DailySocial Corporate Digital Transformation Report 2020 EN

Corporate Digital
Transformation
Report 2020
© July 2020
1
Contents
Contents 1
Introduction 2
Research Method and Scope 3
Digital Transformation 5
Definition 6
Stages 9
Digital Transformation During Covid-19 11
Case Study 14
Banking 15
Banking in Asia 15
Banking in Indonesia 15
Vision and Leadership 16
Corporate Culture 17
Technology Innovation 21
Verdict Table: BRI, BCA, Mandiri, PermataBank 30
Non-Banking Financial 34
Insurance 35
Verdict Table: Allianz Life Indonesia, Zurich Indonesia, Sequis Life 41
Pegadaian 44
Verdict Table: Pegadaian 50
Mandiri Tunas Finance 51
Verdict Table: Mandiri Tunas Finance 56
Telecommunication 57
Telecommunication Industry Landscape in Indonesia 57
Telecommunication Business Model 57
Telecommunication in the Era of Disruption 57
Digital Transformation in Telecommunication 59
Verdict Table: Telkom, Telkomsel, XL Axiata, H3I 70
FMCG 74
FMCG Industrial Landscape 74
FMCG Industry in the Era of Disruption 74
FMCG Indonesia (undisclosed source) 74
HM Sampoerna 77
Verdict Table: HM Sampoerna, FMCG Indonesia (undisclosed source) 82
Transportation and Tourism 84
Transportation Industry 84
Blue Bird 84
Panorama Group 91
Garuda Indonesia 94
Verdict Table: Blue Bird, Panorama Group, Garuda Indonesia 98
Conclusion 101
Bibliography 107
2
Introduction
Corporate transformation is becoming a strategic agenda to many policy makers. Transformation can be
interpreted as a comprehensive change in strategy, operating model, organization, talent, process, and
technology utilization. The use of technology in organizations has many promises such as efficiency,
increasing value, and even vehicles to change the direction of the company.
DSResearch through this whitepaper presents the results of research on the development of corporate
transformation in Indonesia. The identified companies consist of five different sectors, banking, non-bank
financial, telecommunications, transportation and tourism, and FMCG. This research will explore in-depth
the extent to which these five sectors are transforming.
Component identifier consists of three things:

1. Commitment made by policy makers and companies.
2. An innovation journey, both the ongoing and future plans.
3. Product innovation or value generation within the business scope of each company.
These three components will be used as the main framework to identify the transformation of each
company. In addition, the discussion of each sector will be supported by suitable additional frameworks
with the case study.
In its journey, this research intersects with the Covid-19 pandemic in which the presence hit all aspects
worldwide. This report also comes with a section that elaborates on the company’s attitude to optimize
transformation in time of pandemic. Through this report, readers are expected to get insights related to the
corporate transformation in Indonesia.
3
Research Method and Scope
DSResearch returns with the latest hot topic, corporate innovation. This research presents information about
the company’s commitment for transformation in the digital age. Through this research, DSResearch tries to
dig and absorb on how companies innovate and comply with the future techno-logical developments.
DSResearch has interviewed more than 20 speakers from large-scale companies, both in C-Level and
Mid-Level positions. All speakers came from five different sectors, namely banking, non-bank financial,
telecommunications, transportation and tourism, and FMCG.
First, the banking sector includes BRI, BCA, Mandiri, PermataBank, CIMB Niaga, and Maybank. Second,
the non-bank financial sector includes Zurich Insurance Indonesia, Sequis Life, Allianz Life Indonesia,
Pegadaian, and Mandiri Tunas Finance.
Third, the telecommunications sector consists of Telkom, Telkomsel, XL Axiata, and Hutchison 3 Indonesia
(H3I). Fourth, the transportation and tourism sector includes Blue Bird, Panorama Group, and Garuda In-
donesia. Fifth, FMCG includes HM Sampoerna and one company that cannot be named.
In processing information, DSResearch fully uses qualitative methods obtained from representative
company interviews as primary data, and various alternative sources as secondary data (annual reports,
financial reports, and online articles/news). All interviews were conducted from October 2019 to early
March 2020).
However, due to an unprecedented situation that occurred in the last few months, DSResearch decided
to conduct another interview through a brief survey related to the impact of Covid-19 on the company’s
digital transformation. In addition to the existing sources, DSResearch has obtained answers from several
other companies.
01 Digital
Transformation
6
Digital Transformation
The world is changing faster than before. Arguably, we have reached the fourth industrial revolution, built upon the
previous three. This revolution is supported by the optimization of digital technology where both the development
and diffusion of innovation is much faster than before (Schwab 2016).
Market behavior is one thing which shows a significant change. Product innovation is quite fast and easy to imitate.
Companies are forced to mobilize human resources to learn and adapt to the digital world with new capabilities. The
demand to adopt technology requires companies to rethink their approach to innovation.
For decades, starting in the 1960s, innovation was concentrated in the R&D centers of large companies, which gave
these companies a competitive advantage, especially in setting up the direction and acquiring benefits. However,
since the 1990s, this model began to be disrupted by the rise of new digital technology, venture capital, and the faster
adoption of consumers for new technology. Companies started to build an innovation ecosystem that developed into
the “open innovation” model.
As new digital technology introduced, opportunities to capture new markets or to outperform old players are in-
creasing. For large companies, this scenario is quite like a double-edged knife. They did have the opportunity to
develop the company, but they also had to be prepared for higher risks.
1. Definition
A. Transformation
The term “transformation” has been used by various business practices in the 1990s (Muzyka et al. 1995). The early
effort to define business transformation took place at a conference organized by the Corporate Renewal Center at
INSEAD. It results in a two-dimensional concept, a fundamental change in organizational logic or a fundamental
change in behavior (Muzyka et al. 1995).
Meanwhile, McKeown and Philip (2003) define transformation as a comprehensive concept that encompasses various
competitive strategies adopted by organizations to produce significant improvements in business performance. These
strategies include processes in business redesign, organizational development, overall quality management, and the
use of information technology.
More importantly, technology has been identified as the main vehicle to help organizations transform. The role of
information technology (IT) and new communication has been widely recognized due to rapid development and
diffusion, thus triggering consideration of business transformation in organizations (Morgan & Page 2008).
B. IT Empowerment
Dehning et al. (2003) stated that information technology (IT) is transformational when companies change the way
they do business traditionally and fundamentally by redefining capabilities, processes and relationships. Organizations
should involve strategic acquisition of technology to obtain new capabilities or capture new markets.
Eventually, the implementation of IT creates a significant change. It appears, this fundamental change requires
companies to operate in a completely new market scheme. For example, an FMCG company which business run
manually and traditionally is shifting sales towards digital. When the company penetrates into the current ecosys-
tem, there will be many adjustments that can cause fundamental changes in their distribution systems.
In an effort to integrate work, Morgan and Page (2008) propose four phases in order to develop and increasing risk
and profit.
The four phases consist of:

1. Adapting or automating activities
2. Evolving aor synchronizing technology
3. Envisioning or redesigning business network process
4. Renewing or redesigning business scope
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C. Digital Transformation
Various perceptions of digital transformation appear in a with customers, and business operations. In conclusion,
number of literature. This idea was born from a blend of digital transformation is a more complex effort than a
personal and corporate IT environments and summarizes technology-supported business transformation to over-
the transformational effects of new digital technologies come the strategic role of new digital technology and the
such as social, cellular, analytic, cloud, and the Internet of ability to innovate successfully in the digital world (Yoo et
Things (SMACIT) (White 2012; Kane et al. 20 5; Sebas- al. 2010). We define it as a process in which a company
tian et al. 2017 ). unites several new digital technologies with a wide range
of connectivity.
Broadly speaking, digital transformation is described as
the integration of digital technology and business pro- The goal is to achieve superior, competitive and sustain-
cesses in the digital economy (Liu et al. 2011). A similar able performance by changing various business dimen-
view regards it as an effort to radically utilize technology sions, including business models, customer experience
to improve company’s performance or scope (Wester- (digital products and services), and operations (process-
man et al. 2014). es and decision making), which can affect the abilities or
talents of individuals and the entire value system.
Digital transformation is about how to become an orga-
nization that utilizes technology to develop all aspects of
a business model, on the products offered, interaction
Figure 1. Transformation Degree
Enter or create
new market
Market & Customer
Enter adjacents Transformational

market, serve
new customer
Positioning
Adjacent
Serve existing
market and Develop new
Where to Play?
customer Core offerings, assets,

and business models
Use or improve
existing offerings
and assets Add incremental
offerings and assets
How to Win? Products & Assets
Unknown Needs Known and Knowable Needs

Which must either be Which can be planned and
discovered or developed tackled
Source: Wired
8
► Core
In this stage, companies will see innovation based on existing products. According to Capgemini’s explanation, most
of the companies that have carried out the transformation, run this type. In this phase, the company can involve every
employee, because innovation is executed in the daily activities of the company. This process can be one of the efforts
to promote and instill a culture of innovation in the internal company.
In addition to involving employees as well as being a source of innovation, the “Core” type also opens up great oppor-
tunities for innovation from its customers. Most of the companies interviewed worked closely with their customers to
improve existing offers. The most influential approach is the collection and analysis of customer data and customer
co-creation.
► Adjacent
Adjacent innovation usually took form of:
1. New product/service for the current customers which is well understood by the company
2. Current product/service prepared to acquire new target market
Most large companies excel in this type of innovation and use it to generate quick profits. In this type, the key is to increase
existing customers or rely on existing capabilities and use them for new uses.
This category is closely related to the company’s expertise in identifying markets. Innovation can be said to depend on
the moment. Companies need time to efficiently determine innovation and as soon as possible integrate into the product/
service. Especially for digital technology across sectors or general nature, companies usually tend to look for external
partners to get access to the technology needed. Technology vendors and startups are examples of efficient sources for
this type of innovation.
► Transformational
“Transformational” innovation is a form of company’s bet to achieve future goals. This type of innovation is often long-
term and high-risk because it relies on new technology and target markets. Many large companies in this category are
still struggling. This is because the technology is less mature and the application is still unclear. It should be noted that
transformational innovation must be free from pressure in order to deliver short-term returns.
Sources of effective transformational innovation include R&D centers, innovation laboratories, universities/researchers,
and companies on a broader scale. Super technology companies, such as Microsoft and IBM or healthcare companies,
actively carry out basic research internally in specialized research centers.
In the technology and manufacturing industries, companies collaborate with suppliers or other parties to develop the
next cutting-edge technology. Many companies collaborate long-term with universities and researchers to carry out
transformational innovations.
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2. Stages
A. Corporate Culture
Every organization has its own uniqueness in terms of culture and work environment. Daily values and attitude be-
come a guide how individuals respond, make decisions, and deal with change. Generally, organizational culture (corpo-
rate culture) comes from the attitudes of company leaders. Conscious or not, actions, methods of operation, and core
values of company leaders are observed and repeated by every individual in the organization.
In large-scale and complex organizations, culture is defined by many factors including years of policy, employee recog-
nition of what behaviors are valued and what behaviors are not, and employee perceptions about what is needed to be
successful. Although intangible, organizational culture is an important factor in every company’s business decisions
and results.
In the digital age, companies are required to adapt very quickly due to changes in consumer behavior and competition.
Moreover, technological developments allow consumers to share, compare, and assess their experience in enjoying
products/services. We are in an economic era driven by consumer demand, where the company’s reputation is strongly
influenced by ratings. This condition can accelerate the transformation steps needed in the company. The choice, com-
panies adapt to current market realities quickly or become irrelevant.
In time of transformation, leaders usually consider the necessary core components. They utilize deep data analytics,
real-time customer insights, digital solutions, process reengineering, and the latest transformation tactics. Talented
leaders, business analysts and data scientists gather to understand consumer needs and enable change.
B. Innovation Journey
As part of the transformation, it is important to detect the innovation journey of each industry player. This report
uses a three-phase model to detect the innovation process. This model explores three phases starting from ideation/
initiation (idea generation, exploration, and selection). In this phase companies usually will mention more than one
source of innovation. On the internal side, for example starting from C-Level, managers, to the lowest level. On the
external side it can be from consumers, consultants, to competitions held for internal parties.
The second is implementation/execution (prototyping, development). This stage again divides the two ways of exe-
cuting the usual innovation of the company. First, they will appoint a special department or division to execute the
ideation that has emerged. This innovation usually requires certain expertise related to technology. Secondly, it will
promote innovation in the relevant divisions/departments that will later use this innovation. This type of innovation
is related to certain products/services.
The third phase is value generation. At this stage, innovation is ready to be applied. The main purpose of this inno-
vation will not be far from the efficiency of the company or generate new sources of income.
Fase 1 Fase 2 Fase 3
Ideation Implementation/execution Value generation

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C. Product Innovation
Innovation is not just an event that occurs one time then completed, but a discovery process, engineering and trans-
formation. Innovation is also not something that is tightly closed to the internal company, like policy makers. Innovation
requires the whole ecosystem.
In addition to the innovation process identification, this report is to represent the results of these innovations. Through
the conducted research, it reflects how policy makers in the industry reflect innovation. Is it limited to being a medium
to seek new profits and efficiency, or it becomes the main mirror of their business value.
Furthermore, people’s behavior is soon to be driven by digital technology, including economic behavior that will influ-
ence companies in making policies. Therefore, today’s companies should have a strong understanding of how to utilize
the digital world to maximize their impact.
Most of the large companies in Indonesia are starting to be aware of digitalization. Some of these companies have im-
plemented policies utilizing the digital ecosystem. Some of them claimed that based on short-term calculations, efforts
to form a digital business network were not yet comparable to their existing businesses. Even so, basically they agreed
that they should immediately think about bringing business in that direction.
This report is based on the three levels of innovation previously described as instruments to identify the extent of a
company’s digital transformation journey. By not excluding the possibility that there are still many companies that have
not significantly carried out digital transformation, we added one level at an early stage, Pre-Core. The following is an
overview of the framework (framework) used as a reference to identify the journey of each company:
Figure 2. Digital transformation stages
Indicator Pre-Core Core Adjacent Transform
Expanding from existing Developing breakthrough &

Objective Awareness of Optimizing existing business into “new to the inventing things for markets
innovation product/services for company” business (new that don’t exist yet (new
existing customer business, optimize, early business, pre-market, poten-
stages) tial to disrupt core business)
Market Both of existing Both of existing market Enter adjacent market & • New markets (products/
market and existing and existing customer serve adjacent services)
customer customer • New customer needs
Output Efficiency Annual planning & • Business building Decisions to explore, initiate
forecasting and detailed strategies project plan & milestone
plan for growth • Investment budget
• Detailed business plan
for ventures
• Venture client
Player/value Board member or Event & sharing Accelerator, incubator • CV building
Managerial resources • M&A
• Venture capital
• Short-term (12 • Short-term; improve • Short-term (New
month) fix feature/ (enrich customer) business/growth stages)
process level • Mid-term; penetrate (in- • Mid-term (explore/early
Time Tentative • Mid-term (36 month) crease share of wallet) stages)
innovate product • Moon-shot; build (Sub- • Transform (business
level stantial contribution) model level)
• Moon-shot (more
than 36 month) dis-
rupt business middle
level
Source Internal employee/ Internal employee/ Vendor/independent Innovation lab

customer or vendor customer innovator
Source: Capgemini 2019

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3. Digital Transformation During Covid-19

The current Covid-19 pandemic occurred in the world have changed the whole perspective of economic vehicles.
Policy makers and business people are required to consider various possibilities in the future so that their business can
survive. They are also faced with a dilemma of policy choices to deal with a pandemic.
The scenarios applied by each country can be different, ranging from lockdowns, social distancing, to massive tests. All
of these efforts were made to reduce the Covid-19 positive case curve. There are two things that are at stake in taking
this policy, namely public health and its impact on the economy.
Figure 3. Containment policies flatten the medical curve, but steepen the recession curve
New cases
Medical containment
measure
New Case without
containment policies
Make the medical
New cases with crisis less bad
Time
Recession without
Recession with Make the economic

containment policies crisis worse
Severity of
recession
Containment measures flatten the infection
curve, but steepen the recession curve.
Source: Centre for Economic Policy Research (CEPR)
The chart above shows that increasingly extreme policies to reduce the medical curve can have an impact on in-
creasing the recession curve. Vice versa. In the case of Indonesia, the government decided not to do a lockdown, but
large-scale social restrictions (PSBB) and work from home (WFH) in a number of areas.
Some players consider this approach to be ineffective to flatten the Covid-19 curve as soon as possible. In reality,
government policies do not stop entrepreneurs or businesses completely, but these efforts do not fully help the
economy because some businesses experience a decline in income that has to close down.
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Figure 4. Navigating businesses through the crisis
Flatten Fight Future
Establish crisis 1 Develope Scenario-Based 2 Create a Rapid Response and

management Planning Approach to Transformation (RR&T) team
manage uncertainty
3 Revamp Organization and 6 Restructing Cost, Managing Focus of future

people for the new normal Cash, & Liquidity edition
Navigate 4 Drive Topline Security and 7 Emerge Stronger; drive

through Flatten, Customer Trust advantage in adversity
Fight, and
Future
5 Stabilize and restart Supply 8 Accelerate Digital and Focus of this
Chain, Manufacturing Technology transformation Edition
Help Society during Covid-19

9
Note: RR&T = Rapid Response and Transformation Team
Source: BCG
This report shows that during this crisis, leaders need to think in two dimensions. Leaders must take an integrated
perspective on health/medical developments, government responses, community reactions, economic implications for
understanding business/sector impacts, and thinking on a multi-time scale in a flatten-fight-future framework.
a. Flattern (short)
In general, this is the initial phase after a pandemic outbreak which aims to limit the number of new cases, especially
in cases that require intensive care. Partial social restrictions and business closures can cause an economic recession
with a large impact on employment.
b. Fight (medium)
In this phase, businesses are trying to find ways to fight viruses, restart the economy, support communities in balanc-
ing life and supply chain, increase economic activity by restoring GDP, reopening businesses, and continuing to work
towards social restrictions in a sustainable manner.
c. Future (long)
In the previous chart, the Future phase will greatly trigger the acceleration of digital transformation and technology.
Outside of government policies, all policy makers must start thinking about shifting business models to minimize fully
face-to-face and physical contact. In this case, innovation is one solution.
In a general note, the transportation, tourism and aviation sectors were hit the hardest by this pandemic. The aviation
sector is faced with the government’s decision to close the flight route by up to 80%, starting from February 2019. This
has a long impact on the tourism sector which is forced to close lodging services for the coming months.
13
On the other hand, the banking sector is preoccupied with their digital shifting phenomenon. As one of the sectors has
transformed earlier, this sector has its own obstacles in dealing with this pandemic. Open banking technology that has
begun to be developed by a number of banks needs more attention.
“
"Although banks have started digital transformation, they should realize that it is a
journey, not a destination. When the business environment is increasingly volatile
and full of uncertainty, banks must remain nimble and continue to innovate, there-
fore, they can immediately respond to changes in consumers and market demands.
This is where open banking comes into place," Red Hat Director of Sales, Financial
Services for APAC Benjamin Henshall said.
The Financial Services Authority (OJK) noticed that the performance of life insurance industry premium growth dropped
significantly due to the pandemic. Life insurance premium declined by 13.8%. As quoted from Bisnis.com, as OJK’s
Head of Commissioners, Wimboh Santoso said, there was a performance correction in the insurance industry as of
March 2020, particularly in life insurance.
Based on OJK’s data, in March 2020 the life insurance performance declined by 13.8% (Year-on-Year/YoY) with pre-
miums of Rp38.16 trillion. This number decreased from the previous acquisition in March 2019 worth Rp44.27 trillion.
In addition, slowing growth occurred in the general insurance industry. The premium growth in March 2020 was at
3.65% (YoY), it is below the achievement growth in December 2019 of 15.65% (YoY). Pandemic was allegedly one of
the reasons behind the decline.
The insurance sector is quite busy with the disbursement of premium funds due to the pandemic. The shifting process
is said to be one inevitable obstacle. This is due to the manual business or operational process. Moreover, insurance in
Indonesia is currently dominated by incumbent players which relies a lot on agents.
Case Study
02
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Case Study
Banking
Automation in the banking sector started along the efforts to computerize its functions. The bank is slowly moving
to improve customer service through branch automation. Banks can connect different branches, automate back office
functions, and facilitate information sharing. Banking brings a one-stop service for everything to be done in one win-
dow. This significantly reduces transaction processing time.
Even though slowly adopted, the banking sector embraced the IT revolution to develop interbank connectivity. The
multi-channel banking approach emphasized on the development of a centralized data infrastructure that consolidates
the inter-bank database into one large database. This system is essential in improving services and reducing costs,
which allows banks to explore various shipping channels such as automated teller machines (ATMs), internet banking,
telebanking, and mobile banking.
The launch of an automated teller machine (ATM) massively changed banking’s customer relation experience signifi-
cantly. This user-friendly technology completes the function of branch offices to be accessible by customers without
having to visit the bank for basic financial transactions. The bank benefits from introducing a new customer service
interface that significantly reduces operating costs.
Banking in Asia
In the Asian region, the banking sector is mainly preoccupied with competition between Singapore and Hong Kong for
years of financial supremacy. The Hong Kong Monetary Authority (HKMA) has granted eight virtual banking licenses
-including the online lender WeLab (the only homemade fintech on the list) - as well as seven separate businesses
led by Ant Financial, Bank of China (Hong Kong), Ping An , Standard Chartered Bank, Tencent, Xiaomi, and ZhongAn
International. Meanwhile, Singapore through the Monetary Authority of Singapore (MAS) announced plans to issue up
to five virtual banking licenses.
About 15 years ago, more than half of the total banking transactions generated from branch networks. To date, this
number has decreased to less than 10%. In 2020, one of two financial transactions estimated to come from non-bank-
ing channels or networks, such as fintech or other third parties. This was triggered by the growth of digital channels
and the implementation of open banking. The increasing rate of Indonesia’s digital financial transactions attracts more
attention to open banking technology.
Banking in Indonesia
Digital technology will continue to change the banking landscape in Indonesia. Based on McKinsey’s report titled Dig-
ital banking in Indonesia: Building loyalty and generating growth, there was a large growth in internet adoption and
mobile banking. This shows that digital channels will become increasingly important in building loyalty and generating
growth for financial institutions.
“
“In order to understand the dynamics of the private financial sector, McKinsey surveyed
900 customers based on banking behavior, which is also part of a broader study of 17,000
personal financial clients in 15 countries in Asia conducted in 1998. Research in Indonesia
shows a shifting trend to digital channels observed in the 2014 survey. The results record-
ed an increase of up to 1.6 times of digital penetration in 2014, which has now reached
58% or equivalent to other developing countries in Asia.”
There are some factors that encourage the migration of digital channels to Indonesia. In addition to the massive adop-
tion of the internet, smartphones and e-commerce services, this digitization effort is also driven by the banking sector,
which stimulates demand from consumers. In addition, the reason most respondents’ said on trying digital banking is
banking’s effort to encourage consumers by explaining how online banking services work.
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Vision and Leadership

In the era of open banking, the banking sector is required to provide more relevant services to its consumers. This is
because consumers increasingly want a fast transaction process without being limited by space and time.
The domination of millennials in the productive age inevitably forces banks to stop dictating the development of
their products and services. On the other hand, technological development can be a “connecting” solution to the
unbankable segment that has not been touched.
The demand to transform becomes an obligation for banks. However, transformation is not an easy matter for a
company. A strong commitment from C-Levels is needed to move all individuals in the organization to achieve the
same goals.
Digital transformation’s observer, Daniel Newman revealed that leadership is an important factor for a company’s
successful digital transformation. Quoted his writings published in Forbes, Newman said there are five must-have
traits for C-Levels in leading a transformation.
These are five leadership traits:
1. Think forward and an opportunist 4. Collaborative

