Economic Business Review - 1H 2021 Clients and Industries, July 2021 - Deloitte
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Economic Business Review 1H 2021 Clients and Industries, July 2021
Topical Views from our expert
in Restructuring/Turnaround
The Secret Sauce of Driving
Successful Digital
Transformation
Industry Sector Update
Economic Outlook 2021
© 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 2
COVID-19 update © 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 3
Thanks to the ongoing vaccinations, especially in the United States, the daily new confirmed COVID-19
cases are finally dropping. However, path of recovery remains uneven across the world. Cases are rising
across Asia again amid new waves.
Daily new confirmed COVID-19 cases
Unit: Cases per day
South America Oceania North America Europe Asia Africa
1,000,000
900,000
800,000
700,000
600,000
500,000
400,000
300,000
200,000
100,000
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2021 2021 2021 2021 2021 2021
Note: Information as of June 27, 2021
Source: WHO
© 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 4
Top 10 new confirmed COVID-19 cases in the world, with India facing the highest number,
replacing the US.
Top 10 new confirmed COVID-19 cases in the world on June 27, 2021
Unit: Cases
46,148
33,704
32,376
21,342 20,169
15,036 14,633
12,105
9,758
6,081
India Brazil Colombia Indonesia Russia South United Argentina Iran Philippines
Africa Kingdom
Source: WHO
© 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 5
Among Southeast Asia, Indonesia witnesses the highest number of new cases. Thailand ranks at 4th
place with cases hovering around 4,000—5,000 cases per day.
Southeast Asia New confirmed COVID-19 cases on June 27, 2021
Unit: Cases
21,342
6,081 5,586
3,995
839 804 415 56 14 10 0
Indonesia Philippines Malaysia Thailand Cambodia Myanmar Vietnam Timor Singapore Laos Brunei
Source: WHO
© 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 6
Global Economy © 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 7
As a result of the COVID-19 pandemic, 2020 was the worst-hit to global GDP since the Great
Depression. However, the IMF projects stronger 2021 growth by 6% amid pandemic rebound.
2021 Real GDP Growth Projections
Unit: Year-on-year percentage change (%)
+0.5
+0.3 • Global growth is projected to grow at 6% in 2021.
6.0
5.5 • Thanks to the ongoing vaccination, re-openings and various policy supports, global
5.2 growth has been upwardly upgraded.
• The positive revision is mainly due to upgrades for advanced economies, especially
the United States.
Forecasted Forecasted Forecasted
in Oct 2020 in Jan 2021 in Apr 2021
Source: IMF WEO Apr 2021
© 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 8
The positive revision in global growth for 2021 is mainly due to upgrades for advanced economies,
particularly to a sizable upgrade for the United States. China’s growth forecast remains the highest
among major economies.
2021 Real GDP Growth Projections
Unit: Year-on-year percentage change (%)
Forecasted in Oct 2020 Forecasted in Jan 2021 Forecasted in Apr 2021
+0.2
8.2 8.1 8.4
+3.3
-0.6
6.4 -0.8 5.9
5.1 5.2 5.3
4.5 +1.0
4.2 4.4
3.1 3.1 3.3
2.3
US EU UK Japan China
Source: IMF WEO April 2021
© 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 9
Thai Economy © 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 10
Thailand
Following the new outbreak, BOT slashed its Thailand’s GDP growth forecast for 2021 down to 1-2%.
Depending on the procurement and distribution of COVID-19 vaccines as well as foreign tourism.
GDP Forecast under three scenarios of estimated vaccinations and time to reach Herd Immunity
Base Case Worse Case Worst Case
Procurement and distribution Procurement and distribution Procurement and distribution
of 100 million doses of of 64.6 million doses of of < 64.6 million doses of
vaccines in 2021 vaccines in 2021 vaccines in 2021
Herd Immunity Q1/2022 Q3/2022 Q4/2022
2021 2022 2021 2022 2021 2022
International Tourist
1.2 15 1 12 0.8 8
Arrivals (millions)
GDP (%YoY) 2 4.7 1.5 2.8 1 1.1
Source: Bank of Thailand as of May 6
© 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 11Thailand
In 2020, Thailand’s GDP registered a contraction of 6.1%, its deepest slump since the 1997 Asian Financial Crisis. In 2021,
it is expected to recover at a slow pace due to a sluggish tourism recovery and scarring effects from the crisis. However,
it will receive support from export recovery and government spending.
GDP
Unit: Year-on-year percentage change (%)
2020 2021F
10.0
1.9 8.7
4.9 5.7 5.2
4.3
1.9
0.8
-1.0
-8.4
-13.3
-6.1 -19.4
GDP growth
Private Private Public Public Exports Imports
consumption investment consumption investment
Source: NESDC and SCB EIC (Outlook Q2/2021)
© 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 12Tourism, a key engine of Thailand's economic growth, has been one of the hardest-hit sectors
by the crisis. Despite vaccination rollouts in many countries, foreign tourist arrivals are expected
to reach only 0.4 millions in 2021 due to new variant concerns and gradual reopening policy
stance from other economies.
Foreign Tourist arrivals
Unit: Million persons, %YoY
Foreign Tourists %YoY
39.8
40 38.3 40
35.0
35 20
30
0
25
-20
20
-40
15
-60
10
6.7 -94%
5 -83% -80
0.4
0 -100
2017 2018 2019 2020F 2021F
Source: BOT and SCB EIC (Outlook Q2/2021)
© 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 13Bank of Thailand cuts its key interest rate by 75 basis points to its all time low of 0.5 percent and is
expected to keep at this rate at 0.5% throughout 2021.
Policy rate
Unit: %
Forecasted
3.5
3.0
In addition to the low policy rate, the central
2.5 bank announced a limited debt moratorium until
year-end to help small and medium-sized
2.0 businesses impacted by the outbreak.
