HeartWare Singapore

Opinion: Singapore Inc. leaders need to rethink innovation or die trying

It came as a surprise to me when it was announced that Ng Yat Chung has been appointed CEO-designate for Singapore Press Holdings (SPH), the nation’s print organization that’s now a diversified group of media, property, and healthcare businesses.

Ng’s last corporate assignment was CEO of NOL, the nation’s once proud sea liner. During his five-year tenure, NOL accumulated more than US$1 billion in losses until it was sold to French CMA CGM.

SPH is now struggling as it faces declining revenues in traditional print advertising over the last four years. With Ng at the helm, will SPH see a leader whose experience and leadership are enough to innovate and take on its disruptive online and social media competitors who are winning in mindshare and revenues?

There’s also a larger issue on hand: Do the business leaders of Singapore Inc. (a colloquial term used to describe the Singapore-based entities of large market capitalization) have the right innovative mindset to take on the world’s technology disruptors? These are leaders who headed traditional established businesses, very few of which I would presume ever did a startup from scratch and brought it to success.

Under fire

In its short history of 52 years, Singapore built global high-value companies through careful and clear leadership. Names like Singapore Press Holdings, Singapore Telecoms, Singapore Airlines, Development Bank of Singapore, ComfortDelgro Group, Capital Land, Singapore Post, and City Development Limited are just some of the 100 entities listed on the Singapore stock exchange and have market capitalization above US$720 million.

But now, the world has changed. Technology cycles are shortening very quickly. Singapore Inc. companies are under siege not only by global competition but also by the onslaught of technology-disruptive startups stepping into their doors and eating their market share.

In less than eight years since their founding, the likes of Grab and Sea (formerly Garena) are all boasting valuations of US$3 billion or more in their recent funding rounds, surpassing listed companies which took decades before they reach where they are now.

No company is spared from disruption

With thousands of pitches I’ve heard and by providing advice in the last six years, I see that literally, every vertical is target for disruption, with startups and their innovative methods breaking the hold of incumbent players.

There are so many of them:

  • fintech companies aiming to be the payment solution providers in Southeast Asia
  • co-working spaces vying for a piece of commercial rentals
  • ecommerce players reducing the demand for retail spaces from the REITs (real estate investment trust)
  • media content streaming companies reaching anyone who has internet access
  • companies looking to uberize services that do not require heavy investment in assets

We understand that the success rate is one percent, but that one percent of startups can do serious disruptions.

With my previous startup, I recalled my conversations with the incumbent local transport companies. The engineering and maintenance teams shared that they were incentivized in keeping the status quo rather than accepting new innovative products. In short, they were paid to “keep the engines running” rather than find new ways to save costs and generate revenue.

Today, one of them, SMRT, is in talks with Grab to sell their taxi business. They have also lost out in all bus tendering services in Singapore. I will leave you to decide whether maintaining status quo is the best way to go.

At a closed-door luncheon I was invited to last year, a senior executive of a Singaporean bank spoke about her experience visiting Tencent. She said she was astounded by the speed of the mobile payments adoption in China. She also mentioned other interesting fintech examples in the Chinese market.

“Alipay’s YueBao raised US$90 billion investment in a money market fund in just 10 months, without a single relationship manager. Most banks take decades and hundreds of bankers to achieve this. YiRenDai has about 6.7 million registered users and facilitated S$1.4 billion (or US$1 billion) of loans in the first nine months of 2015, up from S$56 million (or US$40.4 million) in 2013. And Tencent launched China’s first online-only bank, WeBank, in 2015.”

Banks have been boasting their long-standing trust and relationship with customers, which keeps them dominant in the industry. But as the millennial generation become the next banking customer, one can see Chinese companies’ disruptive efforts, acquiring these new young clients who have limited relationships with banks. It might just be a blink of an eye before these fintech entities come knocking and overpowering banks.

