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TRANSCRIPT
Research on
Digital Transformation in
Hong Kong Business Sector
September 2019
Disclaimer
The content and data in this report is owned by Konica Minolta Business Solutions (HK) Ltd.
(KM) and the Hong Kong Productivity Council (HKPC). Without the authorisation of KM and
HKPC, any changes to the report content and data, as well as selling of the report, are not
permitted. KM and HKPC shall not have any liability, duty or obligation for or relating to the
content and data contained herein, any errors, inaccuracies, omissions or delays in the content
and data, or for any actions taken in reliance thereon. In no event shall KM and HKPC be liable
for any special, incidental or consequential damages, arising out of the use of the content and
data.
Research on Digital Transformation
in Hong Kong Business Sector
Context
1. Introduction ....................................................................................................................... 1
1.1. Background ................................................................................................................ 1
1.2. Objective .................................................................................................................... 1
1.3. Structure of Report .................................................................................................... 1
2. Methodology ..................................................................................................................... 2
2.1. Focus Groups ............................................................................................................. 2
2.2. Telephone Survey ...................................................................................................... 4
3. Findings from Focus Groups .............................................................................................. 5
3.1. Details of the Participants ......................................................................................... 5
3.2. Key Findings ............................................................................................................... 6
4. Survey Statistics ............................................................................................................... 10
4.1. Profile of respondents ............................................................................................. 10
4.2. IT Environment ........................................................................................................ 13
4.3. Views on Digital Transformation ............................................................................. 16
4.4. Concerns on Cyber Security ..................................................................................... 18
5. Conclusion ....................................................................................................................... 20
5.1. Summary on Research Findings............................................................................... 20
5.2. Recommendations ................................................................................................... 23
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1. Introduction
1.1. Background
In this digital era, the rapid development of new technologies, for example social media, mobile devices,
analytics, communications and cloud technologies, has created new expectations on services/products
to be provided by the business sector.
All the demand from external and internal needs, not to mention the active promotion of “smart city” by
the HKSAR Government, urged the necessity of digital transformation among Hong Kong companies –
either go digital, or be replaced.
In the view of this, Konica Minolta Business Solutions (HK) Ltd (KM) and the Hong Kong Productivity
Council (HKPC) jointly undertook the “Research on Digital Transformation in Hong Kong Business
Sector” to gain a better understanding of the present situation and challenges of Hong Kong companies
in the digital transformation process. The results of the research will help raise the awareness among
the business and public sectors, and facilitate the formulation of solutions and recommendations for the
digital transformation of Hong Kong.
1.2. Objective
The objectives of this research are to:
1. understand the current digital progress of Hong Kong business sector;
2. understand the barriers and challenges towards digital transformation;
3. provide insights to the service/product designers; and
4. provide insights to business operators
1.3. Structure of Report
This report sets out our approach and methodology in conducting the research, provides the survey
findings and presents the results of data analysis of Hong Kong companies.
Following this introductory chapter, the rest of this document is structured as follows:
Chapter 2 describes in detail the methodology adopted to carry out the research;
Chapter 3 presents the major findings from focus groups;
Chapter 4 presents the survey results, data analysis and major findings; and
Chapter 5 sets out our conclusions and recommendations.
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2. Methodology
For robust understanding of the views from Hong Kong companies towards digital transformation, both
focus groups and telephone survey were applied in order to facilitate both qualitative and quantitative
analysis.
2.1. Focus Groups
2.1.1 Discussion Guideline Design
The focus groups were structured with a designated discussion guideline as below:
Focus Group Discussion Guideline
1. Welcome and Introduction
2. Consent for Recording
3. Explanation of the process
4. Discussion Questions
5. Closing
________________
1. Welcome and Introduction [5 mins]
Greeting and introduce the moderator and assistant moderator
Create name tent for the participants
Introduce the background of the study and purpose of focus group
2. Consent for Recording [2 mins]
Explain the recording process
Emphasis the information collected will be used solely for the study only and will be
kept in strict confidence
Start the recording
3. Explanation of the process [3 mins]
Remind participants that there are no right or wrong answers in this discussion
Not trying to achieve consensus, but to gather information
Focus group will last about 1.5 hour
Everyone should participate
Turn off cell phones if possible
Have fun
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Feel free to move around
Help yourself to refreshments
4. Discussion Questions [75 mins]
Discussion area include
Keywords think of when heard about “Digital Transformation”
Major business difficulties – both internal and external prospects
Self-assessment on digital transformation process
Barriers/ challenges for “digital transformation”
Experience sharing of “digital transformation”
Most wished technology or investment area with extra funding
5. Closing [5 mins]
2.1.2 Focus Group Meetings
Representatives from Hong Kong companies were invited to share their views and difficulties in
the digital transformation process at three focus group meetings conducted by HKPC. The focus
group meetings were successfully held in March 2019 and attended by 24 participants in total.
