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Digital opportunity in the Middle East: What does it mean for your enterprise?

Digital opportunity in the Middle East-v2

McKinsey’s recent report, ‘Digital Middle East: Transforming the region into a leading digital economy,’ analyses the state of digitisation in the Middle East. By examining nine countries in the Middle East: Bahrain, Egypt, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, and the United Arab Emirates,  the report equates the level of digital disruption in the region to a revolution.

A revolution causes a major shift from the norm.  In the case of digital, this change has brought about opportunities for new solutions, processes, business models and ways of how we go about life. For the Middle East, McKinsey predicts that “Unlocking the full potential of digitisation will require comprehensive, concrete, collaborative action—and it must begin immediately.”

In this post, we analyse the digital opportunities identified by the report and what these mean for enterprises.

Digital consumers are ready for you but are you ready for them?

McKinsey concludes that citizens themselves are leading the Middle East’s digitisation charge.  “As measured by digital consumer adoption, the United Arab Emirates, Qatar, and Bahrain are among the top countries in the world, with more than 100 percent smartphone penetration and more than 70 percent social media adoption—even higher than the United States.” Digital offers invaluable opportunities for enterprises to easily launch products or services that deliver a personalised user experience.

Some early adopters exist, the Roads and Transports Authority in Dubai for example has developed mobile applications that make it easy for the city traveler to manage their commute with ease.  The smartphone penetration and mobility means that it’s much easier and cheaper for enterprises to target and reach digital consumers. Considering the youthful population in the region, digital consumption will be on the rise in the foreseeable future.

Businesses and governments are yet to fully embrace the digital opportunity

McKinsey reports that “On the business side, adoption of digital technologies is lower.” A recent survey revealed that just 18 percent of small and midsize enterprises (SMEs) in the United Arab Emirates, 15 percent in Saudi Arabia, and a mere 7 percent in Egypt have an online presence. By 2019, projections estimate that the Middle East and Africa will have the world’s highest cloud traffic growth rate, at 41 percent.

Building an online presence for enterprises using an open-source content management system is ideal because this provides a way for businesses to get up and running quickly without worrying about expensive code development. In addition, the UAE and Saudi Arabia is home to leading web development and digital companies in the region. The concern for most companies contemplating moving to the cloud is the question of security and governance. Business can minimize these concerns by looking for platforms that comply with existing compliance and security measures.

Region is capturing only a fraction of its digital potential

To understand the relationship between digital and economic impact, the McKinsey report examined the link between the McKinsey Digitisation Index and GDP. “Our analysis shows a strong correlation between a country’s non-oil GDP per capita.” McKinsey concludes that “Our analysis and estimates show that the Middle East region’s economy has realised only 8 percent of its digital potential. Some Middle Eastern governments, including those of the United Arab Emirates and Bahrain, have begun implementation of core digitisation initiatives,” but these states are facing implementation challenges.

In order to overcome some of these hurdles, creating public-private partnerships are crucial. In the UAE for example to deliver the Smart Dubai Platform, Smart Dubai is partnering with telecommunications company du. du will be contribute their expertise to build a collaboratively-designed platform that brings the most advanced technology innovations on the market to support smart city experiences for all Dubai residents, visitors, business owners and city decision makers. In Saudi Arabia, the National Transformation Program 2020 prioritises digital transformation as one of the top four Common National Goals. The programme has 5 digital platforms, 29 essential digital initiatives for key sectors, and a number of national digital assets to receive state funding.

The future & Conclusion

McKinsey concludes that “consumer enthusiasm for digital suggests strong growth potential in the near future, as consumers are clearly primed and ready to embrace new digital offerings. It will be critical for the region to increase ICT patent applications and enhance infrastructure to improve its ICT supply and innovation performance.” The modern Middle Eastern consumer has embraced digital technologies. To gain from the digital economy, businesses must embrace digital technologies and build the right culture.

You can access the full McKinsey report here.

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