To make the most of digitalization, businesses and government need to implement enabling frameworks.

The pandemic brought digital transformation to the forefront for many Taiwan-based businesses. When companies had to quickly pivot their services, products, or business strategies to stay afloat, efficient digitalization strategies became a necessity. The shift to remote work also compelled many companies to initiate or speed up existing digitalization plans.  

In fact, 35% of Taiwanese companies said they would significantly increase their investment in digital transformation projects over the next three years to remain competitive, according to a 2021 study by international accounting firm PwC. 

Successful digital transformation can improve customer satisfaction, drive employee innovation, and ultimately spur company growth at a fundamental level. PwC’s study showed 60% of executives view digital transformation as their most critical growth driver. Yet as many as 70% of large-scale corporate transformation projects end in failure, reports management consulting firm McKinsey & Company.  

Digital transformation, like any large-scale change, also requires leaders to support a culture of risk-taking to grow innovation. In societies with highly hierarchical organizational structures, this can require a mindset shift.  

Leadership style plays a crucial role in steering a company toward digital transformation. One weakness when formulating a business transformation plan is often the lack of buy-in from leadership. But to drive digital transformation, effective leadership doesn’t necessarily have to come solely from upper management – co-leader models have also proven to be successful.  

In Taiwan, cross-functional collaboration holds one key to effective organizational change, notes William Zyzo, managing director of Taiwan-based consulting firm Z&A Knowledge Solutions.  

“The one thing our clients in Taiwan and the region can improve on is to better synthesize cross-functional messaging when it comes to organizational change strategy so that it’s coherent,” he says. Collaboration among mid-level managers can address the disparities in organizational change across different teams within the same company. 

While commitment from the head of the company is important, team leaders across functions need to collaborate to ensure that organization-wide change accurately reflects the needs of the company. Effective communication can drive cohesive support for transformation projects, preempt employee fears of being replaced by technology, and grow employee morale. To drive true transformation, leaders must create a shared vision and have organizational support.  

“A common failure mode, or an insufficient success mode, is a chief executive saying, ‘We’re going to go digital,’ and then making public statements about digital strategy,” said Rodney Zemmel, senior partner at McKinsey, in an interview with McKinsey Digital. “Then every person on their leadership team creates their own digital road map. What you end up with, six months or a year later, are many digital pilot projects across the organization.” 

In the long term, organizational change requires a reframing around the concept of failure. In societies like Taiwan, where hierarchical authority is foundational, this can require a mindset shift. 

The problem, says Zyzo, is that while many Taiwanese companies have robust business strategies, they allow little or no room for failure within those blueprints. Such a mindset can have long-term consequences for success. When one step in the strategy fails, this can have a knock-on effect on the rest of the project timeline, but perhaps more importantly, penalizing risk-taking can stifle innovation.  

Digital transformation can only move as fast as talent allows. Across disciplines, the number of new graduates in Taiwan has been falling for several years, making it harder to fill talent pipelines in areas related to digital transformation. In fact, lack of digital-related skills and talents is one of the biggest obstacles encountered by Taiwanese SMEs as they implement digital transformation strategies. SMEs – which as of 2021, comprised an all-time high of 99% of all enterprises in Taiwan – can have vastly different digital transformation needs than multinational companies. 

A recent study on SME digital transformation by PwC recommended that more be done to help small and medium-sized enterprises, in particular with talent development and training.  

“SMEs could establish a digital innovation office to systematically and continuously promote digital innovation, train and promote outstanding talents with internal and external support, provide products or services, maintain customer relationships, and achieve sustainable corporate development,” the report read. Taiwanese SMEs have expressed a desire for the government to address these shortcomings, with many saying more government-sponsored programs for digital talent development are urgently needed. 

Across companies of all sizes, one of the biggest misconceptions about digital transformation is that it is a marginalization of existing human resources. While not denying that automation and outsourcing occur for certain job types, Zyzo believes that “rather than framing the idea as technology replacing current capabilities, we should understand technology as a means to augment our current capacities.” 

The problem is not resistance to change as companies digitalize, continues Zyzo, but rather in keeping digital literacy up to speed with the fast pace of technological developments. Digital transformation doesn’t have to be perceived as a disruptive force. Rather, it could be seen as a positive change that, with appropriate training programs aimed at specific sectors of the workforce that are in demand for digital skills, can enable businesses in Taiwan to grow sustainably and maintain their global competitiveness. 

Generally, Zyzo observes, resistance to change is not a mindset he sees as pervasive within the business culture in Taiwan, and AmCham Taiwan’s 2023 Business Climate Survey report echoes this observation. Overall, the data from the report shows that companies view their Taiwanese employees as adaptable and open to training to at least some extent. When all these characteristics come together, it suggests that Taiwan’s business climate may be favorable for companies to undergo digital transformation. 

Resilient infrastructure 

As a top player in the global information technology industry, Taiwan is no exception to the global trend of increasing reliance on the digital economy. If the island nation is known for frequently “punching above its weight,” it’s because it must. With a relatively small population and economy, especially compared to some of its regional neighbors, Taiwan’s continued prosperity depends on ongoing economic development, technological innovation, and institutional flexibility. 

