CNBC Transcript: Oliver Tonby, Managing Partner, Southeast Asia, McKinsey & Company

Following is the transcript of a CNBC interview with Oliver Tonby, Managing Partner, Southeast Asia, McKinsey & Company. The interview was broadcast on CNBC on 27 April 2017, during CNBC's "Hong Kong versus Singapore" theme week.

All references must be sourced to a "CNBC Interview".

Interviewed by Dan Murphy, Correspondent, CNBC, and Martin Soong, Anchor, CNBC.

Dan Murphy: Now a lot of companies in Southeast Asia rely on McKinsey's counsel and services to future proof their business model. What would you say is the number one question that you're getting asked right now?

Oliver Tonby: I think we're getting asked a couple of questions by senior executives. I think the first one is 'is this real?' you know, 'the technology change that's happening and all the digital and the analytics is it real? Is it going to affect me?' and the answer to that is absolutely. We're seeing a sea of change as we speak. Globally, we see that you know two, three billion dollars worth of value is going to be created from this...this ongoing revolution. We also see that 44 percent of all skills, all tasks that are performed are going to be potentially automated over time, varies a lot by industry. But the short answer is there is a massive revolution going on that's going to affect every single company.

Dan: And we hear a lot about innovation 4.0, manufacturing 4.0. How does that change the nature of jobs here in Singapore and here in Southeast Asia? Well broadly.

Tonby: Innovation 4.0 or you know industry 4.0 we see a number of very exciting technologies coming. It's already here, in robots or even co-bots that can actually work alongside of people. We see virtual assistants. If there was one here now it can read my body language and they can read my emotions, would tell you that whilst this is very fun it's also a little bit intimidating to be here. But you know this technology there's so much happening and it necessitates a different type of skills. What we're talking about is the need for automation engineers, we're talking about UX designers, we're talking about data scientists. So there's a change in the skills required. We also see a change in... There's going to be a number of people that need to be either upskilled, redeployed so that's another big, big change that's coming our way and we see here in Singapore the government is really trying to get behind that.

Dan: So Oliver my very unintimidating colleague Martin Soong has a question for you.

Martin Soong: Hey Oliver good morning and thanks for joining us. Great to have you on the show. So let me ask you since, you brought up the government in education and jobs and skills etc., you know all this stuff can be learned in school but at the end of the day the practical application - being able to use what you know and learn to come up with new innovative ideas essentially to do things better or differently, faster, cheaper et cetera…Can that be taught? Can something like that be sort of you know imposed top down as though? As if you know 'you shall be creative.'

Tonby: I think it absolutely can be taught. And it has to be taught because, you know, we're facing a situation where across the region millions of people will need to be up-skilled, re-skilled. It can be taught and it's one of the reasons that we have JV with the advanced manufacturing and technology center. We've set up the digital capabilities center work. The purpose is very simply to do three things. Number one is to showcase some of these technologies in a physical environment. You want to see the machines doing this, see the co-bots, see the predictive analytics machines on site. We want to use this to train people, hands on. Everybody from the CEO to the shop floor operator. And finally companies can come in and test their solutions there. So you know we believe that through using this kind of facility and this kind of methodology we absolutely can train people.

Martin: So Oliver, very quickly before I let you go. I don't mean to put you in a tough spot because I know you have a pretty close association with the government here but you know when you think about technical training, vocational training the model in Singapore is based on the German model. Is that changing fast enough to keep up with the times?

Tonby: Listen I think to answer to that - is it changing fast enough. I think every government, every company wants to change faster and things are moving exceptionally fast as we speak. I don't think we've seen this kind of pace ever before. On the other hand you look at some of the things that the same government is doing. They have the CSIP, the committee of skills innovation productivity. That is driving the implementation of how do we build skills that are required for the future economy. And they have a roadmap for each and every sector in the country and they're putting real intensity behind it. You look at the skills future program investing billions of dollars and it's special and that every single individual in Singapore actually can get a credit for the purpose of reskilling or upgrading, doing courses and what have you. So I think you know it's quite remarkable the intensity behind this skill building that we see now.

Dan: Oliver, what would you say is the greatest challenge, the greatest barrier that Singapore faces in its quest to become a smart nation?

Tonby: Let me start with what I think is the positive starting point and then come to some of the challenges. I think if you look at Singapore, it is a very conducive environment for I think, three, four reasons. Number one there's this…there's an ecosystem of companies, service providers around here, each and every one trying to push the boundaries. Secondly, there is access to talent to skills here whether it is automation engineers, UX designers, data scientists, they're scarce but there actually are some. Number three, there's actually a market and at the end of the day, let's cut to the chase, what we are talking about is you know there needs to be a purpose behind this which is to get to the customers. Right? The products to the customers. ASEAN 700 million people as a gateway to Asia and the fourth reason I think is just that the government is really putting an intensity behind it in helping to ease...ease of doing business in Singapore is great but it also goes further than that. You know I actually get calls from the EDB saying that 'you know have you thought about the following idea? Have you thought about partnering with X, Y or Z? And by the way let me introduce you.' so there is very active help and support coming behind that.

Dan: About the barriers?

Oliver: Yes the barriers. Listen I think there are a couple of things and I think these are common. It's not a single Singapore per se but number one we do see that SMEs are a little bit slower in adopting. Small or medium sized enterprises are slower in adopting, why is that? You know I think they don't necessarily have the skills or the resources to put behind it. That is a problem. Many of them are worried about increasing competition and they're saying the second reason is, is this. I think many people are worried. You know if you've been doing the same job in the same way for 20, 30 years, you suddenly now need to do it differently. You know that that comes with a little bit of stress for the human for each and every human.