2. Agile, adaptive, with clear vision 5. Competent to problem solving
3. Take risks and experimental
From the points above, DSResearch found some similarities our banking sources believed as an important factor in the
continuation of digital transformation, such as:
1. Corporate culture, including transformation leadership

2. Talent demand
3. The company’s commitment to digital transformation through team and division building
Figure 5. Digital office led by CIO/CTO/CEO is the prevalent option for executing digital strategy
How effective is your current IT environment for supporting your digital strategy?
Moderately Effective 64%

Very Effective 16%
Slightly Effective 10%
Extremely Effective 10%
Who is leading your digital strategy?
Chief Information Officer 36%

Chief Technology Officer 32%
Chief Executive Officer 12%
Chief Marketing Officer 2%
Chief Operating Officer 6%
Chief Financial Officer 2%
Others 10%
Source: PwC
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Corporate Culture
Corporate culture becomes a reflection and identity of how a company grows values, which then becomes an organi-
zational standard to conduct corporate actions.
While talking about transformation, every individual in the organization will be involved in its implementation. The
company needs a capability to ensure the whole organization is on the same goal. One of them is the capability to lead
or leadership.
Based on DSResearch interviews and observations, there is a finding at BRI and PermataBank. Both banks are looking
for important and experienced figures in their fields to lead digital transformation in the company. This explains the
importance of the leadership factor in implementing transformation.
BRI appointed Indra Utoyo who previously served as Director of the Digital and Strategic
Portfolio Telkom Group to become Director of Digital, Information Technology, and Oper-
ations in 2017. Indra’s figure cannot be separated from Telkom’s success as the largest
telecommunications operator in Indonesia. He has worked there for more than 20 years
and is one of the main figures behind Telkom’s development of digital strategy and inno-
vation. Indra is also a pioneer of the Indigo Incubator program which launched in 2016.
Meanwhile, PermataBank appointed Abdy Salimin as Director of Technology and Op-
erations at the end of 2016 from his previous position as Head of Global Transfor-
mation at Standard Chartered Bank. Abdy has worked at Standard Chartered Bank
Indra Utoyo
for 15 years and has held many important positions, ranging from the Global Product
Director of Digital, Information
Engineering Head to being the Chief Information Officer in Singapore. Technology, and Operations BRI
With several similarities, the reasons for the appointment of the two are based on dif-
ferent problems. Indra revealed that he was asked to lead BRI’s digital transformation
to be more relevant in terms of service and to transform BRI’s IT system to become
future-ready IT.
This transformation will be a difficult task for BRI as a bank with widest coverage
service, with 19,184 ATMs and 120 million customers throughout Indonesia. BRI has
a strong market share in the Micro, Small and Medium Enterprises (MSME) segment.
On the other hand, this digital transformation is a big challenge and at the same time
Abdy Salimin
attractive to Indra Utoyo, who is an expert in the telecommunications industry. He
acknowledged the transition phase considering the telecommunications and banking Director of Technology and
Operations PermataBank
industries are very different.
In his experience, the telco industry had already been distorted, it was accustomed to competition, not only from fellow
players, but also digital/internet companies. However, the burden is felt more because the telecommunications busi-
ness may not be relevant to the presence of complementary services.
While banking is a trust-based business and strongly driven by risk management. It creates a pattern that raises more
challenges than risk aspects.
“
“Even challenges can arise earlier than business opportunities,” Indra said.
On the other side, PermataBank appointed Abdy Salimin to improve the performance of PermataBank in terms of
technology and operations. Not only changing the position of Director of Technology and Operations, Abdy said that
the shareholders replaced all management, including the President Director/CEO.
In 2016 PermataBank suffered a loss of up to Rp6.48 trillion. This is considered as the biggest loss in the history of the
banking industry. In addition, PermataBank also experienced several problems with credit services, risk management
and operations. Abdy said the technology used by PermataBank at that time was outdated and unable to catch up.
“
“We were quite slow in terms of delivery to the market. Our funding is also limited. Apparently,
before 2017, PermataBank’s [growth] is stagnant in the last five years,” Abdy said.
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Figure 6. Business profile and network
Bank Level (BUKU) Number of Employee Office Branch Sub Branch
BRI 4 125,602 467 611
BCA 4 24,789 139 873
Mandiri 4 39,065 139 2,304
CIMB Niaga 4 12,372 451 319
PermataBank 3 7,120 310 -
Source: Annual Report 2019
As previously mentioned, leadership not only talks about how leaders plan for transformation, but also builds an inno-
vative mindset, therefore, every individual in the organization is able to adapt in a rapidly changing era.
The banking industry is a business of trust which has often dictated products to its customers. Banks are not accus-
tomed to developing innovation quickly. The culture within the organization is very compliant and tightly regulated by
the Financial Services Authority (OJK).
Therefore, when talking about the transformation journey over the past three years, all the interviewees agreed that
changing the mindset became the most difficult challenge.
In order to answer this challenge, Abdy Salimin changed the company’s culture from the original waterfall method to
agile, especially in the IT team under his reign. It was due to accelerate the transition considering that PermataBank
was difficult to discuss innovation while the priority was about how to survive.
In BRI’s case, the oldest bank in Indonesia has the competence and availability of a wide range of services and infra-
structure that have been built for so long. BRI’s organizational scale continues to grow by having 125,602 employees
based on the 2019 report.
In this case, Indra made changes in some of the aspects to minimize the gap within the organization. It includes build-
ing core competencies, the mindset of innovation, to corporate governance.
“ “[To adapt in the digital era], sometimes organizations need to rethink and be different,
and more customer-centric. It will be difficult for companies to transform if a potential
employee does not have a suitable way of thinking in the digital age,” Indra said.
BCA applied quite different steps. The largest private bank in Indonesia has instilled an innovation culture since its
debut in 2011. It all started from BCA employees’ enthusiasm in providing input and initiation for the product devel-
opment originally initiated by the head office.
Following this idea, Jayaprawirya Diah, who was currently serving as BCA’s EVP Digital Innovation Solutions, revealed
that the company finally began to involve internally in the development of new ideas/products/services. This internal
involvement was then realized into a program called the BCA Innovation Awards which runs from 2013 until now.
“
“We always wanted to encourage improvement and ideas for customers since the employ-
ees interact daily with them. Well, these things are to be enriched by the headquarters. In
addition, we want to develop an internal innovation culture as many thought the head office
was the center of development. Therefore, we finally see the great development in BCA’s
organizational culture,” he explained.
19
The thing is, the company accommodates the innovation culture by providing wholeness in the form of business canvass
to facilitate idea development. Therefore, ideas are shared evenly throughout the organization, it also works together
with the Community of Practice, where each work unit up to the smallest unit can participate in sharing sessions.
“
“Of all events [BCA Innovation Award] we’ve acquired 500-700 ideas at most. We’ve got
enough ideas to help solve any kinds of problems. Previously, the headquarter is expected to
solve all problems. Meanwhile, ideas from branch offices are based on daily real problems,”
Jaya said.
Bank Mandiri applied a similar commitment. The Board of Commissioners focuses on monitoring the implementation
of the company’s strategic policies, one of which is information technology throughout 2019 to smoothen business
operations.
In managing and developing IT systems, the company has been guided by the 2017-2020 Re-Aligned IT Strategy &
Execution Plan (ISP) and has carried out the necessary activities effectively, such as testing the system for developing
e-money channel services, preparing project charter Mandiri Online application development, testing the system for
developing cash management on the notional pooling platform, and piloting upgrading the Mandiri Cash Manage-
ment (MCM) service through the addition of several features on the new platform and developing big data to improve
supporting infrastructure in conducting data analysis effectively and efficiently.
In addition to the top level commitment, the IT’s technical skill development program has become the Mandatory Skill
Development Program. Bank Mandiri provides information technology training to all levels of positions, from commis-
sioners to executive officers.
In general, Bank Mandiri’s digital transformation is performed by the IT department consists of four divisions, Digital
Banking Products, Digital Banking Delivery, Digital Banking TMO, and SORH. This department’s main task is to change
everything that was traditional into digital, including digital financing, digital services, and data operations.
The TMO division has an objective to change the culture into digital. One of those is to form an agile team to replace the
waterfall method. The SORH Division or Senior Operation Risk is responsible for maintaining operational risk, such as
online/digital service complaints.
Digital Banking Product is in charge of digitizing products and planning the delivery process to the customer. As Digital
Banking Product is based on the product and customer experience perspective, Digital Banking Delivery has a role to
deliver it as a platform. This team is where agile development operates.
A. Talent Acquisition
Corporation has the ability to accommodate the development of Human Resources (HR) in the company. In general, it
can take the form of training (training) and workshops in objective to nurture the capabilities of the HR sector.
Internal training is not enough, because the corporation does not have enough capabilities to develop digital businesses.
The digital business model is new to the corporate world.
20
Figure 7. Hackathons for banking innovation
Bank Hackathon Year
BRIxGoogle Hackathon 2020

BRI Hackathon Digital Challenge 2019
BRI Digital Challenge: Innovate to Empower Indonesia 2016
#Blockchaininnovation 2019
#DataChallenge 2018
#Codescape 2017
#HackByTheBeach 2016
What The Hack! (WTH) 2019

Mandiri Hackathon 2016 2016
CIMB 3D Conquest 2018
Source: Annual Report
Companies have two options to acquire capabilities. First, professional hiring (pro-hire) or to hire talents outside the com-
pany. Second, implement a hackathon to explore qualified talents who can later be recruited to the company.
In terms of pro-hire, the company has many options for acquiring talents who have experience working in the digital eco-
system. For example, BRI recruited Nicko to head the newly formed BRI Ventures in mid-2019. Nicko Widjaja previously
served as CEO of Telkom’s MDI Ventures.
In terms of hackathon, BRI, BCA, Mandiri, and CIMB Niaga have implemented it—some have even done it several times—
to see the extent of young people’s talent in Indonesia for digital innovation. Hackathon is an activity in which the pro-
grammer/developer is challenged to solve a problem that has been determined in a limited period of time
B. Strategy & Commitment

A form digital transformation implementation plans is to create a team or special division as an innovation develop-
ment space. This method is not obliged, it depends on how C-Level views the essence of digital transformation and
their ability to implement the innovation.
In general note, the special team/division is to facilitate coordination through one door. In addition, this method can cut
long bureaucratic chains so that the decision making process becomes faster. Now, from the information we gather,
the strategies or commitments from our sources differ.
BRI has thousands of business units and more than 120 thousand employees. The center for innovation development
is centered in the Digital, Technology and Operations division under the auspices of Indra Utoyo. Inside there are two
units formed for innovation development plus one separate entity outside BRI.
1. Digital Center Excellence (DCE)

Founded in 2017, in charge of technology based banking innovation for the bank ecosystem.
2. Kerja Sama Technology (KJT)

Founded in 2018, in charge of technology based banking innovation for non-fintech ecosystem, such
as retail, micro, and corporates.
3. BRI Ventures (BVI)

A separate entity for venture capital founded in 2019, in charge of a disruptive or accelerating
innovation stream.
21
The division was created based on the Hybrid Company Model concept implemented by BRI in the organizational scope.
Indra mentioned two things to be focused through this method, the existing service development to remain relevant
“
along with market exploration/experimentation and new opportunities.
“Companies are required to adopt the startup culture by incorporating non-tradi-

tional talents, therefore, they can blend in and how companies can make products,
design thinking, lean discipline, and agile,” Indra said.
Unlike BRI, PermataBank has a different approach on this issue. According to Abdy, banking innovation is not Perma-
taBank’s main business that the company is yet to have eyes in forming an R&D division. In addition, PermataBank also
has capital limitations when looking at its financial situation in 2016.
“
“We cannot take 3 or 4 years to make a change. Therefore, we must make changes in a small release,”
Abdy said.
Based on our observations, the development of PermataBank’s technology products or innovations is currently only in-
tended for the Retail Banking business unit. The development kitchen is centered under the auspices of Abdy Salimin,
the Technology and Operations division.
Furthermore, BCA has a decentralized development of ideas and innovations from each business unit or branch office,
from the previous method which was centralized at the head office. Meanwhile, the execution of internal development
is in the Strategic IT Group (GSIT) division. While the development of external innovation is carried out by a separate
entity in the field of venture capital, namely Central Capital Venture (CCV).
As with BCA and BRI, Bank Mandiri also has a vehicle for innovation, Mandiri Capital Indonesia (MCI). MCI has the duty
to be a bridge between investors and entrepreneurs in the rapidly developing fintech industry so as to maintain the
sustainability of the banking business and reach a wider target market.
In terms of agile team, Mandiri’s digital innovation is not run solely by IT department along with related divisions. The
company also has a Transformation Officer in charge of aligning the agile work system with Bank Mandiri’s corporate
work system. It is undeniable that Mandiri’s decision to involve the startups they fund to get into the Mandiri ecosystem
requires operational adjustments.
Technology Innovation
Technological developments encourage the banking services digitization trend. This sector is starting to develop digi-
tal-based innovation to facilitate customers’ transactions without having to come to the branch office (branchless).
A. Innovation Journey
DSResearch practices the ideation, incubation, and value creation framework to identify the developing technological
innovation path or process.
As a general note, the innovation development is generally adapted to each company’s corporate planning and
strategy. The objective is to ensure the digital innovation development to go along with the company’s strategy.
Before discussing the innovation process, DSResearch found BRI’s framework to determine the digital transformation’s
direction. The goal is to digitize business processes as efficient and find new business models to create new value. Next,
there are three main points we quoted from BRI’s Annual Report in 2019, including:
• Digitizing Core
Creating solution for banking customers through BRI’s super apps.
• Digital Ecosystem
Creating solution to penetrate broader ecosystem with digital solutions.
• New Digital Proposition

Creating Solution for new model to keep up with “go smaller”, “go shorter”, and “go faster”.
22
The above framework is the forerunner to the birth of the Digital Excellence Center (DCE), Technology Cooperation
(KJT), and BRI Ventures (BVI) as previously described. These three initiatives were formed in stages after Indra Utoyo
was appointed as Director of Digital, Technology and Operations. Meanwhile, this framework clarifies the functions
and roles of DCE, KJT, and BVI in achieving the desired target of the company.
In the chart below, DSResearch summarizes the innovation process within the scope of BRI. Based on the results of
interviews and observations, we considered that each business unit/department at BRI contributed to the collection/
development of ideas. However, DCE and KJT who acted as internal innovation vehicles also participated at this stage.
Figure 8. BRI innovation journey
Ideation Incubation Value Generation
Internal
Each department in Bank BRI

Business As Usual (BAU)
IT Architecture • New revenue stream
• Efficiency
Corporate Planning
Digital Center of Excellence

• BRI Innovation lab
DCE and KJT 1. Pinang
2. Ceria
3. Open API
Kerja Sama Technology
4. Brimola
5. Junio Smart
External
BRI Ventures Financial Ecosystem
1. ayopop
2. LinkAja
Process of an external Innovation vehicle

Process of an internal Innovation vehicle
DCE and KJT are also involved in the incubation stage to execute an idea into a product/service before it is launched.
At this stage, DCE and KJT are also supported by other IT teams.
On the other hand, BVI runs as an external innovation vehicle. The process is certainly different from the other two
divisions because BVI has a different business model. BVI invests in startups. However, BVI and the IT team continue
to establish continuous communication in integrating startup products into BRI businesses.
The entire team is under the control of Indra Utoyo, including the BVI entity. In the process, Indra Utoyo was fully
involved in making decisions for the development of innovative products.
Meanwhile, PermataBank’s innovation journey occurred because of demands to improve the company’s performance
which slumped in 2016. Based on the 2016 Annual Report, PermataBank recorded a large loss of up to Rp6.48 trillion.
This loss was triggered by the credit sector and the high NPL ratio of 2.2%.
In his interview, Abdy Salimin revealed that he was asked to improve the company’s performance in terms of tech-
nology and operations. “In that position, it was difficult for us to talk about innovation, but how to survive,” he said.
Because there is 2017 he determined the objective to carry out this transformation, namely:
(1) PermataBank must acquired more than 3 million customers in the next three years and
(2) Achieving a profit target of Rp3 trillion.
23
Figure 9. PermataBank revamp strategies
► Loss is at Rp6.48 trillion Focus on developing small release: ► Launching ► 3 million customers acquired;
PermataMobile X ► Follow-on development of
► Low-quality management and ► Changing PermataMobile Smart
strategic planning CX into X version ► Launching PermataMobile X
PermataAPI ► Follow-on development of
► Slow-delivery in target market ► API pilot PermataAPI
► Outdated IT infrastructure ► Launching Branch Model
2016 2017 2018 2019
In the process, PermataBank identified what technological solutions can be implemented to achieve the target. With
limited funding conditions, PermataBank decided to develop a small release approach, namely the development of a new
version of the PermataMobile mobile banking application and the Open API.
Then in 2019, the company managed to reach its target by pocketing 3 million customers and net profit of Rp1.5 trillion.
The development of PermataBank’s innovation continues with the introduction of the Model Branch concept.
Overall, DSResearch found that the innovation process within PermataBank was quite simple considering that from the
beginning Abdy mentioned that there was no R&D division. First, the digital innovation developed at this time is still in-
tended for Retail Banking which is currently included in the E-channel service category.
Based on DSResearch observations in the PermataBank Annual Report, we found that the company formed the Digital
Delivery IT division since 2018. This division is under the authority of Technology and Operations led by Abdy Salimin.
This division focuses on developing the company’s E-channel products, such as the PermataMobile X application, Open
API, Model Branch, and QR Code based digital payments.
Figure 10. PermataBank innovation journey

• New revenue stream
Technology & Operation • Efficiency
Corporate Planning
1. PermataMobile X
2. API Banking
Technology & Operation
3. Model Branch
• Digital Delivery
Retail Banking
• Digital Channel Financial Ecosystem
1. Kredivo
2. Amartha
24
Second, the Retail Banking business unit under Djumariah Tenteram has a Digital Channel division. We believe that the
Digital Channel division and Digital Delivery division are involved in the process of PermataBank’s E-channel product
idea and incubation.
Although it does not have separate R&D and venture capital entities like other banks, PermataBank continues to col-
laborate with startup fintech, where the company becomes an institutional lender. In developing its strategy, we also
believe that the process is also carried out across divisions as mentioned above.
In Bank Mandiri’s case, the ideation process came from various sources as described in the chart below. Likewise, the
incubation process. If you look at the plot, the divisions involved in the ideation and incubation process coordinate with
each other and are not centered at one point.
Figure 11. Mandiri innovation journey
Retail > Digital Banking Product IT Team BAU (New revenue stream/
Wholesale > transaction Wholesale (strategy & architecture,etc) efficiency)
Banking Product
1. Mobile Banking Apps
2. Mandiri API
Mandiri Transformation
Mandiri Transformation Office Office
New Market
Internal team Mandiri Bionic SME

Mandiri Department/Group Department/Group
(MTF, AXA Mandiri, etc) (MTF, AXA etc)
Financial Ecosystem
Mandiri Capital Indonesia Third Party (vendor, startup/

investor) Investment for Startup
Process of an external Innovation vehicle Process of an internal Innovation vehicle
Bank Mandiri’s internal value creation can refer to each department or division, although the starting point can be
external, for example in the form of customer input. The digitization process is mainly carried out by the IT team, they
play a role in digitizing operations ranging from digital financing, digital services, and data operations. This idea may
encourage internal initiatives or input from customers. After ideas emerge from each division, everything is gathered
together in Digital Banking Products
B. Innovation Product
1. Mobile Banking
After the ATM and SMS Banking penetration, mobile banking service is believed to be the future for the banking sector.
The “super apps” trend is encouraging banks to transform mobile banking with such a concept. This means that mobile
banking can become a home for all future community banking activities.
In reinforcing the importance of the mobile banking experience, J.D. Power found that mobile banking was the main
driving factor for overall retail banking satisfaction. This condition actually helps a lot of the biggest financial institu-
tions because they have the ability to invest more aggressively in digital channels.
In Indonesia, most banking companies already have mobile banking services. Bank BCA became the first bank in In-
donesia to launch this service under the name m-BCA. Furthermore, this service was adopted by other banks, such as
Mandiri, BRI, PermataBank, and CIMB Niaga.
25
Figure 12. Smartphone-based mobile banking is the leading component of digital strategy
Which of the following are components of your digital strategy?
Mobile Banking - Smartphone-based apps 86%

Internet Bankings 68%
ATMs 48%
Collaborations with Fintechs 46%
Digital Branches 44%
Chatbots 38%
Mobile Banking - SMS/USSD-based 38%
Robotic Assistants 18%
Source: PwC Indonesia
In its journey, banking institutions have been aware of consumer’s demand for mobile banking services. With the
mature technology, banks are started to increase their service capabilities. Not only can transact, customers can also
create an account without having to visit the bank.
DSResearch noticed that BCA, BRI, Mandiri, PermataBank, and CIMB Niaga already have online account opening
services in their respective applications. However, in the case of BCA and BRI, the feature is available in the mobile
banking application which is an extension of the previous application.
Figure 13. Key features of mobile banking platform
Year Product Function Key Feature
2013 BRI Mobile Mobile banking services Transfer, bill payment,

merchant payment
2019 BRIMo Further development of BRI Mobile pro- Online bank account
vides mobile banking, internet banking, application, fingerprint,
and e-money in one menu Face ID
2011 m-BCA Mobile banking services Transfer, payment,

mutation
2019 BCA Mobile Integrated app for banking transaction, Online bank account
m-BCA and internet banking BCA (smart- application, QR Code
phone ver. of KlikBCA
2016 PermataMobile Mobile banking services Transfer, bill payment,

Smart CX top up
2018 PermataMobile New look of previous version with more Online bank account
X online banking services application, QR Pay,
Face ID, fingerprint
26
2017 Mandiri Online Mobile banking services Online bank account

application, e-money
top up, online deposito
2017 Go Mobile Mobile banking services Online bank account

application, online
deposito, QR Pay,
fingerprint
2. Open API
The open banking or API (application programming interface) concept refers to open innovation first conceived by
Henry Chesbrough. Open API enables broader banking transaction services, including the MSME segment.
In its development, open banking technology in Indonesia often gets its pessimistic views from several parties. Be-
cause this technology allows moral hazard actions that can threaten aspects of consumer protection. This aspect is a
guideline that must be prioritized for the financial services industry in doing business.
The past few years inter-account transfers are still the most commonly used payment system. This was triggered by
the growing development of the e-commerce sector which became the locomotive of the digital industry in Indone-
sia. This trend has triggered banks to encourage the adoption of more massive Open APIs.
Referring to the collected information, all of our respondents were reported to have implemented Open API and
become one of the strategic plans for the development of digital banking services in the future. Both BCA, BRI and
PermataBank have commercially launched Open API.
Indra Utoyo assessed that Open API can be a reflection of how the digital economy can run massively. According
to him, now is the era of collaboration and the era of connectedness where everything starts to be digitalized and
connected between sectors.
“
“Banks must also embrace opportunities in the era of open banking. We open the bank for various part-
ners. Therefore, we collaborate with related parties to be either the front end, but not necessarily. In the
past, banks were always in the front with their own products. We hope the banking industry has Open
API standardization to make it more efficient for companies to develop,” Indra said.
In addition to the three banks, Bank Mandiri plans to launch Open API this year. In fact, Mandiri has been developing
APIs since 2011, but this solution is still based on business or host-to-host cooperation agreements with B2B. Since
2019, the IT Architecture team at Mandiri has begun developing digital APIs that can be directly used online.
Mandiri is considering testing with a sandbox environment and controlling who has access to the API documenta-
tion. However, Mandiri claimed to be releasing 12 API service features in the year that had the highest demand and
significant impact. Some of them, fund transfers, Mandiri Virtual Account, balance information, inquiry, notifications,
ATM locations and so on. Then, a new onboarding feature is opening a new account.
CIMB Niaga chose a different strategy than others. If the four banks mentioned develop their own API, CIMB Niaga
would collaborate strategically with JB Financial Group (JB Financial) and Mitra Lima Services to provide Open Banking
services in December 2019. JB Financial is a provider of open banking platform (Obank) services from South Korea.
Through the MoU between the two, CIMB Niaga provides fund transfer transaction services through the API system).
Mitra Jasa Lima was involved because so far it has been functioning as a marketing and acquirer of the Rural Bank
(BPR), for JB Financial in Indonesia.
27
Figure 14. Digital transformation through Open API
2017 2018 2019 2020
Open Innovation API BCA PermataAPI BRI API Relaunch Open API Bank Mandiri
Merchant 1.600 800 >100 -
Figure 15. Mandiri API ecosystem
State-Owned Company E-commerce
Account Information
E-money Top Up Exchange Rate Info

Media Sosial
Government Nearest Branch

Nearest ATM
Tax Office
API Retail
Smart EDC
Fund Transfer
Subsidiary
Account History Micro Load
Digital Signature
Foreign Bank Fintech
Indonesian banking industry is currently in competition to create digital banking. The efforts has reflected in the the
product innovations and digitization launched. Mandiri, PermataBank, and CIMB Niaga are competing to present digi-
tal branches with their respective approaches. PermataBank with the branch model, Bank Mandiri with the Hype
Branches, and CIMB Niaga with Digital Lounge. All three are targeting the same market segment, millennials.
BRI shows quite different products in targeting the market segment. They focus on catching up with digital products
which are already being used by fintech players. BRI opens the option to provide loans online through the Pinang
Application. This application has been equipped with technology-based systems such as digital verification, digital
scoring and digital signatures.
Responding to industry change, BCA created Vira, a machine learning based chatbot service in 2017. Vira is acces-
sible through the chat messaging platform Line, Kaskus Chat, and Facebook Messenger without having to download
a new application.
28
Figure 16. Bank Mandiri AI Predictive Model
During Pilot: We compare leads selection between the BAU vs AI (Recommendation Engine)
How Recommender System Works?

