In the previous chapter of our ‘Leadership, Disrupted’ series, we heard what the APAC leaders of 70 MNCs had to say about the drawbacks of their previously-successful legacy business models. And why they were making it hard to change. Now, here is what they are doing about it.
First off, there’s a detectable new attitude to risk. This is because of the accelerated pace of change facing business that is challenging the conventional business theory. Today’s unprecedented, day-to-day realities mean decisions can’t be made ‘by the book’. There is no comfortable precedent for executives to rely on. This, of course, brings additional risk.
One executive explained that they don’t know exactly what the business will look like in the future, but this was not a reason to delay the journey. “What does disruptive innovation mean commercially? We are in the midst of a transformation and I am trying to work out a business model that is commercially viable in the future.
“At our HQ, we have a full-size dinosaur skeleton that everyone sees every day. This is to remind us about disruption.”
Another executive who is aggressively driving many new change initiatives remained humble about what he could see: “Should we be disrupted or the disruptor? We don’t know what we don’t know.”
This is a common theme amongst those who are pro-active about addressing “their” disruption. All of our interviewees were corporate executives, not entrepreneurs, but there is an acceptance of risk and willingness to leap into the unknown with enthusiasm. This fearless attitude is much closer to that of an entrepreneur than we would have seen five years ago.
APAC is different to Europe and the US
Every experienced APAC executive will say that the “region” is purely a convenient time-zone demarcation, so US or European multi-national companies can neatly carve up the globe. It is common outside of APAC for businesspeople to speak about India and China in the same sentence. To those in the know, this is like regarding Canada and Iran as similar. The rest of APAC is just as diverse. So, to mirror business models that have worked in the US or Europe in every APAC market, without considering local conditions, generally fails.
“If we used the same business model we use with global clients, with our local and regional clients, we would not be able to trade. We set up separate models and teams under the same brand. There were a lot of discussions about a second brand, but we decided to stay with the single brand.”
In China, for example, WeChat is all pervasive. Global companies are using it in a way Western social media simply wouldn’t, despite Western paranoia about security.
“Our recruitment of sales agents in China is through WeChat and since we started this, we have seen exponential growth, virally.”
One B2B company explained how they have moved just about everything onto WeChat. Marketing, sales, payments, internal written comms, voice comms, recruitment, and more. Food for thought and a bold move. The global CEO of one long-established global services company said: “We run our business on WeChat in China.”
Fast and slow
“In Asia, countries are leapfrogging technology advances. China has adopted mobile financial transactions because Visa and MasterCard are not there.”
“In Japanese companies, change is slow. It’s step by step. Very rigid employment law stops us from changing people and skills. Because of this, some Japanese companies will face a severe challenge in the face of disruptive change. This is why Japanese companies are not globally successful with their local model.”
One size does not fit all and APAC leaders are well used to complexity.
Most MNCs have tried multiple structures, from fully-local P&Ls to a mix of local and centralized regional teams, and matrix models. There is a strong preference now for fully-accountable local teams. MNCs see this as the best way to be close enough to the market and then develop and deploy the right model.
“A big headline for us is localization.”
“We need to become more local in our approach to be relevant.”
“As a leader, my philosophy is that the business is in the country.”
But there are other reasons for this too? For example, this response: “Huge amount of localization to counteract FX risk.”
Of course, there needs to be a way to keep countries aligned with the overall global strategy, quality, compliance and values. Like this fast-moving global technology company: “We allow each country to run its own P&L, but we have small SWOT teams that we drop into countries for three months to drive change quickly. They are people who have done it before. We stopped asking the local MD to change as it took too long. This allows fast execution of change while leaving the local MD to do the day job.”
This quote explains the importance and success of moving to a less-layered company structure: “Speed and urgency of decision-making has a direct implication on our structure. We have eliminated three organizational layers to speed decision-making. This has created speed, urgency and direct accountability. We removed the bureaucracy and we are all aligned on objectives globally. This came from our CEO realizing that there was a gap between what was being said at HQ and in the regions. He has pushed the centre of gravity out of the US. In the last five years, we have grown from 500 people in APAC to 6000. Hierarchy is bureaucracy.”
