovation and collaboration in the all-digital era if they want to be able to adapt well in the face of a dynamic environment that keeps changing. Currently, numerous corporate actors and governmental organizations in Indonesia support a supporting ecosystem for MSMEs in order to respond to dynamic and constantly shifting trends. These third parties' involvement aims to accelerate MSMEs' adoption of digital transformation in all areas, from payments to operational systems to logistics.
6. Expansion of Consumer Reach Outside Big Cities
The epidemic has altered people's buying and selling habits, changing both consumer and merchant behavior patterns. MSMEs still contribute significantly to the Indonesian economy, where they make up 61% of the country's entire GDP. It was stated that throughout the pandemic, there was a growth in digital customers, reaching 21 million.
It's interesting to note that 72% of these new consumers reside outside of major cities. Because Indonesia has a broad geographic area with a diverse consumer base, it is crucial for today's business players to extend their reach to non-urban areas. Through the now-commonly used internet sales platforms, this expansion can be accomplished more quickly.
Economic prosperity, wealth creation, and the improvement of residents' lives are priorities for every nation. As digital technologies are gradually linked with the way products and services are made and consumed, the digital economy is becoming a vital component of national transformation. Understanding this new economic structure is crucial for national governments and policymakers, who can then support its development by fostering an enabling environment.
Organizations must become digital enterprises in order to thrive in the digital age. This involves embracing digital business models, mastering data, and taking part in industry ecosystems. Each business, corporation, or other type of entity must ultimately be digitally flexible. We now live in a time where digital dominates practically everything.
”Organizations must become digital enterprises in order to thrive in the digital age.”