Innovation is now spoken in the same breadth as productivity and skills. Top government leaders have stressed the need for innovation to underpin Singapore's new economic drive. ]ust what is innovation? Can an innovation culture be fostered? Insight presents views from the experts and highlights three examples of innovation in action.
Walk into OCBC Bank on Sunday, and you will be greeted, offered coffee and cookies, and if you have children in tow, a play place to keep them occupied.
Making this observation in a class of 25at the Singapore Management University (SMU), Professor Desai Narasimhalu says these gestures may appear small and insignificant, but they go a long way in appealing emotionally to customers.
"It is the human touch, the emotional points that make the difference in service innovation," the director of the Institute of Innovation and Entrepreneurship at SMU tells the pioneer batch attending the newly launched Innovation Catalyst Programme.
His students - a motley crew of undergraduates and representatives from small and medium-sized enterprises (SMEs) - are the first to sign up for the two-month course designed to spur innovation among SMEs.
If they are jumping on the bandwagon, it is because they know that innovation is now a crucial part of Singapore's new economic growth strategy.
As announced by Finance Minister Tharman Shanmugaratnam in February, Singapore must embark on a growth course "based on skills, innovation and productivity".
Or as Deputy Prime Minister Teo Chee Hean, head of the National Productivity and Continuing Education Council that will spearhead the drive, put it: "It is no longer sufficient to focus on optimizing or reducing production costs to improve the bottom line.
"We must also look at new ways of improving the top line - looking harder at new and innovative ways of creating new products and services, and going into new markets, to capture greater value."
lnnovation is seen as a way to break away from the 'commodities trap’ in which competing businesses that sell the same products end up slashing prices and cutting profit margins to gain business.
That is, companies should compete based on the value of their products, and not the appeal of their price tags.
The higher the value of the solution, the more people are willing to pay, says Prof Narasimhalu.
New ideas can also lead to greater efficiency, product or service quality, and the creation of new products and services, notes Professor Soon Ang, head of the strategy, management and organisation division at Nanyang Business School.
To encourage SMEs to boost productivity and embrace innovation, the Government introduced a new tax incentive - the Productivity and Innovation Credit.
Under this scheme, companies that spend in six innovation-related areas enjoy 250 per cent tax deduction, capped at $300,000 per activity.
The areas are: staff training, research and development, registering intellectual property including patents and trademarks, acquiring intellectual property, design
activities, and automation.
To give smaller firms a leg-up, businesses are allowed to convert up to $300,000 of the credit per year into a cash grant of up to $21,000.
But what exactly is innovation?
Experts describe it as the process of finding fresh solutions to problems by leveraging on something new, and breaking away from the norm.
It is a process of constant change, and improvement usually involves breakthrough, and adds value to the business and/or customer.
Unfortunately, SMEs often fall behind in innovation as they are too occupied with managing cash flow, watching the bottom line and fighting daily fires.
So what will it take to coax SMEs out of their inertia? Will the new tax incentive be enough of a sweetener?
An SME innovation survey released last month found that although 91 out of 100 respondents understood what innovation was, only 21 said they had the right tools to innovate, and actually did so.
Dr Wilson Chew, chief executive of branding consultancy StrategiCom, which conducted the survey, attributes the low take-up rate to a four-letter word: fear.
Fear of not knowing if an innovation project will turn out positive, coupled with the fear that seemingly high costs can cripple companies, he says.
Mr Ben Tan, director of training firm ConsultingOne, agrees. He observes that people in a traditional business setting are trained to minimise risks and value predictability, whereas innovation is often thought of as being risky and unpredictable.
Then there is the universal cry of "money no enough”, because many think research and development will cost a lot of money.
Mr David Thomas, chief executive and managing director of fire protection solutions firm Thermal Limitec, thinks otherwise. He says companies have no excuse for not innovating, regardless of the size of their resources.