Facilitated by HKPC, the representatives of companies participated in a 90-minute group session.
The focus group framework, guideline and data analysis were also developed and conducted by
HKPC independently. Notably the participation in the focus group was voluntary, anonymous,
and confidential.
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2.2. Telephone Survey
2.2.1 Questionnaire Design
To facilitate the interview process and enhance record management, HKPC developed a
designated questionnaire.
The information to be collected is illustrated as follows:
Perception on Digital Transformation;
Business Difficulties;
Barriers to Digital Transformation; and
View on Cybersecurity.
2.2.2 Sample Size
In this Study, 104 responses were successfully collected between April and May 2019 from the
following eight business categories:
Manufacturing
Import/Export/Wholesale
Retail
Accommodation and Food Services
Information and Communications
Financial & Insurance
Professional and Business Services
Real Estate
The ratio of each business categories was derived based on the latest number of establishments
in corresponding business categories from the Census and Statistics Department of the Hong
Kong Special Administrative Region (HKSAR) Government.
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3. Findings from Focus Groups
This chapter presents the findings from qualitative analysis – focus group, with the following structure:
1. Details of the Participants (Section 4.1);
2. Key Findings (Section 4.2);
3.1. Details of the Participants
In March 2019, 3 focus groups were successfully conducted, attended by 24 participants in total. They
come from Hong Kong companies which are invited by random with no specific industry target.
Registered Attended
Group A 15 10
Group B 15 8
Group C 13 6
Total 43 24
The industry of the attended participants covered different industries, including
Accommodation
Financial Service
Information Technology
Manufacturing
Professional Service
Public Organisation
Retail
Trading
Transportation and Logistics
The following graphics reflects the company information of the 24 participants in the 3 focus groups:
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3.2. Key Findings
This sub-section discusses the key findings from the focus groups in 4 areas, including
Perception on Digital Transformation;
Business Difficulties;
Barriers to Digital Transformation; and
View on Cyber Security.
3.2.1. Perception on Digital Transformation
To understand Hong Kong enterprises’ perception on digital transformation, the participants were invited
to provide three keywords upon hearing the term “digital transformation”.
Key Observations
1. Participants generally consider digital transformation as not only to adopt advanced technology but
also to improve efficiency, change people mindset and give rise to a new business model;
2. Financial issue is still the common concern for B2B and B2C companies. They will think about the
cost and return but not going digital for digital itself;
3. B2C companies tend to think about data management and analysis more while B2B companies are
concerned more about internal operation and efficiency;
4. B2C companies are generally seeking to provide digital service to their customers by moving their
service/product online; and
5. Transforming hardcopies to digital format is the first step for digital transformation.
B2B B2C
Keywords AI
Big Data
Business Case
ROI
Capabilities
Client
Cloud
Cost
Digitalise
Efficiency
Equipment
Finance
Funding
AI
Analyst
Automation
Business
Cloud
Computer
Cost
Curve
Data Legal Responsibility
Data Transparency
Deep Learning
Digitalise
Efficient
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Keyword
Machine Learning
Manpower
Market Demand
New Technology
Personnel
Platform
Records
Replacement
Security
Skill
Staffs
Time
Transformation
Trend
Update/replacement
ERP System
E-service
Innovation
Internet
IOT
IT
Manpower
Mindset
Mobility
Money
Online
Paperless
Return
Security
Service
Social Media
Solution Vendor
Virtual Machine
3.2.2. Business Difficulties
To understand the direction or area to be improved by digitalisation, the focus groups gauged the
information of major external and internal business difficulties that participants were facing currently.