1.75
1.5
1.25
1.0
0.5
0.50
0.0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Source: BOT and SCB EIC (Outlook 2Q/2021)
© 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 14In the remaining year of 2021, the baht is expected to depreciate due to slower-than-expected
recovery of the Thai economy and current account deficits.
Exchange rate
Unit: THB/USD
Actual Forecast Forecast
33.0
32.5
32.0 32 • The Thai baht has already weakened by 4%
since the beginning of the year to close at 31.2
31.5 baht per USD on May 31, 2021.
• The depreciation degree is considered
31.0 31
significant compared to other regional
30.5 currencies.
30.0
29.5
29.0
28.5
Jan 19 Jun 19 Jan 20 Jun 20 Jun 21 Dec 21
Source: BOT and SCB EIC (Outlook 2Q/2021)
© 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 15Topical Views from our expert
in Restructuring/Turnaround
The Secret Sauce of Driving
Successful Digital
Transformation
Industry Sector Update
Economic Outlook 2021
© 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 16Views from our expert—Restructuring/Turnaround Activities What have been the common actions taken by companies unknown. Only a few companies have recognized working in order to sustain their balance sheet and preserve capital optimization, which is an example of a more liquidity in response to the current economic conditions sustainable measure to improve cash flow despite longer during the past 12 months? timelines for implementation. As part of the government relief measures, financial In addition, some companies have considered selling their institutions have been the first port of call for struggling assets for liquidity. It is undeniable that the sale of non-core corporates to request for waivers and payment holidays on assets is one of the options that all restructurings principal and interest. In my view, this may not be the most practitioners have advised companies. However, identifying the sustainable solution for generating liquidity as the non-core assets for sale is crucial and can have a significant obligation to make payment against debt facilities remains impact on the future strategic position. As a result, I would and future repayments are likely to be higher because of suggest companies redefine their strategic priorities first. the deferrals. The ability to further amend and extend debt Moreover, questions on the timing and sale process should facilities remains to be seen, especially given the more be rephrased -- whether it is the right time, whether there stringent capital requirements for distressed positions. It is is sufficient market appetite. Structured well-prepared sale clear that the financial institutions have taken a pragmatic processes take time from the decision to divest until the view and waived events of default to avoid systemic failure completion -- whether the sale proceeds are worth time and widespread insolvency. and effort spent. Most companies also rationalize operating costs by Also, this might not be common under this situation but deferring non-essential and major capital expenditure there are few companies successfully accessing to the new regarded as ‘quick fixes’ rather than sustainable measures fund by drawdown on existing debt facilities, issuance of to improve the balance sheet. This should be carefully new instruments, or shareholders’ support to improve considered as the long-term strategic consequence of the liquidity position. delayed or cancelled capital expenditure projects is © 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 17
Views from our expert—Restructuring/Turnaround Activities (cont.) What restructuring/turnaround actions would you suggest companies to consider? In fact, whatever actions companies take, those should be carried strategically. Two companies may execute exact same actions with different approaches yet achieve completely different results. The current downturns are challenging with many unknowns -- overall uncertainty around global conditions, the vaccine rollout, the path of recovery of the virus, supply chain risks, ongoing weak businesses, and consumer confidence. Thus, doing nothing is not an option. For some businesses, the need for immediate action may be painfully obvious. For instance, for an international airline, its operating model has been severely damaged. Some have been in deep trouble and sought for court protection in order to reorganize and shed liabilities. For these companies, the approach is more narrow and traditional sense of restructurings. Conversely, the companies with less financial stress should take more deliberate steps to reposition themselves and opt for long-term instead of short-term survival only. Deloitte sees responsive actions grouped into three categories based on the spectrum of situations -- “Disrupted”, “Disadvantaged” and “Distressed”. These three categories are to highlight the available approaches a restructuring/turnaround mindset can bring. To avoid long-term disadvantages, these categories can help you see circumstances clearly and weigh through prudent approach in order to balance between fixing short-term problem and maintaining long-term competitiveness before taking any restructuring/turnaround action. © 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 18
Views from our expert—Restructuring/Turnaround Activities (cont.)
In the disrupted situation, a company may want to refresh its go-to-market model, turnaround planning in order to categorize non-focused businesses with less
brand positioning, or other parts of its strategy. By being willing to rethink the business, competitiveness or profitability. The effort to rebalance and reconfigure might involve
leadership may find new ways to thrive amid shifts in customer behaviors, supply chain selling or even winding down a severely impaired unit that has little prospect of
disruptions, or changes in capital requirements or availability. Where impacts are returning to profitability to help strengthen other operations.
lasting, they may consider reasons to redesign specific business processes. For instance, Some distressed companies may reach a level of strain that requires difficult issues to
one of the responsive actions may be around optimization of its business portfolio. To be addressed urgently, using the tools and proceedings that fit the narrow and
ease liquidity pressure, a disrupted company should take a holistic approach when traditional restructuring. In addition, they should become vital to reconnect with
deciding cost saving. Rather than immediately cutting costs, such companies may
shareholders, creditors, and other stakeholders such as employees, customers, and
rethink how spending can support their business value creation and by how much. Also, suppliers. Moreover, they have to reconstruct themselves by making changes in capital
companies should refresh its communication on cost reduction program by promoting structure. If successful, these steps should lead directly to a long-term mandate to
productivity -- not only money saving (efficiency) but also performance (effectiveness) -- restore trust in the company and its purpose. Perhaps a distressed company that
and redesign how they spend budgets from a zero-based budgeting approach. embraces a full reorganization will likely involve a pressing need to reconstruct the
Some companies may find themselves in a disadvantaged situation where the capital structure by renegotiating terms with existing debt holders and other creditors.
disruption of a business or an industry has been more lasting or severe; hence, they To do this requires a viable plan to restore the company to viability. The plan has to take
require additional initiatives or a deeper transformation. There may be a need to reset into account changes in the current business environment, or the structure of capital,
relationships by making significant changes in the supply chain or developing market debt and assets, along with the increased uncertainty. Any such plan or strategy needs
efforts. There may be a need to rebalance financial and tax condition by strengthening to reconnect with the business’s customers, including potential new investors. Selling
the balance sheet or making better use of available capital. Companies may need to assets may well be part of the effort to raise capital and restore the parts of the
reconfigure its workforce by reducing the number of employees or dramatically business that have the greatest value as a going concern. Practically, the Business
changing the mix of job titles. Also, actions companies may consider include putting Rehabilitation under Thai Bankruptcy Act can support a distressed company by shedding
themselves on a solid financial footing. For example, a disadvantaged company needs to obligations that other options cannot. This plan should not be seen as the endpoint, but
shore up its finances through a divestiture or a managed exit. By identifying and as an available approach that makes possible to restore things in ways that would not
shedding business units, a company should reset its strategic priorities with business be possible any other way, reconstruct itself and reconnect to its purpose.