Digital resilience has become a common thread underpinning Taiwan’s forward-looking digital economy strategy. While Taiwan continues to build the infrastructure for a cohesive and globally competitive digital economy, many gaps remain compared to other advanced economies. As a result, Taiwan fell down three spots from the previous year when it was ranked the 11th most digitally competitive of 63 advanced economies in the Institute for Management Development’s (IMD) 2022 World Digital Competitiveness Ranking. 

The inauguration of the Ministry of Digital Affairs (Moda) in August of 2022 signals a new chapter in Taiwan’s journey toward a resilient digital governance infrastructure. As the agency itself is less than a year old, it remains to be seen how the long-term successes of Moda will play out. 

“The most notable milestone [supporting Taiwan’s digital resilience] would be the inauguration of The Ministry of Digital Affairs,” says a representative from Visa Taiwan.  

Its establishment is a step in addressing the gaps between digital and traditional industries, and – in its own words – the core of the ministry lies in building “resilience.” Moda currently takes a three-pronged approach to tackle digital resilience at all levels of society: broadening digital inclusion, supporting industrial transformation, and accelerating cybersecurity defenses.  

In the banking and financial services space where Visa operates, the growing “digital-first” mindset has much potential to drive innovation in digital payment development, and competition is intensifying. While achievements like the establishment of Moda are steps in the right direction, Visa believes more could be done to push the digital commerce agenda forward, particularly in the areas of digital trade and B2B money flow modernization. 

IMD identified Taiwan’s “use of big data and analytics,” a measurement of future readiness, as an overall top strength. While not the only case highlighting the importance of digital resilience, such a concept became all the clearer as Taiwan battled the Covid-19 pandemic in 2020. Taiwan’s early successes in pandemic management received global recognition and demonstrated how effective and democratic use of technology can be used to save lives. In fact, such “prompt digital adoption in both government agencies and the private sector when it comes to combatting the pandemic” acknowledges the government’s efforts to actualize digital resilience, says Visa Taiwan. 

A sophisticated contact tracing system, for instance, emerged from “g0v” (“gov-zero”), a decentralized community of “civic hackers,” or politically minded computer hackers. By allowing relevant data to not only be made public, but also captured in an easily accessible way, this “bottom-up” form of information dissemination supported contact tracing and other pandemic prevention measures. In the early days of the pandemic, for example, members from the g0v community created a “map mask,” collecting data on where masks were available, which was eventually adapted and scaled up by the government. 

If, however, digital decentralization can have its benefits, there is also a downside. The line between regulating easily accessible disinformation online and censorship has always been complicated, yet it is inevitable as digital modernization continues. The recent draft of the Digital Intermediary Services Act (DISA), which seeks to combat online disinformation and related cybercrime, faces growing opposition driven by allegations of lack of clarity and regulatory overreach.  

Proposed by the National Communications Commission (NCC), DISA is meant to reference international best practices and is largely modeled after the EU’s Digital Services Act (DSA), an agreement standardizing digital regulation across EU member states as it relates to intermediaries using digital platforms to connect consumers with goods, services, and content. However, there are some critical differences between the two. Notably, Taiwan’s version authorizes the relevant government agencies and legal systems rather than independent review bodies to identify and remove illegal content. 

Facing stark opposition questioning whether the scope and definition of parts of the DISA were too far-reaching and bordering censorship, the NCC announced the consultation process of the Act to be put on hold for further public comment.  

Specifically, “the DISA draft does not mention foreign interference, despite it being clear that government intends this regulation as a way to strengthen internet security in the face of disinformation from China and hostile states,” writes Arthur Shay of Taiwan law firm Shay & Partners.  

Shay posits that the draft’s “broad and unclear definition of ‘regulated digital intermediary service players’ has puzzled many internet access providers, social media companies, and online platform service providers, from small-medium enterprises to industry tycoons, which do not have permanent presence in Taiwan.”  

While many civil society groups have emerged to combat disinformation and censorship and the administration has integrated media literacy into nationwide school curricula, standardized and effective legislation is still needed to address online misinformation and allow social media companies and other players in the space to operate effectively. 

However, such dynamic transformation may inevitably leave other areas behind. Cybersecurity, for example, can become an afterthought. Taiwan’s large digital footprint, both at the civilian and governmental levels, combined with delicate regional geopolitical dynamics, creates a significant cybersecurity vulnerability for Taiwan. Moreover, Taiwan’s unique positions in global supply chains mean its digital economy cannot afford to neglect such issues.  

A report by Check Point Software Technologies found that in 2022, organizations in Taiwan were on average hit with 3,118 attacks per week, up 10% from the previous year. Digital systems across the island are hit with tens of millions of cyberattacks every month, a trend that has been recorded for the past several years – but to be fair, of those attempted attacks, only a handful are usually serious enough to result in stolen data or paralyzed systems. 

However, the potential risks should not be downplayed. Some companies mistakenly believe the cost inflicted by cyberattacks to be less than that of establishing defensive capabilities to prevent such attacks from happening in the first place. While larger corporations may have the resources to counter such threats, attackers often choose to target downstream portions of the supply chain instead, with the intent to indirectly cripple the more powerful corporate platforms. 

Yet at times there can be a disconnect between intention and implementation. The Cybersecurity Security and Management Act went into force in January 2019 and reflected the government’s pivot toward prioritizing cybersecurity. However, even now, the administration still faces acute labor shortages, and the recruitment of professional IT and cybersecurity experts lags behind demand.