The article was published in The Business Times on 23 March 2016.
How Singapore should evolve from a value-adding to a value-creating economy will be key to the Committee on the Future Economy chaired by Finance Minister Heng Swee Keat, and what Singapore Budget 2016 contains towards this end is keenly awaited.
While deliberations can continue, what would value creation mean to Singapore businesses operating in a rather high cost environment and striving to compete in the rapidly changing global economy?
To remain relevant and competitive, we suggest that any effort at value creation should keep in mind two key considerations: shifting the focus from ideation to commercialisation; and starting businesses with the global marketplace in mind.
The recently announced Research Innovation Enterprise 2020 Plan (RIE2020) is an example of a Government initiative that seeks to translate research into solutions that address national challenges, build up innovation and technology adoption in companies, and drive economic growth through value creation.
However, Singapore is hardly unique in this approach. To grow the UK economy, Innovate UK1 drives the science and technology innovations by collaborating with people, companies and partner organisations. Closer to our shores, Innovate Australia 2encourages, assists and promotes Australian innovation.
As competition intensifies, just being good at the science of product and service creation is no longer sufficient. Companies are increasingly pressured with the challenge of finding new growth opportunities and new ways of doing things.
In order to remain competitive as an economy, an equal – if not stronger – focus is needed on the creation and adoption of new business models that are also congruent with the developing digital economy. Any form of Government support thus needs to look beyond initiatives to generate ideas or new concepts.
Also, for value creation to be sustainable, the subsequent commercialisation of their ideas must be thought of upfront.
Thinking bigger than our little red dot
Singapore’s indigenous businesses cannot succeed on a global stage if they are not thinking global from inception. Many entrepreneurs today start a business with the notion that being locally successful is enough. Many then meet the hurdle of being prepared for a day when overseas expansion holds the key to growth.
The point therefore about successful commercialisation of any idea, is scale. And clearly Singapore with its small market is not big enough.
Their businesses need to be scalable – with ideas not simply addressing the local market at inception, but also due consideration given to how they would scale, whether to embark on a new digital strategy and/or internationalise to address markets in the region and beyond.
The Productivity and Innovation Credit (PIC) scheme currently encourages productivity and innovation in Singapore. Many of its key tenets address the technology which enables productivity and innovation, but the scheme should also address innovations that can help businesses scale up and disrupt the industry, like developing new business models and service innovations.
Singapore’s current tax and government incentives lean towards supporting mature enterprises, and fewer schemes address the needs of start-ups. For this reason, a mix of targeted and broad-based support schemes should be made available. While targeted schemes can be highly effective in supporting specific industries, broad-based schemes provide support for bottom-up innovations that are often missed by targeted schemes.
Indeed, KPMG’s recent pre-Budget poll found that 70% of respondents indicated the need for both types of schemes to support innovations. The Government can therefore also play a bigger role in providing more support to these organisations for the commercialisation of the best ideas and capabilities to compete on a global stage.
If Singapore is to succeed on an international stage, then our entrepreneurs need more help at commercialising their ideas and more local talent is also needed to help them take their ideas onto a worldwide stage.
Commercialising for the international stage: How can the Government help?
A lot of government schemes today are targeted at helping our enterprises market themselves overseas. However, good knowledge of consumers and markets would go a long way to helping our local companies to expand overseas.
In this intensive game of dollars and talent, more Government funding can play a role as a catalyst and encourage Singapore companies to expand their brands in foreign markets through appropriate government assistance.
This is currently an underserved segment, and the Government can play an important role in helping local companies achieve scale on a global stage.
Our start-ups and future enterprises therefore need help to grow in these foreign markets, in the form of help to establish distribution channels, or to adopt pilot trials for their new products and services.
We propose the creation of an Internationalisation Academy to teach local enterprises how to understand a target market, including local culture, consumer behaviour, as well as regulatory and tax requirements.
To support the call for Singapore companies to internationalise, the benefits of the Internationalisation Academy should also be extended to helping Singapore companies pilot new products or services, or establish new distribution networks for products and services instead.
A driver of economic growth
The backbone to value creation must be an attitude towards innovation as a driver of economic growth. At the same time, innovation will always remain a bag of ideas unless there are ways to commercialise the best ideas.
And when it comes to internationalisation, entrepreneurs who are good at defining their proposition aren’t necessarily the most natural managers. They do in turn require support which the Government can provide, to understand the business, of business.
In the level playing field brought about by the digital economy and disruptive technologies, businesses now have the opportunity to compete at a new start line. It is our hope that the Government will focus on supporting innovation from ideation through to commercialisation, and with the international stage in mind. This will enable local businesses to take on bigger players and truly allow our little red dot to punch above its weight in the global marketplace.
The article is contributed by Lyon Poh, Partner and Head of Digital + Innovation and Chia Tek Yew, Principal, Advisory at KPMG in Singapore. The views expressed are their own.
1 Source: https://www.gov.uk/government/organisations/innovate-uk/about
2 Source: http://www.innovateaustralia.org/index.html#features