Winning with data

AFTER more than a decade as OCBC Bank's Head of Global Commercial Banking, Linus Goh has three wishes for Singapore's small and medium-sized enterprises (SMEs).

The first is to raise the bar on going digital. He believes companies should push themselves further to become "highly digital" and transform the way they run their business, by leveraging the power of data from digitalised operations.

As a proxy, OCBC defines highly digital businesses as those which perform at least 50 per cent of their sales collections, supplier payments and transaction processes digitally.

"Those we consider highly digital are showing significant gains over the rest of the SMEs," he observes, adding that companies which performed well over the course of the pandemic were those that had already achieved this level of digitalisation.

According to Goh, one in two "highly digital" companies would have seen growth of 5 per cent or more since Covid-19, while less-digital enterprises would have seen a decline in performance of about the same percentage.

He points out that SMEs in certain industries, however, took more time to achieve such levels of digitalisation than others.

While SMEs in sectors including the services, education and healthcare industries were recognised by Goh as "early movers" in the global digitalisation wave, those in sectors such as building and construction, manufacturing, logistics, retail, and food and beverage were slower to digitalise but ended up benefitting the most from the onset of Covid-19, as they saw more significant disruptions in comparison.

"SMEs in these industries digitalised the most during the pandemic. Whether they were disrupted in their access to customers and suppliers, or had to operate without a physical presence in their markets - these businesses all had to pivot to new business models leveraging digital tools. There was a higher adoption of e-commerce and partnerships in business-to-business commerce while the businesses urgently explored different ways to sustain their operations," he says.

Goh now considers about 75 per cent of OCBC's SME customer base as "highly digital", double of what it was five years before - a result of disruptions brought on by Covid-19.

"Why did Covid work well for businesses? It provided an unprecedented force to shift to alternate ways of doing things, and more companies are now realising that, having digitalised, they are also wellequipped with the agility to deal with future changes and shocks."

Data-driven growth

The biggest payback from going digital, however, comes from the data accumulated as a result.

In Goh's view, this is because businesses that consume larger quantities of data in real time have a better chance of managing their sales well with a deeper understanding of their customers, their preferences and how to sustain demand while retaining product visibility.

Conversely, businesses facing rising levels of competition will have the advantage of responding faster to their competitors with higher levels of data, he says.

"Digitalisation isn't magic. It forces you to have a more disciplined way of how you conduct your business. If businesses can capture data well, it becomes their ongoing scorecard; a health check on how they are performing by their customers' standards, for example."

Due to this wealth of data, many highly digitised SMEs based in Singapore are better equipped to expand internationally, he says.

One example given by Goh is local startup Secretlab, whose ergonomic gaming chairs are sold in over 60 countries today.

"Today, if you look at many of the startups and young companies here (including Secretlab), entrepreneurs are starting out with a global vision. In fact, they have been able to serve global markets more than their peers 10 or 20 years ago, when traditional enterprises had to rely on big distributors or trading companies to help bring their product across."

He reckons that online, collaborative tools including social media and ecommerce platforms have played a large role in propelling modern-day SMEs into global markets with greater ease, backed by a base of loyal customers who then help them build their brand.

This leads Goh to his next hope for the SME community in Singapore: to utilise the fruits of their digitalisation efforts to grow their businesses beyond the country.

"There is clear evidence of people not only becoming sharper at using a combination of digital means to engage their customers but also ensuring a good customer experience across various markets, keeping tabs on alternative supplies, keeping track of prices, and evaluating the availability of sources. In the event of disruption, enterprises such as these will be more able to adapt (than their less-digital peers)."

Embracing sustainability

Last but certainly not least, Goh says it is important for SMEs to integrate sustainable practices - not doing so would cause them to miss out on business opportunities as customers and industries insist on new standards.

In his view, the pandemic was also responsible for forcing a greater focus on sustainability, amid food security and environmental concerns which emerged from supply chain disruptions through global lockdowns.

The ability to embrace sustainability is significantly linked to digitalisation as well, he says, because harnessing large amounts of timely data is key to providing visibility on aspects crucial to measuring sustainability, such as energy consumption and product traceability.

"For example, companies that have digitised their operations would have superior visibility on energy consumption and emissions across their buildings and fleets of vehicles - with all that data, they are better able to manage their optimisation and improvement over time."

These days, companies are realising that embracing sustainability has become more of a necessity than an option.

"If we were to have a conversation with local SMEs five years ago, most of them would react to the subject of sustainability with some reluctance. Back then sustainability came across (to them) as burdensome, complicated, and implied a cost of compliance without a clear value to these companies," he says.

As mindsets changed, the bank in late 2020 launched its SME Sustainable Financing Framework to democratise and simplify access to green finance among the SME community.

In its first year, over 200 SMEs received funding for sustainability projects in areas such as energy efficiency, alternate energy and circular economy.

The Framework has since expanded to Hong Kong and Malaysia, with OCBC looking to take it to Indonesia next.

"To be ahead is to differentiate positively within your sector, to win new businesses and improve profitability. Industries like manufacturing - which have witnessed the biggest disruptions over the past few years - are now looking to line up their processes to become more agile and broadly distributed, rather than overly reliant on a single source or customer," he says.

"These are the things I wish for Singapore's SME community. Don't wait and end up lagging behind; move fast to win. Digitalisation, internationalisation and sustainability are all critical drivers, no longer 'nice to haves' - they define the future world order for businesses."