Is digital innovation the future for businesses?

If the past two years taught us anything, it would be that black swan events such as COVID-19 have the power to push businesses to rethink, recover and rebuild. As the economy improves, businesses are pivoting their strategies, some rebounding from almost zero revenue and taking risky gambles in investments to be future-ready.

Singapore is welcoming a post-pandemic recovery, with most sectors including those that were hard-hit due to border closures and travel restrictions steadily recovering. While this seems like good news for businesses, there may be other disruptions in the future.

Companies need to be prepared for illness-related absences and shortened workdays. With fewer team members present, productivity may suffer, and staff burnout is also more likely. If unaddressed, businesses could be adversely affected. Transforming the business as if the pandemic is here to stay is one way to respond and adapt.

Slow shifts into digitalisation – what is to blame?

Contrary to the belief that COVID-19 accelerated digitalisation across all sectors, Singapore reported a slow take-up rate during the height of the pandemic in 2020. Digitalisation has repeatedly been shown to be crucial for businesses. However, for some, investments in digital transformation seemed to have been deprioritised during the pandemic.

A study done by the Association of Small and Medium Enterprises (ASME) and Microsoft showed that although 54 percent of respondents blamed COVID-19 for slowing their digital transformation plans, about an equal proportion (56 percent) mentioned that it was too costly to digitalise. Through industry chats, surveys and focus groups, IndSights Research also gathered similar sentiments that some companies were deterred by the high implementation and operational costs of information and communication technologies. Business survival and overcoming financial difficulties were businesses’ prime concerns in 2020.

To ease companies’ financial burden in adopting digitalisation, there have been constant rollouts of government initiatives, subsidies and projects.

According to a survey conducted by IndSights Research between April and June 2022, one in two Singapore companies believed that innovative or digital transformation was moderately to extremely important for growth in the next five years.

However, from our chats with business leaders, some shared that many digital systems and platforms were not industry-tailored, rendering them less optimal for business operations. Promising systems may be too costly or not covered by government aid. Furthermore, there is a need to upgrade employees who lack the skills, knowledge, and time to integrate these systems into their work. Although it appears that businesses understand the need for digital platform services, their implementation has not yet kept pace with Singapore’s plans for digitalising businesses.

READ MORE: Business Sentiments of Local Companies in FY22 Q2

To drive tech adoption amongst companies, a mindset shift is necessary. First, firms must see digital innovation and implementation as a cost-saving investment. While adopting technologies can be financially taxing on resource-constrained companies, doing so propels them to stay ahead in the game. Companies that explore innovative ways to incorporate tech into their products or services will also be able to provide new and interesting offerings for their employees.

Second, firms must also cultivate a workplace culture that embraces digital transformation. Consulting firm McKinsey found that the main bottleneck in digital transformations is the lack of a strong and common culture. Unsupportive leaders are more likely to impose a top-down approach to their management styles, leading to employees holding back their thoughts. The lack of interaction and communication can slow down the progression of the business.

Rising operational costs is another common concern for all industries in Singapore. The budget needed for a company to digitalise can be substantial; it would inevitably be expensive to replace existing infrastructure and overhaul security practices to integrate technology into existing systems. Yet, despite rising operation costs, and combined with the cost of digitalisation, most security companies are still profitable. Two-thirds of the security firms polled from July 2020 to June 2022 cited that they were profitable in the Financial Year 20/21, higher than the overall average of only 57 percent for all sectors.  Perhaps this may quell the worries of employers that investing in digitalisation will compromise profitability.

Jumping employees, jumpy employers