Key Observations:
Business Difficulties - External
Business Environment - With an ever changing business environment, coupled with more
competitors going digital, businesses are under pressure to follow their peers to stay competitive.
New Client - In this digital age, the marketing channels have evolved and digital platforms are
becoming more and more important for businesses to reach potential new client/customer and
provide information about their services/products. However, these platforms often contain too many
similar services/products in the market and it is difficult for small businesses to stand their ground
against bigger competitors without a commensurate digital marketing budget.
Existing Client - Given the difficulty of finding new clients, it is important for businesses to retain
existing clients to revisit their services/products. Hence, customer service in pre-sales, sales and
post-sales stages are very important and challenging to maintain good relationship with existing
client.
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Communication with External Parties - Most of the Hong Kong companies are now exploring the
Mainland/overseas markets to expand their business. However, different countries, or regions got
different local communication channels, e.g. social media/ instant message application. It is
challenging and time consuming for HK companies to handle multiple communication channels with
external parties.
Business Difficulties - Internal
Human Resources - Human resources-related issues are common pain points for HK companies,
especially SMEs. Ageing staff, huge staff cost, high turnover rate, lack of systematic staff training,
are just some of the issues. Hence HK companies are seeking ways to automate system to reduce
staff cost and wish to find user-friendly software that allows new staff to input and output easily.
Internal Process – Some companies are still operating in traditional ways, with rigid internal
process that only accept hardcopy signature, from leave application to overseas quotations, which
is time consuming and bring difficulties to their daily operation.
Data and Analysis - Businesses are facing difficulties when proceeding data transfer between old
and new software and data exchange between different divisions/departments. Also, how to handle
data from different systems to generate visualise report to management is also a challenge for them.
Cyber Security - Digitalisation will lead to cyber security concerns which may create another time-
consuming problem. It is difficult to protect themselves from cyber attacks given the perceived low
staff awareness in cybersecurity among SMEs.
3.2.3. Barriers to Digital Transformation
Although digital transformation is a major development trend in most businesses, it is not as easy as
simply installing the most advanced software. The focus groups also studied the barriers and challenges
that IT managers may need to pay attention when engaging in digital transformation.
Key Observations:
Corporate Vision & Strategy - The digital vision of management level is important. Without
management support, the staff cannot do much on digital transformation accordingly. However, it is
difficult to convince management to support without successful showcase and quantified ROI.
Mindset & Culture - Another common issue is the reluctant attitude towards digital transformation
among staff and internal partners. Staff, especially those experienced one, are already accustomed
to one particular way to work and are therefore resistant to change. Also, a lack of long-term vision
of internal partners may lead to focus on the short-term influence on the financial operation of their
team but not the whole picture of the company.
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Talents & Skills - For those companies with limited data, they are struggling with the data collection
skill to enlarge their database. For those with sufficient data, they are not confident enough to hire
a data scientist for the analysis, especially for the SMEs.
Regulation & Compliance - For some industries, especially the professional industry, the industry
standard is driven by the governance associations or authorities. If these governing parties do not
take the lead, the practitioners cannot do much on the digitalisation process. For example in Hong
Kong, the legal industry still relying on case bundles in paper form due to the requirement.
3.2.4. View on Cyber Security
During digitalisation, businesses will become more connected to the cyber world, making themselves
more exposed to various security threats that can cause immense impact and damage. Hence, cyber
security is a very important topic in digital transformation that cannot be omitted.
Key Observations:
Awareness - The awareness on cyber security among the management was highly raised in recent
years due to the famous ransomware “WannaCry”. However, some companies are still not paying
enough attention to their data assets, under the false premise that their company is too small to be
the target.
Protection - For some companies involving credit cards transaction, they are already following the
Payment Card Industry Data Security Standard (PCI Standard), which ensured the protection
quality of their business. Some other companies, however, are only adopting basic firewall
protection with regular backup.
Disaster Plan - The disaster plan is not clearly developed among the participants. Most of them
believe they have a relatively low chance to come under cyber attacks, and are confident enough
to handle the basic backup practice.
Investment - Most of the participants will not invest further technically but will focus on internal staff
training and education to raise cyber security awareness as they believe most attacks are from staff
email/ external devices (e.g. USB).
