Now, even Prime Minister Pham Minh Chinh has affirmed that digital transformation is vital in creating a strong driving force for new innovation and laying the foundation for a modern economy. In the years before the outbreak of the Covid-19 pandemic, there were only around 20 percent of businesses that were truly interested in digitalizing their operations. However, the post pandemic scenario is compelling most businesses to switch to the latest technology and innovate their working methods.
Lack of human resource
At the first industrial innovation forum held in Ho Chi Minh City, Mr. Mai Huu Tin, Chairman of the Board of Directors of U&I Investment JSC, acknowledged that in order to bring enterprises into the global supply chain it is necessary to innovate the entire industry. In order to do this, it is necessary to determine that the trade union creates the right conditions for smart production.
Mr. Tin also said that the quality of human resource in Vietnam is still very low at the college level. Therefore, an innovative culture in enterprises and the quality of human resource must be made an important issue. Mr. Tin shared that even in consulting enterprises, in theory everyone can read and understand, but in practice this is very difficult to put into operation, hence small changes are necessary that will bring about growth in businesses.
Several difficulties plaguing the business community were also acknowledged and discussed at the recent forum. Mr. Do Phuoc Tong, Chairman of Board of Directors of the Duy Khanh Mechanical Company, said that his company moved towards digital transformation seven years back but so far, they are still not satisfied with its status and need to do more to strengthen digital transformation within the work environment.
Currently one of the main challenges facing small medium enterprises (SMEs) in their endeavor to switch to digital transformation and putting the right technology into production operations is the serious shortage of human resource. As some mechanical industries run on a low-profit margin, and have insufficient investment flow, they cannot completely move towards the digital transformation stage because of lack of funds for qualified human resource.
A representative of one enterprise said that they had invested US$10,000 in a digital system in the company, but the maintenance cost of it was more than 10% per year. Since good data collection requires qualified operating personnel, it has now become hard to operate this system, with the company representative and his partner working night and day to maintain and keep the digital system running.
It is clear that digital transformation is not an easy move for businesses, even for businesses operating in big cities like Ho Chi Minh City. The difficulties do not just lie within the enterprises alone but there are problems in finding a suitable consulting unit and providing appropriate solutions also, especially for manufacturing enterprises.
The common problem pointed out by many enterprises under the Ho Chi Minh City Business Association is the process of looking for a suitable consulting unit and providing the right digital solutions. Consultants often do not understand the operating methods of a business, so they tend to provide the same solution for each industry group, even when the problems vary. There are too many difficulties which lead to many failures in the process of digital transformation. Several reports show that upto 70 percent of businesses that adopted digital transformation have so far failed in their efforts.
Challenges and failures in digital transformation make it difficult to promote innovative ideas and bring technology into the production process for Vietnamese enterprises. However, according to Asso. Prof. Dr. Nguyen Anh Thi, Head of the Management Board of Ho Chi Minh City Hi-Tech Park, this process is also proving to be a big challenge for several businesses around the globe. As per a report by Innosight, about 75 percent of businesses in the 500 stock Index (S&P 500) of Standard & Poor in the US will be replaced by 2027 due to lack of innovation in technology.
Challenges in digitalization
Businesses are fast learning that digital transformation is rather a very difficult and complicated process. Hence it is now essential to find ways to simplify digital transformation so that more businesses can adopt it without feeling the strains of change. Ms. Pham Thi Ngoc Thuy, Executive Director of the Office of the Private Economic Development Research Board (Board IV) narrated two instances of digital transformation in companies that illustrate this point well.
The first instance is of Quang Ninh province, which has become a leading province in setting up a successful digital government. Ms. Thuy narrates that when she and her colleagues interviewed the leaders of Quang Ninh province about the challenges in the journey of digital transformation and building of a digital government, her team received an answer that the most difficult factor was technology. Hence, the level of readiness of the staff in the system itself was the first difficulty that needed to be resolved. It finally took three years for Quang Ninh province to overcome several problems and resolve issues.
The second instance is about one industry that seems to be unrelated to technology and digital transformation but is considered a business that has made great effort in digital transformation, namely the wood manufacturing and wood processing industry. During the two years of the Covid-19 pandemic, businesses could not hold meetings and could not even exhibit, and had difficulty selling their goods to foreign buyers. The wood industry then turned to using the zoom platform to meet and introduce new goods and also sell their goods to foreign buyers.
The Ho Chi Minh City Woodworking Association (HAWA) formed the HOPE online exhibition platform. Now, businesses want to develop a team of directors for information technology with the same role as production directors to maintain their sales. Ms. Thuy shared that in their efforts, they realized that instead of supporting solutions such as digital management and digital marketing, they should focus on developing key people for the community in the wood industry. She believes that the wood industry is gradually developing a network of directors of information technology and are encouraged by the fact that many business owners are becoming more interested in digital transformation.
The above instances show that the right trained personnel plays a very important role in digital transformation. Hence resolving the serious issue of shortage of human resource is the first and most important step. Along with this, financial resources also cannot be underestimated when implementing digital transformation. The fact that the resources of enterprises, especially groups of small enterprises, are very limited causing many people to suggest that businesses in the same industry should connect because they have similar problems in digital transformation.
Once businesses connect, they can find a suitable supplier to work with to offer products that can be shared, which will reduce overhead costs. In order to do this, the role of associations will become very important in the future.