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When I joined National Trade Union Congress (NTUC) in 1981, I saw the workings of the co-operatives and was convinced that it is an effective countervailing force to keep the free market in check. In forums with the unionists, I advocated that whenever possible we should use the co-operative as a tool to counter the excesses of the free market. 

The co-operative concept is in line with the solidarity of the common men. The objective of a co-operative is not to maximise profits; mediating the members is the objective. If we can do that, we can keep the free market in check. But the co-operative has to be big enough to make an impact. Fortunately for us, co-operatives like FairPrice and Income have the power to set benchmarks in society.

 

mr lim boon heng co-op champion
Mr Lim Boon Heng, Chairman, NTUC Enterprise

Says Mr Lim Boon Heng, Chairman, NTUC Enterprise, in an article published in Co-operator (July-Sept 2012 issue).

Six years later, these words still hold true.

With more than 600 combined stores and centres serving over two million customers, the social enterprises of the Labour Movement under NTUC Enterprise Co-operative Limited are doing good WELL.

However, in the digital age, the challenge that NTUC’s social enterprises face is no different from that faced by all companies in Singapore. All sectors face disruption. Mr Lim also points out: 

 

No organisation should believe it has arrived. If it does so, it will surely decline, and lose its relevance. That is the case with the social enterprises under NTUC Enterprise Co-operative Ltd. So if we believe we have arrived, we will be disrupted, and soon be history.

In this first issue of the digital Co-operator, the Champion of Co-ops talks about the kind of disruptive pressures that NTUC’s co-operatives face and how NTUC Enterprise is rising to the challenge.

Mr Lim has chalked up 26 years working with NTUC – the last 13 as its Secretary-General. He once remarked that when you work in the labour movement, you get to understand what people want. “Basically, what everybody wants is a good life and if possible, to improve their lives.”

Following his retirement from the NTUC, Mr Lim continues to work on improving lives through the labour movement's network of co-operatives. Besides helming the NTUC Enterprise Co-operative Ltd, Mr Lim is also deputy chairman of the Singapore Labour Foundation. He sits on the Board of NTUC Eldercare as chairman since 2000.

What kind of disruptive pressures do NTUC co-operatives face?

NTUC FairPrice has seen competition from online retailers. Local start-up Redmart has been aggressively building clientele by heavily subsidising customers. American multi-national Amazon has also started online retailing in Singapore. This is good for consumers as they get goods delivered and usually pay lower prices.

“How do these online retailers do it? They are using investors’ money to subsidise customers. The game plan appears to be to capture market share to become a monopoly or near monopoly – by being the last man standing.”

But it is a huge challenge to NTUC FairPrice as such competition compresses margins. NTUC FairPrice has an online channel too, but the more it sells online, the more it will lose on those sales.

How long will this battle be? It is hard to say. However, Amazon has huge financial resources from other streams of business, and Redmart has very strong backers.

NTUC Income similarly faces disruption by online insurers. Like banking, insurance can easily be done online. NTUC Income has developed online services, and is currently leading in online sales. But it must recognise that there are companies that are far bigger, with huge financial resources and global talent that can develop more efficient online services. Furthermore, their clientele base, on which they can spread the cost of developing these services, means their costs will be much lower.

Are any of the NTUC co-operatives less likely to face disruptive pressures?

In the ‘high touch’ services, more dependent on labour, the disruptive pressures may be lower. Pre-school services and eldercare services are highly dependent on trained manpower. However, it may be fatal to think that they are safe. They too should be harnessing technology to lower costs and improve services.

How is NTUC Enterprise responding to the challenge?

NTUC Enterprise has set up a $100 million digital transformation fund. It will digitise all its businesses. Much of the fund will go towards manpower. NTUC Enterprise has to compete to recruit talent with digital skills. When they have formulated what is to be done, there will be capex costs that each social enterprise will have to bear.

The challenge that NTUC’s social enterprises face is no different from that faced by all companies in Singapore. The next few years will be critical. Some will succeed, while others will fail. The window for transformation is a narrow one.

 


Learning Tips

  • Need to have the volume and size to compete and make an impact
  • Harness the power of digital technologies to become more effective, innovative and disruptive
  • Build up a pool of talent with the right skills and strengthen learning agility

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