SINGAPORE (Apr 24): The global economy is facing an unprecedented challenge amidst the Covid-19 pandemic. The impact of extraordinary international supply and demand shocks has resulted in disruption to markets and societies across the world, and increasingly looks to represent the beginnings of a global recession.
Governments and businesses remain committed to focusing their efforts on combating this virus. While the foundation of any recovery must be built on healthcare, there is a vital imperative to provide comprehensive support that helps safeguard economies and livelihoods. The timescale of recovery remains uncertain, but what is clear is that businesses must act now to prepare. Digitalisation is an invaluable tool in supporting rapid recovery while embracing a more resilient operating model for the future.
Digital transformation at a time of challenge
Boston Consulting Group (BCG) works closely with governments and businesses to support digital transformations. In Singapore, BCG has partnered with the Infocomm Media Development Authority (IMDA) to deploy the Digital Acceleration Index (DAI) to measure the digital maturity of companies across all 23 sectors of Singapore’s economy.
The DAI is an industry leading assessment of digital maturity, having been taken by 14,000 organisations from more than 18 countries globally. In Singapore, more than 3,500 unique organisations across public and private sectors have completed the DAI survey over the last two years. Our study and experience show us that digitalisation can positively transform business prospects, generating new avenues for value creation and operational improvements. The importance of such opportunities cannot be overstated in the current economic climate.
The findings of BCG’s global study reveal a clear correlation between digitalisation and business benefits, with digital leaders growing Ebitda at 5.9%, compared to 3.5% for digital “starters”. Analysis of enterprise value shows a similar result, with leaders able to grow enterprise value at 5.9%, compared to 2.6% for starters. These margin differentials are far from insignificant and will be more pronounced in a post Covid-19 economy.
While the impact of Covid-19 is still evolving, evidence in Singapore indicates that digitally-savvy businesses are better able to adapt to this rapidly evolving situation. Some digital native businesses are even able to leverage the crisis for substantial breakout growth, such as those providing remote services such as educational technology, telehealth, and video-conferencing applications — all of which demonstrate the opportunities to excel in this environment.
Singapore has witnessed some remarkable responses across its own business community in adapting to the crisis. Many businesses are exploring new digital opportunities: gaming equipment manufacturer Razer, for example, partnered with Zouk to offer cloud clubbing, live-streaming DJ performances and bringing the party experience to people’s bedrooms. Others are more resilient to disruption due to the digital nature of their business. Firstcom and Oddle, for example, are two local technology companies that specialise in helping Singaporean SMEs build their website and manage digital marketing campaigns. In this time of unprecedented change, stories like these reveal how responsive digital businesses can rapidly react to global and local needs.
Mapping an informed digital strategy with the DAI
The DAI provides a common framework to identify digital capabilities across businesses. It incorporates all key facets of a company’s activities, from strategy to digitalisation of core operations, exploring critical enablers such as data and technologies. Companies are mapped onto four stages of maturity — starter, literate, performer, leader — based on their results.
BCG’s findings show that companies across Singapore are heeding the government’s call to digitalise. Analysis of the more than 2,600 companies in this year’s DAI survey shows 78% of multinational companies (MNCs) and large local companies (LLCs), and 38% of SMEs have reached at least the digital literate stage. This is an increase of 11 percentage points for MNCs and LLCs, and 6 percentage points for SMEs from 2019.
DAI scores in 2020 show broad-based improvement over 2019. As the share of digital performers and leaders continues to grow, Singapore boasts companies on par with global leaders in their respective sectors. Most strikingly, 63% of the companies that improved their digitalisation scores between 2019 and 2020 see an increase in revenue; conversely, 59% of companies that have a decrease in their digitalisation scores see a decrease in revenue.
In order to increase digital maturity, larger companies like MNCs and LLCs should accelerate adoption of upcoming technologies like AI, and actively look to build long-term enablers such as industry collaborations. Talent hiring should continue to be a high priority even in this challenging time, as competition for digital talent will inevitably intensify post-Covid-19.
While progress can be seen amongst Singapore’s SMEs, it is vital that they continue to commit to the digitalisation journey. SMEs should continue to build on basics, determining their digital priorities, and making targeted investments to nurture digital growth, supported by key government schemes. The success of companies such as Hai Sia Seafood, a 40-year-old local seafood wholesaler embracing digital marketing to achieve 400% increase in their website traffic, showcases how traditional businesses can excel in the evolving digital landscape.
Relevant government agencies should also maintain focus on digitalisation at the top of their agendas, providing greater support to drive SME digitalisation at-scale.
Digital readiness offers a response to a global economic challenge
These efforts are framed against a backdrop of global economic challenge. Singapore’s Resilience Budget announcement in March laid out $48 billion of measures to support business, with a focus on digitalisation and business transformation. IMDA and ESG have increased their funding support from 70% to 80% for enterprises to adopt digital solutions from May 1 to Dec 31 this year as an enhancement of the existing “SMEs Go Digital” initiative. This includes technologies such as virtual meeting, communication, and collaboration tools, which have proved invaluable during measures to curtail the Covid-19 outbreak.
In addition, a new e-invoicing Registration Grant has been introduced by IMDA to help businesses eliminate the need to handle paper invoices. As part of the ongoing “Stay Healthy, Go Digital” campaign, more digital solutions, platforms and training programmes will be made available by IMDA, in collaboration with trade associations and the technology industry, to support SMEs in business continuity and digital opportunities.
Embracing digital transformation in this cost-constrained environment will necessitate practical measures which can be implemented in a cost-effective manner, such as redeploying existing IT infrastructure or mobile communication to enable a virtual operational environment. DBS Bank for example, now offers greater incentives for businesses to adopt digital banking services such as trade financing and digital business loans, supported by digitalised training courses and online webinars.
Collaboration has been another key success story emerging from this global health crisis, and one which provides a blueprint for new business models. Companies can consider working in partnership through digital platforms to pool procurement across multiple companies, and consider re-training and re-employing retrenched employees given the more volatile labour market.
Adversity can breed champions if we commit to proactive investment. The government is offering generous support programmes for companies willing to take the next step, providing a valuable springboard to accelerate digitalisation and to strengthen organisations going forward. The future is in our hands. Now is the time to seize the opportunity to digitalise and set our businesses on the course for a rapid recovery.
Michael Tan and Michael Meyer are both Managing Director & Partner at Boston Consulting Group. Tan leads the Public Sector practice in Southeast Asia, while Meyer leads the firm’s Singapore office.
