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1. A.T. Kearney XX/ID 1
SOE
Digital Transformation Report

2. A.T. Kearney XX/ID 2
• Digital Transformation Trends in
Indonesia and Required Investment
• What Indonesia Needs to Do
• Role of SOEs and the Ministry

3. A.T. Kearney XX/ID 3
ASEAN: Digital Economy has the potential to transform daily
life and add ~ $1 Trillion1 to the region’s GDP by 2025
Borderless
digital services
100% digital
literacy
• ASEAN’s digital revolution has
potential to significantly transform
daily life across the region
• Digital Economy can add incremental
~$1T to GDP over next 10 years
through a combination of:
– Impact of increased broadband
penetration;
– New industries (e.g. eCommerce,
mobile payments, etc.)
– Increase in worker productivity
ASEAN’s Digital Revolution
1. Based on current prices; uses 2015 as baseline to project future nominal GDP growth
Source: ASEAN Digital Revolution, A.T. Kearney

4. A.T. Kearney XX/ID 4
Indonesian aspirations: Indonesia has a vision to become the
largest digital economy in ASEAN by 2020
Indonesia’s Digital
Economy Vision, 2020
1000 digital start ups valued at US
$10B, and 50+ new digital companies
each year
Transactions of US $130B
8M SMEs to go digital
Country wide broadband
coverage
Country wide mobile
coverage
Source: Morgan Stanley Digital Indonesia 2018

5. A.T. Kearney XX/ID 5
1
10
100
1,000
10,000
100,000
2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0
Malaysia
Singapore
Thailand
United States
JapanIndonesia
Vietnam
Malawi
Chad
Global Digital Maturity: However today Indonesia lags ASEAN
peers in digital maturity
Country Digital Maturity
Digital Readiness (2016)
GDP(2016,$USBillions)
Nascent Intermediate Advanced
• Manual local engagement, low
digital affordability
• Focus on mobile platforms with
rapid adoption of app based
services
• Seamless Omni-Channel
experience with advanced
personalisation
• Low priority, exception of
financial services
• Point based application of digital
and Focus on digital upskilling of
w/force
• Advanced use of analytics,
automation and skilled workforce
• Limited data infrastructure and
connectivity concentrated in select
areas
• Focus on scaling infrastructure -
focus on connectivity & devices
• Focus on infrastructure
upgrades, innovation and
security
Source: GMSA: Achieving economic growth and fiscal stability in Chad , Better than cash alliance, Gartner – Verticals Forecast WW 2017Q1,
World Economic Forum – Networking Readiness Index, World Bank GDP
Digital
CX
Digital
Ops
Digital
Infra-
structure

6. A.T. Kearney XX/ID 6
Digital Investment: Indonesia digital spend below ASEAN
peers; spend concentrated in services
Digital Spend in ASEAN (USD)
Enterprise Digital Spending1
(2016/17, US$ per capita, % of GDP)
Total Digital Spend by Industry
(2017, USD M)1
3,513
142
424
64
148
32
45
26Productivity per
employed person2
(2017, ‘000 US$)
ICT spending as % of GDP
146
1,011
3,440
75% 22%
3%
Services Industry Agriculture Total 2017
4,597
ICT spending per capita
6.6%
4.5%
2.4%
1.3%
1. Gartner "Forecast: Enterprise IT Spending by Vertical Industry Market, Worldwide, 2016-2022, 1Q18 Update“, excludes telecom and internal services.
2. The Conference Board “Output, Labor and Labor Productivity, 1950-2018”
Source: Gartner; The Conference Board; A.T. Kearney

7. A.T. Kearney XX/ID 7
Investment Required: ~4x increase in investment (2017-22)
needed with strong growth in advanced services
Enterprise Digital Spend by Industry
(2017-22, USD, M)
Enterprise Digital Spend by Type
(2017-22, USD, M)
1. Assumes 0.000073 IDR to USD
Source: Gartner; A.T. Kearney analysis
29%
40%
49%
CAGR
(2017-2022)
2017 2022
12,152
5,363
1,066
4,597
146
1,011
3,440
Services Agriculture Industry (Includes Manufacturing)
18,581
29%
37%
CAGR
(2017-2022)
2017 2022
59%
41%
4,597
34%
66%
18,581
Foundational Advanced

8. A.T. Kearney XX/ID 8
Future Digital Trends: 10 digital trends are emerging across
for digital transformation
Digital
Infrastructure
Digital
Customer
Engagement
Digital
Operations
Security
Networking
Cloud
Data Analytics
Digital
Workplace
Automation
21 43
7 56
8 109
Internet of
Things (IoT)
Omni
Channel CX
Deep
Customisation
Enhanced
Responsiveness

