Innovation-led Productivity for Service Sectors

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Home > Articles > Innovation-led Productivity for Service Sectors

 Innovation-led Productivity for Service Sectors

Bertrand Leong | Today's Manager
September 1, 2017

Service sectors (food services, retail, and hotel) businesses in Singapore and abroad are facing tremendous headwinds from escalating operating costs—pressurising margins and provoking intense competition.

In Singapore, there are about 21,000 1 retail establishments, employing approximately three per cent 1 of the total workforce; while there are roughly 6,800 2 food service establishments that employ around 4.5 per cent 2 of the total workforce; and about 400 3 hotel establishments employing about one per cent 2 of the total workforce. It shows that these sectors are a significant employer, however continuous growth in manpower is not sustainable. That is why there is a need to restructure these sectors to be more manpower-lean and innovatively productive.

Productivity versus Innovation-led Productivity
Mr Michael Tan, chief executive officer (CEO), Singapore Productivity Centre (SGPC) says that productivity, seen from a narrow view, is about value added per hour worked. “It is about finding how to increase output using lesser input,” he says. “Therefore the focus is on the processes and how to be lean. Innovation-led productivity on the other hand is about doing things differently, learning to change, and creating new value in the process.”

There are many tools and programmes available that assist businesses on the innovation-led productivity journey. Here are some of them.

Business Model Innovation
Business Model Innovation involves rethinking a business around a clear customer need—realigning resources, processes, and profit formula with this new value proposition. Some examples of business model transformations include IBM managing changes in customer offers from mainframes to personal computers to technology services, Apple evolving its customer offers of personal computers to music delivery devices and smartphone app services, and Dell’s innovation of a new distribution model by allowing online customisation that capitalised on improving Internet technology.

Design-thinking is a proven problem-solving protocol used by various businesses and professions to achieve results. It is a hugely popular lexicon that gives an anchor for people to relate to and involves the more abstract applications of the way that designers think or work applied towards a more problem-solving approach.

A design-thinking methodology can help turn challenges into opportunities in business (re)design. This is done by testing the prototype of a new business model set against a backdrop of unique industrial challenges; through harnessing trend research, customer interviews, and new technologies to create new service concepts and business models that open up fresh opportunities for business growth.

Concept Differentiation
Finally, concept differentiation helps businesses reinvigorate their business concept by using data. It uses unique methodology in defining, developing, and growing an outstanding concept, which would translate to productivity gains such as increased sales and margins, strengthen in-house business capabilities, or streamline processes.

“An example of concept differentiation for instance would be a food service restaurant adopting a point-of-sale system (POS),” says Mr Tan. “It may be a common sight for restaurants to have POS. However, many do not fully utilise the benefits of the POS. Typically, POS was adopted to expedite orders and streamline financial processes, but the data collected could be extracted and analysed to derive most profitable items, ensure better inventory management, and determine promotional items to generate higher profit margins.”

“While the retail sector faces technology disruption and changing consumer purchase behaviour, it is necessary to manage the stock accuracy and inventory level, and streamline the online-to-offline fulfilment processes. Therefore, adopting a backend automation solution such as RFID inventory system that integrates with the POS providing real time sales report and inventory accuracy/level is critical. On top of it, effective inventory system has significant manpower savings where it reduces the time taken to do manual stocktaking in the outlets and warehouse, as well as reduce human-errors. With these manpower savings, employees can be deployed to do higher value-added tasks such as providing better customer
service,” says Mr Tan.





Mr Michael Tan, CEO of Singapore Productivity
Centre says that innovation-led productivity is
about doing things differently, learning to change,
and creating new value in the process. (SGPC)


Consulting on Innovation-led Productivity
Consultancy plays a significant role for the above tools to work, as not all programmes and tools are a one-size-fits-all solution. Therefore, assessing and defining business needs (functionality, budget, capacity, and resources) is crucial. This would determine the suitable programmes/tools and measurement of the return-of-investment (ROI). As such, SGPC helps businesses become innovation-led by undergoing customised and bespoke programmes that help to enable this change.

“SGPC is working with the Boston Consulting Group, a US-based global business consulting firm, to develop, contextualise, and deliver masterclass workshops in these areas to transfer the skills and knowledge in these areas,” says Mr Tan. “In addition, business owners can gain exposure to international best practices through study missions. Earlier this year, SGPC brought a group of food services enterprises to USA and visited innovative food companies such as the Blue Apron—an innovative meal kit start-up and many others, through a collaboration with the Culinary Institute of America. In May, a group of local retailers went to Shanghai to learn about the leading E-commerce market in China where they met and mingled with many successful retailers who have transformed from traditional brick-and-mortar to omni-channel retailers and learnt about the power of social media in business digital marketing strategy.”

Concerns about minimising risk and disruptions must be addressed and the use of certain tools may necessitate a radical and transformational change. However, recognising and responding to this need for innovation-led productivity is a necessary first step towards business sustainability and long-term survival.

1 2015 DOS Data

2 2014 DOS Data

2016 Hotel Industry Transformation Map


Copyright © 2017 Singapore Institute of Management

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Today's Manager Issue 3, 2017

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