© 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 19Views from our expert—Restructuring/Turnaround Activities (cont.)
In summary, when considering restructuring/turnaround actions, a company should activities will play an ever-increasing role. My concern is that there are now many
understand the levers that can be applied across the spectrum of situations, whether restructuring tools and options businesses can choose from, this consequently may
the disruption is mild, or the distress is severe. This understanding can help you allow them to delay a holistic restructuring. Then, until they run out of cash and become
embrace changes, find opportunities in a longer term, anticipate what comes next, and up to the end, there would be too little time to do so. Based on recent studies of how
thrive in the future through turnaround planning process with the different magnitude companies came out of the last recession, the businesses that managed not only to
of mindset and actions -- “Refresh, Rethink, Redesign”, “Reset, Rebalance, Reconfigure”, survive but also to thrive outperforming peers.[1] Hence, I would recommend companies
or “Reconnect, Reconstruct, Restore”. to do this exercise for the long-term purpose.
Under this economic downturn, it is expected to see a rise in restructuring or In case you are looking for a talent to lead the restructuring/turnaround project in your
turnaround trend. Some companies may look for a talent to handle this particular organization, the top five critical skills and characteristics of such person are turnaround
work within a company. Can you provide suggestions about the characteristics and and crisis management, strategic thinking, reliability, decisiveness, and stakeholder
skills that a leader of restructuring/turnaround function should possess? communication. This person will be responsible for leading the development of the
turnaround plan, negotiating terms of restructuring (both financial and operational
While it was not the case for Thailand, restructuring/turnaround activities trend has
terms) on behalf of the company, and implementing the plan. Importantly, you should
been on the rise around the world even before the COVID-19 crisis hit. With the
ensure that the major stakeholders can work well with this person. As developing the
recovery of the pandemic and re-openings, the government support and debt
professional career in this field, the personality fit with the client is another key criteria
moratorium schemes will eventually be lifted. Companies that does not prepare for the
for the resource assignment.
end of support may face vulnerability. Thus, it is expected that restructuring/turnaround
[1] Kevin Laczkowski and Mihir Mysore, “What Companies Should Di to Prepare for a Recession”, Harvard Business Review, May 2019
© 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 20Views from our expert—Restructuring/Turnaround Activities
Kamolwan Chunhagsikarn
Partner, Restructuring and Value Creation Services
© 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 21Industry Sector Update
The Secret Sauce of Driving
Successful Digital
Transformation
Topical Views from our expert
in Restructuring/Turnaround
Thailand Economic
Review 2021
© 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 22Executive summary
Based on 2020 performance, sectors can be grouped as Deceleration, Recovery and Expansion.
Deceleration Recovery Expansion
In 2020, most of the Pharmaceutical sales
Consumption of petroleum
consumer goods yielded increased by 4.5% in 2020
products dropped 12% in 2020 Consumer
Oil & Gas lower market value Life Sciences due to a higher number of
especially Jet fuel, due to Product
because of COVID-19 medicines distributed
airline service slowdown.
pandemic. through hospital.
Automotive sales in
Automotive Thailand decreased to 0.8
million in 2020, dropping Healthcare spending
by 21%. increased substantially by
Banking market value in 2020
Banking Healthcare 7% in 2020 partially due to
declined by 7% YoY.
The COVID-19 pandemic the increasing trend of
Power, Utilities & aging population.
Renewables and the national lockdown
reduced annual electricity
demand by 3% in 2020.
Manufacturing PMI
recovered from a rock
Insurance market dropped by Domestic consumption of
Industrial bottom point in April 2020,
-3.1% in 2020 while non-life Chemical petrochemicals dropped
Insurance Product & which coincided with the
insurance increased by 1.8% by 3.0% in 2020.
Construction beginning of the COVID-19
in 2020.
lockdown, to 50.7 in April
2021.
In 2020, the modern trade
Wholesale & industry experienced a
retail historic contraction in
sales, falling by 10.0-12.0%.
© 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 23Consumer product © 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 24
In 2020, most of the consumer goods faced with the lower market value because of COVID-19
pandemic. However, laundry care saw a positive value growth due to stockpiling behaviour due to
COVID-19 lockdown.
Market Value by Sector in Thailand (THB billion)
Mass beauty and personal care Laundry care Bath and shower
198 +11%
-6% -14%
41 43 26
154 37 22
145
19
2019 2020 2023F 2019 2020 2023F 2019 2020 2023F
Source: Deloitte analysis based on Euromonitor
© 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 25In 2019, the total sales value of packaged food in Thailand reached around 14.2 billion US dollars,
increasing since 2015.
Packaged Food market in Thailand
Total Sales of Packaged Food in Thailand from 2015-2019 ($ USD) Driving Forces
Welfare card Convenience store E-commerce
holder expansion
Restraining Forces
Economic slowdown Household
due to COVID-19 pandemic debt
Source: Deloitte analysis based on Kanar and Neilson, Statista
© 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 26Industrial Product & Construction © 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 27
Manufacturing PMI recovered from a rock bottom point in April 2020
Manufacturing PMI (Index) 2017-4M2021
Expansion
Manufacturing PMI recovered from a rock
bottom point in April 2020, which coincided
with the beginning of the COVID-19
lockdown, to 50.7 in April 2021, the highest
rate since before COVID-19 period. However,
Contraction the PMI number has not yet taken into
account the current third wave which could
lead to a lower number.