9. A.T. Kearney XX/ID 9
• Digital Transformation Trends in Indonesia
and Required Investment
• What Indonesia Needs to Do
• Role of SOEs and the Ministry

10. A.T. Kearney XX/ID 10
Need a national digital vision supported by 4 structural anchors
DIGITAL
INFRASTRUCTURE
CONSUMER
AWARENESS &
TRUST
FUTURE READY
WORKFORCE
INNOVATION
ECOSYSTEM
Open Policy
Healthy
Industry
National
Projects
Consumer
Education
Data
Privacy
Cyber
Security
Industry-
University
Engagement
Expanded
National
Curriculum
Private
Sector Skill
Building
Ecosystem
Facilitation
Intellectual
Property
Laws
Funding &
Exit
Options
Digital
Roadmap

11. A.T. Kearney XX/ID 11
Current Digital Framework: Indonesian digital initiatives are
split across a number of different national roadmaps
Roadmaps/ policies in Indonesia influencing digital Not Exhaustive
Ministry Roadmaps
Digital Initiatives
Infrastructure
Consumer
Demand
Stimulation
Future proof
workforce
Innovative
Digital
Ecosystem
Advanced/
Industry specific
Technology
Individual SOE Roadmaps
RIPIN 2015-2035
KIM 2015-2019
Vocational match program
Sectoral roadmaps
Vision Indonesia 2045
Vocational Roadmap
E-commerce Roadmap
Cybersecurity
IoT blueprint
SOE
Industry
National
Planning
Info &
Comms.
Manpower
Non
Digital
Disparate roadmaps drives high risk of gaps and potential duplicated efforts

12. A.T. Kearney XX/ID 12
National Digital Vision: Digital roadmaps like Singapore’s
‘Smart Nation Program’, critical to realising full potential
• Objectives: Economically competitive global city,
improve living and encourage businesses to innovate
and grow
• Government Investment: S$2.4B2 over next 4
years (from Nov 2017) into the digital economy
• Strategic National Projects: National Digital
Identity, e-Payments, Smart Nation Sensor Platform,
Smart Urban Mobility, Moments of Life
• Ecosystem priorities: Open Data, living laboratory,
cybersecurity and data privacy, computational
capabilities and digital inclusion
United Kingdom
- UK Digital Strategy2
• Objectives: To make Britain the best place in the
world to start and grow a digital business, focusing on
digital productivity benefits
• Government Investment: £ 4.7B+ in gov. spending,
including £450M over 3 years for the Government
Digital Service, £1.9B investment in cybersecurity
over the next 5 years, £1B investment into IT
Infrastructure
• Strategic National Projects: Digital Skills
Partnership (including in schools), Cybersecurity
uplift, Next Generation IT Infrastructure (including full
fibre and 5G)
• Ecosystem priorities: Establishing technology hubs,
investment in R&D, Cybersecurity, IoT, data
protection regulation
Singapore
– Smart Nation1
1. https://www.smartnation.sg/about/Smart-Nation
2. https://www.opengovasia.com/, www.gov.uk/government/publications/uk-digital-strategy

13. A.T. Kearney XX/ID 13
Solid Digital
Infrastructure
Consumer Demand
Stimulation
Future Ready
Workforce
Digital Innovations
Ecosystem
• Inconsistent quality of digital
infrastructure
• Low private sector
investment
• Sub-optimal technology use
• Insufficient consumer
protection regulation
• No national cybersecurity
framework
• Low levels of e-literacy
• Setting up workforce
entrants with right skills
• Re-skilling existing workforce
• Poor access to skilled
resources
• Limited access to global
knowledge and to market
leaders
• Limited access to larger
deals
• Healthy industry with 3 key
players
• Substantial national projects
working with the industry
• Clear consumer protection,
privacy and cybersecurity
frameworks
• Nationwide e-literacy training
programs
• National skills, education
roadmap
• Incentives for enterprises to
upskill existing workforce
• Eased temporary global
experts
• Incubator hubs and
partnerships – showcase
local champions
• SOEs/ government to
support local champions
Structural gaps
1. Workforce management; 2. Robotic process automation; 3. Natural language processing
Source: A.T. Kearney
KeyActions
1 2 3 4
Issues
Structural
Anchors
Structural gaps: further action required to close gaps

