SPEECH BY MR S ISWARAN, MINISTER FOR TRADE AND INDUSTRY (INDUSTRY) AT THE ENTERPRISE 50 AWARDS CEREMONY AND GALA DINNER, THURSDAY, 19 NOVEMBER 2015, 7.40PM, WEST & CENTRAL BALLROOM, RESORTS WORLD CONVENTION CENTRE
Mr Alvin Tay, Editor, The Business Times
Mr Tham Sai Choy, Chairman, KPMG Asia Pacific and Managing Partner, KPMG in Singapore
Mr Linus Goh, Head, Global Commercial Banking, OCBC Bank
Professor Bernard Yeung, Dean of NUS Business School
Distinguished guests,
Ladies and gentlemen,
Good evening,
1. I am pleased to join you at this event to present the Enterprise 50 Awards for 2015.
Changing Landscape for Businesses
2. As our SG50 celebrations draw to a close, the theme for this year’s Enterprise 50 Awards has a special resonance. We look ahead and consider what the next 50 years might have in store, and how we can make it better than the first 5 decades. In particular, we must reflect on the core factors that have differentiated us from others and enabled us to succeed, and how these need to be reinforced or even changed as we adapt ourselves for an uncertain future.
3. Similarly, for businesses, the tension lies in dealing with immediate challenges and sustaining a formula that has worked, while being prepared for longer term trends and disruptive developments. There are many notable examples of companies which, in their focus on current performance and profitability, lost sight of larger trends and the impact on their business. Today, this risk is accentuated by rapid technological advances which are bringing businesses and their ultimate customers closer together, and compressing supply chains, product cycles and time to market. As a result, several disruptive business models have emerged with the potential to profoundly transform many sectors. I would like to highlight three such trends which our businesses must factor into their plans for the future and these pertain to the evolution of the sharing economy; disintermediation through technology; and the rise of open innovation.
Disruptive Business Models
4. The sharing economy, also known as collaborative consumption, has already had a profound impact on many different industries. The most important aspect of a sharing economy is that it allows individuals to monetise assets that are not being fully utilised. There is a growing number of mobile platforms that effectively connect people who have certain goods, services or skills with those who don’t but need them. It makes it possible for ordinary people to advertise and sell goods and services that used to be provided only by full-time businesses. Trust, an effective exchange platform, and convenient payment systems are essential ingredients for success in a sharing economy.
5. Firms in this space, like Zipcar and AirBnB, have built their value proposition on their ability to bring together buyers and sellers through a proprietary platform via the Internet. Closer to home, Carousell, a start-up which was founded by three NUS students in 2012, operates a marketplace where users can snap photos of items that they wish to sell and post it via their smartphones. Due to its ease of use relative to other platforms like eBay, their user base has grown very quickly and it now has operations in Malaysia, Indonesia, Taiwan and they plan to expand to the US, Australia, Hong Kong and India.
6. In the sharing economy, the ownership or mere aggregation of physical assets is less of a competitive advantage. In Carousell’s case, they simply provide an easy-to-use interface for buyers and sellers to transact; they don’t hold an inventory of goods for sale. These platforms enable the monetisation of unutilised or underutilised assets, be they cars, old clothes or rooms, which can now generate income for their owners. This has compelled companies to rethink the way they do business, and identify the main source of their competitive advantage and value add to customers.
7. The internet has also led to disintermediation in the supply chain. This is most apparent in e-commerce. The proliferation of online sales portals poses a significant challenge for traditional retailers as it is now easy for consumers to bypass physical stores and buy direct from manufacturers and wholesalers, often at lower prices. Amazon has done this in book sales and Apple’s iTunes has had a similar impact on the music industry. Similar trends are evident in sectors as diverse as insurance, travel and fashion apparel. The traditional players in this space have had to respond; they have adapted by adopting omnichannel strategies (eg online to complement physical stores) and accentuating the value they bring to their customers through service quality and product range.
8. E-commerce has also created new opportunities in the fulfilment space. SingPost, for instance, has been growing its e-commerce logistics business, most recently through the acquisition of TradeGlobal, a leading US end-to-end e-commerce provider. It now provides managed e-commerce solutions, including warehousing, delivery, returns management, and e-commerce technology solutions, and is positioned to take advantage of the growing e-commerce market in the Asia Pacific region.
9. The third trend which I wish to highlight is that of open innovation. Innovation is a key source of value creation for companies. Traditionally, innovation, such as in the pharmaceuticals industry, has been a proprietary and secretive process. But, with the rising cost of innovation, and declining productivity of the research process, companies are increasingly seeking to collaborate with other parties to share the cost and risks of innovation. Many companies have already adopted this open innovation approach. General Electric, as part of its Ecomagination initiative, crowdsources innovative ideas to improve environmental sustainability, and works with an ecosystem of partners to implement them. Singtel is actively cultivating relationships with start-ups through its corporate venture subsidiary Singtel Innov8 that invests in start-ups with promising ideas and the potential to collaborate with Singtel in win-win partnerships.
