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COMMENTARY

In pursuit of Services 4.0 - a Singapore perspective

THE services sector remains the bulk of global gross domestic product (GDP), and in the last 20 years, also represents an increasing share of Asean GDP. As a services-oriented economy, Singapore's services sector contributes 72 per cent of the nation's GDP and employs 74 per cent of the workforce.

At this juncture, it is important to acknowledge the emergence of key trends underscored by the rise of emerging technologies that will shape the future of the sector. These trends include the pervasive adoption of Artificial Intelligence (AI) that is becoming more and more empathetic, cognitive and affective; the potential of technology interfaces such as Mixed Reality to create unique customer experiences that resemble real-life encounters; solutions that will be developed with greater ease via codeless development tools offered through cloud technologies and by leveraging the power of application programme interface (API); and, blockchain that will redefine trust across all digital platforms.

For Singapore's services sector, this begs important questions - what does it mean for the future of the services economy, and how can we mitigate challenges and address opportunities from these trends?

Businesses in the sector will need to ask how they can harness the opportunities to achieve greater growth and productivity, and how they can mitigate the risks. A Harvard Business Review study indicated that the most productive service sector firms can have a 5.5 per cent productivity growth rate, which exceeds the global average of 0.3 per cent.

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Businesses will also need to ask how digital technologies can disrupt their current models. In a study by Singapore Chinese Chamber of Commerce & Industry , one in five small and medium enterprises in Singapore view disruptive technology as a key business challenge, and in another study by Fujitsu, 66 per cent of Singapore businesses expect to lose customers to their competitors due to technology disruption.

To respond to these trends, Singapore's Info-communications Media Development Authority (IMDA) launched the Services and Digital Economy Technology Roadmap in November 2018 that envisions the concept and strategy around the future of services, also known as Services 4.0.

Services 4.0 is the result of the services economy's evolution from manual services (Services 1.0) to efficient, Internet-enabled services (Services 2.0), followed by self-services enabled by mobile, wireless and cloud technologies (Services 3.0). This next phase will be one of seamless services that are end-to-end, frictionless, empathic, and can anticipate customer needs using emerging technologies (Services 4.0).

THRIVING IN THE ANYTHING-AS-A-SERVICE (XAAS) ECOSYSTEM

The ideal services provider ecosystem for achieving Services 4.0 can be found in the XaaS paradigm, which views business capabilities, products and processes not as discrete vertical offerings that operate in silos, but rather, as a seamless experience that transcends organisational boundaries and business lines. For businesses to thrive in this ecosystem and unlock new value, they should re-engineer their service delivery model and how workers work together with machines to participate in this new model.

The technology roadmap identified nine innovative approaches that will significantly impact on Singapore's services and digital economy in the next three to five years, and they fall under two broad "servitisation" themes - the Transform Value/Price Equation approach where businesses can consider shortening their value chain, aligning price with use, converging products and unbundling products and services; and the Harness Network Effects approach where businesses can consider expanding market reach, unlocking adjacent assets, turning products into product platforms, connecting peers, and distributing product development.

Innovative businesses have already begun adopting one or a combination of the above approaches to re-engineer their services proposition. For example, insurance companies are harnessing the benefits of network effects by converting product offerings into services via digital platforms, with one insurance company having disrupted its traditional service delivery model by offering on-demand, micro-duration insurance policies that are personalised to the needs of their customers.

Products such as newspapers and even education, that were once thought to be the smallest viable unit of sale, can now be unbundled to newer units of sales, thus changing the entire economics of production, distribution and access. In terms of using digital technologies to shorten the value chain, it is now possible, for example, to manufacture products while the product is on its way to the customers and achieve "zero delivery time" that was once unthinkable.

XaaS can also help change the way internal functions operate and empower the workforce. For instance, a leading workforce solutions provider adopted a fully automated, zero-touch recruitment AI platform and started listing IT-related jobs such as programmers and DevOps professionals because they are the easiest to codify. After just a few months, the company was able to automate the recruiting processes for the vast majority of their job listings.

In conclusion, there are three considerations for businesses in the era of Services 4.0. Firstly, businesses need to understand that Services 4.0 is a journey. Business leaders ought to chart their organisation's strategy and make decisions as to which parts of their business need to or need not be Services 4.0 enabled. Secondly, businesses need to transform the way they are currently consuming technology and move towards a cloud native architecture that enables greater flexibility, scalability, agility and accessibility so that digital technologies can be used cost-effectively. Thirdly, businesses should work hand-in-hand with machines and robots to enable greater and better achievements, rather than assume machines will do most of the work.

Services 4.0 sets the foundation for businesses to imagine, deliver, and operate in the future - but mapping this future is no small order. Business leaders need to sense and evaluate the emerging technologies, consider the non-technology forces that are unlocking new opportunities, and create a series of well-defined but aspirational ambitions to embark on new territories sooner rather than later.

  • The writers are from Monitor Deloitte, the strategy consulting practice of Deloitte Consulting. Mohit Mehrotra is co-leader, Asia Pacific, and Samrat Bose is senior manager, South-east Asia.