Source: Deloitte analysis based on Trading economics
© 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 28Constant YoY decline in Capital Goods with 11% CAGR decrease in 2020. Nonetheless, a positive sign of
8% increase in Q1 2021 from Q1 2020 can be found.
Import value of Capital Goods (THB Trillion) Change 3M2020 vs 3M2021 (%YoY)
Machinery, equipment, and supplies Others
Computer 42%
-8% Telecommunication
37%
equipments
-11% Power-generating
1.84 1.84 27%
1.74 1.74 machinery and parts
18% 1.54 1.54
17% Office automations
+8% 23%
15% & parts (excl. computer)
0.42 Transformers, generators,
0.39 17%
13% motors, and accumulators
16%
82% 83% Rubber equipments
85% 10%
and parts
84% 87%
Measuring, checking,
9%
and precision instruments
Medicinal and surgical
5%
2018 2019 2020 3M2020 3M2021 equipment and supplies
Source: Deloitte analysis based on Bank of Thailand
© 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 29Steady YoY decline in import value of raw materials and intermediate goods with -12% 2020 YoY
decrease. However, there was an increase of 6% in Q1 2021 compared to Q1 2020.
Import value of raw materials and intermediate goods (THB Trillion) Change 3M2020 vs 3M2021 (%YoY)
Minerals Fuel
Agricultural and agro-manufacturing products Non-agro manufacturing products
-11%
Minerals 12
4.5 -12%
3% 4.1
7%
3% 3.6
7% Fuel -14
29% 2% +6%
8%
27%
23% 1.1
1.0
0.1 0.0 0.0 Agricultural and
0.2 0.1 2
0.3 agro-manufacturing products
62% 63% 67%
0.6 0.7
Non-agro manufacturing products 16
2018 2019 2020 3M2020 3M2021
Source: Deloitte analysis based on Bank of Thailand
© 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 30Automotive © 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 31
Automotive sales in Thailand decreased to 0.8 million in 2020, dropping by 21%YoY due to the COVID-
19 crisis. A cumulative -6% decline during Q1 2021 YoY can be seen despite a substantial increase in
Mar YoY at 33%, due to steep declines in Jan and Feb 2021 YoY, especially in commercial cars.
Thailand’s Automotive Sales (THB million)
1st car scheme
The expiry of 5-year lock-up
period
1.44 Growth
COVID-19
1.33
3M2020-3M2021
1.04 1.01
53%
53% Commercial car -24%
0.88 0.87
0.80 0.80 0.80 0.77 0.79 Passenger car 6%
-6%
62% 60% 49%
58% 60% 0.20
57% 55% 63% 0.19
64% 65%
47% 61% 68%
47%
43% 45% 42% 40% 38% 40%
37% 36% 35% 39% 32%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 3M2020 3M2021
Source: Deloitte analysis based on FTI
© 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 32All important key figures show signs of automotive sector recovery.
Production Domestic sales Export
Thousand units Thousand units Thousand units
200 120 120
100 100
150
80 80
100 60 60 +414%
+558% +147%
40 40
50
20 20
0 0 0
Jul-20 Apr-20 Jan-21 Oct-20 Jan-21 Apr-21 Jul-20 Apr-20 Jan-21 Oct-20 Jan-21 Apr-21 Jul-20 Apr-20 Jan-21 Oct-20 Jan-21 Apr-21
Motor Vehicle Parts and Accessories Manufacturing
Industrial production index Finished goods inventory index Utilization rate Labor index
101
83
91
177
Jan-20 Jul-20 Jan-21 Jul-21 Jan-20 Jul-20 Jan-21 Jul-21 Jan-20 Jul-20 Jan-21 Jul-21 Jan-20 Jul-20 Jan-21 Jul-21
Source: Deloitte analysis based on OIE
© 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 33Vehicle sales increased by 33% YoY in March 2021 where Toyota remained the market leader. Honda had
the highest overall growth at 37% YoY with a 47% increase in passenger cars. Toyota had the highest
growth in commercial cars at 42%, nearly surpassing Isuzu, the market leader in commercial car sales.
Share of new vehicle sales in March 2021 (YoY %)
Total (+33%) Passenger cars (+46%) Commercial cars (+26%)
Toyota
Others
Toyota 18% 0%
25%
28% +29% Isuzu
Others 35% +29%
37%
Others 44% 9% Nissan
+34% Mitsubishi 6%
22% +4%
30%
13% 34%
Isuzu
Honda Honda
+29% Toyota
+47%
+37% +42%
Source: Deloitte analysis based on Toyota Motor Thailand Co., Ltd. (TMT)
© 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 34Technology, Eco-friendly and Sharing economy are key mega trends in the automotive industry.
Technology EV has high potential in Thailand
EV roadmap
Autonomous car
Connected car
Main focus • A roadmap to make the country a hub of electrified vehicles in
the ASEAN region in five years
Electric vehicle • The EV master plan aims to increase EV production to 30% of
total annual car production, or about 750,000 units out of 2.5
million units by 2030
• The government is working on developing EV charging
Ride-sharing infrastructure in the country. PTT and EGAT will help one another
in building more charging stations in the country
Eco-Friendly Sharing economy
Source: Deloitte analysis based on BOI
Note: Electrified vehicles—including hybrids, plug-in hybrids, and battery electric vehicles (BEVs)
© 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 35In order to realise the full potential benefits of electrification, there are five different enablers that
should be addressed to increase the feasibility and attractiveness of EV adoption.
Five enablers for electrification
Total cost of ownership
Despite a recent increase in EV adoption in Thailand, overall numbers remain low.
