By Faridun Dotiwala, Joydeep Sengupta, and Jatin Pant, McKinsey & Company
4. Operating Models Will Be OptimiSed For Speed, Agility, And Trust
Most companies in Asia have had to implement remote work to keep their employees safe. This unprecedented experiment has helped shift mindsets in profound ways, even as CEOs are still figuring out the exact role that remote work will play after the pandemic subsides. “This has been a good learning period,” said SBI’s Kumar. During the pandemic, SBI had to quickly equip staff with VPN-outfitted laptops to access full back-office functions securely. “We’ll build upon these learnings, and we’re reimagining the kind of capabilities that we can achieve to bring productivity gains to the bank. But we’ll need to design a system that can measure productivity, which is very difficult to do,” said Kumar.
The mindset shifts will alter operating models. As Ayala Corporation’s Zobel explained, “With the crisis, I had to advocate for a far shorter planning horizon.” His execution plans are implemented with weeks-long time frames and are subject to constant reviews and revisions.
To spur swifter decision making, leaders are flattening their organisational structure and pushing decision making down, trusting that employees on the front lines know best what to do. Teams within companies increasingly collaborate across functions in a synergistic way. As Tata Motors’s CEO Guenter Butschek put it: “The objective isn’t just to give direction. Much more important, it has been about hearing people, listening intently, and gaining a deeper understanding of their concerns, constraints, and risks—and, when possible, providing quantitative and qualitative support.” Similarly, at GSK Consumer Healthcare, top management provides guiding principles, while the leaders closest to the markets make and implement decisions. “Our decision tree is based on the empowerment of our people—the trust of the leadership in people on the ground,” said Choy. As another example, Ping An has been gradually moving toward an hourglass-shaped organisational structure, where middle managers function as “coaches” that help employees realise their potential.
To work, this kind of human-centered approach to management must be accompanied by training that prepares employees for the disruptions that technology may bring to their roles. Companies—including DBS Bank, IAG, and Samsung SDS—have launched initiatives to improve employees’ data literacy. “With this training, more employees will be able to understand the importance of data and how data must be handled to create more value,” said Hong, who hopes to turn every Samsung SDS employee into a data scientist. “We bring in the new technology to be proactive, but our employees benefit on a personal level by becoming more capable of doing more valuable and intelligent work. This allows them to make use of job opportunities within and even outside the company.” (For more, see “How COVID-19 is redefining the next-normal operating model.”)
5. Purpose Will Pay Off In The Short And Long Term
Each CEO we spoke with maintained that their company’s purpose proved essential for responding to the pandemic and would be equally central to creating resilience for the future.
During the pandemic, purpose helped companies prioritize on solutions for a variety of stakeholders. Leaders focused on helping employees and suppliers navigate the crisis. Ayala, for example, gave its 70,000 furloughed workers stipends to tide them through periods when work was halted, and BHP improved payment terms to suppliers during the outbreak. “People remember things like that,” said BHP CEO Mike Henry. “When they’ve seen that we’re there for them in their time of need, they’ll be there for us in our time of need.”
Many Asian business leaders say their companies’ purpose extends to society at large. Ayala partnered with the government to galvanize the wider community, and 270 private companies pooled their resources together to provide 9 billion pesos ($185 million) in aid to 2.8 million people in the Philippines. “Everyone understood they had a broader responsibility, and this created a very interesting dynamic in our country—a sense of common purpose and a coming together of different groups,” Zobel reflected.
In India, Tata Motors’s Butschek has had a similar realisation: “[The pandemic] reinforces how we are all interconnected and responsible for one another in ways beyond what we might have envisaged—whether it’s employees, customers, suppliers, or communities,” he said. “We have worked hard to stand with our ecosystem partners, and I think this purposeful, ecosystem-centered approach is helping us weather the crisis—or at least weathering it better.”
The pandemic has also brought environmental, social, and governance (ESG) issues to the fore, and companies such as South32 and BHP see the benefits of factoring ESG into every company decision on the bottom line. Making ESG a line-accountable item can “lift what is already a substantial contribution to our stakeholders further without eroding short-term financial or operational performance. Over time, you build greater value and greater returns for shareholders,” explained Henry.
In some ways, the CEOs’ discussions of purpose bring us around once again to our first trend, the idea that interdependence will strengthen Asia. Several leaders described government initiatives that would play a key role in cementing a stable future for the private sector. They expect that Asia will continue to benefit from substantial investments and infrastructure spend. For instance, Thailand hopes to establish itself as an electric-vehicle hub, while China intends to attract $500 billion in investment for green infrastructure. These are public goods and private opportunities. As Hahn put it: “There is an opportunity for public and private sectors to collaborate. Collaboration doesn’t mean making a private company operate more like a public company. It means the public sector and private companies can work together.”
