Part 3
EECi: Smart Connectivity in All Aspect: What’s Next for Thailand
Dr. Pailin Chuchottaworn, Deputy Minister of Transport, Ministry of Transport of Thailand then took the stage following Martin Wezowski’s session on the Eastern Economic Corridor of Innovation and Smart Connectivity. The Minister began by discussing the growing importance of Thailand’s transport-import structure, inclusive of all channels of transportation from land to sea and sky. However, much of the investment is dedicated to constructing the railway system, integrating smart connectivity with Western Technologies. In a couple of years, we will start to see the development in this frontier.
When speaking of Thailand 4.0, many people might still wonder what 4.0 really means. In fact, if you Google 4.0, you will realize that 4.0 is essentially the progression of the industrial revolution. Technology progresses in an exponential matter, which means that if you cannot keep up with its progression, you will be disrupted. In Science, 4.0 is basically a new frontier nobody could really predict what would be the outcome.
Thailand’s initiative towards Thailand 4.0 is to take the area-based development approach. The Eastern Economic Corridor is one such initiatives. Why the Eastern Corridor? Because 20% of Thailand’s GDP is generated from the Eastern Seaboard area. Thus, the need for an area-based development approach. However, implementing area-based development comes with certain challenges such as laying down the infrastructures required. The key to implementing area-based development is to ensure that all strategic planning procedures are conducted in an integrated manner. We must first consider how do we layout the water pipeline, where do we layout our schools, where do we need to build roads, and then we can plan the direction in which we want to drive our industries.
Take Bangkok, for example. The infrastructure being developed in Bangkok is developed to support the lives of 10 million people. On December 6, 2018, our Sky Train will now run to Samut Prakarn. The key to urban development is a fully-integrated transportation system, which will allow for mass urbanization. In developed countries, mass urbanization would means that 60-70% of the total population is clustered around a handful of big cities lying in major economic zones. Why is this the case? Dr. Chuchottaworn pointed out that our current education system encourages our children to move into the city for work. This means that our cities must have the essential infrastructure to support this movement. And for this to happen, we then have to move our industries outside of the city area, which means that our transportation system must expand outside of the city. Because of this movement, we then began to see the city expand to adjacent areas, which will then have to expand in turns to support the growth of cities in major economic zones. Strategically, the Eastern Economic Corridor is one such area.
Dr. Chuchottaworn pointed out four modes of transportation – road, rail, sea and air. There are two major roads connecting Bangkok with the Eastern Seaboard – the Motor Way, and the Burapha Withi Expressway. According to Dr. Chuchottaworn, the Thai Government is in the process of constructing two more motor ways into the Eastern Seaboard. These two motorways will connect the Eastern Seaboard to Cambodia and to the Northeastern part of Thailand. This is because the majority of the labors working in the Eastern Seaboard area lives in the Northeastern part of Thailand.
For the rail transportation, the Government plans to construct a high-speed railway system connecting the Bangkok with the Eastern Seaboard Provinces in addition to the Thai-China high-speed railway system. At the same time, the traditional railway system is also in operation.
The third mode of transportation is sea transportation. Dr. Chuchottaworn mentioned that there are plans to construct a new port in Map Ta Phut, in addition to the Laem Chabang Port. Currently, the Laem Chabang Port is exporting goods of over 22 billion USD per month. The Laem Chabang Port is currently handling over 90% of all exported goods in Thailand. The Laem Chabang Port is a major bottleneck for Thai exports. This is why Thailand is currently working on expanding the Laem Chabang Port to be able to handle more loads of transported goods. Last weekend, there was a major development at the Laem Chabang Port. For the first time in 30 years since the port was in operation, a cargo mothership docked at Laem Chabang Port. Typically, the cargo ships in Thailand would have to load themselves up with containers filled with exported goods and then dock themselves at the mothership floating near Malaysia or Singapore. This marks the first development, where a port in Thailand is now able to accommodate a mothership. Once the third phase of construction is completed, the Laem Chabang Port will be able to fully handle a ship as large as the mothership on a regular basis.
Another major development taking place in Thailand at the moment is a major construction that will be moving the central railway hub of Thailand from Hua Lamphong to Bang Sue. This will become the central hub of Thailand’s major land transportation. This new transportation hub will be able to accommodate the high-speed train, as well as the current mass transport rapid train system and the traditional train system. The high-speed train system heading towards the Northeastern part of Thailand will be connected to China, which will be completed in the next 5 years. There are also plans to develop other high-speed rail systems such as the Northern and the Southern route. Once completed, the Bang Sue Land Transportation Hub will become the center of Thailand’s transportation connectivity. All of these developments is part of the Smart City initiative for Thailand 4.0.
Platform Disruption: Why it applies to all of us?
Mikolaj Jan Piskorski, Director of the Digital Business Excellence and Co-Director of Learning Digital Transformation Program at the International Institute for Management Development (IMD), Switzerland took the stage for the afternoon session on the major topic of “Disruption”. Disruption, according to Piskorski, is considered a real threat in today’s digital progression, as it is happening almost everywhere and could happen anywhere from the very basic low technology industries to the very high-level technology industries.
Piskorski introduced a framework that could be used to cope with disruption consisting of three basic components: a company with a product, a server access point, and access to customer usage data. With these three basic components, the framework can be used to sort out all possible threats that could arise from analyzing how your customers usage data and how they engage and interact with the product. Piskorski then demonstrated how this framework could be applied to the Mercedes business model, a car manufacturer with dealers selling their cars to customers. On the other hand, there is Tesla, a new car manufacturer who has come in and innovated the car engine, the way they approach their customers, and the customer experience with their autonomous driving technology. Applying the framework to each of the three differences would reveal how Tesla is better or worst than Mercedes. For example, if you look at the engine, Tesla’s electric engine cost half the price of Mercedes’ combustion engine. Going into more details, you would begin to understand why this is the case – a combustion engine simply requires more functionality and mechanics than a simple electric engine that does not require the engine to handle any combustion. After evaluating these differences, Mercedes then need to ask whether this new electric engine is going to fundamentally destroy the company. The answer to this question is – no. This is because electric cars also have their setbacks such as wheel efficiency and lack of supporting infrastructures. As such, it will take more than 5 or 6 years before Tesla could get their electric car completely right.
