Digital Transformation – Maslow's Hierarchy of Needs

Guo Ping, Rotating CEO at Huawei, speaking on digital transformation at the 2017 Huawei Asia-Pacific Innovation Day

Over 200 government officials, technology experts, scholars, and representatives from tech companies gathered on 9th November from all across the Asia-Pacific region for the third annual Huawei Asia-Pacific Innovation Day, held in Kuala Lumpur. The event was co-hosted by Malaysia's Ministry of International Trade and Industry (MITI), the Malaysia Digital Economy Corporation (MDEC), the Malaysia-China Business Council, and Huawei Technologies.

This year's event focused on fostering digital economy in the APAC region, with special focus on digital transformation models for emerging markets, small- and medium-sized enterprises, and core industries like services and tourism. At the event, Huawei announced the construction of a new OpenLab in Malaysia, which will serve as an open, flexible, and secure platform for joint innovation with local partners. Guo Ping, Huawei Deputy Chairman of the Board and Rotating CEO, gave a keynote speech titled "Digital Transformation – Maslow's Hierarchy of Needs". The following is the full text of the speech.

I. Digital vision

Ladies and gentlemen,

Good morning!

Welcome to the third Huawei Asia-Pacific Innovation Day. It's great to see you all again.

When we talk about digital economy, the focus should be on economy itself. Digital technology is an enabler, but the end goal is sustainable socio-economic development.

We are entering an intelligent world

• At Huawei, we believe that mankind will soon enter an intelligent world. In this world, all things can sense, all things will be connected, and all things will be intelligent.
• Devices will be the "feelers" for all things to sense. Networks will connect all things. And "digital brains" in the cloud will pool huge amounts of data and insight. With the help of these "digital brains", anything that requires mental effort will become more efficient.
• We see digital progress everywhere. When you travel in China, for example, you can use mobile payments wherever you go. They are accepted in cities and remote villages, and you can buy anything from plane tickets to fruit on the side of the road. Many people in China don't carry cash anymore.

In 2016, mobile payments in China reached 24 trillion US dollars. This is astounding. With wider use of big data and AI, an intelligent world isn't far away.

II. Digital status in the Asia-Pacific region

Digital transformation of Asia-Pacific countries

Let's take a look at the digital status of different countries in the Asia-Pacific region.

Huawei uses the Global Connectivity Index (GCI) to track digital status. There are three groups of countries: starters, adopters, and frontrunners.

In our research, we discovered something interesting. When the GCI score of a country reaches 35, the ROI for digital infrastructure will experience a multiplier effect. Malaysia, Thailand, and the Philippines are at this stage of development, and Indonesia and Vietnam will enter this stage soon. In other words, ICT investment in these countries will lead to greater GDP growth.

Example: Malaysia

Take Malaysia, for example. Malaysia aims to "become one of the world's top 20 economies by 2050". To support this goal, it has proposed many initiatives, including Industry 4.0, Smart Education, Smart Tourism, and Safe City.

ICT infrastructure like IoT, cloud services, and broadband networks will go a long way to help Malaysia achieve these goals.

Micro, Small & Medium Enterprises (MSMEs) are extremely important to Malaysia. By 2020, they are expected to account for 41% of the country's total GDP. For this to happen, Malaysia needs to provide these enterprises with affordable broadband, easy-to-use cloud services, and IoT platforms that support innovation. Malaysia also needs to foster an ecosystem that is conducive to growth. This is also an approach encouraged by the UN's Sustainable Development Goals.

III. Digital transformation – Maslow's hierarchy of needs

A country's hierarchy of needs

Next, I would like to talk about digital transformation from a city and country perspective.

Maslow's hierarchy of needs outlines a range of needs, including physical, safety, esteem, and self-actualization needs.

To me, a country's digital needs are similar. I would divide this hierarchy into four layers.

• The first layer is ICT infrastructure – the foundation of digital economy.
• The second layer is security, for both the physical and digital worlds. Security is necessary for development.
• The third layer is industrial digitization.
• The highest layer is creating a digital brain to help coordinate management.

The first layer: ICT infrastructure

Example: China

Let's explore this concept by looking at ICT infrastructure in China.

Just now, I mentioned that annual mobile payments in China reached 24 trillion US dollars. Other digital domains have seen similar progress. China has over 100 million shared bikes, and its e-commerce transactions amount to 3.5 trillion US dollars. In all of these domains, China ranks number one in the world.

China's progress in these areas is no accident: It's the result of long-term, heavy investment in infrastructure. For instance, Shenzhen covers less than 2,000 square kilometers. But it has more than 36,000 base stations. That's 2,000 more than those in Malaysia.