The BaU (Business as Usual)
The customer will be offered a
merchant discount program if the
customer has historically made a
purchase in that particular merchant.
For example: Foods that Mr. X Foods that Mr. Y

Discount program in Tokopedia will only Purchased Purchased
be offered to customer who has historically
made a purchase in Tokopedia.
Soup Soup
Pizza Pizza
The Recommender System
• Recommender system is an Ai algo-

rithm (used by Netflix and Amazon). Soda
• This algorithm is trying to find similar
pattern between consumers, based
on their transaction behavior. Since most of Mr. Y’s purchases are similar to most Mr. X purchases,
• This algorithm is used to predict there is a high probability that Mr. Y will purchase Soda
customers’ likelihood in purchasing a
product/service from a Predictive 104.87%
particular merchant.
AI Model Recommender system sale volume
Demonstration improvement for BAU
Figure 17. Fintech and non-fintech products
Bank Product Category Info
CERIA Fintech; digital lending App-based; cardless; targeting

millennials; e-commerce payment
and online travel
PINANG Fintech; digital lending App-based; cardless; business

loans
BRImola Non-fintech; supply Web and app-based platform for

chain ordering system from Pertamina
Junio Smart Non-fintech; education Education management platform

for school
Sakuku Fintech; e-wallet Provides banking services, top up,

payment, etc
Welma Fintech, investment Provides investment portfolio, such

app as mutual fund, insurance, and
obligation
29
3. Digital Bank
One of BCA’s commitments to digital transformation is through the establishment of a digital bank to be launched in
June 2020. In its process to create a digital bank, BCA has acquired all of Bank Royal’s shares worth Rp1 trillion in 2019.
Bank Royal will become an independent entity and not merge with BCA. Later, Bank Royal’s digital business will be
integrated with BCA services. From this corporate action, it can be said that BCA used this strategy to make Bank
Royal a different vehicle.
This is reasonable considering that BCA has its own positioning and market in the banking industry. It would be difficult
to become a digital bank if it comes from regulators. BCA’s Director. Vera Eve Lim revealed that the digital bank Bank
Royal is to target different market segments. For example, BCA focuses on providing credit to the corporate segment,
while Bank Royal will target the mass market or retail segment.
In addition, Bank Royal also plans to create an online loan service. However, it is not yet known what the business model
is like. If realized, this plan will add a row of banks that go into an application-based online loan product without a card.
Digital Transformation During Covid-19

Based on the results, the Covid-19 pandemic is considered to affect the company’s digital transformation. In this
case, the PSBB and WFH situation encourages the acceleration of innovation development, especially those relating
to customers.
The survey shows that this sector seeks to optimize services to customers by relying on banking platforms, such as
BRIMo, Mandiri Online, and BCA Mobile. Open API is also considered influential in optimizing service to customers.
As BRI’s Director of Digital, Information Technology, and Operations, Indra Utoyo said, Open API is very influential and
essential for banks to develop new features and partnerships quickly, safely, and efficiently in a pandemic.
The survey also mentioned some concerns of banks during the pandemic, such as shifting customer interactions into
digital self service and helping employees with new work patterns. In general, banks have changed their priorities and
strategies to minimize the spread of Covid-19.
In BCA’s case, the company has prepared some sites (hubs) to be used as operational sites during the crisis. While
Bank Mandiri developed the Online Customer Onboarding self service application for new customer registration via
web and video calls. Indeed, with the support of AI and analytics, Bank Mandiri seeks to capture changes in customer
behavior during the pandemic to analyze necessary solutions.
While BRI, as a micro and SMEs bank has considered the pandemic to drive digital transformation in presenting
solutions to support market traders implementing online orders and home delivery through websites and messaging
applications, also strawberry micropayment solutions.
Next, online financing support for e-commerce merchants through digital KUR by BRI’s microsite, providing fully-digital
account set-up, and supporting online SME’s loan relaxation and restructuring.
Two of the three banks we surveyed were reluctant to explain the hardships of digital transformation during the pan-
demic. Meanwhile, Mandiri experienced the biggest obstacle to talent management.
The impact on innovation and agility budgets is quite different. In BCA’s case, it’s not significantly affected. Meanwhile,
for BRI and Mandiri, agility increased during the pandemic, but the innovation budget stays.
30
Verdict Table.
Transform
Indicator Pre-core Core Adjacent Transform
Objective Awareness of Optimizing existing products/ Expanding from existing business Developing breakthrough &
innovation services for existing customer into “new to the company” business inventing things for markets that
(new business, optimize, early don’t exist yet (new business,
stages) pre-market, potential to disrupt
core business)
Market Both of existing Both of existing market and Enter adjacent market & serve adja- ► New markets (products/services)
market & existing existing customer cent customer ► New customer needs
customer
Output Awareness/ Annual planning & forecasting ► Business building strategies Decisions to explore, initiate project
Efficiency and detailed plan for growth ► Investment budget plan & milestone
► Detailed business plan for ven-
tures
Players/ Board member or Event & sharing resources Accelerator, incubator ► Venture client
Value managerial ► CV building
► M&A
► Venture capital
Time/ Tentative ► Short-term; fix features/ ► Short-term; improve (enrich ► Short-term (new business/
period process level (12 month) customer) growth stages)
► Mid-term; innovate ► Mid-term; penetrate (increase ► Mid-term (explore/early stages)
product level (36 month) share of wallet) ► Transform (business model level)
► Moonshot; disrupt business ► Moonshot; build (substantial
middle level (>36 month) contribution)
Sources Internal employee/ Internal employee/customer Vendor/independent innovator Innovation Lab

customer or vendor
31
Transform
core business)
customer
tures
► M&A
► Venture capital

customer or vendor
32
Adjacent
core business)
customer
tures
► M&A
► Venture capital

customer or vendor
33
Core
core business)
customer
tures
► M&A
► Venture capital

customer or vendor
34
Non-Bank Financial
Financial institutions are intermediaries in providing financial services in the form of fund collection and distribution of
funds to the public with a return in the form of interest or percentage.
This institution consists of two types, bank financial institutions, and non-bank financial institutions. Its policies are
regulated by the government and its movements are closely monitored by the Financial Services Authority (OJK).
Based on OJK data as of March 2020, IKNB assets have reached Rp2.490 trillion or up 2.93% from the same period in
2019. Meanwhile, the number of Non-Bank Financial Industry (IKNB) players in Indonesia recorded as many as 1,336
companies, both licensed and registered.
In this report, DSResearch looks at digital transformation efforts at several insurances, pawnshop, and financing
companies bearing in mind that these three business sectors are also being disrupted by fintech. Fintech covers a
very broad business vertical that opens up opportunities for non-bank financial businesses to transform.
There are various insurtech services on the market, in the form of marketplaces and self-service. Likewise, the pawnshop
and financing business began to rely on digital technology in its business processes.
Insurance
Insurance Industry in Indonesia
The penetration rate of the insurance market in Indonesia is still very low contrasted to other countries in Asia. Only
2.1% of Indonesians have life insurance in 2016, and only 11% have a bank account. Many factors cause low
insurance penetration in Indonesia. Low level of financial education, lack of access to financial services, and high
prices for insurance premiums.
While insurance penetration is still low, BPJS Health scheme promotes awareness of insurance products, especially
health insurance (86% of 1,296 respondents who claim to use insurance products) according to the 2019 DailySocial
Survey. This makes the insurance sector growth opportunities are still high. With an average of 5% + annual economic
growth, a large population, and a developing number of middle classes, innovation is key. The young population that
is adaptive to technology and high internet penetration and technology will play a significant role in helping higher
insurance penetration.
The insurtech has proposed innovation in the insurance industry landscape. Insurtech trends do not only appear in
countries with already high penetration. Indonesia is also ready to start a new direction in the insurance industry.
Still from the same report consumers who have used insurtech services show satisfaction with the products and
services they use. In the future, technology optimization, whether adopted by traditional insurance or already done by
Insurtech will bring a new era of the insurance industry in Indonesia.
The role of insurtech in the insurance sector can be seen by the way they look and attempting to see the current
problems. Based on the business insurance process here are some of the problems in the insurance sector.
Figure 18. Insurance business process
Policy Admin. Capital, Risk & Investment

Product Development Distribution Underwriting Claims
& Servicing Management
35
1. Manual Onboarding Process

Most of the registration process, underwriting calculations, and insurance claims are currently still done
manually. Many manual tasks such as data entry, customer service are handled inconsistently. These
results in inefficient information flow. Those things are one of the problems that need to be simplified
using technology to achieve efficiency.
2. UI/UX Design
The largest percentage of current insurance users come from the Baby Boomers' generation. But the
fastest-growing population is the millennial generation. They are the generation that is close to the
internet and technology. Most insurance industry players have not captured them as an insurance
market segment.
3. Product Customization
Every customer has a different lifestyle and interaction. This certainly influences the risk calculation of
each person. Customers who actively smoke may have a higher risk of incurring the disease compared
to nonsmokers of the same age. Every customer should have a way to choose which insurance is
prioritized instead of buying everything. Things like this have not been seen as an urgent matter to
be seen in the insurance business in Indonesia.
4. Expensive Premium
This problem is still related to before. Because insurers don't yet have technology that is reliable
enough to read needs, they tend to hit flat prices with minimal categories. This makes premium prices
tend to be more expensive.
5. System Integration
The real scope of digital transformation is more difficult to achieve because it must mean changing
the culture and behavior of people in organizations to business processes. Meanwhile, by utilizing
technology, companies benefit from more structured data, transparency, and shorter bureaucracy.
Apart from these five problems, there are still some problems in the insurance sector that can be
overcome with technology. For example, claims that initially had to wait for days now with the help of
technology could be completed in a matter of minutes. Risks that were previously spread can now be
read by technology as an early form of risk mitigation.
Digital Transformation in the Insurance Sector

Not all traditional insurance players have implemented technology in their companies. According to the interviewees,
almost all of the company's policymakers have understood and are aware enough to carry out the transformation.
However, this awareness was not followed by a significant transformation.
According to them many things were prepared to carry out the transformation. Such as investment in technology,
market readiness, and talent needs that are still difficult to fulfill. Currently, most insurance industry players still use the
website platform to optimize marketing and improve product literacy.
Figure 19. Traditional approach vs. digital transformation
Pillars of Traditional Insurance Business Level of Digital Disruption in Insurance
Digitization of Operations - Robotics, Ai, Cognitive
Expense Product
Control Distribution
Digital Customer Engagement - Channels
Customer Focused
Digital Disruption
Product Focused
Digital Data Flows - IoT Connected world

Customer
Experience
Digitally Enabled Safer World - Risk Avoidance
Risk Underwriting
Management Digital Disintermediation- Uberization Potential
Source: EXL Service (2018)

36
Based on the above framework, many insurance process chains are still done manually. Most of the disruption of
technology in this sector was initiated by insurtech and aggregators. For example, Qoala offers guaranteed claims in
a shorter period for flight delay insurance. There are still many other insurtech players who offer technology-based
solutions to replace the role of agents.
At the competition level, startups in the insurance or insurtech sectors also play at the onboarding process level. They
have a big goal to educate the market. Before further developing the technology to process data, read risk, they have
to set a target market. For now, most insurtechs in Indonesia are targeting the same market segment, millennial.
This report explains three traditional insurance companies in Indonesia related to their efforts in digitizing. Three
things are explored, the company's commitment, innovation journey, and their innovation products, either in the form
of insurance services or collaboration with startups.
Digital transformation is one of the new strategic approaches in the insurance sector which is driven by several factors.
One of them is the presence of insurtech in the digital ecosystem. Although not necessarily taking the market of the
traditional players, the presence of insurtech offers a change that can be called customer-centric.
With current technological developments, insurtech players have managed to disrupt existing business processes.
Insurtech players can erase the role of agents and change the whole process to digital. The onboarding process from
registration, policy counting, underwriting, to claim requests can now be completed online.
Low risk products can also be completed in just minutes. Through changes to business processes, Insurtech players
can offer lower premium prices. As is known, the high price of insurance premiums is one of the challenges in the
insurance sector because it cannot reach certain market segments.
Through changes to the business process part, they also managed to offer lower price premiums. The expensive
premium is one of the problems in this sector so that insurance does not reach certain classes.
1. Commitment and Work Culture

Sequis Life formed an innovation lab in January 2019 and was directly under the auspices of the CEO. Innovation lab
as a new initiative directly carried by the CEO shows a strong commitment to support transformation and innovation
at Sequis. The innovation lab that is currently being developed is attached to health insurance products.
But as an organization, the innovation lab is under the CEO. According to Marlin, as Chief Digital Officer, Sequis
prioritizes working on health insurance because more innovation can be explored. The concept of innovation lab in
Sequis has been initiated since 2015 by a shareholder together with BOD.
“
"The Indonesian market segment is still broad, and what can be worked on is health
insurance. Especially before BPJS health was executed. Coverage of health protection in
Indonesia, the gap is far between the ability to pay health costs and the facilities themselves
are affordable or not. Well, insurance is there to protect."
Policymakers see a loophole that can be worked on further. The vision to innovate starts from there and is top-down.
The CEO did not discuss the matter of digital transformation explicitly, more than that how to stage in the entire
healthcare ecosystem in Indonesia.
Allianz Life Indonesia’s commitment to conducting digital transformation is demonstrated by showing a special role,
Chief Digital Officer. The whole team under the CDO is dedicated to digital transformation. Allianz itself has digitalized
the process within their company.
Zurich in Indonesia consists of Zurich Topas Life and Zurich Indonesia together with Adira. Zurich Topas Life manages
life insurance, while Zurich Insurance Indonesia and Adira are in the process of integration, managing general insurance.
At present, the transformation process at Zurich Topas Life can be seen with the formation of the innovation team
division. The team is tasked with managing the data warehouse, data analysis, and innovation initiatives. Apart from
this Zurich is also connected to the global team, the Center of Excellence which contributes to innovation. Instead of
using consultants, Zurich Indonesia can utilize the ability and technology that the global team already has.
37
2. Innovation and Digitalization

Innovation at Sequis relies on a product and market approach. As previously stated, even though it sticks to the
health insurance product, the innovation lab's task is not merely to change conventional insurance products into
digital ones. They do not create pure health insurance products but rather riders or additional insurance or stick to
the parent/principal insurance.
Pure health products are currently still relatively expensive, by breaking down the product, the price of insurance will
be more affordable. The innovation lab is in charge of brewing the product so that this product is like a puzzle. After
the product is affordable, customers can easily add other products according to their respective abilities.
In contrast, Allianz’s innovation approach starts from within the company. They optimize the roles of agents. Allianz
currently provides more than 90% of its agents with tablets. Through this way Allianz expects their agents will be
more productive and customers’ data can be sent directly to the Allianz system. Customers immediately get policy
documents via email. Positively, this expected to increase customer satisfaction. Therefore, in the future Allianz will
continue to optimize its role rather than focus on online development.
Technology development in the Allianz insurance chain is currently focused on reduce the claims policy in about 7-10
days, currently are 14 days. Submission of claim documents must be done within 5 minutes. The data processed at this
time still revolves around sales data, agent data, claim data, underwriting data, operation data, financial data.
Indonesia still faces low insurance penetration. Many people are not protected. One of the efforts to overcome this
problem is cooperation with Gojek and Bukalapak.
Focus on agents is also the same thing done by Zurich. However, currently, Zurich Topas Life is preparing an online
channel, one of which is through the website. While Zurich Indonesia is exploring more digital streams. Zurich Indonesia,
which focuses on selling general insurance, sells products online at Tokopedia.
For the current collaboration, Zurich has the Zurich innovation championship, which was initiated by the global team.
Through this Zurich opens opportunities for startups to collaborate with Zurich in each country where the location of
the startup.
Zurich is running a roadmap for the next 2 years to continue the more massive digital transformation. Plans start from
the beginning of 2020. The focus is on IT, claims, and underwriting. Zurich also seeks to improve product distribution
and agent management. This effort was made to achieve the goal of being a customer-centric company. He said he was
trying his best to develop better solutions for insurance claims.
Figure 20. Onboarding online/digital self-service
Distribution Back-end
Company Underwriting Claim Product
Chatbot Online Policy Risk Customization
Registration Admin Calculation
- - - - -
- - - - -
- - -
38
3. Insurance in the Disruption Era (Product and Collaboration)

At the time of the interview, all Sequis products were still under development. Sequis digital product approach starts
from optimizing mobile/gadget. First, products to help sales agents, especially for agents who have licenses. Second,
the customer-facing app. This application is quite different from Sequis existing app, Polisku. If Polisku works for
policyholders, this second application is called marketing apps. This application is for a tap in people who are not yet
policyholders, but not limited. They are free to download and use the application. The content is in the form of wellness
and healthcare products as a by-side of health insurance.
Third, the mini-apps that later be integrated into the agent app. This application uses a gamification scheme for the
concept of selling. Agents will be equipped with methods of selling with a more friendly approach. Sequis expects that
through this they will not only introduce insurance products but healthy lifestyles.
As mentioned earlier, Allianz’s fully digital insurance products are in Bukalapak and Gojek. Collaboration with Gojek
takes the form of insuring Gojek drivers and their family members. Traditionally, people would pay insurance premiums
every month, but drivers drove their payments every day. While in Bukalapak, Allianz sells simpler products.
Allianz also does the same. Through collaboration with Halodoc, Allianz explores utilizing telemedicine for pharmaceutical
shipments. Allianz sees besides low insurance penetration, there are not enough medical service providers in Indonesia.
1. eAZy Application
A health claim mobile application uses a mobile application from a customer’s mobile phone (based on iOS and Android).
The eAZy Med service was launched to help order digital drugs for immediate delivery.
2. EAZy Payment Service

Online life insurance premium payment service, which is easy and safe to use.
Figure 21. Agent support application
Expert
Underwriting
System (EUS)
Allianz Star Allianz Sales

Network Illustration
(ASN) System (ASIS)
39
3. Application for Agents
ASIS for iPad makes it easy for Allianz Star Network (ASN) agents in terms of mobility in the preparation of proposals
and product offerings to prospective customers, through the Allianz Sales Illustration System (ASIS) program that can
be run on the iPad.
ASN Toolbox is a digital sales tool for agents that simplifies and accelerates the process of making policy illustrations
to be offered to prospective customers, as well as for filling out life insurance application forms. ASN Toolbox is avail-
able offline and online for iPad.
Expert Underwriting System is a system that automates the process of underwriting and decision making for accepting
prospective customer applications, which previously had to be done by agents and marketing personnel of the Company
manually. With the support of EUS, all of these processes can be done online and in real-time, so the process takes place
faster (up to three days faster).
Zurich’s digital products are currently the focus of collaboration with Tokopedia. Just like Allianz, they equip agents with
digital devices and are developing their websites.
1. Business Analysis and Warehouse of Our Data

This business analysis and data warehouse allow management to get business analysis in-
stantly and automatically anytime, anywhere. These features include an executive dashboard,
production by the principal, and many more.
2. Sales Portal
A platform that provides all information needed by our sales force including general infor-
mation, marketer information, client and policy information, services, and sales documents.
3. Zurich Pro Application (Z-PRO)

The first version of the Z-Pro application is aimed at digitizing the sales process by sales-
people starting from inputting prospective customer data, making illustrations and SPAJ,
followed by a digital submission and payment process.
4. Automated Varicent Compensation System

This automated compensation system can automatically calculate the commission of a market-
er, thereby increasing agent satisfaction while increasing the efficiency of internal operations.
5. Training Application for Marketers (ZEL)

Application to simplify the training process, where agents can conduct training anytime and
anywhere using a smartphone or tablet.
6. New Marketers Recruitment Application (EAZI)

Application to support the process of recruiting marketers who are equipped with marketer
registration and online approval functions, licensing information, and AAJI exam registration.
Chatbot
7. Chatbot technology to respond to marketers’ questions through 24-hour self-service, which
can be accessed via the messaging application via smartphone.
8. Automatic Voice Notification System (Kokato)

Empowering customer communication using automated call technology that offers a faster
and more effective way to deliver messages.
40

