Techblog
Building capabilities for SMEs to enable business transformation
The SME Capabilities Forum 2016 discussed the need for business transformation to achieve big results, and how to get started by making small changes.
In order to survive in a volatile market, SMEs need to learn about business capabilities that allow them to sustain success and enable business transformation. This will help them rise above factors such as increasing costs, intense competition and the proliferation of disruptive technologies to stay relevant and resilient, and be ready to capitalise on opportunities for growth.
By transforming business competencies, SMEs can achieve promising results just by making small changes. These were discussed at the SME Capabilities Forum 2016, with insights from experts.
The Business Excellence Framework
Joan Tan, director (Advisory Services), EY, referred attendees to the Business Excellence Framework. Likening it to an individual going to a clinic for a health check, she suggested using the tool as leverage for developing a company's processes and people.
While the framework itself is not prescriptive, it can be used to tie together a company's existing initiatives to draw a big picture for the organisation.
A 2014 Business Excellence Impact Study by NUS Business School concluded that between 2008 and 2012, organisations in the private sector that have been certified to business excellence (BE) standards (after using SPRING's Business Excellence Framework) saw a 14.1 percent profit growth on average, double that of their peers within the same sector. Profitability of SMEs who were certified to BE standards also grew by 19.2 percent, three times the industry average.
The Business Excellence Framework is a robust, comprehensive framework for companies to assess and conduct a self diagnosis of their business to figure out the areas that need improvement. For organisations looking to transform their business, the framework can be used as an anchor to figure out where a company needs to build capabilities to support their transformation.
Lean Six Sigma methodology
The Lean Six Sigma methodology and technology is another way companies can transform business competencies, said Chang Phuan Heng, lead consultant/senior manager of Singapore Innovation & Productivity Institute (SiPi). Even though early adopters of this methodology include General Electric, Honeywell and Citibank, Chang discussed how the methodology can be adapted at the SME level. Local companies that have adopted it include ComfortDelGro and DHdeco.
This business transformation methodology emphasises elimination of waste, whether in a manufacturing or non-manufacturing organisation, or in operational and administrative processes. Between 85 to 95 percent of a company's processes are non-value added, with only five percent adding value. Most organisations tend to focus on achieving the five percent while ignoring the 95 percent.
The methodology involves five phases – Define, Measure, Analyse, Improve, and Control – and should be dealt with a two-pronged approach at the enterprise and operational levels. It's also important to have the CEO committing to the methodologies based on the business vision of the company, so that results can cascade downwards. The results: customer satisfaction, employee satisfaction and shareholder benefits.
Move with the times
Another way to transform your business is to own the disruption and ride the wave, according to Eugene Chang, managing consultant of Korn Ferry Hay Group Singapore. He shared that SMEs have the advantage of being more agile and are therefore able to disrupt business models more easily.
Consider the examples of Gillette and Kodak. Gillette moved with the times and transformed its business, and has done well as a result. At the other end of the spectrum lies Kodak, whose missed opportunities to introduce digital photography, a technology it invented, led to its eventual decline.
The forum also gave SPRING a chance to offer information about their Capability Development Grant (CDG), which aims to help SMEs grow their business by building their business capabilities across key areas including developing human capital, adopting technology for staff training and overseas expansion. The financial assistance programme funds up to 70 percent of qualifying project costs such as consultancy, training, certification and equipment costs.
SMEs can start their business transformation journey, even in volatile times, by heeding the following advice:
- Use SPRING Singapore's Business Excellence Framework as a 'health check' for their company.
- Adopt the Lean Six Sigma methodology.
- Own the disruption and ride the wave.
- Tap the Capability Development Grant offered by SPRING Singapore.