IoT creates momentum for enterprise innovation

New infrastructure creates new opportunities, especially for MSMEs. Over the past year, new ICT infrastructure is becoming one of the most powerful new engines behind innovation. Especially NB-IoT.

Dairy farms in northwestern china are connecting 1.2 million cows to increase milk yields, and two-thirds of new cars are launched with IoT modules. NB-IoT has a strong signal, huge range, and low power consumption. Many SMEs are leveraging it to improve their existing services and develop new ones. Companies are using NB-IoT to connect streetlamps, water meters, and electric meters all across the country. The possibilities for innovation and new growth are endless.

The second layer: security assurance

The physical world: safe cities

The second layer is security, for both the physical and digital worlds.

Let's begin with physical security. Video surveillance is seeing wider deployment in recent years. Combined with intelligent technology, it will bring safe cities to a new level.

Here's a great example:

Changzhou is a major industrial city in China's Jiangsu Province. The city has deployed a safe city cloud system, which uses AI and video for daily management. In the morning, it helps traffic police manage violations by scanning license plates across the city. After peak traffic hours, the system helps public security officers monitor key areas in the city. The system continues working through the night to organize and archive video content. It's super efficient, and cuts manual labor significantly.

The digital world: network resilience

Digital security is important too. In the past 20 years, ICT progress has presented many cyber security risks, especially with the rapid rollout of the IoT.

In the past, cars were closed systems, controlled mechanically. But today, vehicle systems rely heavily on IT. Even engines. Over 80% of engine R&D is software-related. More and more cars, power grids, and electrical devices are being connected every day. If we aren't proactive about cyber security, these developments will present huge risks.

In the future, all industries should work together to increase network resilience. We need ongoing improvements in both management and technology. This must be a joint effort between ICT, industry, and third-party players.

The third layer: industrial digitization

Industry 4.0

The third layer is helping industries go digital to gain a competitive edge.

The manufacturing industry is a good example. In the past several years, sales and logistics in this industry have all gone digital. Leading global companies are building digital twins of their products and equipment. These digital twins bridge the physical world and their business activities, helping manufacturers unify end-to-end operations, and drive intelligent business.

From a top-level perspective, many countries are releasing plans to help their industries go digital. Germany has proposed Industry 4.0, and has launched an Industrial Data Space program to better integrate industrial data. China has launched its "Made in China 2025" initiative. Involvement at the national level is critical. Industries need to go digital, and start leveraging their data to be more competitive. This will make their countries more competitive too.

Digital agriculture

Agriculture is the world's oldest sector, but it's also making rapid digital progress.

This chart is from Michael Porter, a management guru. As you can see, modern agricultural systems are interacting more with each other. This is because we can now capture and analyze data about machinery, soil, irrigation systems, seeds, fertilizer, and weather. Experts can analyze this data, use this data to train machines, and provide suggestions on things like seed selection, crop spraying, and greenhouse settings to increase agricultural efficiency.

Digital agriculture is also helpful for top-level design. In the past, it took about six months for the Ministry of Agriculture to gather data from underdeveloped regions. When they finally got the data, crops were already on the market, and it was too late to get involved. Today, massive amounts of data make it easier to guide macro trends and provide agricultural subsidies.

The fourth layer: a digital brain

A digital brain for city management

The ultimate goal of digital transformation is to equip cities with a digital brain. The emerging "city-wide computing" will integrate data across industries and domains to create huge business and social value.

City management is a good example. Today, new safe city systems in countries like Singapore, Hungary, China, and Russia will enable centralized management across different departments, including public security, transportation, environmental protection, and water conservation. If a landslide strikes in one area, all departments in the city will know about it. They can then work together to resolve the issue. Those responsible can monitor progress on a big screen.

A digital brain for industry management

Digital brains are also important for industry management. During an inspection of a heavy equipment manufacturer, a Chinese leader said: "This screen is amazing. With one glance, I can tell what all of our heavy machinery is doing. This is a full picture of China's construction sector."

Just imagine if each industry association could pool together all of industry data. Relevant authorities will have real-time insight into industry development, and adjust policies in response.

Every scenario is different, and there are countless examples of how digital technology helps improve management. Data aggregation screens like this need the support of big data and AI. Providing instant digital insight and support is our ultimate goal.

Conclusion

We still have a long way to go. Huawei is committed to the Asia-Pacific region, and will continue working with our partners to drive digital economy and ensure a better connected future for all of APAC. Thank you!