With the green shoots of recovery now evident in construction and real estate following the worst decline since 2008, these sectors must pull ahead on digitalization.

The South-East Asian region’s construction and real estate markets look set for a rebound in 2022, following dismal performance over the past few years.

However, digitalization of these sectors is behind many other industry sectors, while crucial to their survival, according to research by McKinsey.

DigiconAsia discussed market, manpower and digital technology developments in the construction, real estate and shipping industries – considered laggards in digitalization – with Edward Senju, Regional CEO, Sansan.

Edward Senju, Regional CEO, Sansan

With increased market demand, how can South-East Asia’s construction sector keep up productivity amid a manpower crunch, compounded by an ageing population and increased cost per worker due to ongoing pandemic restrictions?

Senju: Allow me to use the example of one of our customers in Singapore – TOA Corporation, a leading general contractor construction firm that is digitalizing its invoice management processes (approximately 1,000 monthly invoices). 

Sansan’s digital invoice solution Bill One offers a simplified invoice management hub to help corporates streamline their business processes, and we think our case study with TOA Corporation highlights just one of the ways companies in the construction sector can keep up productivity amid a manpower crunch. 

Broadly speaking, we are supporting TOA Corporation’s transition away from paper-based processes at the core of operations and towards a digital-first approach. In addition, more of the communications between TOA Corporation and its vendors will move into the cloud with Bill One.

Bill One will allow TOA Corporation to automate much of its invoicing and vendor-side operations that were previously more manual and thus consumed substantial man hours to oversee, leading to cost savings. 

As more businesses look to adopt environment, social, and governance (ESG) frameworks, reducing paper wastage while improving data governance is a priority. 

Digitising invoices allows TOA Corporation to go paperless across more of its finance operations and at the same time reduces the amount of overtime its employees have to put in, resulting in better work-life balance.

Overall, we are encouraged by the clear desire of the leadership team at TOA Corporation to embrace a meaningful program of digital transformation in the post-pandemic era. We’ve seen time and again that those businesses who don’t put in place strategies to go digital are being left behind. 

With this step towards transitioning more of their finance functions and workforce tasks into the cloud through our Bill One platform, TOA Corporation has shown their commitment to upgrading the business and remaining competitive in the new digital environment. 

We believe they are now well positioned to go from strength to strength in the years ahead and become a digitalization success story within Singapore’s construction sector.

As the construction industry’s dependence on materials is deeply tied with the global supply chain, how are digitalized suppliers and contractors streamlining processes and communication to weather ongoing supply chain disruptions?

Senju: Construction and real estate took a heavy hit at the height of the pandemic. Many projects and sites were partially or completely closed down for extended periods.

Globally, the top players in construction agree that digital technologies are critical to their survival, according to research by McKinsey, yet many small and medium players still need to do more. 

While digital investments and transformation cannot singlehandedly solve all the challenges these sectors faced (or will face in the next global shock), they are certainly superior to the alternative: the status quo where digital is an afterthought not crucial to survival.

Amid the challenges and work to be done are clear silver linings to inspire us, with Singapore as an example. Support from one of the world’s most innovative and business-friendly governments, post-pandemic green shoots of recovery are emerging as economies bounce back in the wake of massive monetary and fiscal spending, and Singapore’s pragmatic can-do spirit.

Over the past year, Singapore’s real estate market performance has been excellent, as the sector attracted S$26.2 billion of investment sales during 2021, representing a 10.4% year-on-year increase.

A Monetary Authority of Singapore (MAS) survey projected construction sector growth of 15.8% this year, while the Building and Construction Authority’s (BCA) Annual Report 2021 heavily stressed the importance of digitalization for the Built Environment sector moving forward.

Positive market sentiment and a very strong bounce-back is good news, of course, but we are now seeing rapidly rising inflation and a looming domestic manpower crunch. These further increase the need for automation and make more stark the digital gap.

SMEs in traditional industries are among the laggards in digitalization. How should smaller businesses in traditional industries such as construction, real estate and shipping start their digital transformation journeys?

Senju: At the recently unveiled annual Budget (2022), Singapore’s Finance Minister Lawrence Wong highlighted that while local enterprises account for 80% of all firms, they only represent about 25% of total business R&D expenditure.

This imbalance is likely more pronounced in legacy sectors that have thrived for decades but were particularly hit by COVID, leading to a wake-up call on the need for better business resilience, continuity planning, and accelerated digital investments.

Shipping and maritime, for example, struggled during the supply chain squeeze last year, as turnarounds at ports were delayed and strain built up in a system still largely running on outdated processes and technologies – such as paper over digital.

My advice to businesses ready to take the plunge but not sure where to start is simple: start small and go fast. Identify a department or team ripe for a digital transformation pilot project and get it underway immediately. The time to hesitate and mull it over has passed.

Then, based on positive results, start rolling out digital initiatives across more of the organization. Something as simple as moving a finance team’s invoice processes from predominantly paper-based to digital formats is an easy point of entry. 

Moreover, digital investments, once started, often reveal benefits unseen in the beginning. These include improved remote work capabilities, superior corporate and data governance, and even more sustainable operations with lower carbon footprints (think about all the paper that digital alternatives typically save).

Over the course of the COVID-19 pandemic, many organizations have focused on remote work and digital tools to support business continuity. What else can businesses in the region do to remain competitive versus regional and global peers as the world charts its path to the post-pandemic era?

Senju: With the annual budget now behind us, two things have become clear: first, the Singapore government remains steadfast in its commitment to strengthening the digital capabilities of our SMEs and, second, there is a limited window of opportunity over the next few years for traditional industries to catch up.

The after-pandemic innovation agenda will take no prisoners, yet there is still an opportunity for Singapore to “establish leading positions” in key markets, as Finance Minister Lawrence Wong put it.

The Advanced Digital Solutions and Grow Digital schemes are good examples of the government leading on digital policy to support business, while at the same time continuing large infrastructure investments in broadband and 6G.

Singapore is clearly ahead in many cutting-edge areas such as fintech and digital banking, but we must impress a sense of urgency on traditional industries – such as maritime, construction, and real estate – around the need to accelerate investments in digital transformation.

Failure to do so means we may pull ahead (and even be a global leader) in some concentrated areas, though at the expense of others. That would lead to a scenario where, in a few years, our business expenditure on research and development in innovation across the board may fall short.