Overall, the cost of EV in Thailand is significantly higher compared to ICEV.
Battery range and life
Increased incentives may be required, such as lower excise taxes and the introduction of EV-only
lanes, to stimulate greater demand. Fleet use cases are also set to witness increased adoption.
The challenge for EV in Thailand lies in limited fleet charging networks. The charging infrastructure
Charging networks needs to be improved, for example, by implementing battery swapping systems for two-wheelers, and
adapting power grids for solar-powered chargers.
Currently, Thailand’s value chain capabilities and customer demand are also mostly focused on PHEVs,
rather than BEVs. Industry players should consider ways to leverage the initial interest in PHEVs to
Regulatory environment generate a stronger BEV network, by integrating EV charging infrastructure at existing gas stations.
Value chain potential
Source: Deloitte analysis
© 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 36Newly registered electric vehicles in Thailand skyrocketed in 2020, especially BEV.
Newly Registered Electric Vehicle in Thailand (Thousand Units)
2018 2019 2020 3M2021 2018 2019 2020 3M021
Others Motorcycle
0 1
3.0 (1%) (5%)
Car 30.7 32.3
0
(37%)
20.3
1.6
1.3 1 14.2
(62%)
Motorcycle
0.3 13
(95%)
BEV HEV/PHEV Car
Source: Deloitte analysis based on EVAT
© 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 37Banking © 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 38
Banking market value in Thailand grew by 0.3% CAGR with a 7% decline 2020 YoY, mainly because of
lower other operating and interest income.
Banking market value
Unit: THB billion
CAGR Growth
2016-2020 1Q2020-1Q2021
0.3%
-7%
1,004
964 5%
917 929 929
5%
5% 4% 6% Others operating income 7.4%
20%
21%
20% 21% 20% Fees and service income -0.3% 262
11%
213
18% 4% Others operating income -73.8%
22% Fees and service income +0.2%
75% 75%
75% 75% 74% Interest income 0.0%
71%
74% Interest income -15.0%
2016 2017 2018 2019 2020 1Q2020 1Q2021
Source: Deloitte analysis based on Bank of Thailand
© 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 39In 2020, Corporate Loan growth surpassed that of Consumer Loan for the first time as a result of a
weak household purchasing power due to COVID-19.
Loan growth classified by loan portfolios and Share of total loans
Unit: %
18%
Share of
10 total loan
9 8% 8%
7.5
8
7 2%
6 5.4
4.6 Corporate 36% Mortgage Automotive Personal Credit card
5
Consumer
4
3 64%
32%
2 23%
1
0 -0.8
-1
2016 2017 2018 2019 2020 SME Large corporate
Note: Large corporate and SME are excluding financial business
Source: Deloitte analysis based on Bank of Thailand
© 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 40Consumer loan quality declined across all portfolios, except mortgage which showed a positive sign.
Mortgage Auto Credit card Personal
10.1 11.8
Consumer loan growth by
Unit: %
portfolio
7.6
6.2
2.4
5.9 -2.1
5.4
2017 2018 2019 2020 2017 2018 2019 2020 2017 2018 2019 2020 2017 2018 2019 2020
Unit: % of total loans
Stage 3 (NPL) and stage 2 by
5.8
6.5 6.2
portfolio
9.5
1.9 7.2 7.1 7.4
1.9 1.8 1.9 2.4 2.3 2.3
1.7 2.0
3.2 3.3 3.7 3.8
2.6 2.3 2.4 2.4 2.5 2.5 2.3 2.4
1.6 1.7 1.9 1.4
2017 2018 2019 2020 2017 2018 2019 2020 2017 2018 2019 2020 2017 2018 2019 2020
Source: Deloitte analysis based on Bank of Thailand Stage 2 Stage 3
© 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 41Commercial Banks must adjust to the New Normal era due to COVID-19.
The impacts of the COVID-19 pandemic on the commercial banking business 4 major developments
Cashless payment
The increasing role
of contactless
The speed of disruption Familiar with technology
payment
has become faster
Competition from non-
banks
COVID-19 and Credit policy has
Social distancing New business
been changed and
New economic environment opportunities
revised
“New Normal" Changing business practices
environment
Growing
importance of cost
New consumer behavior efficiency
Source: Deloitte analysis based on KResearch
© 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 42Insurance © 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 43
Insurance market dropped by -3.1% in 2020 while non-life insurance increased by 1.8% in 2020 YoY.
Insurance’s market size by type (THB billion)
Million Baht
CAGR Growth
-3.1% 2007-2019 2019-2020
+4.8%
860 855
819 828
784
747
709 27% 29%
27% 30% Non-life Insurance 4.5% 1.8%
646 28%
28%
571 29%
31%
31%
73% 73% 71% 70% Life Insurance 6.5% -5.0%
72% 72%
71%
69%
69%
2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: Deloitte analysis based on OIC
© 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 44Total Life Insurance direct premium declined by -2% YoY despite an 8% increase among riders, as they
accounted for only 19% of total Life Insurance direct premiums.
Life Insurance direct premium by type of contract (THB Billion)
THB 600 billion in 2020 2019 2020
+6% (-2%) -4%
86 412
80 394
Rider 19% 81% Main
+11%
+8% -9%
-2% +2% +16% -7% +6%
15 17
45 41
25 25 12 14 6 5 5 5
Health Accident Ordinary Group Unit-link Pension Industrial Personal
Accident
Note: Others refer to Annuity, Industrial, Personal Accident and Universal Life
Source: Deloitte analysis based on OIC
© 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 45Miscellaneous businesses saw the highest YoY growth at 8% across non-life insurance portfolio mix,
while marine was the only business with a -3% decline.