As one of the affected sectors, insurance companies do not remain silent facing the pandemic. There are two things
that need to be underlined in the post-Covid-19 insurance industry. First insurance deals with “flooded claims”, both
life insurance and general insurance. Second, efforts to do digital shifting while most insurance companies still rely on
the role of agents.
Based on a mini-survey conducted by DailySocial, there are several obstacles facing the insurance industry. First, with
the current business model, the IT team is not ready to support remote work. On the other hand, one of the speakers
who served as Chief Digital Officer claimed that the digital division suddenly under major pressure to immediately be
a vital wheel in the company. Thus, changing project coordination also affects project delivery and budget allocation.
From all the answers, insurance companies are now responding to the focus of developing their platforms, both mobile
apps, and websites. They also consider collaboration with Insurtech.
But this moment could also have some positive long-term effects on this sector. When pressure on health services
increases due to many patients, the industry should be able to see an increase in telehealth services that offer consul-
tation to patients via telephone or online video services.
Telehealth services could help health care reach a wider population. Make health services more available and accessible
or it can be said that the community can benefit from the learning and actions taken during Covid-19.
The pandemic itself can cause more people to reconsider their personal health insurance needs. For example, after the
SARS epidemic, there was a temporary surge in sales of critical illness insurance in Asia.
The policymakers of this industry quickly access operational areas to capture the existing potential. This situation
allows for significant changes in the rate of adoption of new ways of working, including supporting technologies that
can change the way organizations are run after a crisis.
This crisis can also be a trigger to see the move of more systems and applications to the cloud area. With more people
working remotely, having a system in the cloud offers much greater bandwidth and capacity than if staff access the
local server remotely.
This is an opportunity for the insurance industry and a catalyst for this movement. Actuarial modeling software is often
only placed on the local computer, because there are considered security issues by placing it in the cloud. But with today's
cloud services offering better security protocols, it might be time for more industries to move to the cloud base system.
More broadly, the insurance business is the same as other sectors, they need to start the digital transformation of the
organization. The company needs to become a more agile, responsive, and connected company. This pandemic has
succeeded in encouraging more insurance companies to transform.
41
Verdict Table.
Allianz Life Indonesia Adjacent
core business)
customer
tures
► M&A
► Venture capital

customer or vendor
42
Zurich Indonesia Core
core business)
customer
tures
► M&A
► Venture capital

customer or vendor
43
Sequis Life Core
core business)
customer
tures
► M&A
► Venture capital

customer or vendor
44
Case Study: Pegadaian
The History of Pawn Business in Indonesia
In its context as a business—not a business brand—Pegadaian was first established during the Dutch Indies Gov-
ernment. On August 20, 1746, the first pawnshop was founded by Vereenigde Oostindische Compagnie (VOC). This
institution, known as the Van Leening Bank, functions to provide loans with collateral for movable property.
During almost 200 years after it was founded, the pawnshop experienced several power takeovers, which resulted in
changes in business policies/regulations. First, pawning regulations changed when Britain took over the authority of
the Dutch East Indies Government in 1811.
Next, the British Government issued a liecentie stelsel policy, in which the community was given the discretion to open
a pawnshop with permission from the local government. Until 1816, the Dutch East Indies Government returned to
power in Indonesia and changed this policy to a cultural system, in which the government took over the management
of the pawn business.
During this period, the pawnshop became a business brand called Pegadaian. Based on Staatsblad No. 131, the
Dutch East Indies Government sets Pegadaian to be a government monopoly. As an implementation, the Government
established the first State Pegadaian in Sukabumi, West Java, on April 1, 1901. Since it was run by the Republic of In-
donesia Government, Pegadaian has changed its status several times and finally became a Limited Liability Company
(PT Persero) based on Government Regulation No. 51 of 2011.
In Indonesia, Pegadaian is not the only player in this business. Based on data from the Financial Services Authority
(OJK), there are 24 pawn companies that have obtained licenses and 47 other pawn companies that have been reg-
istered as of October 31, 2019. Of the 24 companies, there is only one state-owned company (Pegadaian), and 23
others are private companies.
Pawn Business in the Disruption Era

Pawn is defined as an activity of lending money by handing over goods as collateral. The business model is that the
collateral will become the lender’s property if the loan is not repaid until a certain time limit.
As one of the oldest businesses in Indonesia, Pegadaian has contributed in supporting the lower-middle-class econo-
my. This is still an on demand business for people prefer to get loans by mortgaging goods rather than relying on
high-interest credit.
In the digital age, not only banking services are disrupted, but also pawn services. The rise of fintech services began
to take a role in the financial ecosystem. Technology support enables fintech players to target more business verti-
cals, not only payments, but also Peer-to-Peer Lending (P2P) and investments (stocks, gold, mutual funds).
In addition, the fintech market continues to grow driven by an increase in market segments in the productive age and
middle class income that is dominated by millennials. The public can obtain loan funds easily and quickly.
In the Asian region, the Philippines is one country with a pawn industry landscape similar to the Indonesian market.
Philippine pawnshop business thrives due to the weak functioning of local banks. This has encouraged informal
business lending, such as pawnshops, to become more popular.
Another factor is the low penetration of credit cards, credit card filing facilities, and incomplete track record of credit
users which ultimately triggers people to seek loans from alternative sources. Meanwhile, pawn service users in the
Philippines come from the middle and lower income segments. Generally, they belong to a group of people who do
not have a bank account (unbanked).
The increase in internet services in Philippines also drives the trend of online-based pawn services. PawnHero is
the first online pawn service in Southeast Asia to launch in 2015. The platform partnered up with 2GO, the largest
supply chain logistics company in the Philippines.
45
Pegadaian Transformation
Figure 22. Corporate innovation impacts customer in four ways
In order to adjust to the disruption era, Pegadaian trans-
formed several elements of its business. This effort was
made to increase the role of Pegadaian in the financial
ecosystem, therefore, it was not substituted with other
fintech players. To date, the company controls 90% of
the national pawn market share, with a total of 4,221
outlets spread throughout Indonesia.
Product Innovation
However, the pawnshop industry does not have a
well-structured transformation benchmark. Take one
for example, banking began to penetrate the open
banking platform or insurance sector towards In-
surtech. Meanwhile, it is not clear where the position Customers
of the pawnshop industry is in the financial ecosystem.
Business Model Operational

Innovation Innovation
Customer Experience
Innovation
Source: Crowd Companies

Figure 23. Pegadaian SWOT analysis
Strengths • Implement a top-down commitment for digital transformation

• Form a special division to run digital transformation
• Create a framework for digital transformation
• Top of mind in pawn business
• Cover the 90% pawn market share in Indonesia
• Biggest network with 4,221 outlets
Weaknesses • Yet to have benchmark in building and running digital transformation
Opportunities • Capable to reach broader market with online-based services, particularly

for the unbanked
• Capable to set new standard for pawn business digital transformation in
Indonesia
Threats • Pegadaian can be substituted by fintech services

• Without benchmark, digital transformation might be a failure
In terms of analyzing digital transformation in Pegadaian, DSResearch uses two approaches, namely SWOT Analysis
to map the advantages, weaknesses, opportunities, and threats to the transformation conducted by Pegadaian.
Then, a framework that is oriented towards the impact of transformation on customers. There are four main focuses,
including how Pegadaian is transformed through (1) product innovation, (2) operational innovation, (3) customer ex-
perience innovation, and (4) business model innovation.
46
A. Vision and Leadership

As the data compiled from various sources by DSResearch, the effort to perform digital transformation was Sunarso’s
initial initiative, as the President Director of Pegadaian that time. Sunarso is said to be an important figure behind the
Pegadaian transformation effort. The execution has been running since 2017, at which time Pegadaian began to ex-
pand its main business channel to digital services.
During his leadership period, Sunarso formed a new Transformation Office (TO) directorate in October 2018. However,
he was appointed as Deputy Director of Bank BRI in early 2019—now he is President Director—before he could carry
out further executions of the company’s transformation plan. forward.
As for carrying out this transformation, Pegadaian refers to the 2019-2023 Corporate Long Term Plan (RJPP) as set
out in the 2018 Annual Report. Through RJPP, the company wants to transform into a “financial company” and plays
an active role in the financial inclusion program.
Figure 24. Pegadaian 2019-2023 Corporate Long Term Plan (RJPP)
Focus Old Model New Model
Business Pawnbroker institution Pawnbroker institutions and other financial

services, with a large portfolio of unsecured
loans
Operational Traditional: paper-based, based on Digital: based on collateral analysis and

collateral assessment customer profiles
Marketing Channel Single channel: branches Multi-channel: branches, sales force, agent,
dan digital
Customer Middle to lower class Middle to lower class and specific middle to
upper class
RJPP is the basis for the formation of the Transformation Office directorate, which has the role of transforming the old
Pegadaian business model as described in the table above.
Pegadaian also brought new external figures to strengthen the implementation of transformation, especially in terms of
collaboration or synergy. Herdi Sularko was appointed as VP Digital Business Development & Partnership at this new
directorate. He previously worked in a Telkom-owned venture company, namely MDI Ventures, for the past four years.
Based on his interview with DSResearch, Herdi said that the implementation of the TO work was under C-Level su-
pervision. Meanwhile, Director of Information Technology and Pegadaian Digital Teguh Wahyono was appointed as
the executor of this transformation.
In terms of composition, said Herdi, Human Resources (HR) in this directorate was filled by 70% of internal employees
and 30% from outside the company (pro-hire). According to him, the 70:30 composition from the beginning was set to
produce organic transformation by eliminating the big difference between the TO and the central office.
Referring to his experience at MDI Ventures, Herdi revealed that his side often held meetings to make a project/piloting
that could be done together. The aim is to blur the line between Telkom and its portfolios. This style also wants to be
brought into the Pawnshop innovation culture.
“
“If you want to [achieve the results] of organic transformation by including more outside or pro-
hire human resources, there will usually be a clash. At present, we are still emulating what is at
the head office or each division. The TO Directorate will be filled by representatives from each
division who gather into one spot,” he said.
47
As the space for Pegadaian’s innovation development, the Transformation Office (TO) has three divisions that perform
different functions, including Innovation Squad (IS), Project Management Office (PMO) & Change Management (CM),
and Corporate Culture.
Innovation Squad
Serves to find new business models, look for opportunities for collaboration with digital/
technology companies, and make innovations to deliver new digital products.
Project Management Office (PMO) & Change Management (CM)

Serves to update business processes in the scope of the organization, including teamwork,
and rolling off new products.
Corporate Culture
Serves to renew the work culture in the scope of the organization to be more agile in devel-
oping products/services.
Figure 25. Pegadaian innovation journey

Transformation Office • Efficiency
• Innovation Squad
Corporate Planning
Transformation Office
• Innovation Squad • Pegadaian Digital Service
• Open API
Business Unit
Institutional Lender
(on the plan) Financial Ecosystem
Each division contains several squads which will be led by the product manager and
product owner. In practice, one squad can be filled by one product owner, several
“
product managers, tech assistants (developers/business analysts), UI/UX, bizdev, and
product marketing.
From the beginning, Pegadaian used a top-down approach to form solid commit- “Digital is evolving and we
ments. The aim is to encourage the organization within it to be involved in this trans- have to start training [to
formation. A number of initiatives, including the formation of a new directorate, also adapt] because every day
came from the board of directors. This marks C-Level’s contribution to the innovation there is always something
process at Pegadaian. new. Problems in corpora-
tions are only communica-
However, since the formation of the TO directorate, the ideation process at Pegadaian tion between departments
has become more centered. Likewise in the process of executing an idea into a service/ or divisions. Therefore, we
product. Of the three divisions above, the Innovation Squad has a mandate as the center must be nimble and agile.
for innovation development. Our focus is not to be a
startup, but rather to form
In terms of work culture, the directorate of TO has carried out a number of initiatives by a culture of ‘our work and
training the agile, lean, and nimble mindset of all its squad. For example, holding an ide- others can align” Herdi
ation once a week to encourage each HR to contribute to an idea. This is done to adjust said.
and accelerate the development of innovation.
48
C. Innovation Product
Pegadaian has three main businesses, capital lease (mortgage), financing, and gold investment. More than 90% of
Pegadaian’s income comes from the pawn business. Meanwhile, total customers have reached 13.86 million users by
the end of 2019.
Pegadaian became the first SOE company to have a business portfolio in the field of mortgage, financing, and gold in-
vestment. Unfortunately, not many people know that Pegadaian is now entering the gold investment business. During
this time, the image of the pawn business has been attached to Pegadaian.
From the series of innovation processes above, DSResearch observes three main products produced by the company
1. New business model through Pegadaian Digital Service

2. Product innovation through Open API
3. Customer experience innovation through outlet transformation with new concepts.
• Pegadaian Digital Service (PDS)

The company seeks to expand its business reach while encouraging new business awareness by setting up digital
sales channels. Thus, the pawn process to the purchase of gold investment can be done not only offline but also online.
Meanwhile, PDS applications went public in early 2018.
Figure 26. Pegadaian Digital Service
Bureau of E-channel Product (2017) Fee Based Division (2018)

Product Directorate Digital and Information Technology Directorate
Biro E-channel emerged into a new division

Process of development
Key Features
Jual-Beli Emas Cetak Emas Daftar Rekening
Gadai on Demand Gadai Tabungan Emas
Source: Interview
As a general note, PDS was released before the TO directorate was established. Herdi revealed that the PDS application
development at that time was carried out by the E-channel Bureau under the auspices of the Product Directorate.
This division then evolved into a Fee Based Division which is included in the Directorate of Digital and Information
Technology. “However, the management of PDS applications has been fully operated on the TO, especially in the In-
novation Squad,” Herdi added.
49
• Open API
One of the innovations that became Pegadaian’s big breakthrough was building the Open API infrastructure. This
innovation answers the company’s efforts to enter the financial ecosystem in Indonesia. Through collaboration with
more partners, Pegadaian tries to create new ecosystems and income opportunities.
“
“Disruption is happening out there. All banks start moving towards the open banking platform.
The problem is, the pawnshop industry does not have a benchmark because our position is
between the banking and other financial industries. Indeed, this business is not quite affected
but we can look at the scalable business model by the TO formation” Herdi Said.
Pegadaian’s collaboration with Tokopedia is considered a successful Open API. Within two months, Pegadaian made
an API integration with Tokopedia for Online Gold Trading Service. Meanwhile, development began in October with
pilots starting in December. The service officially launched in January 2019.
• Outlet Transformation
Another innovation from Pegadaian is transforming outlets so that their services are
more relevant to current market needs. The company’s strategy is to adopt the outlet
cafe model to attract more visitors.
“
“Actually, the tip of the
Pegadaian business is
finance. Now, all financial
services can be obtained
The company is transforming its outlets into priority service outlets to increase the through the application.
number of customers among millennials. A total of 31 new outlets were launched as of Therefore, the physical
March 2019 under the name The Gade Coffee & Gold. outlet must be changed in
function. We also see bank-
Changes in functions were also made to optimize 4,221 Pegadaian outlets throughout ing starting there. Outlets
Indonesia. Moreover, not all outlets will achieve the desired performance target. that are not performing will
be closed,” Herdi said.

Based on the survey results, the Covid-19 pandemic actually encouraged the digital transformation of Pegadaian that
was executed by the Transformation Office (TO) division. This answers the increasing agility of innovation develop-
ment as mentioned by the company.
Pandemic also does not affect the working model of TO because since its inception the division has implemented agile
and flexible methods with the support of online supporting tools to communicate. Likewise, the innovation budget.
“
“Since 2019, we have migrated email services, office computing, conferences, and project
management to Google G Suite and Jira on an intensive and daily basis so that they do
not stutter when facing PSBB conditions,” said VP of Digital Partnership and Business
Development Herdi Sularko.
In Herdi’s opinion, the current situation is seen as opening opportunities to answer the need for digital transforma-
tion across directorates/divisions. However, the situation of PSBB and WFH prevented companies from recruiting
new talent.
In the transition process during the PSBB and WFH, Pegadaian made a priority change to its business. Herdi said
that the Pegadaian operational network was deflected to digital services whenever possible. That is, all transactions
that have touch points on physical outlets, strived to be run remotely.
To increase pawn service transactions and the sale and purchase of gold, Pegadaian optimizes existing digital
products, namely Pegadaian Digital Service and collaboration with Tokopedia through the Open API. According to
him, Open API is very influential on optimizing services to customers during the pandemic
50
Verdict Table.
Pegadaian Adjacent
core business)
customer
tures
► M&A
► Venture capital

customer or vendor
51
Case Study: Mandiri Tunas Finance

Multifinance in Indonesia
Multifinance companies are non-bank financial institutions that offer leasing, factoring, and financing services (car
loans, car pawning).
Its business model is based on an underlying asset, the relation between financing and manufacturer, distributor
and single-brand holder, and service facilities. This makes the industry more engaged to its consumer than the
lending business.
In Southeast Asia, there are countries that offer this type of business model, such as Thailand and Vietnam. Meanwhile
in Singapore and Malaysia, the bank is the one that offers car financing loans.
Multifinance Business the Era of Disruption

Financing has been one of Indonesian people’s alternatives for basic needs, particularly the lower-middle class. Similar
to pawn business, the role of the financing sector is fading as the rise of fintech players offering loan business model
for investment.
Former Minister of National Development Planning (PPN)/Head of Bappenas Bambang Brodjonegoro suggests that
this business needs to be aware of the new trend and to look at opportunities in the future business.
As the technology advances, consumer behaviour has started to change. We see that consumers tend to have services
that are accessible. Industry must come with a strategy on how to compete with fintech or any financing services that
are provided by e-commerce platforms.
Unfortunately, auto loans and car financing are facing some challenges in the past years. It is because the number of
car sales in Indonesia continue to decline. Based on Indonesia Financial Services Association (APPI), total financing
dropped to 1.21% (YoY) from Rp416.7 trillion to Rp411.7 trillion.
It was because purchasing power continued to decline as well as economic instability due to the political situation
which had heated up in mid-2019. Cars and two-wheelers have combined market share around 74.8% of the total
of financing business, meanwhile machines/heavy equipment about 6.2%. Total car financing down to 5.10% from
Rp218.3 trillion to Rp207.2 trillion.
Mandiri Tunas Finance Digital Transformation

Mandiri Tunas Finance is a subsidiary of PT Bank Mandiri Tbk that provides financing solutions for cars (both new
and used), motorcycles, and commercial vehicles (both individuals and corporations). Based on company data, MTF
became the third biggest financing company in Indonesia with total financing Rp28.77 trillion as of 2019. A total of
73.8% of the total funding came from cars and motorcycles.
Given the disrupting business today, MTF is now doing transformation by developing digital products to maintain its mar-
ket share. Besides, the company intends to push collaboration with digital players to create new business opportunities.
A. Vision and Leadership

MTF aims “To Be The Most Progressive and Reliable Multifinance in Indonesia”. The company intends to provide peo-
ple’s basic needs through financing services with value added to create an effective and efficient process.
In achieving the goals, MTF sets up some strategic initiatives that solely focused on digital development. Regarding
this, DSResearch quoted company’s strategies about digital product development and collaboration from its 2019s
Annual Report.
52
Figure 27. Mandiri Tunas Finance strategic plans in 2019
Main Strategy Excellent Business Improving the Excellent

Development Operational Process
► Establish cooperation with fintech via ► Mobile platform optimization by developing

P2P Lending for funding distribution MTF Go apps to improve easy access to
services both by customers and for internal
processes
Action Plan
► Establish new partnerships with online ► To develop a digital scoring system
financing sales channels and distributors as a tool to accelerate the process of
in Indonesia prospective customer credit analysis
► Cooperating with online auctions to

expand the marketing of MTF towing car
sales at a more efficient cost
In fact, the company has been aware of digital transformation since 2014. Several initiatives have been applied. How-
ever, the C-Levels are yet to fully commit by forming a dedicated division or team to execute the real plan.
In January 2020, MTF finally set up Digital Division as a company’s innovation arm. This is under supervision of
directorate of IT, Strategic Business, Initiative & Human Capital. IT, Strategic Business, Initiative & Human Capital
Deputy Director William Francis said that the decision is driven by the urge of doing digital transformation.
“ “Customers want affordable and accessible products. If we can be efficient, the price can
be well managed. That is why we push the process efficiency, both for customers and
internals,” William said.
He expects the digital transformation can deliver two main results, (1) cost savings and simplification, and (2) rising
sales that will improve better Service Level Agreement (SLA) for the customers. Currently Digital Division is employed
by internal staffs. The company continuously to add pro-hire to strengthen innovation development.
As stated above, MTF built an innovation mindset within its organization rather than forming a special division.
Since 2014, William said that the company has encouraged every individual to produce ideas that can improve
business efficiency.
This agenda has run and became the company’s official innovation award program since 2017. This effort marks how
MTF sees the importance of each individual to adapt and achieve the same goals.
One of the use cases that has already been implemented in its business was developing a payment authorization for
the third parties. With this system, payment authorization can no longer need paper receipts.
Before this division existed, MTF had already created several digital products that were contributed by internal and
later executed by IT Division. Digital Division has three main roles that consist of:
• Business through Online to manage online-based financing services

• Development to explore new ideas
• Implementation to execute ideas into products that involves the whole division and partners (dealer, insurance)
53
William said that this strategy can help the company to accelerate the innovation development. That means the company
can proceed the ideas immediately without the need to run an innovation award program.
For your information, the Digital Division is actually part of the company’s Digital Roadmap for 2020-2021. The road-
map includes 16 strategic initiatives in innovation development and collaboration with external parties. In its making,
MTF involved consultants.
Figure 28. Mandiri Tunas Finance innovation journey
Internal Business As Usual (BAU)

Business Division • Efficiency
• Innovation Award
IT, Strategic Business
Initiative & Human
Capital • MTF GO
IT, Strategic Business initiative
Corporate Planning
• Chatbot “Marsha”
& Human Capital • IT Division
• Digital Scoring
• IT Division • Digital Division (Kick Off
2020)
• Digital Division (Kick Off 2020)
Business Case Institutional Lender

External Competition • Amartha
• Akseleran
Business Case Competition
Mandiri Capital Indonesia Financial Ecosystem
“
“The purpose of these initiatives are to simplify the business process. Our roadmap is set for two
years ahead considering that the digital trends are constantly changing. We want to embrace
greater business growth through digital transformation,” he said.
MTF also used external channels to accelerate its innovation development. Earlier this year, the company held a
Business Case Competition which aims to encourage millennials to channel creative ideas in the business world.
MTF’s first Business Case Competition carries the theme “Digital Business Innovation Using Information Technology
for Multifinance Business”.
Related to the innovation process, the company engaged with external parties to solicit creative ideas that can be
implemented to MTF digital products/services. There are three winners that match for MTF digital services.
“
““Diponegoro University came as the winner for channel- This competition also has another purpose as they are
ing innovation for MTF Go apps. Followed by University looking for new talents. According to William, the winners
of Indonesia as the second winner who developed a digi- get the opportunity to become management trainees at
tal solution to boost MTF refinancing services. As well as MTF. If interested, they can immediately join without going
Bandung Institute of Technology created AI based solu- through the recruitment process. However, all the solutions
tions that help agents to collect payment from potential they created will become a patent owned by MTF.
customers,” William cited.
54
DSResearch classified MTF innovation products based on the company’s priorities.
• Mobile Apps
Based on our observation, MTF has developed 4 mobile apps, both for internal and external purposes (end-user and
agents). But, as stated in MTF 2019 Annual Report, only two apps that are set as MTF’s main focus in carrying out
digital transformation.
Both apps have different functions and target markets. MTF Go aims for existing and new user segments, while My
MTF is used for internal needs, agents and corporate partners.
Figure 29. Mandiri Tunas Finance mobile platforms
Year Product Function
2018
MTF Go Provides any information about credit simula-
tion for two wheels vehicles, other products,
and promo
2019
MTF Mobile Provides any information for users
My MTF Internal apps for agents and MTF partners
Provides online auction services for vehicles with

MTF Lelang competitive price
“
William said that all apps were developed before MTF formed “MTF Go is going to be our big strategy since we
the Digital Division. He also mentioned that MTF Go will be expect all transaction activities from pre-acquisi-
its main focus since it is designed to be a super app for com- tion, acquisition, and post-acquisition can occur
pany core business. through this app. We are deciding our priority
right now,” he said.
• Chatbot “Marsha”
Marsha or Mandiri Assistant Virtual Sahabat Anda is a virtual assistant launched in February 2019. It is designed to
simplify customer services. Marsha provides services such as:
1. Information about installment, tenor, and payment methods

