09 Oct 2017
The Business Times
By NISHA RAMCHANDANI
ENGINEERING conglomerate Singapore Technologies Engineering is intensifying its focus on new technologies and high-growth sectors as it seeks to position itself for long-term growth.
These are some of the key strategies that the group has identified to help it scale its next growth curve, chief executive Vincent Chong tells The Business Times in his first interview since assuming the role last year.
"We have been in business for fifty years and I think we’ve done very well...But we’ve reached an inflection point. We need to find new growth levers," says Mr Chong, adding that revenues have been flat over the last few years. Mr Chong joined ST Engineering in 2014 from ExxonMobil Asia Pacific and took over the helm from former chief executive Tan Pheng Hock in October 2016.
One such lever involves ramping up efforts to collaborate with start-ups and other organisations on technology and innovation to complement the group’s traditional approach of in-house research and development efforts.
"We need to look at partnerships more so than before so we can develop our solutions at a faster pace because business cycles are so much shorter," says Mr Chong.
"While there are a lot of disruptions going on that cause anxieties for many companies, we see it as more of an opportunity than a threat. We’re not only users of technology but also developers of technology."
Last week, it officially launched the Open Innovation Lab, Innosparks, at One North, providing start-ups with facilities as well as resources in the form of its engineers in the hopes of creating new solutions.
Meanwhile, these start-ups can tap the group’s network and distribution channels to help produce and commercialise their products, Mr Chong says.
Separately, it has established a US$150 million corporate venture capital unit, ST Engineering Ventures, to search for breakthrough innovative and cutting-edge technologies.
Most recently, the unit invested in California-based cyber security firm, Janus Technologies.
In the past 2 1/2 years, ST Engineering has also invested in two corporate labs at Nanyang Technological University and Singapore University of Technology and Design to conduct applied research on robotics and cyber security respectively. Collectively, these two programmes are worth nearly S$100 million.
"We are using those as conduits to support our growth objectives. We need to continue to strengthen our core business. We also want to look for new growth areas in the new world. Cyber security is one, robotics is another," he says, along with autonomous vehicles, the Internet of Things (IoT) and data analytics.
He cites the electronics and kinetics sectors as among those with upside potential, given the growing demand for smart cities.
ST Kinetics, for instance, inked a partnership with the Land Transport Authority to develop and trial autonomous buses which use satellite-based global positioning systems and sensors. This has a "high chance" of being operational in the future given Singapore’s manpower constraints, following which the group could potentially roll it out to other cities.
The defence and engineering giant is also trying to leverage its group synergies, especially when venturing overseas to win projects.
For instance, a smart city project can cover areas ranging from cyber security to robotics and smart transport. Combining the strengths of its different business segments means it can come up with a stronger proposition.
"We’ve started gathering intensity on approaching the market as one group, which is important as we embark on the next journey of growth, for example in smart city (projects), especially outside of Singapore where we are lesser known and competing against large companies," says Mr Chong.
"In some cases now, we have to start looking at public-private partnership models, (which) is work- in-progress in terms of platforms and processes, but we’ll get there."
Sharing group resources has also allowed it to operate more efficiently and reap cost savings. Over the past year, it has implemented six shared services functions that support the entire organisation, resulting in over S$10 million in savings.
Prior to that, each business unit had its own services such as human resources, IT, communications, finance, procurement and facilities management functions.
In addition, it is strengthening its portfolio by looking at making long-term investments, especially in high-growth areas, as well as the reallocation of resources where necessary by divesting existing investments.
For instance, it has acquired a 51 per cent stake in SP Telecommunications, giving it a wide fibre-optic network to market smart city solutions for governments and companies; it has also invested in US-based Aethon, which manufactures autonomous robots for deployment in sectors such as hospitality and healthcare.
But even as it channels investments towards new frontiers, it continues to invest in R&D for its core businesses, such as aerospace, electronics and land systems.
"Aerospace is a steady growth sector. We are building new aircraft maintenance facilities in various parts of the world and we’re still looking for opportunities to invest when the opportunity presents itself," he says.
Aerospace arm ST Aerospace, which is the world’s largest commercial airframe maintenance, repair and overhaul (MRO) service provider, has started leveraging data analytics, augmented reality as well as predictive maintenance, and is currently evaluating the use of drones for inspection. It is also investing in other growth areas such as aircraft interior modification.
This is not to say there are no challenges in its core businesses either.
Its marine business reported a pre-tax loss of S$8.1 million in Q2 2017 on the back of weak industry conditions and its US operations.
RHB analyst Shekhar Jaiswal wrote in a recent report: "Amid expectations of additional provisions to be made, we are assuming...the shipbuilding business (will) remain loss-making in 2017 and 2018."
Source: The Business Times © Singapore Press Holdings Limited. Reproduced with permission.