Non-life Insurance direct premium by type of contract (THB Billion)
2019 2020
+1%
144 146
+8%
91
84
0%
-3%
10 10
5 5
Motor Miscellaneous Fire Marine
Note: Others refer to Other Miscellaneous, Health, Fire and Marine
Source: Deloitte analysis based on OIC, EMIS and TGIA
© 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 46Power, Utilities & Renewables © 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 47
The state-owned Electricity Generating Authority of Thailand (EGAT) and Independent
Power Producers (IPPs) dominate electricity generation in Thailand with a combined
market share of 61.2% as of Feb 2021.
System Generating Capacity
Total 49,600 MW As of Feb 2021
PEA&DEDE
VSPP
8.3%
Import 0.1%
EGAT
10.9%
31.1%
19.4%
SPP
30.1%
IPP
Source: Deloitte analysis based on EPPO
© 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 48Key Figures Update: Power, Utilities & Renewables
Electricity Consumption Growth
%YoY (RHS) Electricity Consumption (LHS)
200 10
8
150 For full-year 2020, the COVID-19 pandemic and the national lockdown reduced
6 annual electricity demand by 3%
4
100
2
50 0
-3% -2
0 -4
2012 2013 2014 2015 2016 2017 2018 2019 2020
Electricity Consumption Classified by Sector
10
0%
0 The Business sector saw the most drastic decline since the start of 2020 due to
Industrial
COVID-19 and generated the lowest consumption compared to industrial and
-4% Residential
-10 residential sector
Business
-20 -15%
2014 2015 2016 2017 2018 2019 2020 3M2021
Source: Deloitte analysis based on EPPO and Krungsri Research
© 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 49Oil & Gas © 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 50
Consumption of petroleum products dropped by 12% in 2020, especially Jet fuel due to
airline services slowdown.
Consumption of petroleum products
Unit: %
50,722 million litres in 2020 2018 2019 2020
Fuel oil
Jet Fuel 10
4 3 4 4 5 4
3% 3 2 1
5% 1
0
-3 -1 -1
-10
LPG -12 -10 -11
-12
21% -20
47% Diesel
-30
-40
-50
23% -60
-62
Gasoline -70
Total Diesel Gasoline LPG Jet Fuel Fuel oil
Source: Deloitte analysis based on EPPO
© 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 51PTTEP is the largest E&P company in Thailand, while Thai Oil maintained its position as the leading
domestic refinery.
Top E&P Companies by Production Volume, 2019 Top Petroleum Refining Companies by Refining Output, 2019
Unit: % Unit: %
Others BSP
10% 12%
Total sa
7%
30%
PTTEP
37% 12%
petronas 9%
9% 13%
Moeco SPRC
18%
15% Pttgc
28%
IRPC
Source: Deloitte analysis based on EMIS
© 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 52Chemicals © 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 53
Players in Chemicals will be exposed to several risks and challenges in the upcoming 2020-2022 period
that could rein in on growth in the Thai petrochemicals industry
Risks Challenges
• US-China trade tension
1. New technology and Circular Economy
• Fluctuations in oil prices
— The use of new technology to add value to their
• Plans to increase production capacity for some petrochemical products, processes, especially in packaging, automobiles and
especially PX and Benzene, largely in China, Vietnam, and the Middle East. electronics in response to the emergence of the circular
— This would cap prices of these products despite stronger demand economy.
— Thai producers will see weaker demand for their goods. — Demand to shift from commodity-grade goods to a
greater need for specialty products and the
Internal
petrochemical industry would be forced to change.
factors
— Deloitte estimates that although over the next 15 years
(from 2018), the global market for petrochemicals will
grow by about 3% per year, demand for specialty
petrochemical products will expand by 4.5%
2. Self-sufficiency plan in major export destinations
Shift from supply-driven consumption to demand-driven
production.
Before—Ability to source inputs and control costs
After—Ability to produce a wide variety of products to External
meet market needs, to build relationships with factors
businesses in other sectors, and to develop and exploit
new technologies and processes.
Source: Deloitte analysis based on Krungsri Research
© 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 54Life Sciences © 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 55
Pharmaceutical Overview
• Increasing pharmaceutical sales are arising from the implementation of universal health insurance, and growing number of medicines distributed through hospital.
• Export values continue to rise due to expanding markets in ASEAN, especially Vietnam. However, import values dipped in 2019 due to strong THB relative to main import
countries such as Germany, USA and India.
