After 13 consecutive years of positive GDP growth, Singapore’s economy recorded its first GDP contraction in 2015, declining 4.44% from USD 306.34 billion in 2014 to USD 292.74 billion in 2015. With many observers keeping a keen eye on the release of the nation’s fourth quarter GDP result in 2016, the Singapore economy rallied and grew by 1.8% in 2016. Despite ending the year on a firmer footing, there seems to be a palpable sense of uncertainty amongst business owners in Singapore. Looking out for key trends and new developments will remain imperative for businesses that want to position themselves advantageously and maintain business resiliency in varying economic climates. At BDO Management Consulting Services, we have identified 3 key trends to keep in mind while planning for 2017.
- Potential Volatility in 2017
As a globalised economy, Singapore has relied heavily on exports for economic growth. In fact, net exports make up the largest component of Singapore’s GDP. However, globalisation also exposes our nation’s economy to volatility in the global economy. Notably, significant international events have yet to show its full effects on the economy – including the exit of United Kingdom from the European Union, a new and seemingly unpredictable administration in the United States, as well as the slowing of China’s economy. For companies intending to invest heavily in capital expenditure or aggressive market expansion, greater market volatility brings with it higher risks and subsequently a higher risk-adjusted rate of return for capital investments. Hence, expansion strategies may not be a suitable strategy for smaller SMEs.
Instead, SMEs may use this opportunity to look inwardly and improve on internal margin improvements through cost transformation initiatives. In other words, business owners should consider streamlining different aspects of the company to reduce cost and in doing so, drive profitability improvements. While there are many potential areas for streamlining activities, business owners may well benefit by first looking at several common areas for improvements, including eliminating wastages in processes, manpower restructuring and product mix optimisation. A leaner and more profitable company is one that will have a greater likelihood of success in a more optimistic economy.
- Digitisation As The Way Forward
Digital transformation is a very general term that may sometimes seem intimidating and daunting, particularly for SMEs. While most SMEs in Singapore acknowledge the need for digital transformation, a research report by SAP indicated that 11% have done little to apply new business technology in their companies. Digitally transforming your business does not require a complete overhaul of your operations. Rather, it should be done in incremental ways to avoid both overspending on unsuitable technology and excessive disruptions in operations.
As a general rule of thumb, business owners may consider the following principles when kick-starting digital transformation in their companies. Firstly, invest time to source for providers. In this digital age, there are many vendors that can provide similar digital solutions such as ERP and CRM systems. It is imperative to compare prices, technical specifications and after-sales service in order to select the best provider for your needs. Secondly, pilot a number of small projects and scale up successful initiatives. It is not uncommon that digitisation may come at the cost of trial and error. Hence, it is critical for companies to start small, evaluate the effectiveness of the initiative and invest in successful systems. Lastly, sustain the change. Investment in digital infrastructure is not on a one-off basis. It needs to grow hand-in-hand with your business to ensure it remains relevant and effective for your current business.
- Employees As The Foundation For Growth
According to Forbes and the World Economic Forum, “…the Fourth Industrial Revolution is underway and changing everything we know about life, business and consumerism. The emphasis, they say, will be on talent not capital”. In this day and age, employees have begun to part ways with traditional college degrees. Instead, ambitious employees create CVs of their own with additional nano-degrees, online courses and hands-on experience to build their own version of talent. Moreover, switching jobs are now much easier than what it has been in the past, with the arrival and popularity of job portals such as Linkedin, Indeed and Jobs Bank in Singapore.
Businesses, especially local SMEs, need to develop plans to drive greater employee retention and realise that international companies and offices are well-ahead in their employee retention strategies. It is imperative for business owners to realise that excessive employee turnovers are expensive, time-consuming and may stagnate the growth of an organisation. Each employee turnover will reduce the productivity of the position for months if we look at the chain of events – job hunting, serving notice periods, handling of administrative processes, recruiting and finally the training of the new employee. To avoid these hassles, acknowledge and embrace the fact that change is in motion. Listen to your employees, be open to changes and never take a bargain at the expense of your employees. At the end of the day, a skilled, happy and stable workforce is the foundation for sustainable growth.