2. Other services such as BPKB & STNK, insurance and customer service
3. Products dan Promos
• Digital Scoring
MTF plans to develop AI-based digital scoring to accelerate the analysis process of potential customers. However,
there is no further details about the development.
D. Open Innovation Strategy

As a financing company, MTF is fully aware of its capabilities in innovation development. Therefore, the firm relies on ex-
ternal resource to collaborate to develop corporate innovation and optimize sales through digital solutions. This answers
every collaboration plan with digital players, especially fintech whom the company wants to fasten in the future.
MTF expanded its innovation strategy by becoming an institutional lender in Amartha back in 2017. Then, it continued
later in 2019 as an institutional lender in Akseleran. Both are startups in P2P Lending.
55
“ “At that time, I was thinking whether we should form an innovation team ourselves or
find external partners. If we developed internally, it would take time. If we partnered, it
could immediately be executed. This is what made us collaborate with Amartha,” he said.
Other than that, the company also collaborates with Mandiri investment arm’s Mandiri Capital Indonesia (MCI) to deter-
mine investment portfolio. William said there is a possibility to leverage innovation from MCI portfolios to any Mandiri
subsidiaries, including MTF.
Figure 30. Mandiri Tunas Finance open innovation strategies
Collaboration
Leveraging portfolio
Model Institutional Lender Institutional Lender products/services to
Mandiri subsidiaries

The pandemic situation has affected digital transformation of Mandiri Tunas Finance. The company must postpone
some digital projects due to government policies to flatten the curve. For example, to develop automation and robotics
as mitigation risk for credit demand.
Yet the company has just kicked off the new Digital Division in January 2020 which will be the center of MTF innovation
development. Based on our survey, MTF also experienced some challenges during this crisis, such as less innovation
budget.
These challenges affected MTF 2019 digital strategy as it had to delay some projects and its team agility weakened.
William mentioned that the company is currently reviewing its plan and focusing more on digital solutions that can
boost MTF sales. It also seeks transaction growth by optimizing existing apps, MTF Go.
“
“We are re-adjusting our business priority. We prioritize digital solutions that help
companies deal with Covid-19,” William said.
56
Verdict Table.
Mandiri Tunas Finance Core
core business)
customer
tures
► M&A
► Venture capital

customer or vendor
57
Telecommunications
Telecommunication Industry Landscape in Indonesia
Telecommunication sector consists of two service licenses, fixed network (fixed line) and mobile network (cellular).
Previously, there were more than five cellular operators in Indonesia. But the numbers are shrinking due to price war
and unhealthy competition. Some operators have consolidated for the sake of efficiency.
PT Smart Telecom (Smart) and PT Mobile-8 Telecom Tbk (Fren) were Indonesia’s first telco Merger & Acquisition
(M&A) that occurred in 2010. Later, this corporate action was followed by PT XL Axiata Tbk (XL)’s M&A toward PT
Axis Telekom Indonesia (Axis) in 2014. There is also PT Bakrie Telecom Tbk who had to shut down its cellular brand
Esia due to significant financial losses. Currently, Telkomsel, Indosat Ooredoo, and XL Axiata are Indonesia’s largest
telco companies.
In fact, telco is the largest sector to contribute to the Gross Domestic Product (GDP) of Information and Communication
among other business sectors. Badan Pusat Statistik (BPS) stated telecommunications services contributed as much
as 76.53% of Information and Communication of GDP in 2010. In 2017, telco contribution fell to 73.93%.
Figure 31. Indonesia telecommunication operators
Providers License Users*
Telkom Fixed Line 12,300
Telkomsel Mobile 162.9 mio
Indosat Ooredoo Mobile 58 mio
XL Axiata Mobile 54.9 mio
Hutchison 3 Indonesia Mobile 49.82 mio
Smartfren Telecom Mobile 12.3 mio
Sampoerna Telekomunikasi Mobile undisclosed
*Only Fixed Broadband and IndiHome Source: Annual Report 2018
Telecommunication Business Model

Basically, operators offer three main services, voice, SMS, and data, for prepaid and postpaid. They also expand their
business line for the corporate/enterprise segment with IT solutions (cloud, managed services, data center, Internet of
Things, etc). Telkom (including Telkomsel) currently serves the widest coverage in Indonesia.
They also obliged to pay annual spectrum licensing fees (BHP). On average, operators spend capital expenditure up to
Rp20 trillion every year to build telco infrastructure.
Telecommunication in the Era of Disruption

Digital transformation is the highlight of the telco industry over the years. The rise of the internet and smartphones has
begun to shift on how people consume telco services. People now spend most of their time using the internet instead
of voice and SMS.
58
Indonesian Internet Service Providers Association (APJII) reveals the internet penetration rate in Indonesia reached 64.8%
in 2018. Meanwhile BPS reported 171.17 million internet users out of a total of 246.16 million population in 2018.
What makes it challenging for the industry is that Over-The-Top (OTT) services have taken its business growth. OTT
is a term used to describe when providers deliver audio, media, and other multimedia over the telco network. Most of
new business opportunities have been discovered by tech companies instead of operators themselves.
Figure 32. Telco operators compete with OTT and “super apps” platform services
Popular OTT Apps Popular Indonesia’s Super Apps
Giant tech companies, such as Apple, Google, and Microsoft, as McKinsey reported, had doubled their profits from
13% (2005-2009) to 24% (2010-2014) out of the total tech, media, and telco business value globally. This indicates
that OTT players are not only able to redefine the customer experience, but also to win customer relationships.
In fact, this phenomenon is still ongoing when Indonesia’s super apps start to disrupt many conventional business
models. This term refers to all-in-one experience of many services in one app. There are more than one platform, like
GoJek, Tokopedia, Bukalapak, Traveloka, and OVO.
Given this situation, telco’s position in the market has become difficult as its role has began to be replaced by OTT
services and super apps. OTT doesn’t need to build network to run business. Meanwhile, operators must spend a lot
on infrastructure every year.
Figure 33. The growth of Indonesia’s big 3 operators
Top 3 Total Revenue Growth Top 3 EBITDA Growth Top 3 Users Growth
14.8% 14.4% 8.6%

2015 14% 14.4% 10.3%
-3% -3% -30%
14% 16.9% 13.9%

2016 9% 12.1% 22.8%
-7% -4% 11%
7.5% 7.7% 12,9%

2017 2.5% 0.8% 28.7%
7% 3% 15%
-4.3% -11.5% -17%

2018 -22.7% -49.1% -47.3%
2% 3%
0%
Telkomsel Indosat Ooredoo XL axiata
Source: Annual Report 2015-2018
Aside from that, Operators are having difficulty driving business growth due to high and dry Indonesian telco’s market.
Based on We Are Social report, the number of cellular penetration per January 2017 surpassed 142% or equal to 371.4
million registered users. Operators can no longer rely on business growth from new users or acquisitions. Meanwhile,
Indonesian Cellular Telecommunications Associations (ATSI) Chairman Ririek Adriansyah stated that Indonesia experi-
enced minus 6.4% industry growth for the first time in history in 2018.
59
Digital Transformation in Telecommunication

In refer to the business nature, the telco industry is quite “familiar” with the disruption and changing trend. We can
say that operators had already done some transformation efforts earlier than any other business. They use their assets
such as customer database and network to figure out what’s next.
McKinsey mentioned in its report that operators could improve their business by adopting an agile method and using
analytics to create data-driven decisions. These components can encourage operators to understand the customer
journey better and offer digital experiences.
In Europe, telco operators are able to save up to 25% of capital expenditure and operational expenditure by carrying
out analytic and digital transformations. It also mentioned that operators can cut their product portfolio by 80% and IT
spending by 25%. They can see positive results on the sales of internet services through online channels. Digitalization
in customer journey can give positive impacts as well as business process that produce data-driven decisions. Both
can successfully work if implemented by one another.
Meanwhile, MIT Sloan Center for Information Systems Research and Capgemini Consulting use different approaches
to show the importance of the customer journey. Based on the framework, operators can utilize customer value by
offering products/services. Technology is much needed for operators to get to know their customer journey. The chart
below also shows another approach on how operators should try new business models that are totally different from
their core services yet still related to connectivity.
Figure 34. The 5 building blocks of digital transformation
The 5 Building Blocks of Digital Transformation

Operational backbone Accountability framework
Integrated system and processes that ensure Clear ownership of—and coordination among—
operational efficiency and quality transaction and a growing set of digital offerings and components
master data
Shared customer insights External developer platform

Organizational knowledge about what customers A digital platform for an ecosystem of partners
will pay for and how digital technologies can who contribute to and use the platform
deliver to their demands
Digital platform
A repository of business, technology, and data
components facilitating rapid innovation of new
offerings and enhancements
Source: MIT Sloan Center for Information Systems Research, Ross, Mocker, and Beath
60
Figure 35. Building Blocks of The Digital Transformation
Customer Experience Operational Process Business Model
Customer understanding Process digitalization Digitally-modified business

• Analytic-based segmentation • Performance improvement • Product/service augmentation
• Social-informed knowledge • New features • Transitioning physical to
digital
• Digital wrappers
Top line Growth Worker enablement

• Digitally-enhanced selling • Working anywhere, anytime
• Predictive marketing • Broader and faster
New digital business
• Streamlined customer process communication • Digital products
• Reshaping organizational
• Community knowledge
sharing boundaries
Customer touch points
• Customer service Digital globalization
• Cross-channel coherence Performance management
• Enterprise integration
• Self service • Operational transparency
• Redistribution decision
• Data-driven decision-making
authority
• Shared digital services
Unified Data & Processes Business & IT Integration

Digital Capabilities
Analytic Capability Solution Delivery
Source: MIT Center For Digital Business and Capgemini Consulting
MIT Sloan also recommends a new organizational framework when operators consider to adopt a component-centric
business model. This framework is believed to accelerate digital services to the market. To make it work, operators can
no longer use conventional organizational structures, where the decision-making is made based on hierarchy level.
The old model could slow down the product development and delivery to market.
A. Commitment
Telkom sets a vision to become a digital telco (digico) company in 2012 along with three main pillars, Device-Net-
work-Application (DNA). The company will mainly focus on building networks that will be supported by apps and
devices to strengthen the digital ecosystem. Telkomsel plays a big role in executing all these pillars. It dominates
50% of the cellular market in Indonesia and currently is the largest revenue contributor in Telkom.
On the other hand, XL Axiata implemented a 3R (Revamp,

Rise, and Reinvent) strategy to run the digital transforma-
tion that has been carried out since 2015.
This strategy includes:

“
“We want to exist as a creative service provider for
customers. If we can’t maintain a good relationship
with customer, they will only take us as commodities,”
XL Axiata’s CEO, Dian Siswarini said.
1. Revamp as an attempt to change the business model In Hutchison 3 Indonesia (Tri) case, DSResearch can’t
to increase the number of users in terms of volume say much about its transformation strategies and com-
and value, thereby increasing profitability mitments since H3I is a private company and a subsi-
diary of Hong Kong-based conglomerate company CK
2. Rise as a strategy to enhance the XL brand
Hutchison Holdings.
3. Reinvent as a strategy to build and grow business
innovation However, H3I has been consistently positioning its brand
image in the telco market for the past years, making it
According to the company, this strategy was accomplished known as a digital lifestyle provider for youngsters. H3I
to respond to the dynamics of market changes. With this serves products/services according to its market. As
strategy, the company strives to create values that can many as 90% of H3I customers are digital savvy with a
drive the sustainability of XL’s business growth. high digital lifestyle.
61
In general, digital transformation in the telco industry has been driven by the shift of customer behavior and the
demand to adapt to the digital age. Unlike banking that is obliged to report their business strategies to regulators,
telco companies are actually closed when it comes to business strategies.
Based on our interviews, DSResearch sees solid commitment from several companies regarding their digital transfor-
mation. For example, Telkomsel and XL Axiata formed the Transformation Office (TO) division to develop agile, nimble,
and lean work styles within the organization. The purpose is to accelerate innovation development and market delivery.
All of this commitment is also reflected in the operators’ strategy to do open innovation with external parties. The
business models vary, starting from venture capital, incubator/accelerator program, innovation lab, and Internet of
Things (IoT) lab.
Telkom uses both internal and external vehicles to run the process of ideation, incubation, and value creation. For in-
ternal ideation, it will run by Digital Strategy and Hack Idea (innovation award program).
If you look at the flow, ideas from Digital Strategy will be executed by the squad or tribe in the unit. Same as Hack Idea,
potential ideas will be incubated by Telkom’s digital innovation lab, Amoeba. In this case, Amoeba collaborates with
the tribe/squad in Digital Strategy.
Figure 36. Telkom’s digital innovation framework
Innovation Led that is supported by passion based innovation from both internal and external founder/startups
From Empowered by Becomes
Talents Technologies Business
Ideation Incubation & acceleration Value Generation
Structure & CSS/Digital Strategy Tribes/Squads CFU

Expertise based Yield
Internal
Chapter
Culture activation
FU/CFU
Talent mobility
Passion-based Community of Efficiencies &
practice
Effectiveness
Innovator
External
Gain
Local and global
Startup discovery
Startup
Source: Telkom Group
Innovation development that appeals to business can come from external sources, such as innovators and startups.
This role is to run by Indigo Incubator and MDI Ventures. Both internal and external vehicles work together to create
value for the Functional Unit (FU) and the Customer Functional Unit (CFU).
62
Figure 37. Telkom’s innovation culture framework
Telkom is running a “dual mode” organization, not full autonomous customer focus team Archetype.
There is a need for core business to remain as is for the time being.
Traditional Functional Based Project Based Cross Functional Teams

Hierarchical Structure Telkom Today & Experimentation Hubs
Cross Functionality Cross Functionality

Decentralization Decentralization
Customer Focus Customer Focus
Customer Mission Based Teams Autonomous Customer Focused

Telkom Supported by Core Function Teams
Tomorrow
Cross Functionality Cross Functionality
Decentralization Decentralization
Customer Focus Customer Focus
Telkom’s EVP Digital and Next Business,Joddy Hernady revealed that Telkom’s innovation journey has been signifi-
cantly developing since 2013. That means, over the time span, Telkom did not immediately form all the innovation
vehicles as shown in the chart.
He said the purpose of creating external vehicles is due to the rapid development of technology and innovation. For
instance, Indigo Incubator was originally formed to initiate ideas that had never occurred in Telkom.
“
“Nowadays, R&D alone is not enough for the existing innovations and products. These
days, startups need to have three capabilities, technical, design, and business. As the
trends keep changing, we see the urge to do open innovation by collecting ideas from
external organization,” Joddy said.
In terms of human resources, Telkom has recruited many developers (pro-hire) to accommodate the increasing
software requirements. According to him, this need is impossible to be managed externally because it has become
a product.
In Telkomsel, the flow of innovation development is not centralized in one division. Even though the company later
formed R&D division, all business units/divisions can take part in the ideation making.
GM Business Incubation Telkomsel and Head of TINC Eko Seno Prianto stated the company uses several models to
conduct corporate innovation. First, the intrapreneurship model to encourage employees to participate in the inno-
vation process. This model is actually reflected in the internal program Telkomsel Innovation and Digital Acts. This
is under Human Capital Management (HCM).
63
Figure 38. Telkomsel innovation journey

Human Capital Management • Efficiency
• Inno Action
Corporate Planning
• Digital Acts
• T-Cash (LinkAja)
• MyTelkomsel
Internal
• Langit Musik
Business Development Business Development • T-Bike
• Parkirin
• MAXstream
IoT Business Development IoT Business Development
The NextDev The NextDev

• T-Cash (LinkAja)
• Roambee
• PrivyID
External
Business Incubation Digital Ecosystem
• Telkomsel Innovation Center
Telkomsel Mitra Inovasi (Innovator Startup)
(TINC)
As for internal sources, there are several divisions par- For the second model, Telkomsel set up an acceleration
ticipating in the ideation process. Business Development program called The NextDev with the purpose to scout
is an example on how a business unit produced a num- good talents. It also formed an investment arm entity
ber of Telkomsel digital initiatives, such as T-Cash (later Telkomsel Mitra Inovasi to leverage both services and
LinkAja), LangitMusik, Parkirin, and Dunia Game. There is business. Eko makes sure that the innovation journey of
T-Bike service that was initiated by IoT Division in Busi- TINC, The NextDev, and TMI will not be overlapping. In
ness Development. fact, all three can have the opportunity to work together
in creating new business ideas.
“
In 2017, the company formed Telkomsel Innovation Cen-
ter (TINC) as its first incubation program. Eko said that
Telkomsel’s Planning & Transformation Director Edward
Ying was the one that proposed the idea to explore IoT
program. TINC is also set as the main program of Telkom- “At some point, if there are TINC or The NextDev partic-
sel’s Business Incubation. ipants whose business is growing and the profile match-
“
es with TMI, they could become our potential portfolio
partners to receive funding. We do collaboration so that
“We think the incubation concept would be ideal since we we can align with what TINC and TMI are looking for”
have usually done the development in-house. Now, we are he explained.
looking for external sources. With the growth of technology
and local startups, we must adapt instead of doing it our-
selves. We should collaborate between internal and exter- Eko continued, Telkomsel also has an Innovation Com-
nal sources,” he said to DSResearch. mittee consisting of its board of directors (BoD). This
committee is in charge of selecting potential ideas and
to determine whether they pass the following stage. This
Besides, the plan to create an incubation program is to phase also includes candidates that will potentially re-
make sure that all ideas can become a sustainable prod- ceive funding or partnership.
uct. If they use the same-old concepts through business
units, the new business won’t survive longer because it
can’t reach the expected level of sustainability.
64
In contrast with XL Axiata, the company doesn’t have an R&D division for innovation development. Instead of focusing
on R&D, every division/business unit participates in the ideation stage to build innovation DNA within the organization.
This method still works before and after Dian Siswarini is appointed as the CEO of XL Axiata. For further development,
IT division takes the role of deciding whether the idea can be implemented or not.
For example, XL Cash service was first initiated by Digital Services, while MyXL apps were initiated by Prepaid/Mass
Market. Bod made the decision for product development which was supported by corporate planning assessments.
Corporate Planning will help BoD to make decisions.
Figure 39. XL Axiata innovation journey
Internal Business As Usual (BAU)

• Efficiency
Business Unit/Product Owner
Corporate Planning
Directorate & Chief Information • XL Tunai

• MyXL
officer
• Coupa
• Digital Transformation Group
Technical Team
• Lab IoT X-Camp

External • M-Fish
• Elevenia
Open Innovation/Synergy/
Collaboration
Digital Ecosystem
With the exponential growth of the digital ecosystem, XL initiated to form Digital Transformation Group (DTG) in 2017
to accelerate business digitizing for internal (employee) and external purposes (customer). The presence of DTG does
not eliminate the role of other divisions in exploring disruptive ideas. Instead, they work together.
XL also formed a Transformation Office (TO) division to conduct digital transformation and bring the agile, nimble, and
lean culture to the workplace. “Our transformation is very thorough and not only related to the customer or front-end.
What’s important is our operating model transformation. We tried to cut the bureaucratic hierarchy,” Dian said.
The bureaucratic hierarchy can help the company to accelerate decision-making. Since most of the telco companies
generally have seven layers of top management, XL cut it into five layers.
“ “Initiator needs to pass seven layers of positions to get approval. If we cut it into five layers,
it’s way more efficient. This strategy will make our company more nimble and agile so that
our product delivery is faster than ever,” she added.
65
Next, in terms of H3I, there are no further details about how the company performs its digital transformation. H3I
doesn’t have R&D division for innovation development. According to Vice President Director of H3I M Danny Buldan-
syah, R&D is not needed since its holding already has an innovation bank. H3I can replicate the holding’s innovation
strategy for the Indonesia market if needed.
Regardless, he stated that the holding gives full support to whatever the company decide on innovation. In fact, he
said the company can also propose and develop its own ideas and it is possible to be executed by external parties.
As far as we know, H3I took the initiative to develop Bima + as an answer to digital trends driven by e-commerce and
ride-hailing platforms.
“ “Does our company need to have developers? Does our employees need to
become coding experts? Certainly not. Learning is fine, but it’s us who make
products for potential customers. We are the conceptor. The rest can be done
from partners,” Danny said.
DSResearch finds telco sector has created many digital products in the last decade. All of them were developed
internally and externally. Referring to the framework below, these innovation products are classified based on the
service categories.
Operators play in areas where they can utilize the value of their customer base with connectivity. The goal is to under-
stand the customer journey better by providing experience and more value added.
Figure 40. Telkom’s portfolio/business domain direction
Telkom Group will focus on leveraging its core strengths in Connectivity

to expand into digital Platforms and select Digital Services
Digital Connectivity Digital Platform Digital Services

Definition Provide Data Connection Provide Data Connection Provide Data Connection
Connectivity related
Business/ Data center/ IoT/ Big Data/ Adtech Enterprise Consumer
Technology FTTx 4G 5G SDN/NFV Satellite CDB M2M AI Robotics Digital Digital
Examples Services Services
Cloud Security Payment/Blockchain
Oligopoly (Short-tail) - regulated
Mid-tall - limited winners Long-tall - limited winners
Stable cashflow
Stable cashflow, once user base established Volatile cashflow
High capex
Mid-low capex Low capex (but high marketing cost)
Business Nature Monetize from end-users
Monetization may not come Monetiz from end-users
Digital platform will be build
from end-users Scaled digital service can
on top
Digital services will evolve on top become platform
Rationale Connectivity continues to be Digital platform business is natural Very different business nature from
cash cow for Telkom extension for telcos connectivity business
Telco’s Core
Competency Level High Low

66
Figure 41. Indonesia’s telco digital businesses
Operator E-wallet E-commerce OTT Video-on-Demand/

Music-Video Streaming
Telkom T-Money Blanja.com ChatAja IndiHome
Telkomsel T-cash (LinkAja) - - MAXstream, Langit Musik
XL Axiata XL Tunai Elevenia - -
Hutchison 3 Indonesia (H3I) (cancelled) Aggregator in - -

Bima+
Figure 42. Customer touch points
Operator Mobile Apps Starter Pack
Telkom myIndiHome -
Telkomsel MyTelkomsel Starter Pack by.U
XL Axiata MyXL Starter Pack NB-IoT
Hutchison 3 Indonesia (H3I) Bima+ -
This has become a breakthrough for telco players by creating new ways to capture youngsters with digital services.
by.U is known as the first digital-based prepaid service in Indonesia. The company said that by.U is A new modification
to refresh Telkomsel brand image that has been known for a long time.
Figure 43. Breakthrough products/services
• All activities from card ordering, number selection, registration, and

Telkomsel by.U data purchases are made through the application
• Targeting the digital-savvy millennials
• The product is implemented into the gateway system or censor

XL Axiata NB-IoT • Targeting SME and corporates market
Figure 44. Telcos offer IT solutions for enterprise segment
Solution/Platform Telkom Telkomsel XL Axiata H3I
Cloud
Data Center
Big data
IoT
Meanwhile, XL aims for SME and corporates with NB-IoT starter pack. Both Telkomsel and XL aim to target different
markets and services.
67
D. Open Innovation Strategy