Pharmaceutical sales Pharmaceutical Exports
Unit: THB million Unit: THB billion
+3%
Prescription drug sales OTC medicine sales 15,288 15,805
121 14,111 14,423 14,836
117
112
107
102
2018 2019 2020 2021F 2022F
98 95
91 Pharmaceutical Imports
83 86
Unit: THB billion
+1%
76,256 73,095 78,246
64,455 68,548
23 20 20 21 22
2018 2019 2020 2021F 2022F 2018 2019 2020 2021F 2022F
Source: Deloitte analysis based on Fitch Solution
© 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 56Thailand is the leading importer and exporter of medical devices (by value) in ASEAN with durable
medical devices accounting for most of the exports and single-use devices for most of the imports
ASEAN Top 5 Markets for Medical Devices Thailand Export 10M2020
10M2020
Reagent and test kit
Unit: THB million
2%
Export Import
Singapore 57% 43% 575,479 Single-use device
38%
60%
Thailand 70% 30% 483,869 Durable medical device
Malaysia 73% 27% 372,451
Thailand Import 10M2020
Indonesia 50% 50% 176,624
Reagent and test kit
10%
Philippines 77% 78,827
23%
48% Single-use device
Brunei 99% 6,219
42%
1% Durable medical device
Source: Deloitte analysis based on Medical Device Intelligence Unit (MeDIU)
© 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 57Thailand consists mostly of small manufacturers. However, large manufactures receive the greatest
proportion of revenues
Medical Device Manufacturers
Number by size (2020) Revenue of manufacturer of medical instruments and supplies (except dental instruments and supplies) in 2019
Unit: THB mn
Medium Large
Hoya Lens Thailand Ltd 21,257
6%
4% Nipro (Thailand) 7,450
Asahi Intecc (Thailand) 4,712
Kawasumi Laboratories (Thailand) 2,612
91% GE Medical System (Thailand) 2,222
Small
Revenue by size (2018) Revenue of manufacturer of dental instruments and supplies in 2019
Unit: THB mn
Small
M.E.Nikkiso Co.Ltd 1,015
15%
Hexa Cream Co.Ltd 432
14% Medium
Siamdent Co.,Ltd 349
71% P C Dental Lab Company Limited 272
Large Sainamtip Dental Laboratory Co.,Ltd 177
Source: Deloitte analysis based on BOL and Krungsri Research
© 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 58Healthcare © 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 59
The government's further commitment to the development and improvement of the healthcare system
is expected to contribute to the government continuous expenditure growth
Healthcare Expenditure Trends
Historical Data Forecast Data
Unit: THB million
+7% 890
827
770 171
718 162
+2% 672 153
627 146
594 579 597
139
131
117 121 126
719
616 665
533 573
477 457 471 496
2016 2017 2018 2019 2020f 2021f 2022f 2023f 2024f
Private health spend Government health spend
Source: Deloitte analysis based on WHO and Fitch Solutions
© 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 60Total revenue of the Healthcare sector is expected to decrease solely because of significantly lower
revenue from non-Thai patients due to the Covid-19 pandemic
Revenue breakdown by nation Revenue breakdown by patient type
Unit: THB million Unit: THB million
19,521 19,521
16,719 16,593 16,719 16,593
9,175
13,665 8,192 8,131 OPD
13,877 13,772 Thai patients
10,346
8,527 8,462 IPD
5,856
2,842 2,821 Non-Thai patients
Q42019 Q32020 Q42020F Q42019 Q32020 Q42020F
Source: Deloitte analysis based on KGI research
© 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 61Wholesale, Retail and Distribution © 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 62
Wholesale and retail trade value increased by 6% CAGR. However, in 2020 the value decreased by 7%
due to economic slow down
Wholesale & Retail Trade Value
Unit: THB trillion
+6% 2.8
2.6 2.6
2.4
2.2
2.0
1.8
1.7
2013 2014 2015 2016 2017 2018 2019P 2020P
Source: Deloitte analysis based on NESDC
© 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 63Due to the global COVID-19 pandemic in 2020, the modern trade industry experienced a historic
contraction in sales, falling by 10.0-12.0%
Retail business growth by type of store
Unit: % YoY
Supermarkets Department Stores Convenience Stores Discount Stores
18
Store type 2020E 2021-23F
16
Supermarkets -10 to -12 2.8-4.7
14
Department Stores -13 to -15 2.0-3.0
12
Convenience Stores -9 to -10 1.7-2.8
10
Discount Stores -10 to -12 1.3-2.3
8
6.5%
6
4.5%
4.0%
4 3.4%
3.5%
2.9%
2 3.0% 2.7%
0
2012 2013 2014 2015 2016 2017 2018E 2019P
Source: Deloitte analysis based on Krungsri research
© 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 64Traditional grocery retailers remain the biggest players in Thai grocery retailing subsector, accounting
for approximately half of the total subsector sales in 2019. However, modern retail has a gradual
market share increase
Grocery Market Share by Value (2019) Grocery Sale Growth (2019)
8.0%
Supermarket
9.5%
Cash and Carry 4.6%
9.9%
3.2%
Traditional Grocery 1.4%
Hypermarket 12.2% 50.3%
Retailers
18.1% -1.3%
Convenience Store Traditional Convenience Hypermarket Cash and Carry Supermarket
Grocery Retailers Store
Source: Deloitte analysis based on EMIS
© 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 65The Secret Sauce of
Driving Successful
Digital Transformation
Industry Sector
Update
Topical Views from our expert
in Restructuring/Turnaround
Economic Outlook 2021
© 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 66The Secret Sauce of Driving Successful Digital Transformation The roles and characteristics of Chief Digital Officer (CDO) and how CDO can help orchestrate the digital transformation journey As information technology has dramatically reshaped all industries, many companies are pursuing and driving the digital transformation initiatives, in an effort to capture the benefits of these trends or simply catch up their peers. Yet, success in these transformations is not guaranteed, and in fact, facing a highly challenging as being observed from Deloitte’s Thailand Digital Transformation survey. © 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 67
The Secret Sauce of Driving Successful Digital Transformation
The roles and characteristics of Chief Digital Officer (CDO) and how CDO can help orchestrate the
digital transformation journey
THE CDO ENHANCES THE REST OF THE C-SUITE
• To make digital industrial
transformation a reality, a company
CEO needs both a nerve center and a
CFO Be the catalysts for the dedicated digital function.
transformation and innovation
Drive better outcomes to the
agenda of the CEO.
CMO
• Creating an operational structure with
bottom line. With the right digital leader is key to drive the
Support the shift from
mandate and direction, digital
becomes an enabler to save
transactional marketing to transformation successfully.
engagement served up
money and drive new revenue.
Either way, gross margins can
through social, mobile, • The organization would need to appoint
search and wearables. so-called a chief digital officer (CDO), a
rise.
senior leader responsible for the
organization’s long-term digital vision and
the subsequent execution of the
The CDO transformation efforts.
can:
CIO
• CDO think holistically about how a
CSO company’s strategy is executed across all
Build a complementary team of
Support the strategic direction of
digital channels. They own and drive
technical resources with new
the organization by creating new skills, new outputs and time to digital strategy throughout the
opportunities to enter new value.CDO = front end;CIO = organization to help business unit leaders
markets, drive new opportunities COO back end
and change the direction of the
unlock value.
company.
Enable operational efficiencies in the
organization. This includes digitizing
internal operations as well as creating end
user tools that can lessen the burden on
contract centre resources.Core leaderships skills for CDO
Many required core leadership skills remain the same whether it is a business or digital leader, there are some demands
of digital disruption call for certain new skills.
