Digitise or Disengage

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/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 for the challenges of managing a larger and more diverse business.

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, businesses have realised the importance of utilising digital channels to engage their key internal and external stakeholders. However, many fail to realise the urgency of these changes or how transformational it needs to be. In this digitally-driven world, the real imperative is that innovation has to be pursued to compete in an increasingly commoditised market. Technology is evolving at exponential rates and 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 optimisation of its internal and external resources. Fortunately, innovations of the decade provide SMEs with the solution of implementing Enterprise Resource Planning (ERP) systems that help to reduce costs, improve repetitive operational processes and increase efficiency across the organisation. ERP systems are not as capital intensive as they were several years ago. These systems have matured in a way where SMEs can choose off-the shelf products, pay-perusecloud systems or modules that are relevant to them as they do not share the complexities of MNCs. Whether it be automating and/or interlinking internal processesor managing external customer touchpoints and/or suppliers, there are endless ways to start digitising with the number of ERP systems available in the market today.

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, televisions and more. In 2002, with more than 82,000 employees across forty countries, the company faced many challenges, including the following:

  • Different location-specifi c systems and 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 up till 2006. As part of the company’s continuous improvement process, they began developing 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 revolving around the link between HR strategies and business goals:

  • Centralised integrated HR system that provides enterprise-wide view of operations across all subsidiaries

  • Increased efficiency and employee satisfaction due to standardised HR processes leading to an increase in overall productivity

  • Increased employee development through online training

  • Increased cost savings as a result of not having to maintain multiple systems and having common training resources for employees

The benefits are attractive, but it did not come without its challenges. It was a process that spanned over five years and it is still being enhanced. HRMS is only one of the many modules offered in ERP systems that companies may embark on.

Digital Outlook

The extent to which business processes may be digitised is limited only by ingenuity. There are endless benefits to digitising information-intensive processes. Digital platforms are being adopted across all industries:

  • An apparel retailer implemented a radio-frequency identifi cation (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 – increasing the level of customer service and reducing the need for manual labour

  • 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.

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.

- Roger Loo, Executive Director, BDO Singapore -

- Clara Chiang, Associate Consultant, BDO Singapore -