Operators aware of telco has totally different nature with digital business. However, to contribute in Indonesia’s digital
ecosystem, companies are started to explore open innovation strategy.
The business model is quite diverse, such as investment in startups or small business or a mentoring program. As a
result, operators can leverage startups technology, innovation, talents, or business models.
For example, Telkom and Telkomsel established a separate entity as their investment arm. Telkom became the first
telco operator who runs CVC. MDI Ventures, as Telkom’s CVC, has invested in 35 portfolios with 6 exits since founded
in 2015. Following its parent company, Telkomsel also set up a CVC named Telkomsel Mitra Innovation in mid 2019.
Figure 45. Indonesia’s telco operators explore open innovation strategy
Operator Program/Entity Business Model
Telkom Indigo Incubator Investment, mentoring
Telkom MDI Ventures Investment, CVC
Telkomsel The NextDev Investment, mentoring, CSR
Telkomsel TINC Lab IoT, investment, mentoring
Telkomsel Telkomsel Mitra Inovasi Investment, CVC
XL Axiata X-Camp Lab IoT, mentoring
Hutchison 3 Indonesia Incubator pemenang Investment, mentoring

#Kejar Ambisiku
What is meant by business leveraging is to take the value and integrate startup innovation into the company. PrivyID
is an example on how Telkomsel leveraging its digital signature technology to optimize Telkomsel business process.
E. E-commerce Partnership
The rise of e-commerce in Indonesia has encouraged telco players to explore a new opportunity. Indonesia’s top two
operators collaborate with external parties to operate the business. Telkom partnered with eBay to develop Blanja.com,
while XL Axiata teamed up with South Korea telco operator, SK Planet to create Elevenia.
Figure 46. E-commerce as one of Indonesia’s telco digital business
Category Operator Platform Business Model Year
E-commerce Telkom Blanja.com Managed by PT MetraPlasa, a joint 2012

venture between Telkom Group and
e-commerce giant eBay
E-commerce XL Axiata Elevenia Managed by PT XL Planet, a joint 2014

venture between XL Axiata and
South Korea’s leading mobile
operator SK Planet
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F. Telco Failures in the Era of Disruption

Indonesia’s telco industry has been searching for the ideal business to become a digital telco (digico) company.
They explored OTT service opportunities, but they failed. The “digico” concept they were trying to achieve is not yet
reflected in the transformation they have done for years.
Turkcell is one of the great examples in industry who successfully transformed its business by creating its own OTT
services. The Turki-based telco operator created its digital service ecosystem, such as a messaging platform, music
streaming (Fizy), and search engine (TV Yaani).
DSResearch finds several factors of telco’s failure in digital transformation. First, operators were unable to transform
their organization in order to develop innovative products to the market. Operators are lack of capability to create
digital products. Another factor is the business model is not sustainable, forced them to shut down their digital
business before making profits.
For example, Elevenia kept burning money to gain expected Gross Merchandise Value (GMV). This strategy is certainly
not right for operators who are heavily invested in the network. By the end, XL sold the ownership of Elevenia and
back to its core business.
In terms of digital payment, operators failed as their e-wallet users weren’t as big compared to their total customer
base. Operators have advantage with a large customer base and network yet unable to perform the business. There
is a big user gap between telco’s digital payment and independent platforms, such as OVO, GoPay, and LinkAja.
This makes telco’s e-wallet unable to get significant traction for years since it was released. The products can only
be used by the operator’s customer, thus closing the opportunity to acquire non-operator customers.
XL Tunai finally shut down as of March 2020 because it could no longer grow amid intense competition with OVO
and GoPay. Meanwhile, T-cash, who planned to become an agnostic platform, merged into LinkAja in February
2019. On the other hand, Hutchison 3 Indonesia decided to cancel its plan to develop e-wallet due to the new policy.
Bank Indonesia requires e-wallet license holders to be owned by a local company with 51% shares.
Telecommunications expert Nonot Harsono observed that the terminology of digital transformation has shifted
since 2015. This shift occurred because operators’ efforts to duplicate OTT services proved to be a failure. As we
explained earlier, the business model doesn’t match with telco’s business nature. He said that exploring the OTT
trends would be difficult since they have to compete with global services, like Google, Facebook, and WhatsApp.
Unless the government affirms this for the sake of data security. Let’s say local governments must use local applica-
tions. Therefore, he considered that connectivity is the main key to achieve the right transformation model. Operators
need to rethink new business opportunities about how to take advantage of connectivity, not with OTT services.
“
“They can create any products/services as long as it requires a network. Try to get a
big picture from any business vertical, like agriculture. Connectivity is supposed to be
the main services that operators offer. Big data or IoT is nothing without network,”
he told DSResearch.
69

Based on our survey regarding Covid-19, some operators are facing different impacts on digital transformation.
They experienced different challenges, such as budget, product delivery, mobility, talent scouting. On the contrary,
this pandemic is helping the company to accelerate their corporate innovation.
Telkom and Telkomsel decided to review their business priorities for the next months. As a result, Telkomsel delays
2020 The NextDev to avoid the spread of the Covid-19. The company also delays the piloting of an industrial IoT
use case for Telkomsel Innovation Center (TINC) third batch program due to physical distancing and Work From
Home policy.
“
“The current situation forced us to become more agile and speed up the digital transfor-
mation, especially on how to serve our customers faster with limited access. We must
adjust our digital roadmap and accelerate based on priorities,” Telkomsel’s GM Business
Incubation, Eko Seno Prianto said.
Meanwhile, Telkom’s EVP Digital and Next Business, Joddy Hernady revealed that the company has to make a change for
the innovation development based on:
1. Digital health solutions for internal and public needs
2. Digital touch points to maintain relationships with customers and potential customers (retail, SME, and corporation)
3. Piloting e-procurement solutions to simplify the process with vendors/suppliers
4. Digital solutions that will be used now and new normally
XL Axiata’s CEO, Dian Siswarini thought, the current situation has not really impacted their digital development. In-
stead, this pandemic has made the digital transformation more relevant. She said that digitalization has been one of
XL’s foundations in providing services to the customer. To that end, the company seeks to focus on utilizing the latest
technology to support customers’ demand through digital access.
70
Verdict Table.
Telkom Transform
core business)
customer
tures
► M&A
► Venture capital

customer or vendor
71
Telkomsel Transform
core business)
customer
tures
► M&A
► Venture capital

customer or vendor
72
XL Axiata Adjacent
core business)
customer
tures
► M&A
► Venture capital

customer or vendor
73
Hutchison 3 Indonesia Adjacent
core business)
customer
tures
► M&A
► Venture capital
Sources Internal employee/ Internal employee/customer Vendor/independent innovator Innovation lab

customer or vendor
74
FMCG
FMCG Industrial Landscape
Fast-Moving Consumer Goods (FMCG) products are the easiest products we encounter. Generally, this product is
consumed for daily needs. Its availability can also be obtained through stalls, mini markets, to supermarkets.
The FMCG industry is developing very fast over time, because of its nature that is easily consumed or quickly wears
out. This business also has a fast turnover and a relatively short shelf life. This makes the FMCG market scale not only
large but also very competitive.
Research and Market research in 2017 shows that food and beverage products contribute 89% of the total FMCG
market share in the world. Regionally, the FMCG market is dominated by North America, specifically the United States,
and is followed by Canada. Meanwhile, China and India have dominated the Asia Pacific region with a contribution of
almost 40%.
In Indonesia, FMCG is a sector that has supported macroeconomic growth in the last five years. Indonesia is an im-
portant market for this sector because it has the largest market scale in the Southeast Asian region. Euromonitor
International’s research notes that the cost spent by consumers in Indonesia reaches Rp2.700 trillion for products and
services. This figure is equivalent to a 4% growth in the 2012-2017 period.
FMCG Industry the Era of Disruption

In recent years, the digital revival that began with e-commerce business has slowly helped disintegrate many industrial
sectors in the world, including FMCG. Consumer products, such as bottled water and soap, can even be found in any
marketplace at a lower price than the retail price.
This phenomenon also occurs in Indonesia. Growth in internet penetration, smartphones and digital services has driven
changes in consumer behavior in shopping over the past few years. Statista research in 2018 noted that the cost spent
by Indonesian people to shop for food and personal care categories through e-commerce reached Rp1.452 billion.
In addition big brands are starting to enter social media to increase engagement with consumers. Brand efforts to inter-
act with consumers also influence their interests and decisions to buy products. This indicates the role of social media in
consumption patterns in Indonesia.
According to Kantar Indonesia’s research, FMCG also utilizes this phenomenon to communicate with consumers. Several
brands collaborate with the marketplace to expand their sales channels. Although its contribution is still small, the growth
of FMCG product transactions in Indonesia through e-commerce rose from 2% in 2017 to 6% in 2018.

FMCG Company in Indonesia
(undisclosed source)
Many FMCG brands are trying to adapt to shifting
consumer behavior. They want to see how the agile
style of work that has been applied by startups can
also be adopted into the corporate environment. Product Innovation
However, there are still many FMCG actors who have

not seen the importance of digital transformation.
Customers
Digital transformation is not only about leveraging
new opportunities to accelerate business, but how to
make digital the core business.
Business Model Operational
Innovation Innovation
Customer Experience
Innovation
Source: Crowd Companies
75
Considering that FMCG produces products ready for consumption, DSResearch recommends the following framework
designed by customer-centric oriented Crowd Companies.
There are four main focuses highlighted, including how FMCG is transformed through:
1. Product innovation
2. Operational innovation
3. Customer experience innovation
4. Business model innovation
For example, at the point of operational innovation, FMCG can design an innovation that can produce business pro-
cesses more quickly, consistently, and at a lower cost. In this case, the application of technological solutions makes it
possible to achieve these results. We can talk about big data technology, machine learning, or IoT to enter the FMCG
value chain ecosystem.
Innovation Categories Description Examples Benefit to customers
Product Innovation Often led by R&D, product Nike evolved beyond shoes to Continued improvements
features are enhanced, or new Nike Plys, expanding its offerings. on products features and
products are developed based Also, new product lines like Nes- benefits as well as new
on the product roadmap. tle's launch of Nespresso grew a product lines.
loyal customer base.
Operational Innovation Often led by operations, new In the '70s, Japanese automakers Products emerge faster, with
processes increase productivity like Toyota and Honda increased more consistency, and often
and efficiency, or reduce costs the efficiency of auto production at a lower cost.
associated with employees, and reduced overall costs through
partners, and the supply chain. kaizen.
Customer Experience Often led by marketing and Hugo Boss partnered with Uber New services beyond
Innovation customer care, new services, for production delivery, transpor- the core product offering,
interfaces, and channels are tation, and concierge. Swisscom including supportive media,
developed to improve customer launched "Friends" so customers communications in new
interactions, while the product can self-support. channels and mediums, and
often stays the same white-glove service.
Business Model Often led by innovators or BMW launched ReachNow, en- Core product and service
Innovation strategists, companies iden- abling customers to rent vehicles offerings are provided in
tify complete new revenue on demand—rather than buy— new ways that meet shifting
streams from existing core packaged with parking services, customer expectations -
capabilities insurance, and more. reframing customer relation-
ship in the face of disruptive
technologies.
Then, customer experience innovation can be an option for business people who want to improve their consumer
shopping experience. For example, selling through digital channels or collaborating with logistical startups for ship-
ping aspects. To reflect on the extent of digital transformation efforts in this sector, DSResearch interviewed a mul-
tinational FMCG company in Indonesia who could not be named. Mainly, this research explores the transformation
strategy that the resource person applies to his business in Indonesia.
Nevertheless, we highlight two perspectives relating to how companies view this transformation.
76
A. Customer Experience Innovation

Generally FMCG products are distributed to all regions in Indonesia, such as stalls, supermarkets (Carrefour, Giant, etc),
mini markets (Alfamart, Indomaret), including mom and baby shop shops.
Now, the company is also expanding access to sales of its products by collaborating with several e-commerce. Two of
them are Lazada and JD.id. The business model is not like a marketplace or anyone can sell it, but a kind of official store
where e-commerce buys directly from distributors
“ “We call pure player. There is also an official shop, there is also on-demand via the super
apps application. There is also the concept of online-to-offline (O2O) or vice versa. For
example, Indomaret now has offline and online stores,” our source explained.
He acknowledged that this strategy was taken to keep abreast of trends in e-commerce. The initiative came from the
holding company. Nevertheless, he said that actually consumer behavior in Indonesia is still fond of physical shopping.
“The digital shopping journey is still low, contributing only 5%,” he added.
The expansion of sales channels into e-commerce cannot be fully said to be an internal innovation because FMCG only
acts as a merchant or product supplier. Development of innovation still comes from the platform provider itself. In this
case, e-commerce such as Lazada and JD.id.
In this case, many large FMCG brands in Indonesia, especially in food and beverage products, have also taken
similar strategies. For example, Unilever Indonesia is now marketing its products through Shopee e-commerce.
Unilever is included in the Shopee Mall category, just like other consumer goods brands, such as Garuda Food and
Coca Cola Indonesia.
B. Operational Innovation
On the operational side, DSResearch identified that the company was not yet interested in utilizing its data with tech-
nological solutions. Our source said that at present the company is not interested in sharing sales data out.
According to him, it is difficult for FMCG to process data because it is related to competition with other FMCG players.
However, the company is currently cooperating with consultants for data processing as a material consideration or
“
reference.
“The most advanced at the moment is Nielsen. They are now collecting sales
data, not just consumer data. If Nielsen wants to collect sales data from super-
markets, they don’t necessarily want to display it because the sales data is con-
fidential. FMCG data is very important, but it has not been optimally processed.”
He said.
Unlike the Indonesian market, the world’s holding companies have recently revealed their commitment to focus on
data, technology and transformation. The global CEO said that the company plans to transform in the next two years
by adopting an agile work style to leveraging data and adopt technology as needed.
According to the CEO, this transformation was carried out to improve efficiency in the value chain so that the com-
pany could be more flexible and precise in producing customer demand. This is also to achieve top-line growth and
efficiency. It is not clear whether this includes the Indonesian market as well as the global holding has two entities that
run different product category businesses.
Transformation in the FMCG sector can have positive results on the operational side. This sector is closely related to
the long production and distribution process. By adopting technological solutions, FMCG can improve efficiency, both
in terms of time and cost.
In a report by CapGemini and Intel Corporation, big data and IoT are the right combination of solutions to be imple-
mented for the manufacturing or retail sectors. This report states that the significant benefit that can be obtained from
IoT is data. IoT can combine existing operations and data to reduce waste and improve performance.
77
Figure 49. Value chain collaboration enabled by new technologies
Innovation
Sourcing
Transaction flow
Information flow
Manufacturing Physical flow

Consumer
NGO
Distribution
Society
Retailing
Consumer Dialogue
Source: Capgemini and Intel Corporation
IoT can also describe how consumers behave in stores, how to use products at home, to the production process at the
supply chain. Massive consumer data collected will create a pattern that can be used to produce decisions, including
how companies encourage engagement with consumers.
The opportunities generated are also real. In 2013, the giant British retailer, Tesco, managed to save £100 million
in wasted stock each year. The technology successfully analyzed historical weather data, and found sales patterns
based on geography to predict which products will be sold and which stores will be on that day.
HM Sampoerna
As a tobacco company that has operated for decades in Indonesia, Sampoerna participated in enlivening the e-cigarette
market. Philip Morris International, as the holding company, had issued this smoke-free product. This smoke-free product
is named Iqos. According to Andre Michael as People and Culture Manager, the product has been circulating in several
countries. In Asia, this product can already be found in Japan, Korea, and Malaysia.
As a diversified product of Sampoerna, Iqos has a significant difference in approach compared to other cigarette products.
Starting from the supply chain, product distribution, and of course market understanding or product education. Sampoerna
spent a lot of attention on marketing this product in Indonesia.
A. Commitment
The annual report of PT HM Sampoerna 2019 has also included their commitment to market this new product.
Based on an analysis of the materiality aspect of sustainability in 2019, product innovation is one of the company’s
priorities as well as the only topic of business transformation.
78
Figure 50. HM Sampoerna business priority mapping
Higher Prioritized
Agricultural
practices for raw Economic performance
material sourcing Business integrity
Importance to stakeholder
Product innovation
Labor/Management
relations Fair working conditions
Indirect economic Responsible
impacts Contribution to Respect for human rights
marketing and
Training and society sales practices
development Illicit cigarette
trade
Renewable energy
Inclusion and diversity Health, safety and
Child labor well-being at Work
Sustainable supply Water
chain management stewardship Energy
efficiency
Emission
Driving operational excellence

Managing our social impact
Reducing our environmental footprint

Waste management
and littering prevention Transforming our business
Emerging topics
Lower Sampoerna’s significance of economic, environmental, and social impacts
The material analysis itself is an attempt to identify relevant sustainability issues through surveys aimed at policy-
makers, both internal and external. The process begins with the identification of relevant sustainability issues based
on literature review and observation through the media. These topics are then assessed and examined for relevance to
Sampoerna’s business and value chain. Next, designated a series of questionnaires and disseminated. The chart above
is the result of the first phase of material analysis showing some of Sampoerna’s business priorities throughout 2019.
B. Business Transformation
In 2016, PMI replaced their products with lower risk and smokeless products as soon as possible. Traditional cigarette
products often get public attention related to health issues. Bearing this in mind, PMI has developed smoke-free tobacco
products under the IQOS brand which carries a much lower risk compared to cigarettes.
Although it still contains nicotine which causes dependence and is not risk-free, experts agree that the main cause of
diseases related to smoking is dangerous chemicals produced by the process of burning tobacco and inhaled in the form
of cigarette smoke.
These innovative alternative products have gone through five stages of rigorous scientific assessment, which have led to
long-term analysis of qualitative and quantitative data related to how they are used in the real world.
79
PMI’s scientific results are also supported by independent research which has so far concluded that IQOS aerosols contain
harmful and potentially dangerous chemicals that are lower than cigarette smoke. PMI’s ambition is that at least 30% of
adult consumers who decide to keep smoking switch to this smoke-free product in 2025 compared to 2010, to realize the
main goal, namely the smoke-free future.
Sampoerna began to follow in the footsteps at the end of 2016. Along with the priority to market new products while
marking a change in the business model at Sampoerna. As a new business strategy, three transformation divisions in
Sampoerna were formed in the same year.
1. Products
2. The external transformation that will deal with how to interact with
stakeholders. Sampoerna realizes that the company is on its own in in-
troducing new products
3. Internal transformation related to how to build a new work culture and

way of operating
After the transformation team is formed, they will work with the Project-Based Organization scheme. This scheme
requires a small team model. Each of these teams will work using sandbox tools. Every team involves representatives
from each division in Sampoerna, starting from management, governance, finance, IT, HR, to sales. Besides operational
employees, every team is also will be charged with catalysts who are masters of tools and scrum masters. The team
is also supported by startup players who help to boost team activities. They have the role of directing the selection of
testing methods.
In the first sandbox, five challenges will be given to 25 people. They are Sampoerna’s selected employees from all over
Indonesia who will run this project for two months in Jakarta.During those two months, they will receive the outcome
and validation of the project. Then, each team will receive support in the form of funding for testing and coaching. At
the coaching stage, this activity is carried out by a team or a special individual who can be called a government board/
project owner/sponsor.
Government boards will see and assess progress every two weeks. Meanwhile, the coaches are mostly filled by
C-Levels from each company and external experts. There are also several workshops depending on the progress of
the project being carried out.
This business transformation period is also divided into 3 main phases:
1. Learning The initial stage is the learning phase, the transfer of knowledge from the global team. The
learning phase learns how to educate new products on the market.
2. Experience This second phase of experience. Apply the results of knowledge transfer in daily opera-
tions. The form is initiatives and programs that are run every day.
3. Sharing on the The third phase of sharing on the learning, evaluating for a year to find out the problem.
Learning Support from the government-board, or the project owner or sponsor.
In addition to directly involving the early adopters of the organization, namely C-Level and their senior leadership
managers also received a lot of help from the global team. Everyone at that level gets a workshop to know the toolkit,
mindset, and get a real case. After completing the sandbox program, 25 people who finished their project still had the
task to re-apply the work system in their respective divisions.
80
C. Value Generation
Sampoerna has already gotten some results from the transformations. The transformation division that works using the
agile team method successfully improves company outcomes.
A project-based team as a transformation team framework successfully brings cultural changes that are considered
positive by the company. First, every idea initiated by the team gets help faster, especially in terms of administration and
bureaucracy. This function already involves the division’s employee’s member. Second, everyone involved in the project
will focus on a clear mission that automatically leads to a clearer assessment. It also makes it easier for companies to
assess the impact on the organization.
Each individual on the team is responsible for team rewards. If previously the commission was calculated based on
revenue, this project-based would be based on scoring to see the team’s performance. The change is quite visible
since the company turned its working method from top-down to bottom-up. There are 1,000 ideas entered in two
weeks and all collected in one digital platform to be clustered. The company easily identifies the challenges that are
being faced.

