Thriving in a digital economy: Enabling

entrepreneurs, embracing failure

By Greg Unsworth, Digital Business Leader, and Lawrence Wong, Deputy Head of
Government & Public Services, at PwC Singapore
This article was contributed to and first published in The Business Times on 4 March
2016.

The growing digital economy

While growth of the global economy is widely expected to slow in 2016, the growth of
the digital economy will likely accelerate. The digital economy is already permeating
multiple aspects of the world economy and impacting sectors, businesses and
workers. With the next billion people coming online, it will become an even more
important driver for innovation, competitiveness and growth. The digital economy was
a key focus at the recent World Economic Forum in Davos, with the theme of The
Fourth Industrial Revolution.
Digital technologies are changing the way we do business and redefining global
value chains. Platforms such as Airbnb and Uber are disrupting traditional business
models; algorithms, artificial intelligence, blockchain are disrupting professional
services while the Internet of Things and 3D printing are changing industries such as
manufacturing and healthcare. In PwCs latest Global CEO Survey, business leaders
told us technology is one of the biggest disrupting forces in their organisations.
So what does this all mean for Singapore? This article will not delve into specific
digital technologies or suggestions on tax and incentives already outlined in PwCs
Budget Wishlist and white paper on Singapores tax policy Singapore: Sovereignty,
Society, Substance, Success. We will offer broad ideas on areas that the Singapore
government can explore to enable businesses and workers to thrive in a digital
economy.

Digital opportunities and challenges

The growing digital economy presents both opportunities and challenges. It benefits
companies and workers that are entrepreneurial and able to constantly adapt to
create and capture value more effectively. There are two key opportunities:
Shorter route to size and scale. We have seen enormous advantages for players like
Alibaba, Google, Facebook to scale rapidly, dominate their categories and acquire
companies in related and non-related industries. Alphabet, Googles holding
company, is one of the worlds most valuable companies by market capitalisation.
Amazons market capitalisation has exceeded that of Walmart, Alibabas IPO was the
worlds largest. On Fortunes list of 122 unicorns start-ups valued at US$1 billion
and above 11 are valued at US$10 billion and above.

Higher return on skills. Workers who are able to leverage technology the
cognitives will benefit and command a premium on their skills, compared to the
cogs, or workers who are not skilled to work with technology or have commoditised
skills. Googles 43-year old CEO Sundar Pichai recently became the highest paid
CEO in the US. As the market increasingly demands the higher skilled cognitives, the
pay gap between them and the cogs will widen.
This brings us to the challenges. At the broader economic level, businesses and
workers could be displaced as industries restructure and change. Companies face
more intense competition, from both traditional and non-traditional players, as the
pressure to stay ahead of the curve increases. For instance, banks are now
competing against Alibaba and telcos on payments.
There are two other complex challenges:
Hollowing out of jobs. Workers are not just competing against international talent,
they are also competing against more efficient robots and algorithms that can do their
jobs more quickly and efficiently, as staying relevant increasingly becomes harder.
The digital economy may not create many jobs, unlike the industrial revolution. The
hollowing out of white collar jobs will be a key concern.
Increasing complexity to regulation. For governments, the pace of change may be
too fast for policy and regulation to keep up. Rapidly changing industries will make it
harder for governments to regulate. Should Airbnb be regulated like hotels, or
financial technology (fintech) startups be regulated like banks? More fundamentally,
how should the role of regulation evolve?

What Singapore is doing

Singapore is striving to seize opportunities amidst the disruptive change in its aim to
shift towards a value creating economy. It was highlighted by Harvard Business
Review as one of the stand out countries high levels of digital development
combined with continued upward digital progress based on the Digital Evolution
Index. The Singapore government has been proactive in leveraging technology and
enabling innovation, clearly illustrated by the various initiatives around Smart Nation,
the SkillsFuture Movement, and smart regulation and promotion.
SkillsFuture Movement. Human capital is Singapores key resource and it is through
developing and harnessing the right skills that value can be created, and innovation
sparked. Reskilling and upskilling are crucial in a fast changing digital economy.
Smart Regulation and Promotion. The Monetary Authority of Singapore hired a Chief
Fintech Officer (probably the worlds first) and committed $225 million to support the
creation of a vibrant ecosystem for financial innovation, illustrating it is a forward
thinking regulator who can balance regulation and innovation. Infocomm Media
Development Authoritys formation shows that the government is taking the lead to
promote and regulate the converging infocomm and media sectors more holistically.

Enabling entrepreneurship and innovation

The Singapore government has done much to encourage innovation by companies
and upskilling of workforce. Besides SkillsFuture and multiple grant schemes to help
SMEs and start-ups, it is investing $19 billion in R&D over the next five years,
boosting engineering capabilities and encouraging Singaporean tech talent to come
home.
In the next phase of Singapores development, it may not be about the government
doing more but perhaps being more focused on what to do. We suggest three broad
areas for consideration:
Entrepreneurs from the region. Singapore was ranked Asias most talent competitive
economy by Swiss business school IMD on its ability to develop, attract and retain
talent. Moving forward, Singapore could focus its efforts on attracting entrepreneurs
and innovators, especially those from the region. ASEAN holds much economic
potential; its combined GDP is projected to be in the top five globally by 2020
according to IMF estimates. However tapping on the opportunities in the region is not
straightforward due to differing culture, languages, rules, and levels of development.
These regional entrepreneurs will bring with them knowledge of their home markets
and could serve as conduits back to the regional markets. Their presence in
Singapore could add to the energy and cross fertilisation of ideas and benefit
Singapores start-up ecosystem which is becoming more vibrant. Grab (formerly
GrabTaxi) is an excellent example of a start-up founded in Malaysia, now
headquartered in Singapore and expanding rapidly in ASEAN. It is investing S$100
million in an R&D centre in Singapores CBD which will eventually create jobs for 200
engineers and data scientists.
Entrepreneur Pass. Building the above point, a more flexible entrepreneur pass could
be introduced. Current employment pass rules tend to be geared towards
employees, not potential employers of the future. While there is EntrePass for
business owners, the criteria could be onerous for many new start-ups e.g. having
S$50K paid up capital. The relevant agencies, together with the start-up community
in Singapore, could study how the criteria could be made more flexible and also how
to identify the type of entrepreneurs to target.
Experimentation through national challenges. Ageing, healthcare, transport are some
of the challenges facing Singapore. Policy makers could tap on the collective wisdom
of the nation to address some of these challenges by framing them as a series of
problems to be solved through technology. E.g. national hackathons could be
organised where innovative and applicable solutions are adopted by public and
private sectors. This could galvanise the public to try different ideas to solve
Singapores national challenges. This encourages more experimentation and also
allows people to take ownership to help steer Singapore towards a better future.

A collective responsibility to shift culture and mindset

Ultimately, thriving in the digital economy goes beyond investing in the latest digital
technologies or embarking on ambitious IT transformational projects. It boils down to
having an entrepreneurial culture and mindset one that encourages
experimentation, enables innovation and embraces fast failure. Cultivating this
mindset is not just the governments responsibility no one single policy lever can
address this businesses and individuals need to step up and take ownership. The
government can however help by continuing to develop the ideal ecosystem to
support entrepreneurship and an entrepreneurial mindset.
Singapore has always been able to overcome the odds and seize the opportunities
despite its constraints and challenges. With a stronger entrepreneurial mindset, we
are confident that it will continue to do so and thrive in the digital economy.