Thinking differently about the customer
Every business wants to be closer to its customer. One innovative, small acquisition by a global market leader changed the game for them and their industry: “We have disrupted our market by digitally delivering R&D support for our clients to help them bring new products to market more quickly. We brought this in through an acquisition.”
This company is pro-actively re-engineering its technology and engagement model. They see that their APAC customers are the earliest adopters of buying big-ticket financial services products online.
“Our industry has always required a human to human engagement. People are starting to feel comfortable with less of a human touch. The trend is towards less human interaction.”
A manufacturer who does not deal with the end user of their products is building much stronger bonds throughout their eco-system to influence sales. “Our eco-system is a win/win for everyone and we don’t even brand it.”
Organic growth is not fast enough for some
One leader was still looking for a solution to a growing market demand they cannot address: “Asia is a huge market for us and we are struggling to grow fast enough organically, but there are not enough robust M&A targets.”
This is an issue for many. Asian businesses are often family-owned. Even though they have scale, integrating these into an MNC is too daunting for most. Otherwise, in developing Asian markets, the local players have often not reached a scale or sophistication that makes sense for MNCs to acquire. There are some real success stories, but the M&A activity for most MNCs is still in Europe and the US. This does not solve the scale issue.
Where is the new thinking coming from?
Five of the 70 companies we visited had moved their global HQ (the CEO) to Singapore. In their case, they saw APAC as their biggest future market, even if this is not the case today.
Others have made the move for their most senior executives to be based around the world, rather than at HQ. “Our business was built with a US lens, but now 50% of our exco are based outside of the US and this has made a huge difference.” Or, put another way: “Our new global chief purchasing officer is based in Singapore. This distribution of power is good for the company.”
Sometimes this plan has not been easy to achieve and some real work is needed. “We wanted to transfer responsibility from HQ into the regions, but there was nobody to receive it.”
APAC has become the innovator and testbed for new business models
A surprising, yet common theme that came from our interviews was that many companies, across multiple industries, are creating and trialling new models in APAC. Then they’re exporting their successes to Europe and the US.
“We trial our greatest innovations in Asia. If it works, we take it to Europe. In the past, it was the other way around.”
“We are trialling grass-roots models in Asia and seeing what works, then sending this back to HQ. Once you out-perform the industry, it is hard to argue that the model is wrong.”
Interestingly, in many cases, these initiatives are being developed and implemented with no discussions outside of the region and sometimes with significant investment. This links back to the entrepreneurial attitude to risk becoming common amongst corporate leaders in APAC. Their justification is that they don’t want to waste time involving (or ask permission from) people who will not understand or contribute!
"I went to Indonesia and our GM there demonstrated a technology they had developed and gone live with. I had no idea they were developing this. This was a great innovation and we have now exported this to other countries.”
This approach to innovation is explored in much more depth in the next chapter when our final quote will become very relevant: “Human beings are very hard to change. The mindset is the biggest obstacle.”
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To read further chapters of the ‘Leadership, Disrupted' Report, click below:
- Chapter 1: Introduction: 70 APAC leaders of multi-nationals respond to disruption
- Chapter 2: How the digital customer is dictating business change
- Chapter 3: What happens when the competition can do everything you can, only faster?
- Chapter 4: Why MNCs are trapped by their past successes
- Chapter 6: How MNCs are redefining innovation across APAC
- Chapter 7: Looking East for innovation
- Chapter 8: Understanding the expectations of millennial talent
- Chapter 9: The proven ways to attract and hire top talent
- Chapter 10: Learning how to engage talent for the long-term
- Chapter 11: Why leaders are learning to be humble
- Chapter 12: Why changing corporate culture is the key to mastering disruption
- Chapter 13: How the way good leaders communicate is changing
- Chapter 14: Is mindset fast becoming more important than skill-set?
- Chapter 15: Understanding how to seize the mindset opportunity
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