Pandemic turning almost all aspects, including lifestyle and daily shopping preferences. If the impact is permanent,
this situation can substantially accelerate structural changes that shape the industry and also change the value of
these trends.
The FMCG sector is also demanded to be able to adapt and be relevant to consumers and customers. In a relatively fast
time, some products experienced a drastic decrease in purchases, but several other products experienced an increase.
The following figure is a map of Indonesian public purchases taken from the first week of February to March the
third week of 2020. Some food and beverage products are showing any changes in purchasing trends, not only the
germ-killing product.
In terms of purchasing power, the SES (socioeconomic status) class in the upper-middle segment still shows growth in
sales of FMCG products, but growth has slowed for the lower middle class. So far, only the Jakarta area shows a trend
of changing buying behavior, with an additional increase every week.
Figure 51. Impact of Covid-19 on FMCG Product Sales
Value Index
110
109 108
107 107 106
Total FMCG Personal Care Dairy Home Care Beverages Packaged Food
Unit/Trip index
Vol/Trip index
Trip index
Top 3 Growing 1. Liq. soap+sanitizer 1. Cheese 1. Detergent 1. RTD Tea 1. Canned food
categories 2. Baby wipes 2. Growing up milk 2. Floor cleaner 2. Isotonic drink 2. Breakfast cereal
3. Tissues 3. Margarine 3. Dishwash 3. Powder beverage 3. Snacks
Source: Kantar
In terms of purchasing power, the SES (socioeconomic status) class in the upper-middle segment still shows growth in
sales of FMCG products, but growth has slowed for the lower middle class. So far, only the Jakarta area shows a trend
of changing buying behavior, with an additional increase every week.
81
Figure 52. Covid-19 on impact on household spent
Pay Week Pre Covid-19 Pay Week Covid-19 Outbreak
110
108
106
104
102
100
98
96
94
92
90
Source: Kantar
88
Aug 4-weeks Feb 2-Feb-20 9-Feb-20 16-Feb-20 23-Feb-20 1-Mar-20 8-Mar-20 15-Mar-20 22-Mar-20
2020
Total Households Upper SES (AB) Middle SES © Lower SES (DE)
In its report, Accenture tries to map who, how, and when to respond to these changes.
Figure 53. Main Actions During the Pandemic for FMCG Companies
Workforce protection
relationship and flexible How Real-time consumer and
working 10 1 shopper insights
Who
What, Who, and How? Consumers
Transformation Enhanced customer and
and agility 9 2 consumer support
What is driving the change?
Who you need to be Workforce What Customers

connected with?
Virus Progression
How do you need to Partner ecosystem 8 Economic impact 3 Omnichannel and sales-
act to stabilize and force management
grow your business? Policy response Media and
Government influencers
Supply chain and flexi-

Portfolio evolution 7 4 ble production
Industry and Ecosystems
Working capital and financial 6 5 Technology stability and

performance management management
Source: Accenture
In terms of marketing, companies must actively monitor and respond to consumers’ abilities. They are needed to
understand changes in the underlying short-term and structural behaviors of their impacts. Companies can invest in
sophisticated digital assets such as digital platforms to optimize virtual shopping experiences. The technology should
be equipped with analytic capabilities to track KPIs. In addition to the face to face customers, companies also need to
consider digitizing and automating the sales process.
The potential for collaboration with B2B and B2B2C schemes are also very likely to be explored for accelerating sales.
The company can slowly develop strategic partnerships throughout the ecosystem.
Some published research shows that pandemics reduce outdoor activities. Covid-19 is momentum for companies to
develop the digital market and introduce consumers to the platform immediately. Companies must be aware of the
situation experienced by consumers. The brand must be able to offer a positive perspective and be a catalyst for better
new normal acceptance.
82
Verdict Table.
HM Sampoerna Transform
core business)
customer
tures
► M&A
► Venture capital

customer or vendor
83
FMCG Company, Undisclosed Source Pre-Core
core business)
customer
tures
► M&A
► Venture capital

customer or vendor
84
Transportation and Tourism

Transportation Industry
The national transportation service industry shown growth after the road, airport, and port infrastructure development
in the past four years. Quoting the news from Tirto, according to Chairman of Supply Chain Indonesia (SCI) Setijadi in
his written statement, SCI predicts that the Indonesian transportation sector in 2019 will grow by 11.15% to Rp740.4
trillion [contribution to GDP]. The transportation sector contributes to the Gross Domestic Product (GDP) in 2018
recorded at Rp66.2 trillion, an increase of 8.23% compared to 2017 (Rp615.5 trillion).
The highest contributor was land transportation with Rp380.8 trillion or around 51.43% and air transportation with
Rp282.2 trillion or around 38.12%. Meanwhile, sea transportation contributed 6.50% of land transportation (road),
river, lake, and crossing transportation by 2.30% and rail transportation by 1.66%.
This growth cannot be separated from the increasing need for freight forwarding services along with the rise of the
online transaction. Online commerce has created a distribution channel map leading directly from producers to consum-
ers or between consumers. The pattern of shipping goods has made the demand for logistics transportation services
increase significantly. Although the volume is not large in every shipment.
Bank Indonesia even noted, in 2019, the number of online trade transactions each month will reach Rp13 trillion.
McKinsey's prediction, which mentions e-commerce growth in Indonesia has increased eightfold in the period 2017 to
2018. From total online spending of $8 billion in 2017, increased to $55 billion to the $65 billion in 2020.
Although it is still dominated by land transportation, the government is currently also trying to direct other sectors
to utilize digitalization to improve transportation productivity. For example, OTA which helps increase the number of
flights due to buying and selling tickets online. In January 2016, there were 6.3 million domestic flight passengers,
which increased to 8.1 million passengers in October 2018, as reported by katadata.co.id
Case Study: Blue Bird

Blue Bird and Public Transportation in the Era of Disruption
On October 13, 2010, Gojek officially stood with 20 drivers following Grab in 2012. Since then “Ojek Online” has
become one of the most popular transportation. Those who initially used public transportation or conventional taxis
switched to using an online motorcycle taxi.
Based on a survey conducted by the Indonesian Consumers Foundation in 2017 tariffs are the main reason people
move using online motorcycle taxis. Then followed by speed or delivery time, driving comfort, and safety.
Figure 54. Reasons consumers choose online transportation services
84.1 81.9 78.8
61.4
Safety Cheap Fast Convenient
(Percentage %) Source: YLKI 2017

85
According to the statement of the Chairman of the Indonesian Consumers Foundation, Tulus Abadi, quoted from Tempo,
up to 72.6% of the 4,668 respondents who used online transportation services chose Gojek. Followed by Grab chosen
66.9% of respondents. Whereas Uber in a survey conducted in April 2017, 51% was used and My Blue Bird was 4.4%.
From the frequency of its use, said Tulus, 31.6% of users use online transportation 2-3 times the most week. Blue Bird as
one of the long-standing players in the transportation industry gets the smallest portion.
Figure 55. Blue Bird financial performance
Total assets Total equity Net revenue Operating income

(in million Rupiah) (in million Rupiah) (in million Rupiah) (in million Rupiah)
5,265,161
7,300,612 4,930,925
6,955,157 807,271
4,662,680
6,515,487 4,796,096 4,218,702 567,599
4,203,846 558,249
2016 2017 2018 2016 2017 2018 2016 2017 2018 2016 2017 2018
Source: Annual Report 2016-2018
Blue Bird became one of the companies that were quite large affected due to the presence of disruptors. Based on the
financial statements Blue Bird's operating profit has decreased from 2016 to 2018. In addition to facing competition
from application-based transportation players, Blue Bird also has to compete with local taxis in several cities. Blue Bird
did not remain silent. Since 2016 they have been significantly catching up and starting to make some innovations.
According to the presentation of Andeka Putra, who when interviewed as CIO Blue Bird, the company had taken the
first steps to start its strategy, read, and understand their markets. Consumers now have made fundamental changes
in commuting, especially millennials. But on the one hand, they do not prioritize having a private vehicle. This certainly
makes transportation needs high.
Figure 56. MaaS key attributes
2
Customer experience
Lifestyle- Optimised 3
centric pricing mobility
1
Value-
Connected and added service
personalised integration
mobility
4
MaaS
8
Tech Product and
-agnostic service
integrated coordination
payment
Plug and 5
Open data
and analytics Play (API)
7 Back-office
Enablers
Source: LEK Consulting

86
The phenomenon is captured by Blue Bird as an opportunity to innovate. MaaS is a solution for urban traffic manage-
ment. This model requires the system to integrate various modes of transportation, simplifying route planning to make
it more efficient, and using customer-friendly service or access. Based on the chart above, there are several aspects or
indicators that Blue Bird can do to transform.
1. Connected & Personalised Mobility 5. Product & Service Coordination

The connection between transportation providers On-demand integrated services such as delivery
and customers through a single application. services.
2. Life Cycle-centric Pricing 6. Plus & Play API Back Office

Determining rates according to certain calculations
and paying attention to the impacts of various aspects. 7. Open Data Analytics
While allowing customer privacy and security con-
3. Optimised Mobility trols, data collection and sharing seen everywhere
Connections between modes of transportation to and transparent.
facilitate customers.
8. Tech Agnostic Integrated Payment
4. Value-added Service Integration Potential digital developments and innovations that
Real-time data updates related to traffic jams, enable open infrastructure and technology-agnostic
alternative routes, infrastructure, trips, booking and solutions.
payment, and various other services.
However, MaaS is not a simple framework. It requires many aspects t realize. The ecosystem is also an important key.
Moreover, ecosystem factors involve government and community stakeholders in it. The Blue Bird business process
identification using MaaS indicator in the following analysis were without involving other stakeholders in it.
Company Commitment
Blue Bird’s internal policymakers formed a new business unit, the Business Transformation Office (BTO) after the
2016 driver demo which had paralyzed Jakarta. As one of the transportation companies that has always excelled
in the past 40 years, their position could be threatened without transformation. The starting point for Blue Bird’s
transformation began with BTO formation. The main task of the BTO was to find innovative ideas.
Aside from the technology side, Blue Bird takes a more specific approach to fit the needs of its customers. One of
them is in collaboration with hospital institutions, hotels, entertainment centers, and airports.
Blue Bird also collaborates across industries, in addition to local taxi operators. The focus of the collaboration is to
strengthen the ordering and payment system. In 2017 Blue Bird officially collaborated with Gojek. Their collabo-
ration services include the integration of service and payment order systems. Previously Blue Bird payment using
debit cards and credit cards, later they can also be made with a digital wallet (e-wallet). Blue Bird was dealing a
strategic partnership with Gojek.
Innovation
Before the era of disruption, Blue Bird was the first taxi in Indonesia to use a taximeter. Shortly then other taxi services
followed in the footsteps. Decades later, precisely in 2011 Blue Bird released a mobile application for reservations for
Blackberry users who were blooming at the time.
As Blackberry users dimmed and replaced by Android and IOS, Blue Bird's online ordering service began to fade. Blue
Bird also did not continue to develop online orders through other platforms. At that time the taxi booking stream was
still dominated by telephone reservations.
The era of disruption became a wake-up call for Blue Bird to get back up. Blue Bird has quite large data, fleet move-
ments for 10 years, passenger shuttle points, and many more. Through BTO, Blue Bird began to dig up important in-
formation from the data. Instead of broadening its shares by expanding the market to reach what disruptor has already
reached, Blue Bird chose to optimize its markets.
They focus on developing renewable services. In terms of technology, Blue Bird began to make major renovations and
rejuvenation of hundreds of systems/applications internally. Moving all data in the data center to the cloud and start
using new programming languages, one of which is Golang.
87
Figure 57. Blue Bird piloting scheme
Driver Prospective Passenger

Driver Location Detection Petection (near by)
System
Notification Information
Mobile Apps for Driver
Based on the results of data analysis in the early stages, Blue Bird began piloting around Jakarta on small-scale areas.
From the results of piloting Blue Bird could increase the number of citizens by 14%. Revenue grew by almost 8% with
driver compliance rates less than 50%. Especially for new drivers, this is very helpful. Slowly Blue Bird hopes that this
strategy will not only last but also regain its market share.
This shows that the results of technology optimization show a positive prospect in the future. Before focusing about
targeting new markets, Blue Bird could streamline their operations.
Product Innovation and Collaboration
2017 • Collaboration with Gojek so that customers have a wide choice of ordering channels to get Blue Bird services
• Launch of Jakarta Airport Connexion (JAC) -Bigbird airport shuttle to and from Soekarno Hatta airport
• Easy ride innovation, customers can stop taxis on the road and make non-cash payments using the My Blue Bird
application
• Collaboration with Traveloka provides JAC Bigbird and Goldenbird bookings through the Traveloka application
2018 • Launched a new feature on My Blue Bird, Fixed Price. This feature makes it easy for customers to see the certainty
of prices from the beginning of the trip with a fixed price
2019 • The acquisition of Cititrans reached Rp115 billion. The acquisition is an important milestone in the Blue Bird
group’s strategic plan to diversify its business and to build a stronger presence in the upper mass market.
Businesses in this shuttle segment will optimize vehicles from Cititrans as many as 130 units of the fleet
• Seed funding in several startups
• Blue Bird launches e-taxi, a taxi service using a fleet of electric cars. At present, Blue Bird has 30 electric taxi fleets.
Blue Bird aims to have 2,000 e-taxi fleets by 2025
• Together with Telkomsel, it applies the Internet of Things (IoT) technology to 10 taxis. By using IoT, the Blue Bird
ecosystem from the center to the fleet will be connected. This technology will replace the meter or fleet counter
device and the 2G network-based order receiver, which has been used by the company. Thus, services ranging
from metered, booking services, position tracking (GPS), passenger communication with the central operator until
payment will be connected via IoT. Also, this technology can read vital data related to vehicle conditions. This
information will be sent to the Blue Bird application system.
2020 • Armed with tens of thousands of experienced fleets and drivers, Blue Bird presents the Chat-Order-Delivery alias
COD feature. Launched at the end of March 2020, this service is in great demand by many consumers. Apart from
the Jabodetabek area, this service is also available in Medan, Bandung, Semarang, Surabaya, and Bali.
• BirdKirim: logistics delivery service program as a continuation of the Blue Bird COD (Chat-Order-Delivery) pro-
gram that was previously launched. The BirdKirim ordering service can be accessed via the My Blue Bird app
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Reflecting on the innovative products that have been run, Blue Bird prefers to focus on customer reach out rather
than concentrating on disruptor applications. Blue Bird seeks to enrich the booking channel so that customers easily
reach its transportation services. For example, taxis for freight. Before the COD service was launched, many cus-
tomers had used their fleet to deliver goods. Blue Bird reads this as a form of trust in the brand.
Figure 58. MaaS key attributes
2
Customer experience
Lifestyle- Optimised 3
centric pricing mobility
1
Value-
Connected and added service
personalised integration
mobility
4
MaaS
8
Tech Product and
-agnostic service
integrated coordination
payment
Plug and 5
Open data
and analytics Play (API)
7 Back-office
Enablers
6
Source: LEK Consulting
This section will observe the way Blue Bird implements this approach. The MaaS delivery model has eight main
attributes. Those attributes are divided into two parts.
Some of these attributes are related to customer experience, while the rest are related to technology and processes
that can be applied in innovation. The eight attributes will then measure the extent to which Blue Bird applies MaaS.
Connected & Personalized mobility is defined as the connection between transportation providers and customers.
Now Blue Bird has provided a taxi ordering application that can be used anytime. In addition to the My Blue Bird app,
customers can also enjoy the Blue Bird online reservation and payment service on the Gojek app.
Life Cycle-centric Pricing is defined by determining rates according to certain calculations and paying attention to the
impacts of various aspects. Since 2018 Blue Bird has been able to use a fixed pricing system through the My Blue Bird
and Gojek applications.
Optimized Mobility is defined as inter-mode transportation connectivity to facilitate commuting for customers. So far
Blue Bird has demonstrated this effort by making the Jakarta Airport Connexion (JAC) -Bigbird airport shuttle to and
from Soekarno Hatta airport.
Value-added Service Integration is defined as real-time data related to traffic jams, alternative routes, infrastructure,
travel, booking & payment, and various other services. So far the value-added service feature is not available in the
My Blue Bird app.
Product & Service coordination or integrated on-demand services defined as freight forwarding services. Armed
with tens of thousands of experienced fleets and drivers, Blue Bird presents the Chat-Order-Delivery alias COD
feature. Even before the COD service was launched, customers had often sent goods using their fleet. At that time
COD services were not yet integrated into the Blue Bird system. Meanwhile, in the Back Office Plus & Play API, Blue
Bird has not yet developed technology for the API.
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Open Data Analytics or data collection and sharing from various sources and is transparent by enabling customer
privacy and security controls. Optimization of Blue Bird data is currently still derived from internal data. The BTO
Division is trying to get passenger data that has been collected for 10 years.
Tech Agnostic Integrated Payment or the potential for digital development and innovation that enables open infrastruc-
ture and technology-agnostic solutions. Variation of payment methods is one of the services that has been implemented
on mobile apps. Customers can make payments on the My Blue Bird app via credit card, LinkAja, and Funds.
Of the eight MaaS indicators above, there are 2 indicators that have not been done by Blue Bird. Six indicators that
have been carried out still have a long way to go to improve. As an example of the points about Optimized mobility
about inter-mode transportation. At present, the Blue Bird fleet only exists at the airport. Going forward Blue Bird
should also be able to be present at the pickup point and integrate it into their application as added value.
Aviation, Travel and Tourism Industries: Panorama & Garuda

Trends in the aviation, travel, and tourism industry show expansion with increasing demand. This causes great oppor-
tunities as well as challenges for stakeholders to quickly adjust strategies.
Digital consumer's emergence including online travel agents (OTA), meta-search engines, and digital booking plat-
forms aggressively disrupt the traditional travel industry value chain. These newcomers challenge incumbent players.
While incumbents try to adapt to the new digital paradigm.
Disruptor
The Association of Flight Ticket Sales Companies or Astindo evaluates that the traditional travel agent industry is in
decline. This is due to the rapid ticket sales by OTA in Indonesia. The Chairman of Astindo, Rudiana said that at this time
many conventional travel agents began to slump. From 2018 to 2019, there are at least 10%-20% of travel agents who
don’t move out of the total.
While the number of passengers on domestic and international flights shown different data. The Central Statistics Agency
noted the number of airplane passengers for domestic flights in October 2018 expanded 6.85% to 8.11 million people and
gained 7.85% contrasted to October the previous year. Similarly, the cumulative period for January-October this year grew
from 6.98% to 78.63 million people opposed to the same season in 2017.
Figure 59. Total number of passengers of domestic and international flights (2016-Oct 2018)
10 Mio
9 Mio
8 Mio
7 Mio
6 Mio
5 Mio
International Flights
4 Mio
Domestic Flights
3 Mio
2 Mio
1 Mio
Jan 2016 July 2016 Jan 2017 July 2017 Jan 2018 July 2018
Source: Badan Pusat Statistik (BPS)

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Based on these facts, the aviation industry is one of the beneficiaries of the presence of OTA. The market segment
targeted by OT can also be said to be precise, millennial. With a commuting lifestyle and attractive features, OTA is one
of the new mainstays of the tourism industry.
But the presence of OTA does not necessarily change the entire business process of the travel industry. There are
several business models in this industry that have not yet found a way to transform digitally. The transformation might
be present in another form rather than in the form of technology.
This case study will observe Panorama and Garuda Indonesia as a company that has been in the industry for a long
time. This paper tries to see how the two companies do the digital transformation.
Figure 60. Drivers of value creation in aviation, travel and tourism
Value Drivers
Customer Revenues
Industry
Impact Capacity Load factor
Free Cash Flows/
Shareholder Operating Yield Ancillary revenue
Returns Margins
Value Impact Occupancy RevPAR
of Digital
Transformation Platform fees Demand
Societal Value
Impact Drivers
Costs
Cost savings Fuel/utilities Employees
Customers
Time savings
Maintenance Inventory
Environment CO2 emissions Other: R&D, SG&A, food insurance,

commissions, non-aircraft rentals, landing
fees and other minor categories
Employment
Society Economic surplus Capital allocated
Lives saved/ Aircraft rentals/ Technology

security and safety ownership
Terminal/
Facilities/gates/
properties
Source: World Economic Forum
This chart will be used as a framework for calculating the digital transformation process of the two companies. The
value-at-stake analysis aims to assess the impact of digital transformation initiatives on the industry, customers,
society, and the environment.
The main assumptions and observations for calculating the impact of digitalization in aviation, travel,
and tourism include:
Industry Environment
This section will look at the extent to which companies Seeing transformation products that also prioritize envi-
benefit by reducing costs through increased efficiency. ronmentally friendly aspects.
Including how companies offer products as added value.
Customer Public
See improved travel experiences tailored to individual See options for collaboration with local residents such as
preferences and time savings thanks to seamless travel, the use of local assets/houses for rent.
optimized throughout the travel ecosystem.
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Case Study: Panorama
Profile & Commitment

Panorama is a company in the sector of travel and tourism that has been operating for 47 years in Indonesia and
even abroad. As a family company, panoramas mainline is currently held by the second-generation followed by a
third-generation that has begun to enter the middle or managerial level.
At first, Panorama provides services to city tours for foreign guests who come to Jakarta. Its products are in the form of
tour packages to Kota Tua, Monas, and other tourist attractions in Jakarta. Their business processes forced Panorama
to expand services. Starting from transportation and then developing to other services. In the 1990s many profes-
sional employees began to enter. The Panorama was originally only one company. For now, it has developed into
several companies.
In 2001, Panorama became a publicly listed company (Tbk). They started a joint venture with a foreign company. At that
time, Panorama was the principal of the Gray Line Worldwide tour company. Some of the partnerships that Panorama
runs are with Carlson, Chan Brothers Tours & Travel (Singapore), and Reed Elsevier (Europe's largest media company).
As the company expands, the business focus are divided down into five pillars:
1. Inbound: for handling the arrival of foreign tourists

2. Leisure: for the domestic market
3. Media: includes exhibitions, publications, and magazines
4. Hospitality and hospitality
5. Transportation
Under the Panorama Group, there are three other subsidiaries, Panorama Sentrawisata, Destinations Tirta Nusantara,
and Weha Transportation. In 2011, the company formed the Corporate Culture division which was initiated and executed
directly by C-Level. Together with the executive committee, this division functions to determine the business trends that
will be carried forward.
Figure 61. Panorama Group consolidated statement of comprehensive income
Description 2014 2015 2016 2017 2018
Revenue 330,559 334,569 503,128 507,982 514,853
Direct cost 259,957 261,059 389,363 364,747 399,842
Gross profit 70,601 73,510 113,764 143,235 115,011
Operating expense 46,976 58,968 72,598 98,263 97,630
Operating profit 17,465 9,520 38,380 41,918 7,279
Other expense-net (6,158) (5,021) (2,785) (3,053) (10,101)
Tax expense 4,523 2,714 12,995 11,418 4,414
Non-controlling interest (797) (2,270) (220) 735 (470)
Net income 12,594 7,760 25,841 29,501 3,479
basic earnings per share 19.00 12.73 35.83 41.69 5
(In million Rupiah, except for basic earnings per share) Source: Annual Report
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Figure 62. Number of Panorama customers by country
58.1%
Europe
Western Europe,
Eastern Europe,
Russia, Scandinavia
2.5% 4.4% 24.7%

America & Canada Middle East & Africa Asia Pacific
United States United Arab Emirates, Arabic, Southeast Asia,
South America, Central Africa, South Africa South Asia, East Asia,
Canada Australia-New Zealand
Lainnya
10.4% The use of transportation from
other inbound tour operators
in Indonesia
The Company has applied digitalization in its business processes through the use of Tourplan, a web-based applica-
tion for inventory enrichment, product development, distribution channels to travel agents, to invoicing. Tourplan is
also planned to be connected with other online travel agents (OTA) applications so that it can make it a hub of OTA in
market countries accessing tourism products in Indonesia.
In line with business speed through digitizing business processes, the company is investing in the ICT (Information
Communication Technology) sector by purchasing and developing software that supports the company's operations.
This software helps start from adding inventory/product components, developing tour packages, making prices, to
issuing bills to clients/customers. Through this software, the company believes that the effectiveness and efficiency of
work will increase which will lead to revenue growth.
Innovation
A company's innovation is inseparable from its culture. In Panorama, each group has its own culture. Panorama plans
to merge each of these groups into one corporate culture. This is one part of the corporate innovation process to unite
the group. According to policyholders, innovation requires aspects of things that are intangible. Panorama digital
transformation does not only focus on the front-end, but also from the back-end side.
Businesses with B2B, B2C, and B2B2C ecosystems do not merely use business models with direct touchpoints to
consumers. As an example of the Ralph market, a tour company from Germany provides travel services to Java-Bali.
Prospective tourists to Ralph will not be directed to the Panorama website but on their booking platform, Tui.com. This
platform has access to Panorama inventory so that Ralph customers can quote on the Tui.com platform
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The business model uses a B2B approach. Agents who have worked with Panorama can directly access the inventory.
They can see the availability of hotels and existing tour packages. Because of this business model Panorama also pays
attention to the transformation at the back end. Panorama is now using an API. Each Panorama market segment has
its application which they manage themselves.
As a joint venture company, some of their businesses are automatically formed under the OTA or Online Travel
Agencies scheme. Their market is large but fragmented. So, Panorama does not plan to make super apps for now.
The ecosystem is too diverse, requires a lot of consideration and resources to bring it together.
Product
Panorama has a specialized company consisting of programmers, Coders Colony. The company is the focal point for
developing further ideas. Meanwhile, this ideation will be initiated from each business unit, beforehand.
Panorama has also begun to empower their data. One of them is used to offer service/package tours based on the customer
purchase track record. At that time, Panorama was planning to carry out a more comprehensive digital transformation.
Figure 63. Drivers of value creation in aviation, travel and tourism Source: World Economic Forum
Value Drivers
Customer Revenues
Industry
Free Cash Flows/
Returns Margins
of Digital
Societal Value
Impact Drivers
Costs
Customers
Time savings