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4. Survey Statistics
Besides qualitative analysis, telephone surveys also conducted for quantitative analysis. This chapter
presents the survey findings and data analysis of Hong Kong companies for the Study and is divided
into 4 sub-sections. The topics covered are as follows:
1. Profile of Respondents (Section 4.1);
2. IT Environment (Section 4.2);
3. Views on Digital Transformation (Section 4.3);
4. Concerns on Cybersecurity (Section 4.4);
104 respondents have been successfully interviewed in this Study.
4.1. Profile of respondents
This sub-section discusses the profiles of the respondents, including
Business Categories;
Major Business Target; and
Employee Numbers and Age Range.
4.1.1. Business Categories
As shown in below table and figure, the responses were collected under 8 business categories, with
reference the ratio in Hong Kong to reflect a more realistic business environment.
Business Categories %
1. Manufacturing 6%
2. Import/Export/Wholesale 34%
3. Retail 17%
4. Accommodation and Food Services 5%
5. Information and Communications 4%
6. Financial & Insurance 8%
7. Professional and Business Services 13%
8. Real Estate 5%
Total 100%
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4.1.2. Major Business Target
Among the respondents, companies which mainly engage in “Business to Business” (B2B) activities
(52%) is slightly more than those engaging in “Business to Consumer” (B2C) activities (48%).
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4.1.3. Employee Numbers and Age Range
As shown in the below table, around 63% of the respondents are Small and Medium Enterprises (SMEs),
while the rest are Large Enterprises.
Those with more than 100 staff account for the biggest share of the respondents (28%), followed by
those with 10 or less (26%), and 21 to 50 (23%).
Number of Staff %
SMEs1
1-10 26%
11-20 14%
21-50 23%
Sub-total 63%
Large Enterprises
51-75 3%
76-100 6%
>100 28%
Sub-total 37%
Total 100%
In term of average age range of staff, a third of the companies surveyed (33%) are with staff average
age range of “36-40”, followed by “31-35” (26%) and “41-45” (23%). It is noted that SMEs has a higher
average age range of staff, with 38% being 41 or above, 13% more than Large Enterprises.
1 Manufacturing enterprises with fewer than 100 employees and non-manufacturing enterprises with
fewer than 50 employees are regarded as small and medium enterprises (SMEs) in Hong Kong. https://www.success.tid.gov.hk/english/aboutus/sme/service_detail_6863.html
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4.2. IT Environment
This sub-section discusses the IT Environment of surveyed companies, including
IT Support and Outsource;
Documentation and Approval Process; and
Expenses on IT
4.2.1. IT Support and Outsource
Among the respondents, 75% have their own in-house IT support staff or are using IT support outsource
service. “Hardware Maintenance” (58%) is the top IT support area, followed by “Network Technical
Support” (41%) and “Application Development & Management” (35%).
For those respondents that currently without specialised IT Support, if deemed necessary, they may
outsource “Application Development” (42%) and “Equipment Maintenance” (38%), while paying
relatively low attention on “Cyber Security” (15%).
(Multiple Choices)
(Multiple Choices)
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4.2.2. Documentation and Approval Process
Most respondents (81%) install a file server to handle files and documents. However, 36% have troubles
saving and searching scanned files, while 34% and 29% expresses difficulties in scanning and keeping
the copy ,and simply keeping the original copy respectively.
For the approval process for internal documents, for example annual leaves, invoices, and petty cash
request, 40% of respondents are still using “Sign on Hardcopy only”, while 46% starts to use e-approval.
Only 15% have migrated to the status “E-approval only”.
(Multiple Choices)
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4.2.3. Expenses on IT
Excluding wages, the majority of the SMEs would spend “HK$ 2,001-5,000” (33%) for monthly
operational expenses on IT, followed by “HK$ 1-2,000” (27%), much lower than in large enterprises,
which 74% are spending “>HK$ 10,000” monthly.
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4.3. Views on Digital Transformation
This sub-section discusses the views on digital transformation of the surveyed companies, including:
Expected Benefits from Digital Transformation
Barriers to Digital Transformation
4.3.1. Expected Benefit from Digital Transformation
The respondents are asked to choose one expected benefit from digital transformation. For companies
with B2B business target, “Improve business processes and reduce costs” (76%) is their top choice,
with “Business upgrade & transformation” a distant second (10%).