• Transformative vision and forward-
looking perspective—the most important
Transformative Vision & skill which includes the ability to anticipate
Forward-looking perspective markets and trends, make savvy business
decisions and solve tough problems in
turbulent times.
• Digital literacy—a must-have skill, the
leader needs to have general digital
literacy, as opposed to hard-core technical
skills. It is often much easier and more
effective to equip the business leaders
CDO become digitally literate than it is to teach
Leadership
technologists the strategic and business
Skills
knowledge.
• Adaptability—as the pace of change in
digital world, a leader must also be change
oriented—that is open-minded, adaptable,
and innovative.
Adaptability Digital
LiteracyChief Digital Officer Archetypes
Digital Leaders are categorized into one of the four archetypes, with each driving distinct strategic objectives
The The innovative The market-minded The technology • The Disrupter—focus on transforming existing
disrupter integrator maven integrator business models and ways of working who
typically reporting to the CEO
• The innovative integrator—integrates customer
sensing and insights with operational capability
ARCHETYPE DESCRIPTION ARCHETYPE DESCRIPTION ARCHETYPE DESCRIPTION ARCHETYPE DESCRIPTION
improvements. Primarily focus on the highest-
CDO has mandate to transform CDO integrates customer CDO drives new digital CDO is technology- centric
existing business models and sensing and insights with solutions for customer- and uses digital innovation priority innovations and may lack of full control
ways of working operational capability facing channels and to accelerate change over all digital execution.
improvements routes to market
REPORTING INTO
REPORTING
REPORTING INTO • The market-minded maven—drives digital
REPORTING INTO initiatives for customer-facing channels and
CEO INTO CMO/CRO CIO/CTO
CEO PROS routes to market. Focus on customer growth and
PROS PROS
• High decision efficiency
PROS • Digital initiatives prioritized
• Stable demands and work
customer experience, downsides may be
on customer and growth
• Very agile and responsive • Focused on highest-
impact plans increase development disconnected from other ‘non’ front-end business
to customer demands priority innovations efficiency units.
• Accountability for end-
• Able to respond with agility • Focus on single outcomes
to-end ustomer
to customer need
experience can result in optimized • The technology integrator—technology- centric
operations and uses digital innovation to accelerate change in
CONS
CONS the organization. Usually report to CIO or CTO
• Removed from CEO, which
CONS CONS
could restrict large • Less adaptable to changing with single-outcome initiatives and highly stable
• Too many changes at once • May not have full control investments business needs workplans, might be limit perspective and not
may overwhelm the over all digital execution • Key components of business
• Disconnected from business
strategy may be overlooked
quick enough to adapt to the changing business
organization (e.g., product RandD) units, which may limit
• Accountability falls all on adoption
needs.
the CDODigital Function
The key elements that will help CDOs achieving their vision and goals delivery of
transformation initiatives across the company.
Digital strategy
• Digital strategy—acts as a digital North star to help better communicate
Establishes a well-defined digital strategy and policies that align with the broader business and guide all digital initiatives across the enterprise. Organization should
priorities, and develops a prioritized road map for digital transformation efforts
seek inputs from various stakeholders (customers, partners,
shareholders, communities), prioritize and schedule the plan and finally
Digital investment
get validated.
Develops the funding governance mechanism for transformation efforts, drives alignment of investments
to the strategy, and attains cross-functional buy-in on the road map • Digital investment—CDO should oversee the investment
governance model to help creating influence across the
Digital operations organization.
Drives accountability across the organization through scorecards and business capability maps; facilitates • Digital operations—served as a backbone of all digital activities. It must
alignment and execution of road map across business and technical teams
be clearly lay out governance, accountability and metrics to consistently
monitor digital initiatives’ efficiency and execution.
Customer-centricity
Implements structured mechanism to aggregate customer feedback and develops customer-sensing capabilities • Digitalization of customer journey—may begin with the
that use insights to deliver solutions that respond to customer needs development of a sense-and-respond capability to gather customer
information and leverage feedback to take action to deliver business
Digital DNA capability improvements.
Embeds an adaptive and responsive culture across the business to strengthen the adoption of digital • Digital DNA—which is centered around embedded a digital-first
mindset, especially a product-centric mindset and agile ways of working
mindset and ways of working into an organization. It can serve as a
blueprint for bringing a digital transformation to life, to help companies
to organize, operate and behave in digital ways.Digital Operations
Three primary operating models are used during digital transformations
Key
• The decentralized model—for well-communicated and
Level of digital function control
relatively high maturity of digital literacy in an openness
High Low
and trusted environment. CDO team acts as a center of
excellence that shares knowledge and enables delivery
teams.
• Federated model—for organizations that executives in
Digital Digital Digital other units are mandated to deliver sustainable
Function Function Function
operational change plus the initiatives that affect and
require multiple or cross-functional collaboration team for
success. In this model, digital team member is embedded
Function 1 Function 2 Function 3 Function 1 Function 2 Function 3 Function 1 Function 2 Function 3 within the business unit’s delivery teams.
Decentralized Unified • Unified model—for organizations that has relatively low
levels of digital capability maturity or the digital strategy is
The decentralized model The federated model The unified model focused on specific and limited scope in less complex
organizational structure. The CDO team will owns end-to-
end execution teams for all initiatives.
Digital function acts as a center of Digital function collaborates with Digital function establishes strategy
excellence that shares knowledge and functions to create strategic direction and evaluates all digital initiatives
enables delivery teams
A digital team member is embedded The digital function owns end-
within the delivery teams to drive end- to-end execution teams
to-end execution of initiatives for all digital initiatives
Source: Deloitte analysis.Contributors Narain Chutijirawong, Ph.D. Malee Ekviriyakit Chananya Bunyalug Director Consultant Analyst Clients and Industries Clients and Industries Clients and Industries nchutijirawong@deloitte.com mekviriyakit@deloitte.com cbunyalug@deloitte.com © 2021 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. Economic Business Review | 1H 2021 73
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