To illustrate his point, he cites the example of American and Russian scientists who found that conventional pens would not work in space because of the lack of gravity.
"The Americans spent a. lot of money to develop a super-advanced pen that can write in space. Is that innovation? Yes.”
"The Russians faced the same problem. What did they do? They simply used a pencil instead."
Research and development, therefore, does not need to be expensive, says Mr Thomas.
Another reason SMEs cite for shying away from innovation is the difficulty in attracting innovative talent.
A common perception is that talented graduates tend to gravitate towards multinational corporations, but according to Dr Chew, a separate survey by his firm shows that graduates do not mind working in SMEs with a clear sense of vision.
"If they do that well, I can't see why they can't attract personnel," he says.
Likewise, Mr Tan and Prof Ang argue that creativity and innovation are not gifts endowed only to extraordinary people. Rather, they are skills that can be harnessed and developed.
What about those who think innovation is unnecessary? This is a view that firms hold to their own detriment, warns Ang Mo Kio GRC MP Inderjit Singh, a long-time champion of SMEs.
Mr Singh is chief executive of semiconductor company Infiniti Solutions and deputy chairman of the Action Community for Entrepreneurship.
“We must get rid of the mindset which says 'What worked in the past will still work in the future’, because the world has changed and will keep changing," he says.
So how do you foster a culture of innovation? Nanyang Technological University's Professor Vijay Sethi believes that the first step is to set up the infrastructure to help "grow a critical mass". A complete network will include incubators to nurture innovations, investors and a pool of professional venture capital to commercialise them, and good links with larger companies which may acquire them in future.
But beyond these "structural" elements, what is needed is "an openness, a way of encouraging mavericks", he argues.
"Innovators are people who are driven, they survive tremendous odds and refuse to take ‘no’ for an answer,” he says.
These top talents are needed to drive, fund and nurture new-economy innovations, he adds.
Prof Narasimhalu feels that such a culture should start in the schools. Students should be empowered, encouraged to have curiosity, and possess the ability to explore, fail and learn - all of which are lacking here, he asserts.
"Students here are busy with tuition and co-curricular activities (CCAs). They don't have enough chances to explore and experiment. Do our students get time to think? Even CCAs are graded.”
He thinks schools should remove the stigma of failure by placing less emphasis on grades in school, and much more on exploring and experimenting.
This view is reinforced by Dr Alan Robinson, master instructor at the Fashion Institute of Technology's Centre for Innovation Management in New York. He notes that several of the world's top innovative companies such as Internet giant Google and technology firm Toshiba dedicate up to 20 per cent of their time to exploring innovation.
But if innovation starts with education, is it too late for companies?
Not if the management is committed to developing the culture and leads by example, experts say.
ConsultingOne's Mr Tan notes: “This top-down approach is necessary to create a sense of urgency to change."
Prof Narasimhalu adds that SMEs can break the inertia by introducing people from outside the company who can help to bring about changes.
For example, as part of his innovation catalyst programme, l6 undergraduates attending the class alongside the SME participants will intern at these SMEs to help implement an innovation structure.
The students will act as external parties to ensure the SMEs follow through with their commitment to innovation. Another solution is to partner a knowledge institution such as a polytechnic or university.
Recently, a garbage compactor for garbage collection vessels was developed through a collaboration between marine transportation firm Tian San Shipping and Ngee Ann Polytechnic's Centre of Innovation for Marine and Offshore Technology, and the Maritime and Port Authority of Singapore.
Now a single compactor can store five times more garbage, halving the number of times the firm needs to unload its rubbish from 15 to about seven times a month.
Some companies seek the expertise of innovation experts such as Dr Robinson on how to effectively harness the ideas of their employees.
But as veteran New York-based investor Esther Dyson notes, all these innovation efforts will come to naught without good customers, including governments, who are willing to pay for good products.