Employment

Terminal/
Facilities/gates/
properties
In the shareholder return section, Panorama utilizes an unused White Horse fleet on weekends as a new source of
revenue through the open trip package as AB Sadewa, VP Brand and Communication explains during the interview.
This package called explorer. This open trip uses White Horse vehicle units. When there is no tour, the bus will accom-
modate open trips on weekends. The destination areas such as Ranca Upas or Tanjung Lesung.
The Panorama business process in the travel sector is not just a ticket or reservation provider. They use a hospitality
approach by relying on personal roles such as tour guides. Therefore, the process of shifting to digital is not easy.
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Case Study: Garuda Indonesia

Profile
Garuda is one of the companies that often reap achievements at the international level. Garuda became one of the most
punctual airlines in Southeast Asia to 5-star airline for 5 years in a row. Garuda Indonesia shows the growth of financial
aspects every year. One expansion that needs to be considered is other operating income outside the main business.
Nevertheless, Garuda still has a lot of potential that can be developed.
Figure 64. Garuda Indonesia consolidated statement of comprehensive income (Rp)
Description 2015 2016 2017 2018 2019
Operating revenues 3,208,469,733 3,279,806,762 3,401,980,804 3,529,322,999 3,773,399,072
Scheduled airline services 261,899,138 192,145,848 301,498,970 266,866,623 249,906,152
Non-scheduled airline services 344,620,874 391,968,955 473,846,007 534,251,439 549,3332,859
Other 3,814,989,745 3,863,921,565 4,177,325,781 4,330,441,061 4,572,638,083
Total 17,465 9,520 38,380 41,918 7,279
Commitment & Innovation

In line with the unlock opportunity, in October 2018 Garuda has a new sub directorate, business development. This
division serves to incubate innovations aimed at new business lines. The division team is drawn from the talent of the
Garuda Group with their respective expertise.
Figure 65. “Genesis” Innovation Center of Garuda Indonesia Group
“Genesis”
Innovation Center of Garuda Indonesia Group
Facilitator and Connector between subsidiaries
Source: Laporan Tahunan Garuda

95
This mission is also strengthened by the adjustment of the company’s strategy in 2019 to “Beyond Airline Business”
as stated in Garuda’s Annual Report 2019. Referring to Sky Beyond 3.5’s Long Term Corporate Plan (RJPP), the com-
pany seeks to innovate outside the more promising main business of aviation. Therefore, the company conducts an
evaluation that is expected to be able to accelerate the achievement of the Quick Wins 2019 and encourage a more
innovative cultural transformation.
2019 Quick Wins or short-term strategy is aimed at three things. First, the transformation of corporate culture
through the development of human resources, processes and technology. Second, increasing revenue, and third
redefining cost structures based on shared service organizations. This strategy has been implemented since 2018
and will continue in 2019.
In 2019 Garuda built the foundation for a continuous innovation system with the following process:
► Blue Ocean Training for Employees, this training is to provide training related to concepts, methods, and tools in
creating Blue Ocean business innovation
► Development Blue Ocean’s innovation ideas were then presented to the management ranks for the best.
► Implement the best-selected innovation ideas. Strengthening the Sustainable Innovation System by forming an
Innovation Center within the GA Group which was later named GENESIS.
► Garuda Blue Ocean Innovation Center “GENESIS” as the driving generator of Innovation Culture in the GA Group.
► GENESIS Satellites at Subsidiaries to encourage continuous innovation throughout the GA Group environment.
► Blue Ocean Accelerator is under the auspices of GENESIS to drive business growth in the GA Group.
Every quarter, the C-Level ranks led by the CEO will review these innovative products. They will decide on every idea/
innovation to be executed.
The Work Program in 2019 focuses on developing revenue outside the aviation business. This is a starting point for
Garuda Indonesia to expand in the years to come.
Innovation Product
Passenger:
• GIA Mobile or an application that has a voice command feature to order tickets..
• GIA Food Hall or food ordering service before leaving and can be enjoyed while on the plane or brought home
as souvenirs.
• GIA Smart Travel Watch, a watch equipped to detect heart rate and blood pressure.
• GIA Games that can be played while onboard or offboard.
Logistic:
• Tauberes (closed as of April 2020)

Logistics booking service, both for couriers and air cargo gateways based on applications
• Kirim Aja (commercial as of May 2020)

Application-based freight service that covers a number of flight destinations served by the Garuda Indonesia fleet,
CItilink Indonesia (Jabodetabek and other intercity supported by Aerojasa Cargo)
Technology:
• Garuda implements Internet of Things (IoT) on gate 12 Soekarno-Hatta Airport with a face recognition feature.
With this feature, the public does not need to show tickets to pass the gate.
Competition
• Garuda Indonesia Innovation Challenge is a competition for ideas to get innovation (both internal/employee and
external). There are 3 (three) types of categories that participants can choose to participate the competition, “Air
Travel Experience” (“Flight Service”), “Airlines Support”, “Beyond Aviation” (Business Opportunities Outside the
Aviation World).
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Figure 66. Drivers of value creation in aviation, travel and tourism
Value Drivers
Customer Revenues
Industry
Free Cash Flows/
Returns Margins
of Digital
Societal Value
Impact Drivers
Costs
Customers
Time savings

Employment

Terminal/
Facilities/gates/
properties
Source: World Economic Forum
Based on the value creation indicator, Garuda is showing progress towards digital transformation. In the shareholder
returns section, Garuda has additional income from the passenger sector previously mentioned.
In the cost sector, Garuda Indonesia focuses on improving employee capability and capacity. Cross-division turnover is
carried out, which aims to provide an overall understanding of the Garuda business process. This is stated in their short-
term strategy number 1: Corporate Culture Transformation through the Development of People, Process, and Technology.
This strategy also includes the Capital Allocated sector in the sub technology and terminal facilities. Garuda has also
adopted office collaboration technology, cloud computing, and artificial intelligence using work support application
systems through Host to Host/API technology.
As a member of the SkyTeam alliance, Garuda Indonesia has an e-commerce-based digital transactional service for
service users, consisting of Garuda Online Sales (GOS), Online Sales Partnership (OSP) with online travel agencies,
Corporate Online System (COS) based (B2B), to the web and mobile apps for reservation & ticketing services. Garuda
uses IoT at gate 12 using face recognition. Passengers merely show a face to open the gate.
In the societal impact section, Garuda is currently developing a shuttle baggage service and products, Tauberes.
A subsidiary that focuses on digital businesses in logistics: including package delivery and aircraft cargo services.
From the current sub-environment, Garuda is also developing a GIA Box to reduce the use of Styrofoam. Considering
the demand for cargo for marine products is still high and often uses Styrofoam.
97

The transportation and tourism sectors have had a significant impact because of the pandemic. Blue Bird admitted that
this occurrence was an entirely valuable moment to reflect on the business. This pandemic is also an opportunity for
Blue Bird to accelerate digital transformation.
Citing Muhammad Suhada as GM of IT Development, Blue Bird believes that “new normal” will be leveraging technology.
Blue Bird needs to prepare it. This situation leads to the increased company and employee agility.
Because of the pandemic, the internal team carried out several programs. First, the acceleration of the transformation
project, the IoT rollout in our fleet, whose initial plan will be completed in Q3 to Julyy. Second, changing the company
priorities. Logistics and delivery has become the main priority to boost revenue. The digital role is needed for this.
Blue Bird also projects to collaborate in addition to optimizing technology. This pandemic is one of the drives for Blue
Bird to take many opportunities for collaboration.
Various innovations can also be found in the air transportation industry. Airlines and airports recommend a multi-layered
approach to security. Reporting from Reuters, International Air Transport Association (IATA) and Airports Council Inter-
national (ACI) specified plans to implement various approaches to convince the government that flights are safe. The
multi-layered approach in question includes contact tracing, body temperature checks, the application of physical and
social distances, extra cleaning, and the use of masks.
The same thing was said by Garuda Indonesia Managing Director, Irfan Sebuahutra in a webinar session by the In-
ternational Tourism Forum (ITF) with the World Travel & Tourism Council (WTTC). No doubt by Irfan, the innovation
emerged as an effort to provide a sense of security and certainty in the era of The New Normal. The matter is, Garuda
Indonesia has also implemented health protocols that are deemed necessary.
“Garuda will focus on passenger health, that’s for sure. None of our passengers should feel threatened,” said Irfan.
Furthermore, Irfan also highlighted the matter of limiting the number of passengers related to security. It’s just that the
policy will not fully be favored by passengers. The separation of the bench will certainly increase the tariff up to two
times.
The aviation sector cannot rely on a single solution to tackle existing risks. IATA and ACI also support reliable Covid-19
testing for passengers. The medical check-up is necessary but must be done long before passengers arrive at the
airport. Then check body temperature when entering and exiting to reassure passengers and prevent the suspected
passage of infected passengers.
Then, the social and physical distance must be limited to the initial phase of opening the flight. These steps will limit
the capacity of airports and planes as demand for flight travel begins to grow.
In addition, safety and health checks must be carried out together when possible so that passengers do not need to
queue several times to be re-inspected. This is to prevent too much physical contact between customers.
Panorama as one of the representatives of the tourism sub-sector noted losses in several lines of business. Panorama
Sentrawisata Brand and Communications VP, AB Sadewa, explained that in terms of inbound PANR had been unable
to receive guests since the Ministry of Foreign Affairs had canceled the entry visa for Indonesia. In terms of travel and
leisure, it still receives requests in the corporate travel segment, which is mostly official travel in Indonesia.
Due to a ban on office activities related to PSBB in several cities, it also laid-off employees. Work activities are carried
out in Work From Home (WFH). Some business activities cannot be activated yet, but they still serve customers online.
Panorama Group As a travel agency is preparing a strategy in the middle of the new normal. They started preparing
travel products with destinations that are relatively not too full. This is an effort to provide comfort when physical
distancing is applied. Panorama is also preparing a travel product that runs the new normal protocol, for example,
travel by bus that has implemented health protocol standards.
98
Verdict Table.
Transportation & Tourism
Blue Bird Core
core business)
customer
tures
► M&A
► Venture capital

customer or vendor
99
Panorama Group Core
core business)
customer
tures
► M&A
► Venture capital

customer or vendor
100
Garuda Indonesia Adjacent
core business)
customer
tures
► M&A
► Venture capital

customer or vendor
03
Conclusion
102
Conclusion
Figure 67. Level of corporate transformation
Positioning Core Adjacent Transformational
Market & Customer Serve existing market and Enter adjacents market, Enter or create new market
customer serve new customer
Products & Assets Use or improve existing Add incremental Develop new offerings,
offerings and assets offerings and assets assets, and business
models
Figure 68. Digital transformation stages
Indicator Pre-Core Core Adjacent Transform
Expanding from existing Developing breakthrough &

Objective Awareness of Optimizing existing business into “new to the inventing things for markets
innovation product/services for company” business (new that don’t exist yet (new
existing customer business, optimize, early business, pre-market, poten-
stages) tial to disrupt core business)
Market Both of existing Both of existing market Enter adjacent market & • New markets (products/
market and existing and existing customer serve adjacent services)
customer customer • New customer needs
Output Efficiency Annual planning & • Business building Decisions to explore, initiate
forecasting and detailed strategies project plan & milestone
plan for growth • Investment budget
• Detailed business plan
for ventures
• Venture client
Player/value Board member or Event & sharing Accelerator, incubator • CV building
Managerial resources • M&A
• Venture capital
• Short-term (12 • Short-term; improve • Short-term (New
month) fix feature/ (enrich customer) business/growth stages)
process level • Mid-term; penetrate (in- • Mid-term (explore/early
Time Tentative • Mid-term (36 month) crease share of wallet) stages)
innovate product • Moon-shot; build (Sub- • Transform (business
level stantial contribution) model level)
• Moon-shot (more
than 36 month) dis-
rupt business middle
level
Source Internal employee/ Internal employee/ Vendor/independent Innovation lab

customer or vendor customer innovator
Source: Diolah dari report Capgemini 2019

103
Banking
Digital transformation by the banking sector in recent years began to lead into the open banking platform. This is
quite clear through the commitment of some banks to encourage the development and implementation of Open API
in reaching broader market segments.
Banking has begun to utilize digital technology solutions to improve services to its customers. Each company has its
own mobile application to encourage banking transactions to open online-based accounts. Some of them even have
virtual assistants to facilitate customer interaction with bank representatives.
All of these efforts were even more useful when the Covid-19 pandemic occurred. This has also become a momen-
tum for banking to be more adaptive and aware of the importance of technology implementation in financial services
in a pandemic situation. The bank business is a business of trust, so that the handling of banking services quickly
and precisely is needed in the face of a pandemic.
Nevertheless, banking are also aware that their position is not as flexible as technology companies in developing in-
novations given that their movements are overseen by the Financial Services Authority (OJK). Thus, banking started
the open innovation with diverse business models, such as forming venture capital (CVC), collaborating with startups,
and running an incubator program
Banking in the Digital Financial Ecosystem

The rise of fintech players can be considered a threat to the banking existence. Whether we realize it or not, fintech
services are widely growing and not limited to one business vertical. It is quite reliable with a wider market. By entering
the digital financial ecosystem, banks can further enhance their role in wider market segments, especially the unbanked.
To date, Bank Indonesia has been driving the industry towards open banking development within Indonesia’s payment
system framework. This method is carried out through the development of Open API (Application Programming Inter-
face) Standards and the interlink between banks and financial technology (fintech).
Non-Bank Financial
• Insurance
Disruption in Indonesia’s traditional insurance companies is considered to be not as fast as the banking sector. Although
the technology development and digitization has changed many business processes in this sector. Digital innovations are
initiated by some players in the insurance industry, such as insurtech and aggregator.
Some old industry players come with different approach, they prefer to focus on using data to strengthen existing
resources. They provide agents with devices integrated with their systems.
In addition to banks, insurance is an industry with quite strict regulations. Not to mention the long and complicated
business process that covers the entire chains. Both are taking consideration for innovation in the insurance sector.
The pandemic that occurred in early 2020 became a moment of serious reflection for players in the insurance industry.
Slowly but surely all elements of the business will move towards digitalization. The steps taken can also vary, ranging
from strategic partnerships, collaborations, to investments in insurance or startups.
• Pegadaian
In general, the digital transformation carried out by Pegadaian over the past two years has entered the “Core” stage in
which companies rely on internal/existing sources in carrying out this transformation. This can be seen from the effort
to transform the pawn service as the main business into online sales channels through Pegadaian Digital Service (PDS).
Pegadaian is yet to reach the developing innovation stage that disrupts its core business. However, the innovation
process is considered in the “Adjacent” and “Transform” stages, where companies develop innovative products which
were yet to be developed in the industry and performed an open innovation. This can be reflected in the Pegadaian’s
Open API in collaboration with Tokopedia for gold trading services.
104
In terms of commitment, Pegadaian’s transformation was first based on the C-Level initiative and a strong vision and
mission. The company seeks to encourage its business role in the financial ecosystem of the digital age. It was generated
through a digital roadmap and a special division of the Transformation Office (TO) to execute corporate transformation.
For the highlight, this transformation will be difficult due to no benchmark to measure the digital transformation scope
in the pawn industry. In terms of business model, pawn business is not applicable to other financial sectors, such as
banking, finance, and insurance. However, pawn services are part of the financial ecosystem.
• Mandiri Tunas Finance

Digital transformation in Mandiri Tunas Finance (MTF) is not instantly implemented through digital roadmap or special
division. The commitment was built upon the company’s awareness to solve internal issues through technology and
developed into internal competition.
MTF’s solid commitment was only seen when the company formed the Digital Division in early 2020 to execute the
digital roadmap in the next 2-3 years. MTF also received solid support from the parent company of Bank Mandiri and
its subsidiary in the field of investment in Mandiri Capital Indonesia (MCI) in terms of developing innovation. This allows
MTF to integrate its services with MCI portfolio technology solutions without the need to develop it on its own.
Meanwhile, the current situation will narrow the MTF space to realize its digital transformation this year. However,
a pandemic can also encourage companies to be more adaptive and fast in preparing digital solutions to connect
their customers.
Non-Bank Financial in the Digital Financial Ecosystem

Today, financial product varies from savings, loans, investments, and insurance are available digitally. It is quite an
opportunity for non-bank financial companies to take up their role in the digital financial ecosystem.
Companies can reach a wider market with digital-based services, especially in the unbanked segment. This effort is
not only aimed at increasing customer experience, but also opening up opportunities for new customer acquisitions by
expanding other services, such as gold trading, financing and insurance.
Telecommunication
Unlike other sectors, telco companies’ awareness to transform and innovate was built upon demands for competition
with the presence of global technology companies. This is a real threat to
the telecommunication business existence. In fact, the telecommunication industry has largely led its position to the
“Transform” phase.
Telecommunications companies are developing OTT services outside their core business, such as e-wallet, e-commerce,
mobile applications, to on-demand video/streaming. In its journey, most of these services failed due to unsustainable
business model for the telecommunications industry. If it remains, there is no digital business which contribution is close
to the main income. Telecommunications requires organizational and digital roadmap change.
To date, operators began to open for innovation. They realize that they cannot rely on internal sources without any ex-
pertise in digital business. This step is quite an attempt to rise from the first failure. Some have formed a CVC, innovation
lab, and collaborated with accelerator/incubator to gain external innovation.
Telecommunication in the Digital Ecosystem

With its network assets and customer base, telecommunications has quite a role in the digital ecosystem. This asset
can be leveraged to create something that can increase network utilization.
In this case,operators should not refer to the retail consumer products, but those affected with massive efficiency of the
digital and technology adoption. Connectivity based business exploration, as the IoT service for manufacture. Telco’s
role is not only the commodity provider, but also platform and application.
105
Transportation and Tourism

Before the Covid-19 pandemic, the transportation sector was experiencing positive growth. One of those is the logistics
business. This business is experiencing growth because it is driven by the presence of digital services. Garuda has begun
to explore side businesses. The company began to consider looking for new revenue lines from the aviation sector.
Tauberes is one example, which was first run as a pioneer of digital platform-based air logistics service. However, the
service has not shown significant results since it first launched at the end of 2019. This application-based service was
finally stopped in April 2020. A month later, Garuda launched KirimAja which has a business model similar to Tau-
beres. KirimAja serves the delivery of goods to the Greater Jakarta area and between cities.
The transportation and tourism sector was hardest hit by the Covid-19 pandemic. Based on our observation, logistics
is quite a reliable sector during this pandemic. Government policies impose social restrictions and outdoor activities to
encourage demand for online-based logistics services.
In Blue Bird’s case, the company is getting serious to comply with disruption with several internal transformation.
Based on our data, Blue Bird is brave enough to launch several innovative products. During the pandemic, Blue Bird
succeeded in seeing opportunities by utilizing the fleet for COD services that were already integrated with the system.
Blue Bird also actively collaborates across sectors.
Panorama Group, as one of the leading players in the tourism industry, suffered significant losses due to the pandemic.
However, the situation towards “new normal” can now be a reflection for Panorama to start reorganizing its business by
providing health protocols for its tourism products. Utilizing a digital platform can be the key to optimizing their business.
In fact, the transportation and tourism sector has aware of the digital trend in recent years. It is visible through some
populer super apps that disrupts the business sector. Both Blue Bird and Garuda Indonesia can be said to have started
developing innovative products and collaborating with digital players.
Meanwhile, Panorama is currently in the initial stages of transformation. The Panorama C-Level range has realized the
need for digital adoption in the company. For example, the company has developed mobile applications for Panorama
Group products. It’s just that the hospitality business that relies on human hospitality is considered to be one of the
company’s considerations for shifting to digital. The company still waiting the right moment to reconsider its business
in a broader framework.
Transportation and Tourism in the Digital Ecosystem

FMCG’s role in this case is not transformation from the product side, developing new products or entering into
e-commerce, but how to encourage the digital ecosystem by adopting technology to streamline the industry.
It is clear that FMCG does not want to open the data due to competition. In fact, this data can be utilized also to find
out sales mapping. This data is processed with big data to help the company in terms of operations, for example to find
out which areas of the product sell a lot.
FMCG
• HM Sampoerna
Sampoerna was identified as having carried out a digital transformation. The transformation of the Sampoerna company
is driven by its new product. The company gave a positive response to the ongoing innovation.
Agile work styles that involve all aspects and skills make work performance more easily assessed. This affects the
company’s mission achievements. Besides, the involvement of C-Levels in innovation shows a serious commitment
to what is being carried out. The success of innovation is also supported by Sampoerna which involves external
processors to provide a new perspective for innovators.
106
• Indonesia’s FMCG Company (undisclosed source)

The FMCG company is quite aware of the disruption, however, they are yet to make a commitment in terms of trans-
formation. Thus, the position is quite a pre-core. There is no attempt by the company to transform by forming a digital
roadmap, business model framework, special division, taking pro-hire resources, or developing a new mindset.
The effort to intersect with digital is just expanding sales channels to e-commerce. Even though it is not considered a
fully digital transformation, collaborating with e-commerce can be considered a form of open innovation.
FMCG in the Digital Ecosystem

FMCG’s role in this case is not product-based transformation, developing new products or entering into e-commerce,
but how to drive the digital ecosystem by adopting technology to create efficiency in the industry.
It is reasonable that FMCG refuse to reveal data due to competition. In fact, this data can be utilized to find out sales
mapping. It can be processed with big data to help the company in terms of operations, for example to find out which
areas of the product sell the most.
107
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Corporate Digital

Component identifier consists of three things:

Research Method and Scope

The four phases consist of:

Figure 1. Transformation Degree

Enter adjacents Transformational

customer Core offerings, assets,

How to Win? Products & Assets

Unknown Needs Known and Knowable Needs

Adjacent innovation usually took form of:

2. Current product/service prepared to acquire new target market

Fase 1 Fase 2 Fase 3

Ideation Implementation/execution Value generation

Figure 2. Digital transformation stages

Indicator Pre-Core Core Adjacent Transform

Expanding from existing Developing breakthrough &

Source Internal employee/ Internal employee/ Vendor/independent Innovation lab

Source: Capgemini 2019

3. Digital Transformation During Covid-19

Recession with Make the economic

Source: Centre for Economic Policy Research (CEPR)

Figure 4. Navigating businesses through the crisis

Flatten Fight Future

Establish crisis 1 Develope Scenario-Based 2 Create a Rapid Response and

3 Revamp Organization and 6 Restructing Cost, Managing Focus of future

Navigate 4 Drive Topline Security and 7 Emerge Stronger; drive

Help Society during Covid-19

Vision and Leadership

These are five leadership traits:

1. Think forward and an opportunist 4. Collaborative

1. Corporate culture, including transformation leadership

Moderately Effective 64%

Who is leading your digital strategy?

Chief Information Officer 36%

Figure 6. Business profile and network

Bank Level (BUKU) Number of Employee Office Branch Sub Branch

BRI 4 125,602 467 611

BCA 4 24,789 139 873

Mandiri 4 39,065 139 2,304

CIMB Niaga 4 12,372 451 319

PermataBank 3 7,120 310 -

Source: Annual Report 2019

Figure 7. Hackathons for banking innovation

Bank Hackathon Year

BRIxGoogle Hackathon 2020

What The Hack! (WTH) 2019

CIMB 3D Conquest 2018

Source: Annual Report

B. Strategy & Commitment

1. Digital Center Excellence (DCE)

2. Kerja Sama Technology (KJT)

3. BRI Ventures (BVI)

“Companies are required to adopt the startup culture by incorporating non-tradi-

• New Digital Proposition

Figure 8. BRI innovation journey

Ideation Incubation Value Generation

Each department in Bank BRI

Digital Center of Excellence

BRI Ventures Financial Ecosystem

Process of an external Innovation vehicle

Figure 9. PermataBank revamp strategies

2016 2017 2018 2019

Figure 10. PermataBank innovation journey