14. A.T. Kearney XX/ID 14
Consumer protection: Indonesia can leverage global
reference frameworks as a starting point
A.T. Kearney Privacy & Data Protection (PDP) Framework
Source: GDPR, Expert Interviews, A.T. Kearney
Leverage learnings from global examples who have already formalized or are
ahead in formalizing their data governance, e.g. EU, Canada, China, OECD, …
2
Sovereignty / Geo FrameworkRegulation / Legal Framework
Governance / Organizational
Framework
Scope / Subject of Protection
Process Framework
Purpose
Quality &
Assurance
Consent
Future
Processing
Security Anonymisation
Breach
Notification
Compliance
Principles
Personal Data Non-Personal Data
Legislation
Guidance
Regulator/Authority
Licensing
Entity & Sector
Legislation
Country
Global
Functions
Committees
Roles
Structure

15. A.T. Kearney XX/ID 15
Cyber-Security: Framework for policy makers to
operationalize
Cyber-Security: Operationalization Framework
Source: A.T. Kearney
Cybersecurity Example
Establish a national-level agency to
drive the cybersecurity agenda
Establish sector-level
dialogue
Adopt sector-level risk
assessment and maturity
profiling
Develop a coherent national
strategy with an implementation
road map
Develop a law to address
cybercrime
Enact or update cybersecurity
legislation
Establish incident
reporting mechanisms
Establish incident
response capability
Raise community
awareness
Identify global standards
and soft-steer regional
adoption
Identify and address skills
gaps around cybersecurity
through a national talent
strategy
1 2
3
6
7
8
9
10
11
12
4
5
Governance
Cybersecurity
law
Cybercrime
law
Information
sharing and
incident response
Standards
adoption
Awareness
building
Capacity and capability building
Cyber-
security
strategy
2
Identify critical information
infrastructure

16. A.T. Kearney XX/ID 16
Future Ready Workforce: Indonesia is facing talent
development challenges as an emerging economy
Human Capital Trends
Government education spending
(2014)1
1. Korea in 2015; 2. GDP per capita at constant 2010 USD; 3. Indonesia (Jakarta)
Source: World Bank, Survey of Adult Skills (PIAAC) - 2015
% of GDP Per Capita (USD)
2
<1
1
4
<1
<1
Missing
% adults by literacy proficiency level
(2015)
Key:
SpecialisedBasic
3
3
5.7
5.4
5.3
5.2
5.2
5.1
3.4
3.3
3.3
1.9
2,661
2,938
1,933
3,251
581
1,369
1,395
67
114
21
13
13
16
17
19
28
29
37
33
33
37
42
39
42
36
34
35
26
17
8
13
12
10
3
Level 1 & Below Level 2 Level 3 Level 4 & 5

17. A.T. Kearney XX/ID 17
• Increased emphasis on training for displaced
workers
• Encourage foreign talent mobility program5
• Centers of excellence in collaboration with private
partnerships
Existing initiatives: the government is committed to
upgrading Indonesians’ technological capabilities
1. Including primary school (Sekolah Dasar) / junior high school (Sekolah Menengah Pertama) and equivalent (i.e. madrasahs)
2. Including high school (Sekolah Menengah Atas) / vocational school (Sekolah Menengah Kejuruan) and equivalent (i.e. madrasahs)
3. Including bachelor / master / PhD degrees, diplomas and equivalent
4. Including adult learning / upskilling or other programs to improve companies’ access to skilled labor
5. Foreign talent mobility program can be launched only for a specific period of time and specifically intended for passing skills & expertise to local talents
Source: World Bank, OECD, Asian Development Bank, A.T. Kearney
Masterplan for National Education Curriculum Redesign
3
Basic
education1
High school /
vocational school2
Universities3
Mobility programs4
Focus areas Select studies
• Improve participation in basic education,
particularly for lower income segments
• Early exposure to 4IR foundational topics such
as science and mathematics
• Improve coordination with employers; Vocation
education should be industry-driven to ensure
that students have the requisite skills for 4IR
(i.e. engineering, coding, manufacturing)
• Review / redesign national education under 4IR
era
• Concentrate on educational areas aligned to 4IR
needs (i.e. STEM, ICT fields)
• Philippines: Recently reformed the K-12
education system with focus on learning &
innovation, communication and information,
media & technology
• Singapore: Introducing courses on IoT,
advanced manufacturing and other 4IR-
relevant courses in vocational schools
(polytechnics and ITEs)
• Malaysia: Currently redesigning education for
4IR; launched policies such as 2u2i (a work /
learning program in universities), and
CEO@Faculty (trainings on-campus by CEOs)
• Singapore: Offered comprehensive adult
training and skilling through SkillsFuture, offering
credits for mid-career learning programs

