8 Boardroom Challenges for Companies in Asia
Thursday, February 4, 2016
8 Boardroom Challenges for Companies in Asia
How Directors Are Evolving in a New Era for the Asian Economy
"With the Asian slowdown shaking world markets and investor confidence, boards are readjusting their thinking toward the region," says Susan Stautberg, chairman and CEO of the WomenCorporateDirectors Foundation (WCDF), the largest organization of women board directors globally.
What are the corporate game changers in this new post-economic-miracle era in Asia? How are companies operating in the region retrenching, and also preparing themselves competitively for the future? Over 100 top women executives and board members from across Asia gathered at the WCDF Asia Institute in Tokyo last fall to discuss and debate factors affecting growth, and experts provided insight into the key strategic drivers in Asian economies today; the organization's 2016 Asia Institute will be held in Mumbaiin September.
As more than 1 billion people across the world get ready to celebrate Chinese New Year and think about the year ahead, WCDF presents some of the top issues facing boards in Asia this year:
8 Boardroom Challenges for Companies in Asia
1. Surviving the "double demographic shock." Countries across Asia, especially Japan and South Korea but more to come, are experiencing a double demographic shock, with aging populations and a shrinking workforce driving slower economic growth. These conditions are part of a shift in the economic hierarchy, says Di Landau, a Director of James&Co. (Australia), CEO of Global Resources, Inc., and a WCDF Member. "The emerging market countries now contribute a bigger share to global GDP than their developed counterparts – it's no longer a hierarchy where the developed countries are at the core of world affairs with emerging nations at the periphery. Boards have to understand that these terms – 'emerging' and 'developed' – are even dated."
2. Looking at markets beyond the largest cities. As mega-cities have become congested with infrastructure bursting at the seams, both entrepreneurs and large companies are setting up businesses in smaller towns. This has led to disposable incomes rising at an unprecedented pace. "In India we have a segment of professionally and traditionally affluent which is an important target market for companies," says Jyoti Narang, former Chief Operating Officer, Taj Hotels, Resorts & Palaces India; Independent Director, Au Financiers (India), Ltd. and Calderys India Refractories Ltd.; and WCDF Chapter Chair. "This segment of 14 million households is contributing about 29 percent of domestic consumption, but will by 2025 comprise 40 percent of consumption."
3. Understanding the complexity of a new market. "Given that economic cycles have become less predictable, boards really need to expand their strategic planning process to incorporate a range of scenarios," said Julie Hembrock Daum, Spencer Stuart North American Board Practice Leader. "The Chinese market is particularly complex as its culture deeply influences its business practices. Additionally, there are regional differences in language, historical factors, geography, etc. that can create huge obstacles for overseas companies looking to compete with local companies. Boards should require an assessment of local partners and supporting organizations as well as a forward-looking country assessment to thoughtfully evaluate the potential risk and rewards."
4. Working across siloes in an organization. The Japanese concept of "kando" is something that Sony and its President, CEO, and director Kazuo Hirai – who opened the WCDF Asia Institute – have embraced to reinvigorate the "wow factor" in their products and services. To provide kando – an experience that, as Hirai says, "exceeds functional value" – requires crossing siloes in an organization; technology cannot exist in a vacuum. For many organizations, where siloes may be more entrenched, it may require a board to ask the tough questions of management about innovation: the technology may be great, but will customers experience the "wow factor" and make the product go viral?
5. Moving from software innovation to hardware/software integration. While software and apps have been in a continuous boom, hardware is experiencing an exciting and dynamic change as well. Hardware production is getting cheaper and faster – with tools such as 3D printing becoming much more cost effective and technologically available. "Starting a technology company used to be a lot more expensive because hardware development used to cost more. Today prototyping is more easily done with the use of tools such as 3D printing," says Emiko Higashi, Founder and Managing Partner of Tomon Partners, LLC; Director, KLA-Tencor, InvenSense, and Zeptor; and WCDF member. Combining software with the faster, more cheaply developed hardware is allowing business models such as "hardware-as-a-service" – creating more opportunities for innovation even with smaller budgets. "When you think about how this together with massive accumulation of 'data' affects the business you are in, the imagination can go wild," Higashi says.
6. Reducing innovation costs. The cost and risk associated with innovation is driving new partnerships and collaborations, as seen in the Philippines, says Ma. Aurora Geotina-Garcia, Owner, Mageo Consulting Inc.; Chairperson, Women's Business Council Philippines, Inc.; and Chairperson, Bases Conversion & Development Authority; BCDA Management & Holdings Inc.; Queen City Development Bank. "The government has created shared services facilities for smaller companies and is cognizant of the fact that, for the economy to grow, we need to support the smaller companies which cannot afford to buy or secure their technology on their own. There are also instances where academia and industry have collaborated, in which a university provides or develops a technology and makes it available to the companies that cannot afford to create their own. And industry players also get together and co-invest or collaborate on creating innovative practices, which all of them can share."
7. Rising power of ASEAN market. The ASEAN region continues to grow in influence, making it essential that boards have a strategy for ASEAN and its 600 million consumers and its manufacturing capabilities. "ASEAN is clearly a third force alongside Chinaand India in Asia," says Angelia Chew, Asia-Pacific Trade & Customs Leader at KPMG in Singapore. "Companies in ASEAN are benefitting from the region's growth potential and the ASEAN Economic Community. The economic partnerships through the ASEAN free trade agreements and trade facilitation initiatives enhance greater regional cooperation that provides opportunities for ASEAN companies to go global."
8. Impact of technology and talent on competitiveness. The explosion of technology and computing power is transforming industries by multiplying the power of the human brain. In the pharmaceutical industry, in Asia and across the world, technology leaps are "creating competitive advantages of where the brainpower is," says Steve Sugino, Head of Asia-Pacific, President and Representative Director, Biogen, Japan. "You have a critical mass where the brightest minds are integrated across multiple disciplines of biology, chemistry, and physiology to understand how diseases are affecting us. Technology is helping us to the extent where it's no longer necessary to have a huge laboratory with thousands of people. Companies like Biogen, at a much smaller scale, are able to be productive and innovative and create medicines that affect just as many people as the big companies doing this and with a very different infrastructure."
For more information, please contact Suzanne Oaks Brownstein or Trang Mar of Temin and Company at 212.588.8788 firstname.lastname@example.org.
About WomenCorporateDirectors Education and Development Foundation, Inc. (WCDF)
The WomenCorporateDirectors Education and Development Foundation, Inc. (The WCD Foundation) is the only global membership organization and community of women corporate directors, with more than 3,500 members serving on more than 8,500 boards. A 501(c)(3) not-for-profit organization, the WCD Foundation has 71 chapters around the world, with seven more to launch over the next year. The aggregate market capitalization of public companies on whose boards WCD Foundation members serve is over $8 trillion. In addition, WCD Foundation members serve on numerous boards of large private and family-run companies globally.
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