10. Open innovation acknowledges that the best ideas need not necessarily come from within a company. Therefore, companies need to have a culture and structure that embraces new ideas, regardless of source, and be open to collaboration with different partners, even potential competitors, in order to develop a competitive advantage.
Building a Vibrant Corporate Ecosystem
11. Against the backdrop of these and other trends, an important part of the Committee for the Future Economy’s work will be to consider the future of companies and the impact of new business models. If innovation is to be a durable source of value for our companies, what do we need in terms of our systems and capabilities to support this effort? Ultimately, we want a strong and diverse corporate eco-system with dynamic start-ups, productive and capable SMEs, and globally competitive large companies, with strong inter-linkages between them and with the global economy. Government cannot pick winners and losers, but we can provide a conducive environment for this evolution to occur.
12. First, we will need to place greater emphasis on building broader and deeper partnerships between different players in Singapore’s economy, so that they can leverage on each other’s strengths. This will enable us to take advantage of our small size by operating as a tightly coordinated system.
13. Under the PACT programme, EDB and SPRING support the development of partnerships between large companies and SMEs. Large companies benefit by test-bedding new products or processes and the upgrading of the capabilities of their suppliers; while SMEs benefit from new capability development by co-innovating with the large companies. 92 projects have been supported, benefitting 628 SMEs.
14. A good example of such a partnership in action is the work that Rotating Offshore Solutions, or ROS, has done with Keppel Limited. ROS is a marine engineering company. Before the recent depression of oil prices, ROS decided in 2013 to move into the production of Mobile Offshore Production Units (MOPUs), which can improve the recovery of oil from oil fields, in order to diversify its business. Through a partnership with industry leader Keppel, ROS converted and refurbished a Jack-up Rig into a MOPU in the short span of 8 months, which is faster than the industry norm of 12-14 months. With this successful pilot project, ROS has clinched other similar projects and moved up the Oil and Gas business value chain.
Helping Companies be Future-Ready
15. Second, we support our companies in the innovation and internationalisation process, and we will enhance this support where necessary. To assist our companies in innovation and R&D, the Government has invested in capabilities in the A*STAR research institutes and set up supporting infrastructure such as the Centres of Innovation (COIs). A*STAR has undertaken over 7,400 industry projects from 2011 to 2015, which have catalysed more than a billion dollars in industry R&D investments.
16. SPRING has established seven COIs to provide facilities, technology consultancy services, and advice for SMEs undertaking technology projects in electronics, supply chain management, environment and water, food, marine and offshore, materials, and precision engineering.
17. Given Singapore’s small domestic economy, the need for internationalisation is evident. This requires companies to build up their capabilities and market knowledge to develop products which meet the needs of their target markets, and the capacity to operate successfully across borders.
18. For companies which are new to internationalisation, IE Singapore’s Market Readiness Assistance Grant funds activities such as market assessment, market entry and business matching to enable them to make an initial market entry. IE’s Global Partnership Programme provides more customised support for firms embarking on larger scale internationalisation efforts. In the first half of 2015, more than 12,000 companies received assistance from IE through these and other schemes.
19. Third, we will also need to do more to ensure the availability of talent, which underpins our companies’ ability to anticipate and adapt to changes, grow sustainably and stay competitive. The national SkillsFuture initiative will help our companies build their manpower resources. We need companies to step forward by recognising the contributions of their employees, develop them to their full potential, and inspire them to do their best at work. I urge companies to take full advantage of the opportunities offered by SkillsFuture to build and sustain their human capital. One initiative is the SkillsFuture Mentors programme, which will be launched at the end of this year. It will be an opportunities for SMEs to gain access to valuable expertise to enhance their HR and training capabilities.
Conclusion
20. In today’s environment of rapid change and technological advancements, companies must be alert to new models that can disrupt their business and transform industries. To prepare for and seize the opportunities that may come our way, our companies must adopt an open mindset to innovation and collaboration, and develop its people and systems to support this effort. The government and its agencies will be your abiding partner in this endeavour.
21. Tonight, we recognise and honour 50 of the most promising local, privately-held companies. There is much we can all learn from their stories; about what it takes to build a company, sustain its core competitive advantage and achieve enduring success. I offer my heartiest congratulations to all the award recipients on their accomplishments and wish them continued success in the journey that lies ahead. I wish you all a pleasant evening.