18. A.T. Kearney XX/ID 18
Digital Ecosystem: cooperation required between
government, universities and global vendors
• Influence and educate policy makers on
resolving the digital divide
• Jointly develop specific solutions to resolve
issues faced by businesses in accessing
fast, affordable, reliable broadband
• Be champions to test new technologies
and share thought leadership
• Joint digital investment funds focused on
education, workforce upskilling and digital
infrastructure
• Form CEO-CIO leadership councils
• Sharing of global thought leadership
• Oversee national Digital strategy /
ecosystem and stakeholders
• Build long term public sector capabilities
• Provide financial support
• Set and enforce regulations
Smart Nation & Digital Government
Office, under the Prime Minister’s
Office
A central digital government agency
required with a mandate to govern
and coordinate
US $1.8 B + investment in Country
Digitization Acceleration programs with
governments globally
UK business connectivity forum:
(includes providers, manufacturers,
operators, etc.)
Indonesian
R&D ecosystem
4
Masterplan for National Innovation Ecosystem Not Exhaustive
Source: Ranga and Etzkowitz, WEF, WIPO, US National Science Board, WSJ, Desk research, A.T. Kearney

19. A.T. Kearney XX/ID 19
• Digital Transformation Trends in Indonesia
and Required Investment
• What Indonesia Needs to Do
• Role of SOEs and the Ministry

20. A.T. Kearney XX/ID 20
Indonesia GDP
(2016 US B)
Digital Vision Digital
Infrastructure
Consumer Demand
Stimulation
Future Ready
Workforce
Digital Innovation
Ecosystem
SOE Role: SOEs are a big part of the overall economy, and
have a critical role to play in driving the country’s digital agenda
SOE contribution to overall economy
Company Market Cap. (in trillion IDR)
BCA 490
PT Telkom 459
HM Sampoerna 451
BRI 383
Unilever Indonesia 382
Astra International 315
Bank Mandiri 305
BNI 138
Gudang Garam 131
United Tractors 114
What role should SOEs play in Digital?
Listed SOEs as
% of total stock
market capitalization
(2017, USD B)
• Vision based on
leading edge practices
embedded into
individual SOE
roadmaps
• Aligned infrastructure
roadmaps to enable
digital progress i.e.
communications
(Telkom), electricity
(PLN), logistics
(POS), etc.
• Leverage platform to
educate consumers
in digital applications
e.g. using online
banking,
self-service
• Upskill employees
through partnerships
• Embed innovation into
ways of working
• Build networks to
develop innovative
ideas with other
SOEs,
global vendors
SOE Revenue
Other GDP 810
(87%)
123
(13%)
2016 GDP
SOE
(74%)
(26%)
337
SOE
Other
932
1. Assumes 0.000073 IDR to USD
Source: Gartner; A.T. Kearney analysis

21. A.T. Kearney XX/ID 21
SOE Challenges: however structure, investment and skills
around digital remain challenges
Feedback from SOEs
“Long term initiatives
aren’t a priority right
now, due to potential
structural changes”
- Utilities
“We take our
directions from the
top” - Manufacturing
“We have the tools,
but everyone uses
paper anyway” - FSI
“We are running
digital adoption
programs” - Utilities
“We mainly use paper
processes” -
Logistics
“We would like to
develop our analytics
capabilities, but there
are no data scientists”
- Manufacturing
“Most advisers just
sell us boxes, they
struggle with
solutions”
- Logistics
“We expect our digital
advisers to lead by
example”
- Logistics
“We usually just ask
for vendors from the
leaders (magic)
quadrant”
- Manufacturing
“We just look for best
of breed, cost isn’t a
concern”
- Utilities
“fast tracking for rapid
cycle experiments
tends to be a
challenge”
- FSI
<0.5% of revenue on
IT Capex and Opex
- Manufacturing
<0.3% of revenue on
IT - Utilities
<1% of revenue on IT
- Logistics
Unclear top
down direction
on digital
Low workforce
adoption of
digital tools
Difficult access
to digital skill
sets
Less mature
digital advisers
Procurement
not adapted to
digital age
Low investment
Source: SOE Interviews