Moving on to the other part, which is the customer experience on autonomous driving cars, although it takes some time before their customers would start trusting the technology and feel comfortable in an autonomous driving car, the end result is a much-improved driving experience. And of course, the question to consider is whether or not this is going to become a common driving experience. Although there a many controversial discussion around this issue, Mercedes could not fully deny the fact that the autonomous driving movement is receiving a lot of attention with major development progress in different parts of the world. Therefore, from using the framework to analysis the threat of this technology, Mercedes have decided to develop their own autonomous driving technology which is going to be rolled out by 2023. This is common scenario with different major industries, where the traditional players are not the first mover to develop an innovation or technology, but as soon as they realize that that technology is going to be receiving government and public support, and has the tendency to become a new norm, they had no choice but to adopt it themselves.
The challenge then is how to engage the customers. Autonomous driving cars can be integrated into a customers’ life journey in many different ways – integrating the system with Google applications for example is one way. With over 60-70% of the population using the Google Navigation Application, adding a button that reads “Call autonomous car” is simple enough to do. The challenge is, how do you become bigger than your competitors adopting the same technology. To make sure that an autonomous Mercedes would become big, you would require a well-established autonomy, which would take about 7 years to develop. Although this may sound like a long time, 7 years is in fact a single cycle in the car industry. With many players coming onboard in the autonomous car industry, players that may not originally in the car industry, players like Google, Mercedes would need to move fast. Now consider why Google would want to enter the autonomous car business – Google has a well-established navigation platform – the Google Map. With its Map Application, Google automatically have access to a large pool of potential customers if they are able to develop a well-integrated autonomous car platform. The key factor of success in this case is having a well-established platform that would allow you to gain immediate access to potential customers for your new product.
Considering the scenario for other traditional industries such as the Banking Industry, you could imagine how these industries engage their customers – face-to-face interactions and mobile platform. The key is to improve their customers experience both offline and online. While the banking product has changed dramatically over the years from giving people’s advices to money handling, the banking industries are beginning to adopt and integrate more technology to generate advices and improve customers’ satisfaction and experiences. However, this also opens up new opportunities for startups, with a much more efficient and lean operation, financial technology startups could provide more values to the customers. However, the actual winners are not the startups, in fact, in the United States, the real winners are the players with Government support.
And in many cases, we could see that the real winners are those with a well-established platform. Piskorski pointed out that we first need to define what a platform is – a platform connects people. Facebook is a great example of what a platform is. Facebook owns the largest amount of contents in the world, contents created by millions of Facebook users around the world. There are two different types of platform, Facebook is an example of a one-sided platform, where everybody on the platform is the same. With Facebook, humans are connected to humans. On the other hand, there are two-sided platforms, such as Amazon or Apple or Google. On these platforms, buyers are connected to sellers, people looking for information are connected to people producing information. As we can see, Amazon does not produce books themselves, and Google does not produce contents, but they connect people with each other by facilitating the platform. Yet these platforms are one of the most valuable companies in the world. When considering the valuation of a company, it all comes down to two things – one, you are making a lot of profits, and two, people believes that you will be making so much money in the future. So if you consider companies’ valuation in the past 10 years, the increase in valuation for new players like Google, Uber, Alibaba and Amazon are as large as 1 trillion dollars. Yet these companies are not the most profitable companies in the world, so the increase in valuation is based on the belief that these companies are going to be making a lot of money in the future, and this belief is based on their platforms. These platforms, once they are created, once they are established tends to grow bigger and bigger, and are more difficult to be disrupted. Therefore, you can see the dynamic of these companies – a dynamic where the winners take essentially all of the market.
Yet, there is one more dynamic that is even more powerful – the ability of a platform to add services. An example of this is Uber or Grab Taxi, where they are able to add Food Delivery Service, or Grocery Service. These services are add-on services connecting their existing customers to new parties such as restaurants and grocery stores, where the cost of adding these services is not that much, with very little customer acquisition efforts. These are examples of how these platforms are leveraging their existing customer base to add new services into their business.
Piskorski then went on to discuss the success case of Ant Financial, a financial technology company in China with over 150 billion USD valuation in 4 years. The story behind Ant Financial is their close relationship with Alibaba. Because Alibaba is handling so much money, owning over 60-70% of online purchases in China, the Chinese Government stepped in, forcing Alibaba to obtain a banking license, which turns out to become Ant Financial. Ant Financial began as a wealth management application for workers, and within 18 months, they were able to acquire 450 million people with essentially no acquisition cost. This is because a lot of users are already using Alibaba’s platform, and so they simply connect Alibaba’s user to their platform. So with 450 million users using their platform, Ant Financial went on to switch from being a one-sided platform to a two-sided platform by connecting banks into their platform by offering loans to their users. This is once again another example of how a platform can leverage their existing users into creating a new profitable business and disrupting the financial service industries at the same time.
The disruption wave will continue to disrupt every single industries in the world, with no clear indication of when it is going to stop. Therefore, it is crucial that every company should start paying attention to existing platforms as they are your real competitors. Then, start thinking about approaching them and working with them early, start thinking about developing products and how you can design your own products to be integrated into these platforms. Instead of working against each other, Piskorski stressed on the importance of joining forces and moving forward together.
Source: Thailand Management Day 2018
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