How Singapore Inc. leaders can up their game

I would not dare teach how to run a listed billion-dollar company as I have never done so before. I’m sure there are many issues on hand for a CEO and its board of directors to manage. But rather, I aim to share some “startup-style” suggestions that might help up their game in innovation.

moving singapore

1. Reward risk-taking, not keeping the status quo

I brought startups to meet various industry players in banking, real estate, hospitality, logistics, F&B, and transportation. And it is challenging to convince Singapore Inc. teams to accept startup products because they are paid to keep the status quo.

Startups’ new solutions should be regarded by Singapore Inc. companies as refreshing means to solve problems and not as products pushed by vendors. CEOs should empower and incentivize their teams to adopt new products and constantly innovate.

Recently, I’ve been seeing more executives who work in large companies coming out to build their own startups. They lamented that their suggestions to adopt innovative methods were always struck down by bureaucracy.

CEOs will continue to lose good talent if they do not consider incentivizing them for innovation.

2. Create an innovation sandbox

Just as the Monetary Authority of Singapore has created a regulatory sandbox for fintech companies, Singapore Inc. companies should also form their own. This is very different from their current accelerators, which focus on running a program for new startup ideas.

I remember speaking to an executive of Singapore Power who mentioned that they are looking into creating a testbed to allow power-related startups to test their products and services.

Singapore Inc. companies can offer their very own testbed facilities, testing them with a small segment of their customers, getting feedback, and assessing viability. This is good to assess innovative products before implementing them across the board.

3. Include startup entrepreneurs and VCs as part of the board

There’s a striking difference in the formation of startup boards and Singapore Inc. boards. Startup boards are filled with advisors, fellow entrepreneurs, VCs, and tech experts who focus on the growth of the company. In Singapore Inc. companies, they are mainly filled with corporate executives who have gone through the operations route or people familiar with corporate governance.

Maybe it is time for Singapore Inc. companies to consider including startup founders and VCs in their boards and learn fresh perspectives in growth. Entrepreneurs and VCs can also be part of the innovation audit team, determining whether the company is sufficiently innovating and growing.

4. Allow acquirees to innovate, not assimilate

I checked with founders who exited their startups to Singapore Inc. companies and I found out that a number of them have left the startup soon after exit. One even lamented that the startup has totally gone corporate and lost its soul and ability to innovate. The team was placed under the control of a corporate executive, who provided guidelines on how the acquired entity should behave and operate.

Singapore Inc. companies tend to see the financial tangibles of acquiring a startup—traction numbers, revenues, etc.—but many overlook the point of the innovation capabilities that come with the company. An example here is how Facebook acquired Instagram and WhatsApp. You do not see a coercion of Facebook’s values overpowering its new subsidiaries, but you can see the independence in how the respective products are developed.

CEOs should consider the value of acquiring good startups and allow them independence to innovate rather than assimilate them. Allow even a diversion of priority of bottom line considerations, as they are the future growth engines of the company.

5. Accept transformation and overhaul

When it comes to a total transformation of a large corporation, I would look to FujiFilm. It has an inspiring story of how its CEO saw the decline of printing photos and transformed the company into a giant in cosmetics and supplements, drawing from its many technologies of colored photo paper. Today, its new divisions of cosmetics and supplements contribute US$3.4 billion in sales, and its photo film division contributes less than one percent in revenue.

Singpost did a similar bold move many years ago, where it saw the decline in postal revenues and quickly upped its game in ecommerce logistics and fulfillment. The bold vision of then executive chairman Lim Ho Kee led to Alibaba taking an interest stake in Singpost.

Conclusion

Disruption in some verticals is already happening; but it is yet to occur in others. Singapore Inc. companies need to acknowledge this oncoming wave and sticking to the status quo won’t work. CEOs have to understand innovation and may need to look up to startups and their methodologies for inspiration.

Converted from Singapore dollars. US$1 = S$1.38.

This is the seventh article of the Heartware Singapore series, where the author shares on different topics to spur the Singapore startup ecosystem.

This article first appeared on Tech in Asia.