Cumbersome Systems Impede Digital Innovation in SOEs

10:52:04 AM | 9/20/2023

According to a survey by the Vietnam Chamber of Commerce and Industry (VCCI), 92% of Vietnamese businesses have expressed interest in or have implemented digital transformation initiatives in their operations; and 98% anticipated that digital transformation would bring about changes in their businesses such as reducing costs, minimizing physical contacts and enhancing product and service quality. However, in practice, not many businesses have achieved success in digital transformation, especially those in the public sector such as State-owned enterprises (SOEs).

Vietnam Electricity Group (EVN) is recognized as one of the pioneering state-owned enterprises in digital transformation 

Reaping the benefits

As a leading SOE and a pioneer in the “National Digital Transformation Program to 2025 and Beyond 2030” initiated by the government, Vietnam Electricity Group (EVN) has demonstrated its proactive and innovative approach to changing its mindset and work methods, leveraging digital capabilities to enhance its performance and customer service. Digital transformation has also improved socioeconomic life by enabling people and businesses to pay electricity bills online or complete power connection procedures without visiting EVN offices. By early 2023, EVN had announced 14 APIs integrated with digital platforms; updated 98% of major equipment, equivalent to 1.9 million records of power plants and grids, in the PMIS software database; and provided 100% of Level 4 services online. Electricity services were delivered through customer care apps and social network apps (such as Zalo). Non cash electricity bill payments were accepted by 99.67% of customers; electronic electricity purchase contracts were signed by 99.15% of customers; over 700,000 electronic invoices were sent to the General Department of Taxation. All 110kV substations and 84% of 220kV substations were operated remotely and without human intervention; all bidding packages were conducted online.

The aviation industry has introduced a new option for domestic flight passengers since August 2, allowing them to use the second-tier electronic identification account (VNeID) for check-in procedures at all airports and airfields instead of showing personal identification documents. On the first day of official implementation at Noi Bai International Airport, hundreds of passengers opted for the VNeID app to replace their identification documents for a more convenient check-in. The time for aviation security staff to visually inspect VNeID for one passenger (excluding queuing time) varied from 10 seconds to 140 seconds. The QR code check-in took 5-15 seconds. All QR code scans with VNeID were successful, and verified by the Ministry of Public Security. Aviation firms have been able to optimize their labor and production processes and apply digital transformation to reduce costs by saving human resources. The adoption of modern digital technologies has helped streamline the process of transporting passengers and cargos, reduce fuel consumption, protect the environment, increase reception capacity and minimize congestion both in the air and on the ground in civil aviation activities.

After defining its digital vision and the digital transformation roadmap, Vietnam National Oil and Gas Group (PetroVietnam) has developed a specialized database focusing on five core business areas. The group has used E&P database as the basis; deployed and built application platforms to enhance its management and operations; invested and upgraded information technology infrastructure and security solutions to meet digital transformation demands. So far, PetroVietnam has applied and implemented the enterprise resource planning (ERP) system to manage and optimize daily operations; built a database for first-phase exploration and production; built specialized databases in other areas; deployed Office 365 toolkit for employees; digitized Internal Management Regulations; digitally archived administrative records; and continuously upgraded infrastructure and security platforms. The digital transformation process has helped PetroVietnam improve its performance and competitiveness, secure its industry leadership, and contribute to developing the digital economy and the green economy.

Deficient in numerous crucial aspects

However, only a few businesses in Vietnam have achieved successful digital transformation, especially SOEs which have been the driving force of the economy. The lack of personnel, infrastructure, digital information and digital transformation roadmaps are impeding the digital transformation process in businesses today.

Mr. Le Nguyen Truong Giang, Director of the Digital Transformation Strategy Institute (DTSI) under the Vietnam Digital Communications Association (VDCA), explained that the main reason is the very different organizational regulations of SOEs from other types of businesses. They have very rigid legal frameworks, rules, standards and control methods. These barriers prevent SOEs from changing their organizational methods to suit digital transformation because they cannot transform whatever they want instantly. Moreover, because it is hard to change their organizational models, they face many challenges in making digital transformation roadmaps, especially creating new business models or deploying business model ecosystems. Digital transformation also requires a substantial amount of investment funds, but SOEs cannot make quick decisions due to strict control over investment. Digital transformation requires a comprehensive approach and is only successful and effective with a total impact of all transformation elements working together. However, instead of creating a holistic impact, digital transformation in SOEs is currently mainly focused on digitizing operational processes and making some specific solutions. Furthermore, at present, business integration and digital transformation strategies of SOEs mostly concentrate on planning. Implementation, especially at lower levels, is a major bottleneck, therefore, it has not really created a dynamic competitive advantage for them. At the same time, digital transformation also faces legal obstacles related to processes, regulations and mechanisms for changing and applying organizational models, business models, data models and operating models.

Clearing institutional bottlenecks

There is no universal digital transformation model or method that is adaptable and suitable for all businesses and organizations. Digital transformation is a thinking revolution, requiring businesses and organizations to proactively shape their own specific transformation strategies and models based on normative frameworks and principles of digital transformation.

To achieve successful digital transformation, it is necessary to eliminate institutional bottlenecks for SOEs to move fast, Mr. Giang said. In addition, their leaders need to be determined and persistent enough because SOEs often have large operational scales and their traditional production and business practices are deeply rooted in their employees.

According to the Committee for Management of State Capital at Enterprises (CMSC), to promote digital transformation at its affiliated companies, in the future, CMSC will continue to accelerate data application to serve socioeconomic development tasks, align closely with administrative reform and digital government construction and development at CMSC and digital transformation at 19 SOEs, while enhancing the data-based management, direction and operation capacity of SOEs by applying digital transformation solutions; developing a set of indicators to measure the level of digital maturity applied at SOEs; and gradually assessing the level of digital transformation as an important factor of business performance and efficiency.

According to Prof. To Trung Thanh, Director of Science Management Department (National Economics University), to motivate companies to invest in digital transformation, the government must create an environment and mechanism that assure companies and investors to research and develop the digital economy. The country’s information technology infrastructure needs to be prioritized to reach the level of developed countries. It is also important to ensure qualified ICT human resources for digital development.

Relevant agencies need to advise the Government on developing the national strategy for high-quality human resources for digital transformation and introducing mechanisms to encourage SOEs to increase investment and improve innovation capacity and digital transformation. At the same time, they need to build an experimental policy framework in terms of legality and risk tolerance of SOEs, especially to increase the proactiveness and innovative decision-making of leaders.

By Quynh Chi, Vietnam Business Forum