Digitise or Disengage [By Clara Chiang]

How far are you willing to go to ensure the survival and competitiveness of your business?

All SME owners have the desire for their business to be successful. However, the ‘fear of change’ is an overwhelming obstacle for many to overcome. A recent global research conducted by Morar Consulting and Epicor Software Corporation found that:

  • 65% of Singapore business leaders fear that growing their business will put excessive pressure on their operations, which will potentially damage the service and/or product quality and customer satisfaction levels.
  • 57% of Singapore business leaders expressed concerns that their current business IT systems may not have the capacity to cope with larger and more complex business models.
  • 50% of global business leaders indicated that they are personally not ready or prepared for the challenges of managing a larger and more diverse business
  • CEOs are generally worried that growth will cause decrease customer intimacy, which is valued by the customer.

Growth can certainly put a strain on a company’s resources within the business as activities expand. These fears are valid concerns and need to be addressed cautiously to avoid a negative chain reaction. Hence, a key component to a successful change is largely dependent on how business leaders manage their current resources and embrace trending changes in the world we live in today.

 

ERA OF DIGITISATION

Needless to say, we live in the era of digitisation. Businesses have realised and are aware of the importance of utilising digital channels to engage their key internal and external stakeholders. Such efforts will assist with maintaining relevance and presence in the market. However, many fail to realise how quickly the change needs to occur or how transformational it needs to be. In a world where everything is digitised, the real imperative is that businesses need to pursue innovation to disrupt their own business model before their competition does. In an increasingly commoditised world, companies face the high possibility of losing their competitive advantage if innovation is not adopted. Technology is evolving at exponential rates and new digital platforms, software and devices are constantly emerging. Furthermore, with the ever revolutionising expectations of generation Y, it is critical for companies to keep up with the pace of change or prepare to lose relevance.

The ‘fear of change’ mentality that many SME owners share, is largely attributed to the lack of oversight of the company’s operations in relation to the utilisation of both internal and external resources in the business. Fortunately, innovations of the decade provide SMEs with the solution of implementing Enterprise Resource Planning (ERP) systems. In a nut shell ERP systems help to reduce costs, improve repetitive operational processes and increase efficiency across the organisation.

ERP systems are no longer as capital intensive as they were several years ago. The systems available in the market have matured and are now able to suit the needs of different industries with an array of module options. Unlike MNCs, SMEs do not require a complex or highly customised system, hence, off-the-shelf products or pay-per-use cloud systems are sufficient and ready for immediate consumer use. Additionally, due to the large amount of competition in the market, consumers have numerous and comparable ERP systems to select from. Whether it be automating and/or interlinking internal processes or managing external customer touchpoints and/or suppliers, there are endless ways to incorporate the digital element into your company.

 

CASE STUDY: LG ELECTRONICS INC.

LG Electronics Inc. (LG) is a global giant in the electronics industry offering a diverse product range inclusive of laptops, mobile phones, refrigerators, air-conditioners, televisions and more. In 2002, with more than 82,000 employees across 40 countries, the company faced many challenges, which were inclusive of the following:

  • Multiple location-specific systems that resulted in unclear top-level reporting and lack of optimum resource utilisation
  • Different location-specific operational processes that lacked the necessary transparency and automation for the purpose of global reporting
  • Disengaged employees with limited growth opportunities
  • Limited localised resources for employee training and development
  • Management faced challenges with decision making and identifying solutions with significant business impact

LG had different internal operating systems across their 114 subsidiaries across forty countries up till 2006. In 2002, LG realised the need to consolidate all operations and to utilise available technology for the purpose of continuous improvement and staying relevant. They began to develop a single integrated Human Resources Management System (HRMS) to replace the disparate Human Resource (HR) applications used by its subsidiaries. By 2006 the implementation was complete and LG’s management was able to acquire real-time delivery of HR information, which provided them better insight into its workforce and decision-making regarding recruitment and performance management.

As a result, LG benefited in various aspects. A key advantage to the centralised HRMS is that the HR strategies are engineered to link with business goals. This allows management to ensure that LG has the relevant and sufficient resources to achieve specific objectives and campaigns. In addition, other benefits are inclusive of the following:

  • Centralised integrated HR system that provides enterprise-wide view of operations across all subsidiaries
  • Increased efficiency as a result of standardised HR processes
  • Enhanced HR management by providing management real-time access to HR relevant information
  • Increased employee development through online training
  • Increased employee satisfaction and productivity as a result of eased workload and implementation of self-service options
  • Increased cost savings as a result of not having to maintain multiple systems and having common training resources for employees
  • Increased sharing of best practices across the different subsidiaries

The benefits are surely attractive, but it did not come without its challenges, sacrifices and risks. Although it was a process that spanned over five years, LG significantly benefited from the automated HR system and continues to enhance it in order to better serve their needs. HRMS is only one of the modules offered in ERP systems that companies may embark on.

 

DIGITAL OUTLOOK

For many business processes, the extent to which they may be digitised is limited only by ingenuity. Digitising information-intensive processes can save large amounts of costs and time, reduce human error risks, and improve the processes by several orders of magnitude. If applied appropriately, the benefits are endless. Digital platforms are being adopted across all industries:

  • An apparel retailer implemented a radio-frequency identification (RFID) system to better manage its warehouse and in-store inventory. The system provides a real-time update of inventory stock availability across the country in terms of item, size, and colour. This eases the manual labour of warehouse employees and saves sales employees the time to provide better customer service.
  • A bank automated its mortgage-application and decision process, which extended the benefits not only for internal employees but for the external clients. The digitised system reduced (1) the costs of each new mortgage by 70%, and (2) the preliminary approval of each mortgage from several days to one minute (Accelerating the digitization of business processes, Mckinsey Insights 2014).
  • Restaurants are increasingly adopting the smart tablet automated ordering system to reduce overhead costs, order errors and customer waiting time.

Businesses need to digitise in order to create seamless and consistent engagement with key stakeholders to remain relevant in our world today. On boarding the digital economy will evolve businesses and facilitate easier entry into countries beyond Singapore’s borders. Nevertheless, companies need to be ready to commit time, effort and resources as digitisation often does not yield immediate results, as seen in LG’s case. However, the benefits in the long run will surpass the initial challenges and bring your company to greater heights.

“It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change.”

– Charles Darwin

Are you an SME owner? Do you face challenges such as labour crunch, foreign manpower influx restraints and increasing costs? If your answer is ‘yes’ to any of these, then it is time to rethink the way you are doing business. Rather than focusing solely on competing over a shrinking pie and skilled labour resources, SMEs should embrace the future by exploring new technologies. It’s the new way forward.

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