Singapore’s ability to navigate the challenges of disruption rests on becoming a Learning Nation, and ensuring industry-readiness and re-employability among millennials and mid-career professionals.
Disruption is regarded as the new normal. Clayton M. Christensen from the Harvard Business School in 1995 explained disruption as an innovation that “creates a new market and value network and eventually disrupts an existing market and value network, displacing established market leading firms, products, and alliances”.
In recent times, Travis Kalanick, co-founder of ride hailing application platform Uber Technologies, has taken disruption into mainstream consciousness. The term uberisation has become synonymous with disruption.
A popular Internet meme frames the company as “the world’s largest taxi company that owns no cars”. Yet Uber has never regarded itself as a cab company – Mr Travis told CNN that "(Uber is) a technology platform that connects riders and drivers".
Professor John Kotter from the Harvard Business School asserts that globalisation and technology are key drivers of disruption. Since Singapore tops the list of economies that are both globalised and connected, it might be worthwhile to examine three challenges that disruption is likely to bring about.
Challenge no 1: Displacement of legacy
In April this year, both Uber and rival Grab initiated fare cuts which saw average fares falling by around 15 percent. To compensate drivers for the revenue loss, Uber had raised the monetary incentives given to their drivers, despite losses of about US$1.27 billion in the first half of 2016.
While this approach continues to bleed the company’s balance sheets, its appetite for growth is a massive competitive advantage over legacy taxi companies.
The total taxi fleet in Singapore stands at about 29,000 taxis. Uber’s disruption of Singapore’s taxi industry places the employment of these very drivers at risk. In this impending scenario, do taxi drivers realise that despite incessant calls to regulate drivers of ride-sharing apps, the disruption of the taxi industry is inevitable?
Moreover, there is no letting up of Uber’s capacity for growth. Sue Chang of Market Watch reported that funds invested in derivatives alone total US$1.2 quadrillion, a quantum that dwarfs the amount of money in all the stock markets combined. These enable fund managers to amass mammoth war-chests for companies like Uber.
So, when the National Taxi Association lamented that “the playing field (between taxi companies and Uber) is not level”, it had missed the point. The playing field will never be levelled. Which brings me to the second challenge for open economies, which is in helping its populace understand the consequences that disruptors bring to the table.
Challenge no 2: Embracing disruption with open arms and open eyes
Uber at its core is a technology company, which operates on a different algorithm than any taxi company in Singapore. While shareholders hold legacy firms to conventional models of evaluation like the company’s bottom-line, investors in disruptor firms are primarily concerned with growth momentum, which often translates to gargantuan valuations.
Having raised another US$12.5 billion months ago, Uber today has an implied valuation of US$66 billion. By comparison, ComfortDelGro – Singapore’s largest taxi operator – has a market capitalisation of less than 10 percent of Uber’s valuation. Uber is in more than 450 cities across the globe. In the United States alone, more than 450,000 drivers use the Uber mobile app daily.
When one considers the other aspects of its business model, such as Uber’s focus on research and development (the company recently announced an experiment in Pittsburg to pioneer autonomous vehicles), these differences are even starker.
But Uber’s growth will eventually plateau, which might trigger a flight of capital, just as we have seen in once-hot stocks like Twitter and LinkedIn (months before it was acquired by Microsoft). But before that happens, Uber would have been prepared to cut out one of its most significant cost centres: its drivers.
After all, Uber regards its drivers as independent contractors, not employees, whose daily trips offer data that fine-tunes the autonomous navigational capabilities of Uber’s technology platform. But what happens when these independent contractors become displaced by the very disruption that they had helped to engineer?
The third challenge facing Singapore is its ability to inspire in people that necessary appetite for continuous improvement, to cope with the disruption.
Challenge no. 3: Private education institutions should help to create a Learning Nation
Uber is but one of many new economy companies that are poised to disrupt open economies. And if we credit Uber for bringing disruptive innovation into the mainstream, then Singapore’s Prime Minister Lee Hsien Loong should be lauded for propelling disruption onto the national agenda when he rallied the country to recognise disruption as “a defining challenge to Singapore’s economy”.
Singapore’s greatest resource is its people, and underscoring the government’s measures to create a future economy is the development of its human capital through continuous learning. While the government hopes to transform Singapore into a Learning Nation, institutes of higher education from the private sector, like PSB Academy (PSBA), can also play their part by both contributing to Singapore’s industry-ready talent pool, while also serving as vanguards for experimentation of new pedagogy and learning experiences before they are embraced by larger, public institutions.
Over 11,000 students study at PSBA every year on full- and part-time bases. Anticipating double-digit growth this year, PSBA will expand in Singapore with a city campus in Marina Square that spans two-storeys, and occupy over100,000 square feet.
In 2015, PSBA’s graduate and employment survey found that about nine in ten students found employment within six months upon graduation, while six in ten students saw pay raises or career switches that positively impacted their remuneration packages. These figures reveal that private institutions can indeed play a complementary role in Singapore’s ecosystem for human capital development alongside public institutions, to help the country thrive in this age of disruption.
The views expressed in this column are the author's own and do not necessarily reflect this publication's view, and this article is not edited by Singapore Business Review. The author was not remunerated for this article.
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Marcus Loh is Director, Asia Pacific Communication for global visual analytics firm Tableau Software. He was named a Linkedin Power Profile and was listed in Singapore Business Review’s top 10 “Notable Chief Marketing Officers under 40”. Marcus holds an M.S from Michael Smurfit Graduate Business School and won a scholarship for his second master’s degree from the Singapore Management University and Università della Svizzera italiana. He serves on various advisory capacities for academia and industry including, the Institute of Public Relations of Singapore, CMO Council, UOB-SMU Asian Enterprise Institute, Asia Enterprise Brand Awards, to name a few.