22. A.T. Kearney XX/ID 22
Assessment: SOE digital maturity has room for improvement
before reaching the same level as local and global leaders
Dimensions Nascent Standard Advanced
Leading
Edge
Digital
Vision
Customer
Facing
Application
Internal
Digital
Operations
Digital
Infrastruc-
ture
Workforce
Capabilities
12-18 month view of initiatives,
part alignment in biz./digital
strategies
Clear long term (24
months+) digital
strategy to drive
growth
Seamless integration between
digital & corporate objectives
Early experimentation with alt.
channels & payments e.g. online,
apps
True omni-channel
CX, strong digital &
physical offerings
(Banks)
Customised, insights driven
experiences e.g. DBS, Westpac
Initial experimentation with
customer analytics (particularly in
FSI), limited deployment of digital
for efficiency purposes (e.g. IoT in
plants)
Digital to improve
quality (risk mgmt.,
100% paperless,
etc)
E2E automation of processes
e.g. RPA, remote mining, etc.
Issues in upskilling workforce &
access to certain skills e.g. data
science
innovation hubs
pulls some talent,
challenges remain
(Digital players)
Situated in markets with strong
talent, however access to STEM
skill sets remain a challenge
(US, UK)
New to hybrid cloud, varying
maturity in BCP & future proofed
solutions
Established digital
infra. with strong
BCP & redundancy
(Banks)
Self-designed/customised
infrastructure (e.g. Google,
Facebook), architecture
considers existing as well as
future use cases
SOEs: Indonesia: Global leaders:
Comments
Indonesia SOEs Indonesia Digital Leaders Global Digital Leaders
Source: SOE Interviews, desktop research, A.T. Kearney analysis

23. A.T. Kearney XX/ID 23
Spending Gap: SOEs need a ~3x increase in investment
(2017-22) to meet ASEAN benchmarks
CAGR
2017-2022
SOE Enterprise Digital Spend by
Industry (2017-22, USD, M)
CAGR
2017-2022
1. Assumes 0.000073 IDR to USD
Source: Gartner; A.T. Kearney
SOE Enterprise Digital Spend by Type
(2017-22, USD, M)
Others
Manufacturing
EPI
Finance & Insurance
2017 2022
28%
23%
2017 2022
Advanced
Foundational
28%
33%
45%
20%

24. A.T. Kearney XX/ID 24
• Security: Trusted
custodians of wealth
• Omni-Channel:
Understanding and
responsiveness to
customer needs
• Safety: Target zero,
everyone goes home
everyday
• Yield: Reducing waste
and ensuring longevity of
natural resources
• Yield: Reduce waste and
downtime, improve
quality
• Automation: Increase
productive hours, reduce
errors
• Remote Management:
Improve productivity
• Services: revenue uplift
through understanding
customers
• Logistics: optimised
loads, routing and Just-
In-Time
• Agricultural: Improve
yields, and increase
productivity
• Productivity: leveraging
technology to increase
output
• Efficient resource use:
Reduce waste through
optimised allocations and
reduced errors
SOE Investment by Industry: Financial Services & EPI close
to ASEAN peers, however other sectors are significantly behind
Current vs Spend equal to ASEAN benchmarks (2017, USD B)
Finance &
Insurance
Energy Processing
Industries
Manufacturing Other Total
1. Assumes 0.000073 IDR to USD
2. Other includes: EPI, Transportation and Warehousing Construction, Trade and Retail, Agriculture, Forestry and Fishery, Mining and Excavation,
Professional, Scientific, Technical Services, Water Management, Raw Material and Waste, Hotels and Real Estate, Source: Gartner; A.T. Kearney
Spend equivalent to ASEAN benchmarks
Industry
Example
Oppor-
tunities
100% 79% 7% 20% 43%
0.8
21% 93%
80%
57%
2.7
1.3
0.5
0.1
0.8

25. A.T. Kearney XX/ID 25
• Work with Telkom and identified industry champions to define overall SOE
digital outcomes
• Develop model guidelines by industry for individual SOEs to adhere to when
developing internal digital roadmaps
• Establish a central forum to support SOE roadmaps and to sponsor cross-
sector pilot programs (Cybersecurity, Integrated data center etc.)
• Hold monthly steering committees, to ensure SOEs are delivering digital
initiatives as per roadmaps and enable knowledge sharing
• Ensure SOE policies are conducive to fostering digital progress including:
– Digital procurement processes, Support 2-speed IT investment
– Diverse recruitment policies with cross-SOE synergy; Set up a Center of
Excellence for select skills such as Cloud architecture, Security etc.
• Drive culture for digitization and asymmetric SOE synergies (where benefits
are realised by a different SOE to the one that has to invest)
• Foster local ecosystem through preferential treatment e.g. tax exemptions for
pre-approved R&D investments, prioritized selection of local vendors
Ministry of SOE: 5 actions to drive SOE digitization
Action
Imperatives