Ernst & Young's Max Loh sheds light on the new business landscape

EY's Singapore and Brunei managing partner believes there are four ‘megatrends’ that companies should watch out for.

Max is the EY Managing Partner for Singapore and Brunei. He leads and manages their business and operations, providing strategic leadership on market and people development. With years of audit and business advisory experience, his clients span a broad range of industries including technology, food and beverage, construction, manufacturing, trading, hospitality, financial institutions and government concerns.

Max is currently a Board Member and Public Accountants Oversight Committee Member of the Accounting and Corporate Regulatory Authority; Board Member and Audit Committee Chair of Enterprise Singapore, Health Sciences Authority and Singapore Polytechnic; and Deputy President of the Singapore Council of CPA Australia.

In an interview with Singapore Business Review, he shares some of his insightful ideas on digital transformation, talent, business trends, investments, capital allocation—and why the aforementioned megatrends will have a huge impact in the wider environment and in business.

How has digital transformation affected the way companies are being run today? And what are some opportunities that businesses should consider to start their journeys toward digitalisation?

Before the pandemic, the business landscape was already evolving due to disruptive forces such as globalisation, digitalisation and workforce transitions. The pandemic has further accelerated such shifts. In particular, digital transformation has become a priority for businesses seeking to innovate, drive new products and solutions and improve customer and operational outcomes. However, successful digital transformation requires “digital” to be a part of a company's DNA, and not merely as an add-on.

At the heart of it is the need for businesses to be clear on their strategic purpose and priorities. Many companies fail to take a strategic and focused approach, with numerous disparate groups within the organisation undertaking digitalisation efforts in silos. A strong leader with a clear vision is critical for challenging traditional ways of viewing the industry and its competition and overcoming entrenched ways of operating, allocating resources and prioritising funding. While transformation needs to be a strategic enterprise-wide approach, it can be extremely challenging to successfully execute a comprehensive and large-scale transformation across the entire company. Accordingly, companies may need to break the transformation project into smaller work streams and prioritise the ones to focus on, without losing sight of the strategic purpose.

At the same time, companies should consider if digital ecosystem participation has a place in their business strategy. The convergence of industries and the borderless nature of markets means organisations no longer operate in a closed environment and disruptive opportunities exist across the value chain. Apart from accessing new opportunities to deliver products or services, being part of an ecosystem also allows companies to share portfolio assets with other orchestrator-led ecosystems, potentially creating new assets that can be monetised.

However, being part of an ecosystem has its complexities too, such as difficulties in identifying the right ecosystem partner, balancing valuable insights with customer data privacy, overlaps in operations, and determining who owns the end-user relationship. Hence, companies should ask themselves if they want to become the platform where other players connect or join an existing ecosystem or platform.

What are some of the talent or workforce considerations when managing and growing a business?

Talent attraction and retention are generally the biggest workforce challenges that businesses face. In the past year, the pandemic has highlighted the need for employers to reimagine work - from recruitment and job evaluations to collaboration, perks, and the workplace itself - not just to reflect employees' changing expectations, but to capitalise on them. This sits at the heart of the employee experience, or EX, and it is a commonality for companies that achieve exponential value and outperform their competitors, recognise and act on.

HR and business leaders are increasingly acknowledging the importance of EX in having an engaged workforce. With good experiences, teams become more agile, engaged and productive. They work harder to overcome hurdles and improve customer service, and the quality of their work goes up. As well, the most talented employees will be more likely to stay at the organisation longer and to recommend their peers to join them.

Better experience outcomes have been correlated to increased revenue, an improved top and bottom line, superior customer experience, and a stronger, more competitive brand.

Another consideration is ensuring that employees are equipped with the right skill sets for the job. With more companies undergoing digital transformation in the past year, redesigning jobs must also be a focus area. Essentially, job redesign seeks to create a more optimal combination of tasks in a job role for efficiency and productivity. Without job redesign and change management efforts to bring employee mindsets and behaviours on the same transformation journey, companies' efforts at digital transformation may not be sustainable. Entrenched ways of working and a lack of requisite digital readiness skills are common barriers to extracting the full value of improved processes. It therefore makes workforce reskilling ever more important. In Singapore, companies can tap on the enhanced SGUnited Jobs and Skills Package, which supports those with growth potential to accelerate the hiring of locals and reskilling of workers. They can also leverage the various attachments, traineeships and mid-career pathway programs to expand their workforce footprint and access new skillsets.

What are the most in-demand business trends that business leaders should look into right now?