"Governments are all focused on starting a fund to invest in these small companies, but they should be buying from them. These companies need revenues and customers more. When they get revenues, someone will invest in them,"
Still, with about l60,000 SMEs in Singapore employing more than half the resident workforce, it will take more than the offering of innovation-related courses and the availability of experts to effect change in the sector.
As our interviewees stress, developing an innovation culture here requires deep commitment to mindset change at all levels, from the way children are educated, to the way directors run their companies.
It means letting go of the conventional way the nation has measured success - largely by means of grades and paper qualifications - and giving room to exploration, experimentation, and most of all, failure.
Companies will have to stop finding excuses for not innovating, and start taking time to foster an environment in which exploration of new ideas becomes a part of daily life and workers are rewarded for ideas and solutions.
Mr V. S. Kumar (right) speaking to a member of his IT staff. (ST PHOTO: Lim Sin Thai)
The phones are ringing off the hook at Network Courier’s headquarters, but no one is ruffled.
This is because each customer service worker can now handle higher call volumes, thanks to Virtual Client.
The software, developed by the firm, fully integrates its operations, allowing the staff to handle up to three times the volume of calls they used to deal with.
Launched in May last year, the $1 million software allows customers to create, track and check orders online.
These orders tell the company where to pick up goods or documents from, and where to deliver them.
Customer service staff no longer need to sift through order sheets manually when attending to their clients.
Everything is stored on the server and easily retrieved at the click of a mouse.
When orders are fed to the nerve centre, it sends the orders via text messages automatically to dispatch riders who service assigned areas.
Previously, when orders were assigned manually, riders spent up to four hours a day on the road.
With the new system, riders spend less than two hours a day travelling from point to point. This allows them to spend the rest of their eight-hour shift actually collecting and delivering goods.
When a rider returns to base, he signs in by pressing his thumb against the biometric scanner, and his name is taken off the assignments list.
Everything is automated and no one stands around waiting any more.
In all, managing director V.S. Kumar, 46, spent almost $4 million automating his operations in the last two years – a whopping sum for a 170-strong firm with an annual turnover of $10 million.
Asked whether like most small and medium-sized enterprises (SMEs) his firm was resistant to innovation, Mr Kumar proudly replies: “I’ve never behaved like an SME. I always wanted to become an MNC (multinational corporation), so I always think big.”
Mr Kumar, who is married with two children, dreams of growing Network Courier, founded in 1990, into a global network.
To do so, he sets money aside each month as a building block. This was how he managed to acquire his $5 million five-storey building in Horne Road in 2005, and cover expenses for the automation upgrading last year.
His efforts are bearing fruit. Today, Network Courier handles 10,000 deliveries a day, up from 6,700 before automation.
The maximum number of orders it can handle a day has also gone up by at least a third.
Call him a visionary, Mr Kumar is already working on fresh ideas to stay ahead of the competition in an industry of about 330 courier firms.
Aside from plans to franchise Virtual Client and roll out a stored value card payment system for consumers, he hopes to use radio-frequency identification technology to serve his clients in an even faster and smarter way.
“We try and test anything which can help to reduce our process time. It can be a small gusset, and we’d still try it.”
General manager Richard Thomas (from left), senior engineer Corwyn Low and contracts manager Harry Chandran (ST PHOTO: Ong Wee Jin)
At fire protection products firm Thermal Limitec, as well as being innovators, all employees are involved in marketing their products.
“We believe that without innovation, we will be overtaken by competitors in no time, and without marketing, even the most innovative products will have a hard time succeeding,” says Mr David Thomas, 48, chief executive and managing director of the firm.
This is why the Joo Koon Circle-based family-run business does not shy away from even the most challenging requests from its clients, mostly in the oil, gas and petrochemical-related industries.
In fact, it plans on investing about 20 per cent of its $10 million turnover in research and development this year.
To Mr Thomas, who is married with two sons, challenges provide irresistible opportunities for innovation.
