Singapore SMEs slow to adopt business model innovation to gain edge

Singapore

LOCAL firms have been slow to adopt business model innovation (BMI), a critical tool during a time of rapid disruption, say innovation pundits.

Michael Teng, chief of the Singapore Institute of Productivity and Innovation (SiPi), a centre of excellence under the Singapore Manufacturing Federation (SMF), told The Business Times that while BMI is not new, local interest in the concept had only grown in the last two years.

He cited a 2014 national BMI study, which found that under 70 per cent of Singapore companies could not name "even" two examples of BMI. "Indeed, we are slow to change. We have already seen rapid disruption in the banking, hotel, retail industries. In recent years, there have been more industry disruptors than ever."

Dr Teng, who teaches a BMI MasterClass to local firms at the SMF BMI Centre, says BMI is a novel way to create and deliver value to customers and markets. It studies an organisation's business models and finds areas that will disrupt industries.

But BMI can be trickier than other innovation approaches as it doesn't focus on just process or product innovation, but encompasses the full spectrum of the business in a holistic approach, said Dr Teng.

There is also both a science and art to BMI, he said. The science entails business owners planning and implementing BMI, while the art entails them reviewing existing competition, customers and markets, and projecting ahead.

Adopting BMI is especially critical today, with the emergence of disruptive innovations and a fast-changing business landscape, Dr Teng noted.

"Businesses have to find a niche in which they can dominate, to remain relevant and competitive. Once they identify that niche through BMI, they have to be swift to exploit it and implement the new business model."

Apple and Uber are among companies which have been able to rapidly transform their business models, though a change in business model cannot take place overnight. "Even Uber and Facebook did not take off immediately. However, once it does, the financial returns will be exponential."

A key challenge is in implementation, Dr Teng said. Two major obstacles to BMI are organisational mindset and culture. He said: "You will need your entire team to support the transformation of models."

But Dr Teng is heartened. Since the BMI MasterClass programme started nine months ago, he has seen companies implementing new models, and "improvements made", such as company makeovers, collaborative endeavours and a mindset change.

Evangelos Simoudis, managing director of corporate innovation enabler Synapse Partners, said that corporates have always been interested in innovation but more in recent years have been exploring BMI.

Mr Simoudis explained that the pace of tech innovation is accelerating, and that combining BMI with tech innovation is more important than just looking for tech innovations.

"Venture capitalists and entrepreneurs have 'cracked the code' on how to create startups, resulting in a large number of startups globally, and startups becoming a disruptive force."

Corporates are therefore trying to grasp how to benefit from both the actual tech and the BMI created by startups, and how to learn from the ways startups innovate. This has led many corporates to set up innovation outposts in clusters such as Silicon Valley, Singapore and Israel, he said.

Mr Simoudis added however that corporates face the oft-cited legacy-related challenges. "Corporates are very good at establishing processes and then scaling them. They want precision, predictable results, and operate with as little uncertainty as possible. "

While these are helpful for corporates that are trying to scale, or even extend a tried, existing business model, the approach "rarely works" when they are trying to create disruptive innovations. Some innovations will require them to cannibalise existing business models, Mr Simoudis said.

The Silicon Valley-based technologist and entrepreneur will deliver on Tuesday a keynote speech on corporate innovation at Techventure X Slush Singapore, an anchor event of the inaugural Singapore Week of Innovation & TeCHnology (SWITCH).

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