Speech by SMS Lee Yi Shyan at Getting Real with Productivity Forum at Suntec Singapore, Convention & Exhibition Centre, Meeting Room 300-302

Distinguished guests,

Ladies and gentlemen,

Good morning.

A Different Time, A Different Paradigm

I would like to start by doing a survey amongst the audience here this morning. May I ask how many of your companies are less than 5 years old? How many of you have 50 employees or less? How many of you have sales revenue $25 million or less? For those of you who have just raised your hands, I have good news for you. You are very similar in profile to a company which is worth US$19 billion.

Yes, I am referring to the familiar example of Whatsapp, which was started five years ago on 24 Feb 2009 by Jan Koum and Brian Acton in Mountain View, California. It has only 55 employees at the time it was sold to Facebook on 19 Feb 2014. Whatsapp’s founder, Jan Koum once depended on food-stamps for living. But today, he is worth about US$6.4 billion according to Forbes.

Value Creation in Double Quick Time

Skeptics may still quibble over whether Whatsapp is worth the US$19 billion Facebook has paid for. But no one will dispute that Whatsapp has created tremendous values. Consider these facts: as of November 2013, Whatsapp has 190 million monthly active users, and 400 million photos exchanges in a day. In addition, 10 billion messages are shared each day. These numbers are mind-boggling.

Facebook, which acquired Whatsapp, was itself another young company that celebrated its 10th anniversary on 3 Feb 2014. When it went IPO on 1 Feb 2012, it was worth US$104 billion. By Jan 2014 its market capitalisation had risen to US$134 billion.

By comparison, Singapore's largest company by market cap in 2013 was worth S$54 billion. While Facebook and Whatsapp have still yet to prove their ability to generate similar cash-flow like those in the brick-and-mortar business, their potential capacity to do so is clearly recognised by the market.

Clearly, in this Internet age, value creation has taken on a whole new meaning. Facebook has grown its user base to more than 1.23 billion active monthly users within a short period of 10 years. What has taken traditional businesses decades to build is now possible within years. Technology has changed the rule of the game.

If we are running our traditional business, should we be concerned? Is our business model still valid? Will my customers today stay with me tomorrow? Can I run my business the same way as I have always run it?

Small Companies Create Great Values in a Very Short Time

The government can't tell what businesses should change or do because we don't know business better than the business owners themselves. But we know when the new waves of companies sweep into our landscape, they will bring along new services and solutions, creating new markets and customers.

What the government can do, besides sounding a warning, is to create a conducive environment for businesses to transform, make bold changes or at the least, take incremental and continual improvement instead of stagnating in the old ways of doing things.

Under the recently extended Productivity and Innovation Credit (PIC) and recently launched PIC+ for SMEs, we are making generous financial resources available to help companies undertake productivity measures - such as adopting new technology, introducing automation, streamlining processes, implementing 5S methodology and developing human resources etc.

Consider for instance, Munch Saladsmith, a home-grown F&B company with 22 full-time and 40 part-time staff, which used the $5,000 Innovation and Capability Voucher (ICV) from SPRING to hire a consultant. Aside from strengthening financial controls, they implemented a new inventory tracking and forecasting system which helped them reduce food wastage. Armed with a more accurate picture of their supply needs, the company can now better negotiate with suppliers to lower ingredient costs. The ICV was a cost-effective way for the company to raise their productivity.

Government Remains Committed to Support Companies in their Productivity Drive, including Providing Access to Advice and Expertise

Government support goes beyond grants and tax credits. We also provide companies with easy access to the right advice and expertise on productivity improvement. In August 2013, I announced the setting up of the Singapore Productivity Centre (SPC) to drive the productivity of local retail and food services companies. So far, 190 companies have benefitted from the workshops, study missions and consultancy offered by the SPC. SPC will be ramping up its activities to assist more than 2,000 enterprises over the next three years.

One of these was Beauty Collection International—a beauty salon and distributor of beauty products. It has an outlet with 9 employees in Hougang Mall. Like many other small enterprises, Beauty Collection faces rising costs and stiff competition from peers and bigger players. In February this year, Mr Phillip Wee, CEO and MD of the company, attended a Digital Retailing workshop jointly organised by SPC and the Singapore Institute of Retail Studies (SIRS). The workshop convinced him to use digital platforms for greater customer outreach and expand his business overseas. SPC is now working with the company to implement a digital marketing strategy, as well as to improve their backend processes and inventory management system.

The Need to Raise Management Quality

Productivity improvement is a subject that cannot be delegated. Businesses leaders must set the tone. Research has shown that well-led and well-managed companies are more productive. The World Management Survey (WMS) placed Singapore in the 6th place among 22 countries surveyed globally. We have done well, but there is room for improvement.

SPRING Singapore and Singapore Workplace Development Agency (WDA) offer many schemes for leaders and managers to upgrade their capabilities, and improve management processes within companies. Grandluxe, a diary, stationery and gift-manufacturing company, benefitted from SPRING’s HR Capability Programme. A small company with only 38 employees, Grandluxe was able to design a reward structure and performance management system to better align employees with management’s directions and business strategy. Top management was also equipped with the right competencies to better engage the workforce in achieving business targets.

We hope more companies can follow their example. Raising the quality of leadership and management in Singapore is a key priority for the National Productivity & Continuing Education Council (NPCEC). SPRING and WDA are looking into how we can enhance our current approach and help companies even more with this. The SPC will also be launching new events and initiatives in this area.

Conclusion

There are many ways for companies to create value and raise productivity. We may not become a Whatsapp or Facebook tomorrow, but we must not overlook the fact that the Internet world and social media have changed the paradigm for how people are connected and communities are formed. If our traditional businesses don't change and adapt to the new world, we run the risk of becoming irrelevant.

Let's hear now from the many speakers who will share their varied insights covering a wide range of industries. I wish everyone an enjoyable and productive session.