"Resoutces will always be tight for small and medium-sized enterprises. We are no different, but that is not an excuse for not innovating. You may be verv busy, but if something is important enough, you will make time for it."
The firm offers passive fire protection, which means it sells fire-resistant materials that will help limit structural damage of facilities by fires, as well as prevent or slow the spread of blazes.
Since it was founded by Mr Thomas in 2005, Thermal Limitec has set out to differentiate itself by offering value-added services to its clients, which include energy firms Shell and ExxonMobil.
The firm did not want to just supply products but also to design, engineer, manufacture and install them.
This was how it developed its unique Thermal-cast wall, a fire-protection wall that is constructed without using sources of heat, such as welding and soldering. It can be removed if necessary.
These qualities proved critical for one client, who was operating a floating vessel for the processing and storage of oil and gas, where sparks could easily trigger a burst of flames.
The removable nature of the wall means that the client can perform maintenance work easily, and that it can be taken down without a fuss when the client decides to redesignt he facility.
For Mr Thomas, the greatest benefit of innovating is the opening up of new possbilities.
As a brand owner, the firm decides where it wants to distribute and does not have to worry about securing distribution rights.
Developing and testing its own products also allows the company to attain the necessary certifications more quickly, shortening the time it takes for the products to hit the market.
All these measures have helped the young company to grow quickly into a 48-strong business supplying goods and services to more than 25 countries.
It recently opened an R&D facility in Britain and has plans to go into production in Mexico and Brazil.
Mr Thomas says: "Some wise man once said, 'Life is full of ambiguous victories and nebulous defeats - claim them all as victories.'
"We subscribe to that view. Big innovation, small innovation, they are all victories for Thermal Limitec."
(ST PHOTO: Raj Nadarajan)
CRASH! The loud shattering of porcelain bowls slipping through staff's fingers used to be a common occurrence in Palm Beach Seafood Restaurant at One Fullerton.
Then last year, operations manager Doris Chee, 44, found a way to reduce its frequency drastically.
She noticed that her workers tended to fill their storage cupboards with as many bowls as possible, often up to the brim.
But this made it difficult for them to take the bowls out quickly, leading to "several breakages a day", recalls Ms Chee.
As a solution, she introduced "height lìmits" for the tableware.
"No bowls can be stacked above this line," she says, pointing to the green tape markings on the cupboard's interior walls. The same rules apply to the porcelain plates in a nearby cupboard.
She had this brainwave after attending 5S, a structured progranme to help restaurants standardise operations and organise better.
The course was launched in 2008 by the Restaurant Association of Singapore and Spring Singapore, an enterprise development agency.
As part of the course, a consultant flew in from Hong Kong to coach participants and conduct performance audits.
The group also took a trip to Johor Baru to visit Red Box, a global karaoke chain, to see how it implemented 55 in its kitchens.
So far, 10 staff members have gone through 5S, which stands for Sort, Systemise, Shine, Standàrdise and Self-discipline.
The classes, trips and implementation cost Palm Beach about $10,000, including storage materials for ingredients.
It took almost a yeat to put everything in place, but Palm Beach operates like a completely different restaurant today.
"Before, our boxes of ingredients would be all over the kitchen, and our cooks would have to look into this fridge or that before finding the right one," says Ms Chee.
It was the same with dustbins, disinfecting liquid and dishes.
Now, every item has a "home", an allocated space that is labelled correctly.
Storage facilities such as shelves and fridges now have their own plans to indicate the items stored there.
Lights and air-conditioner switches are clearly marked so staff know exactly when they have to be switched on and off.
The kitchen and service areas have also been divided into zones so that staff know exactly what they need to be responsible for.
At the end of each month, the 30-strong staff gather in groups to discuss ideas on how to do better.
The restaurant reports cost savings from fewer breakages and lower electricity consumption.
"There is a standard for everything we do now, and when we follow it, it becomes easy for us to work. So we can focus instead on serving the customer better," says Ms Chee.
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