Mr Lee Yi Shyan at the IBM Leadership Seminar: Keys to Transformational Growth, 16 Feb 2011

Speech by Mr Lee Yi Shyan, Minister of State for Trade & Industry and Manpower at IBM Leadership Seminar: Keys to Transformational Growth at Raffles City Convention Centre, on Wednesday, 16 February 2011

Ms Teresa Lim, Managing Director, IBM Singapore

Mr Png Cheong Boon, CEO, SPRING

Ladies and Gentlemen

Introduction

Thank you very much for inviting me to this gathering of Singapore Business Leaders.

Where Are We Heading After A Strong Economic Rebound

Our economy in 2010 did well by rebounding with a robust 14.7% growth. Our growth was broad based. Manufacturing especially grew by more than 30%. Production capacity was once again fully utilized. Companies are again adding new jobs and investing in Capex. Bank’s lending is up. Consumer spending is rising.

While we marvel at the signs of buoyancy, we should not lose sight of the long-term risks ahead. We have to press on with the important task of building long-term competitiveness and keeping a close watch on the productivity dial.

Productivity for sustainable growth

In fact, for Singapore to achieve a sustainable growth rate of 3%-5% in this decade, we must seek to raise our annual national productivity levels by 2 to 3 per cent every year. We need to seek qualitative rather than quantitative growth. We need to get used to growing without the proportionate growth in the labor force. This is a new challenge for us, particularly for SMEs.

Given that SMEs account for half of Singapore’s GDP and two-thirds of employment, whether and how fast they innovate and raise productivity will determine if we would achieve our long-term growth targets.

National Productivity Movement

This is why we embarked on a national productivity drive – to form the National Productivity and Continuing Education Council (NPCEC). The key NPCEC initiatives include:

·Sectoral productivity plans: to evolve action plans of 12 industry sectors and

·Continuing Education and Training (CET) system: to develop a comprehensive, first-class or world-class national CET system.

In addition, we have Firm-level programmes. The Productivity and Innovation Credit (PIC) was introduced last year to empower firms to invest in productivity and innovation measures. The PIC provides tax deductions for 6 activities along the innovation value chain: R&D done in Singapore; acquisition of intellectual property (IP); registration of IP; investments in design done in Singapore; automation equipment and software; and workers’ training. Singapore companies can claim 250% tax credit against their taxable income for the first $300,000 spent on each of the 6 qualifying activities. The PIC is expected to cost the Government over $2billion in the next 5 years. This also represents the billions of dollars that Singapore companies will spend on productivity.

Learning from World’s best practices

But spending money does not bring about productivity improvement automatically. Our companies have to spend wisely and invest purposefully. The challenge with most SMEs is not one of lacking of will, but not knowing how - how to upgrade, how to innovate and how to raise productivity. For that matter, how to start?

For many of our SMEs, catching up with the best-in-class will be a critical first step towards plucking the low hanging fruits in their productivity journey.

Which is why today’s forum is timely: in that IBM being a worldwide leader in innovative IT solutions and business transformation, knows of many best practices across different industry sectors around the world.

Each of our industry sectors, whether they are in supply chain, retail and distribution, hospitality and leisure, food production, preparation and services, and manufacturing, all have something to learn from the world’s best practices, especially if these practices are tried and tested, and proven to show results.

Benefits of IT adoption

Based on DP Info Group's 2010 SME Development Survey findings, 84% of SMEs surveyed have cited that they have enjoyed material impact from technology innovation. The survey showed that IT adoption is a key enabler for SMEs to improve productivity, improve cost efficiency and widen market coverage.

An example of a company that has invested in information technology and reaped its benefits is Tiong Seng Holdings Limited, a Singapore-based construction group. Their investment in various IT-related initiatives has helped the company to achieve a higher level of quality and productivity in its construction projects. These initiatives include web collaboration for corporate instant messaging and web conferencing with real-time connection between Singapore and their overseas partners. Tiong Seng also deploys state-of-the-art automation prefab solutions. Understand that they will be on the panel later, and you can learn more about their experience.

Another company that has benefitted from transforming its operational processes through technology is Awfully Chocolate, a home-grown bakery. After the transformation, orders are now captured real-time into a centralized system that caters for multi-location transactions. With the centralized system, it takes just up to half an hour to consolidate orders and the process is error-free. Previously, their staff took three hours each night to do it manually. The IT systems - Enterprise Resource Planning and Point-of-Sales Solution, have helped the company save up to 40 per cent in man hours and its expansion overseas.

Supermarket chain Sheng Siong is another home-grown company that believes in leveraging on technology. Automation has helped the company to improve efficiency, simplify work and reduce human error. In this way, their staff can spend time on jobs that add value to the business. With the warehouse and inventory system, all the data capturing and management are web-based. Therefore, new pricing and goods information that are keyed will be able to be shared with all the stores nationwide. With automation, Sheng Siong does not need to deploy staff to track inventory manually, and their supervisors can focus on high-value work such as sales and stock replenishment instead.

Government Support in addition to PIC

The government is also actively promoting IT adoption within SMEs as well. In March 2010, IDA, SPRING and IRAS jointly launched the $25million iSPRINT scheme. iSPRINT makes IT affordable to SMEs by supporting the first adoption of a new IT capability.

The scheme also covers the varied needs of SMEs ranging from basic Business Improvement through the adoption of “quick-to-implement” packaged solutions and subscription to Software-as- a-Service; to Business Transformation with development of complex and integrated business solutions; and sector-wide multi-company transformational projects. Since its launch, 750 SMEs have benefitted from the iSPRINT scheme generating a projected $400million in value-added over the next 3 years.

While strengthening functional competency in IT system is good, sustainable competitiveness sometimes call for a more holistic approach to building strengths in other functional areas. One area is for companies to understand and embrace productivity in its business process and strategies.

To assist SMEs in their quest for higher productivity, SPRING launched the Productivity Management Programme (PMP) in October 2010.

Through PMP, SMEs can get the help of a productivity advisor to assess their productivity performance of their organizations. The baseline study allows them to know where they are in the productivity journey before deciding how much resource to devote for productivity improvement projects.

To date, 415 SMEs have been provided with advisory services under PMP and over 100 were diagnosed using the IMPACT Assessment.

A company that recently sought the help of a business consultant to get an IMPACT assessment is Jovan Tech. With the help of the IMPACT Assessment, Jovan Tech is now able to :

-track the gains in productivity for the improvement projects that it implements.

-see where it stands in productivity in relation to its competition

-map out its productivity improvement plan going forward.

Conclusions

For any enterprise, growing its business profitably over a long period of time must be its inherent objective. For companies in Singapore, profitable growth would also mean growing the top line and bottom line, while increasing the use of technology and reducing the reliance of manpower at the same time.

Raising productivity is not an overnight task, nor is it an easily acquired strength. Raising productivity requires a sound understanding of the business and competition, and a clever use of technology and human resource. Productivity improvement requires discipline and sustained efforts.

I am glad that today’s seminar seeks to provide such a platform for our firms to develop a greater understanding of the subject of transformational growth, and how technology and business strategy can make them stronger against competition. I would like to wish all a very productive seminar.

Thank you.