Even as entrepreneurs focus on addressing the immediate issues of driving the business toward recovery, it is important that they also keep an eye out for megatrends that will have a long-term impact on the wider environment and business. Megatrends provide a valuable basis for businesses to generate new planning scenarios, define a relevant purpose for the future and execute with urgency. In particular, four megatrends will create the most impact across the business landscape: decarbonisation, the future of thinking, unbounded work and life, and the behavioural economy.

In decarbonisation, businesses are increasingly expected to step up in taking action on climate - and more broadly, ESG issues. Employees, customers and other stakeholders expect business leaders to lead the way in addressing growing global challenges, including climate change. Investors are also moving up a gear when it comes to assessing the performance of companies using nonfinancial factors. Entrepreneurs and business leaders can play a role in demonstrating climate leadership through championing climate-related considerations in decision-making processes, incentivising innovation to contribute to a decarbonised business model or drive the development of performance metrics that promote sustainable opportunities.

In the future of thinking, as technology permeates all domains of the workplace, businesses need to strike the right balance between adopting digital technologies that liberate staff for higher-value activities and preserving human-centricity. Importantly, there is a need to ensure that the information and technologies they manage are trusted and protect against and mitigate cyber risks, including disinformation, phishing and malware. Technology is also profoundly changing how we think and behave as customers, employees and citizens. This means that businesses will need new ways to motivate employees to function at their highest capacity and marketing functions will need to rethink branding and advertising if consumers' purchasing decisions are dependent on technology.

At the same time, the boundaries that define work, leisure and learning are blurring more than ever as norms in working hours, leisure time, retirement and learning continue to evolve. For entrepreneurs and business leaders, this poses both opportunities and challenges that are intertwined. How do we best balance what makes for job satisfaction, productivity and a conducive work environment? Businesses need to consider how to engage talent in the new, decentralised operating environment and advocate a culture of inclusiveness to foster belonging within the organisation.

Lastly, in the behavioural economy - we see that human behaviour is becoming a commodity, quantified, standardised, packaged, and traded, as much as consumer data is today. Organisations will be increasingly using behavioural economics together with affective computing to measure, understand and shape consumer behaviour. Businesses must also stay attuned to what kind of consumer is emerging and what new customer segments are being created. The use of sophisticated customer-focused techniques, such as behavioural economics or affective computing, could be useful, as is bringing in behavioural expertise or subject matter experts to better understand evolving consumer needs.

By viewing their businesses through the lens of these megatrends, business leaders will be better placed to take informed and decisive actions for long-term success.

How can business owners better manage their capital allocation strategy?

An EY survey of over 1,000 CFOs around the world and across industries conducted in early 2021 found that 56% of respondents said their capital allocation strategy needed to be completely rethought. Four in five CFOs say their capital allocation process needs to be improved, and about two-thirds were unable to fund all planned projects in 2020, which could have consequences going forward. The lack of confidence in their capital allocation strategy, combined with the shortage of capital to fund all projects, underscores the need for companies to refocus their portfolios on their core business, carefully choose which initiatives to fund and address potential long-term changes to their market.

To better manage their capital allocation strategy, companies must look into three areas: define their future and investment road map, use the capital allocation process to drive business agility, and focus on the right metrics in the post-pandemic era. In the current business environment, there is a great opportunity to improve the capital allocation decision-making process. Striking the right balance between rigour and agility will enable companies to achieve their long-term strategy and value creation goals while navigating short-term disruptions.

Despite global economic headwinds, Singapore continues to attract investments - particularly in the manufacturing and electronics cluster. What do you think are the reasons for this?

The manufacturing sector currently accounts for about 21% of Singapore's total gross domestic product (GDP) and hires about 450,000 workers or about 12% of the workforce. The pandemic has underscored the importance of the sector to Singapore - hence the government's push to further develop the sector. The efforts include the new 10-year plan announced in January 2021 to grow Singapore's manufacturing sector by 50% and maintain its share of about 20% of GDP. The plan will raise the global competitiveness of the manufacturing sector and have more Singaporeans work in the sector.

The drivers for this are Singapore's various strengths in connectivity, infrastructure, trust, stability, confidence and workforce capabilities. Leveraging these strengths has enabled Singapore to compete for sought-after higher-value inbound investments, including in the manufacturing sector. Enhancing Singapore as an economic hub and a gateway to ASEAN and Asia-Pacific plays to our strengths and will enable us to continue to benefit from inbound investments via economic growth, jobs creation and social inclusion.

What are your thoughts about this year's competitive awards entries?

This year's award entries reflect the innovation and transformation journeys, which our enterprises are undergoing. Within each category are corporates that have demonstrated the ability to be nimble, embarked on new solutions and pivoted towards a new normal to drive sustained success.