For companies with B2C business target, “Improve business processes and reduce costs” (66%) is also
their top choice. However, some (16%) selected “Improve customer experience and retain existing
customers”, higher than those with B2B business target (6%).
B2B B2C All*
Improve business processes and reduce costs 76% 66% 72%
Improve customer experience and retain existing customers 6% 16% 11%
Business upgrade & transformation 10% 11% 11%
Find more new customers 4% 0% 5%
Attracting new generation of talent 4% 7% 2%
*The percentage may not add up to 100% due to rounding
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4.3.2. Barriers to Digital Transformation
For SMEs, “Funding” (67%), “Restriction from legacy system” (53%) and “Awareness of employee”
(38%) are the top 3 barriers to go digital; while for Large Enterprises, “Funding” (66%), “Awareness of
management” (63%) and “Awareness of employee” (50%) are the top 3 barriers to go digital.
“Funding” and “Awareness of employee” are common major issues faced by both SMEs and Large
Enterprises. However, unlike SMEs with simple management structure, Large Enterprises generally
think that it is difficult to seek management support during the digital transformation process.
SMEs Large Enterprises All
Funding 67% 66% 66%
Restriction from legacy system 53% 42% 49%
Awareness of management 33% 63% 44%
Awareness of employee 38% 50% 42%
Skill & talent 33% 32% 33%
Cybersecurity 32% 32% 32%
Data management 20% 11% 16%
(Multiple Choices)
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4.4. Concerns on Cyber Security
This sub-section discusses the concerns on cyber security of the surveyed companies, including
Protection
Data Backup
Expenses on Cyber Security
4.4.1. Protection
SMEs (59%) are less worried about the threat of cyber attacks than Large Enterprises (71%). Also, they
are less frequent to review their cyber security measures, with 37% review their cyber security
measures at more than one month interval, and 17% never engaging in security review. Although Large
Enterprises are more worried about cyber attacks, 31% of them still only review their cyber security
measures at more than one month interval.
Frequency to Review Cyber Security Measures
SMEs Large Enterprises
Daily 20% 19%
Every Week 11% 25%
Every Month 15% 25%
More than 1 Month 37% 31%
Never 17% 0%
100% 100%
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4.4.2. Data Backup
All of Large Enterprises would conduct regular data backup, with 87% doing backup daily and 11% even
engaging in real-time data backup. For SMEs, 53% would conduct data backup daily, while 34% would
engage in the practice at every week or longer interval.
Frequency of Regular Data Backup
SMEs Large Enterprises*
Never 2% 0%
Real-time 8% 11%
Daily 53% 87%
Every Few Days 5% 0%
Every Week 11% 3%
Every Month 12% 0%
More than 1 Month 11% 0%
100% 100%
*The percentage may not add up to 100% due to rounding
4.4.3. Expenses on Cyber Security
Nearly half of the SMEs surveyed (47%) would spend “HK$ 1-10,000” annually on cyber security,
followed by “HK$ 10,001-50,000” (27%), much lower than among large enterprises, in which 37% would
spend “>HK$ 100,000” annually.
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5. Conclusion
5.1. Summary on Research Findings
With this robust research on digital transformation in Hong Kong business sector, it is noticed that:
Aspect Summary
Views on Digital
Transformation
More than Technology
Digital transformation is not only about adopting advanced technologies but also about
improving efficiency, changing people’s mindset and giving rise to new business model.
Digitalisation
Transforming hard copies to digital format is the first step for digital transformation.
Current
Situation
Lack of IT Support
Some companies do not employ specific IT support staff or engage outsourced IT support
service. This may lead to slower progress in the digital transformation process.
Difficulty in Documentation
In general, Hong Kong companies find it difficult to handle their documents, in all aspects
of keeping hardcopies, scanning the files and enabling the search function. With the
digitalising of documents critical for the digital transformation process, careful attention
should be taken to handle their files/documents.
Rigid Approval Process
The majority of the companies surveyed are still relying on hardcopy signature for the formal
approval procedure, which is both inefficient and time-consuming in daily operation,
especially when overseas third parties are involved.
Urgency to Retain Existing Client
The business environment is becoming more and more competitive. Instead of scouting for
new clients, Hong Kong companies are more reliant on retaining existing clients to revisit
their services/products, especially among companies with B2C business. Many of them
have set better customer experience as their No. 1 expected outcome of digital
transformation apart from improving internal business process.
