Singapore firms can look to digitalisation and taking on capital to grow abroad

    By RAPHAEL LIM 

    The Business Times, 8 September 2021

    EMBRACING digitalisation and being willing to take capital from investors can be helpful for Singapore companies that are looking to grow into newer markets, said speakers at a conference on Wednesday.

    It comes amid a need for Singapore companies to think about overseas expansion so as to capture new opportunities, as well as diversification benefits, as they reposition themselves for a post-pandemic world.

    These were some points made by speakers and panellists on Wednesday, at the Directors' Conference organised by the Singapore Institute of Directors (SID).

    Finance Minister Lawrence Wong said in a speech that businesses would need to adjust to the post-pandemic world, and that the winners would be those who have used the impetus of the crisis to accelerate digital transformation, as well as to move towards more innovative and productive solutions that are also sustainable.

    "Firms have to continually innovate," he said. "They should also look at ways to expand beyond our borders to scale up and venture into new markets or to reconfigure the operations by tapping the comparative advantages of our neighbouring countries".

    Expanding overseas would open up growth opportunities for local companies, the panellists said.

    Singapore Business Federation (SBF) chief executive Lam Yi Young said: "We are encouraged that even among the small and medium-sized enterprises (SMEs), there is strong recognition of the need to go beyond Singapore. If they want to grow their business, they can't just constrain themselves to Singapore."

    Even as companies face disruptions to supply chains for raw materials and customers during the pandemic, Mr Lam noted that disruptions have also hit companies elsewhere. This presents an opportunity for local companies to insert themselves into new supply chains in different markets.

    "While we face disruption, it is also an opportunity for us to go and seize and establish ourselves in new markets," he said.

    And entering new markets would also provide diversification benefits. Santitarn Sathirathai, group chief economist at Sea, said that those who put all their eggs in one basket could be badly hit by the lockdowns and other restrictions.

    "The need to diversify across geography, across different markets (and) different products if you can - I think all of these can become really important," he said, adding that online tools make it easier to tap new markets and diversify geographically.

    Dr Sathirathai said that in the past, e-commerce tools were a nice-to-have, but have since become more of a necessity. He noted that the pandemic has added the number of digital consumers, and customers who access products through online services.

    Kainaz Gazder, senior vice-president at Procter & Gamble, said that companies can embrace digitalisation in areas such as consumer research, sales and analytics. "All of that helps and makes it easier to go regional or global," she said. "As we do this, the costs come down to a third (or even) to a 10th. Whether it's the big companies with deep pockets or the SMEs, this is the aspect that has to be leveraged."

    Enterprise Singapore's chief executive, Png Cheong Boon, observed that technology has changed how companies are doing their business. He noted that in the past, meetings were mostly physical, but the rise of virtual meetings has become an advantage for businesses.

    "With a lot of businesses and their counterparts getting used to virtual discussions, that actually allows them to do business across the world much better," he noted, adding that companies can also tap talents working remotely.
    But digitalisation can be a double-edged sword, as business competitors would also be able to do the same. Mr Png said that companies would need to innovate to stay ahead of the curve.

    Apart from opportunities that digitalisation brings, companies should also be willing to consider taking on capital to fund their push overseas. Temasek International chief executive Dilhan Pillay said in a separate discussion that capitalisation is important in the growth of sectors and companies.

    "We must, as companies, be prepared to embrace capital, which might mean dilution, but that's the only way to grow the businesses and be successful," he said, noting that the leading technology companies in Singapore, such as Grab, Carousell and Ninja Van, have founders that have taken on capital to grow.

    "They have been successful, they have been diluted to minority positions, but that has not taken away their position as leaders of the firm," he said. "It's enabled these firms to become not just domestic champions, but regional external champions."

    During a poll at the virtual conference, most attendees said that pursuing a strategy of expanding activity in Asia in the next three years would either be one of their companies' top priorities, or be part of a mix with other strategies.

    But attendees also highlighted the constraints of expanding abroad, with the lack of necessary talent and leadership cited as key; other factors cited were risk aversion, as well as lack of understanding of the region.

    Panellists noted that the challenges faced did not come as a surprise, but that companies can consider sending employees abroad for exposure.

    P&G's Ms Gazder said: "Over the years, we've sent people outside to global assignments (and) the wealth of knowledge and experience has enabled them to come back and take on far bigger business leadership roles."

    Enterprise Singapore's Mr Png noted that steps have been taken - past and present - to encourage Singaporeans to go overseas, or for companies to provide employees overseas exposure, which can prepare them for more senior roles in future.

    SBF's Mr Lam said companies may need help to understand overseas opportunities, and added that SBF has programmes to help them.

    Referring to companies' preference for certainty ahead of venturing abroad, Dr Sathirathai said it is like swimming - sometimes, one just needs to take the plunge.

    "You never actually learn how to swim sitting on the edge of the pool and studying a manual. There's always going to be uncertainty; there's always going to be unknowns," he said. "What you need to do to expand to the region is a balanced dose of humility and courage."

    Directors can also play a key role in the process of overseas expansion. He added that they could be a sounding board for management in terms of both the risk and opportunities of moving into overseas markets, and how things could pan out if things go wrong - or right.

    SBF's Mr Lam added: "The board can help to incorporate internationalisation into the key strategies, and also give the management the nudge and maybe the comfort to just try."