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Aspect Summary
Barriers to
Digital
Transformation
Financial Concern
Funding, not surprisingly, is the common top concern for both SMEs and Large Enterprises.
When the companies think of “Digital Transformation”, financial related keywords are likely
to be imagined and they will carefully calculate the return of investment (ROI) before
implementing the digital plan.
Restriction from Legacy System
Restriction from legacy system cannot be neglected with the situation being more serious
in SMEs than in Large Enterprises. Companies are worried about the migration process
from old to new systems to avoid data loss, especially since SMEs are unlikely to have the
budget to replace all systems in one go and may opt to replace the systems one-by-one
gradually.
Lack of Employee’s Awareness
It is noted that aging staff is common in Hong Kong companies, especially among SMEs.
Also, the staff is generally passive and even reluctant to new systems/changes, hindering
the digital transformation process. Lack of long-term vision of internal partners may lead to
focus on short-term influence on financial operation of their team and not the full picture of
the company.
Lack of Management’s Awareness
Awareness of Management is a huge problem for Large Enterprises. The decision making
process of Large Enterprises is much more complicated than SMEs. IT managers of Large
Enterprises are struggling to convince top management to support digital transformation
without successful showcase and quantified ROI.
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Aspect Summary
Cyber Security Gap of Awareness between SMEs and Large Enterprises
The famous ransomware “WannaCry” helped raise awareness of cyber security among
Hong Kong companies in recent years. However, there is still a gap in awareness between
SMEs and Large Enterprises, with the former less worried about potential cyber attacks.
Some companies are still not paying attention to their data assets, and under the false
apprehension that they are too small to be the target.
Urgency to Enhance Protection
The frequency to enhance cyber security measures is relatively low, especially for SMEs.
When companies go through the digital transformation process, their data assets will be
more and more exposed to cyber threats, and it is necessary to enhance protection
measures to be well-prepared for the challenges.
Room to Improve in Data Backup Practice
The regular data backup practice has been well observed among Large Enterprises,
showing that they treasure the value of their data dearly. For SMEs, there exists significant
room for improvement. If the issue is not promptly addressed, it will create a huge problem
as they go further digital.
Focus on Internal Training
Companies are generally not investing much in cyber security, especially among SMEs.
With scarce resources, internal staff training and education is vital to raising cyber security
awareness for basic protection.
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5.2. Recommendations
Based on the results of the focus group and telephone survey, the research team put forward five
suggestions to accelerate the process of digital transformation of Hong Kong Enterprises, including:
1. Set a clear strategy to lead digital transformation at management level
Digital transformation is an on-going process that takes time to reflect the return of investment.
Hence, it is essential to develop a comprehensive digital transformation strategy plan at
management level to lead the process, and set well-defined goals for divisions and teams to
achieve it. Without management support, IT department cannot do much on the process.
2. Establish two-way communication for employees to involve in the process
Although led by management, employees’ opinion cannot be neglected. It is always important
to keep employees informed and involved throughout the whole digital transformation process,
as it allows employees to imagine their future working style and potential benefits on efficiency
after the digital transformation process to secure their support.
3. Utilise the resources available in the market to gear up at early stage
Talent holds the key to digital transformation. Yet it is difficult or costly to hire new staff who are
well equipped with technical knowledge and also understand your company well. Training up
the technical competence of existing staff will be a more attractive solution with the availability
subsidies from the Reindustrialisation and Technology Training Programme for companies to
train their staff in advanced technologies, especially those related to digital transformation.
4. Start cloud migration to reduce the reliance of a single system
Legacy system not only creates limitations to the technology or features that can be adopted,
but can also lead to potential cyber security issues as a result of gradual termination of system
updates and support by the product developer. Thanks to latest cloud technology, people can
now enjoy a flexible and protected environment on applications with continuous IT support.
5. Proactively review cyber security and data backup measures to protect the company's
valuable data assets
In this digital world, data is a valuable asset of your company, which is equally as important as
cash. Hence, companies should start accumulating data - valuable asset of the companies to
prepare for digital transformation, regardless of their competence on data analysis. However, it
must come with suitable security and backup measures, just like a safe to keep the cash.
-End of Report-