Large Asian companies, far more likely than Western ones to be family owned, have a history of robust public–private partnerships. Many of the CEOs we spoke with believe that this history of partnership will play a critical role in the postpandemic world. As DBS Bank’s Gupta said, “We’re thinking about every possible aspect [of public–private cooperation]: sustainability, supply chains, building and construction, the digital economy.” As Zobel told us, “Multiple stakeholders will need to come together to solve society’s pain points.”
How To Lead Asian Companies In A Post-COVID-19 World
The trends we’ve described will challenge leaders as never before. To capture Asia’s opportunity, companies will need to move quickly and boldly, adapt constantly, and collaborate deftly. In the wake of COVID-19, their CEOs will need not only to care for their people but also to energise them. We believe that five actions will be essential:
- Adopt both a telescopic and a microscopic perspective. The American futurist Roy Amara once noted that “We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.” Similar dynamics will be at work in Asia writ large: we can safely predict that the trends we’ve described will play out over the long term, but we should also assume that there will be ample unpredictability along the way, particularly over the short term. An active board can be essential for enduring value creation. Even large public companies can take a lesson from family-run or, in India, promoter-led companies. As Sumant Sinha, CEO of ReNew Power, a renewable-energy company in India, pointed out, “Promoters tend to have a much longer-term mindset; they tend to think much more about the future than a management team might if it was driven by short-term results and incentives.” To be ready, CEOs and their boards—even while keeping their eyes trained on their companies’ long-term visions—are using both their telescopes and their microscopes to keep a close watch on not only what’s ahead but also what’s happening right now, in real time. Regularly deploying data analytics can deepen leaders’ understanding of changes in customer and employee engagement—nearly half of the top-performing companies we interviewed last year collect and analyse customer data weekly. And having a plan-ahead team can improve agility and help CEOs respond swiftly to abrupt trend breaks. Effective leaders strive to maintain close and frequent contact both with their boards (the more engaged the board, the better) and their leadership teams, be accessible to frontline staff, and know their customers as they know themselves. “You need to listen very humbly to your customers and partners [including employees],” said Samsung SDS’s Hong, “and then take action very quickly.”
- Implement bigger, bolder strategic moves. While it’s natural to want to act cautiously and conservatively when faced with uncertainty, we also know that now is the right time to execute seismic shifts in strategy. We’ve consistently found that companies boost their odds of success when they act bolder: reimagining their organisations along zero-based principles, amping up productivity to reach the top quartile of their industries or close to it, and implementing a programmatic approach to M&A, including divestitures. Our research also indicates that winners aggressively reallocate at least 60 percent of their capital expenditure among business units and refresh their portfolios over a decade, as well as embrace new technologies and make the most of a flexible and empowered workforce. Although big changes may feel intimidating, especially in times of unpredictability, successful CEOs are focused on reimagining what their companies can achieve. “If anything, COVID has taught us that we need to be even more aggressive and accelerate digitisation even more,” said Ping An Group’s Tan. She should know. At the height of the pandemic in China, Tan had to enable her workforce of 1.5 million employees to do their jobs remotely within five days. “It’s become a bit of a joke between me and my tech team,” she said.
- Become a trisector athlete. Leaders need to be able to manage and create sustainable value for organisations, society, and government stakeholders over the long term. “The [pandemic] has accelerated engagement between the public and private sectors at the intersection of digital technology and healthcare experiences, and the future of care will demand rethinking core assumptions about the intersection,” added Shobana Kamineni, the executive vice chairperson of Apollo Hospitals in India, citing the example of a nationwide telemedicine platform comprising “a coalition of digital health companies and hospitals.” Like triathletes, CEOs must flex multiple muscles and run with an eye to resilience and sustainability. Long-term value creation requires that leaders manage beyond their firm’s four walls and recognise that by serving employees, customers, suppliers, and communities, they serve investors to maximum effect. “As an organisation, we can only be as strong as our ecosystem,” said Butschek of Tata Motors, “and we are committed to coming out stronger after the crisis together.”
- Be the chief meaning maker. A compelling purpose is a difference maker; it not only focuses your organisation but also acts as an engine for resilience and speed. “A clear purpose statement is a unifying statement and a benchmark to test decisions,” said Karen Wood, chair of the board of Australian energy company South32. Some steps CEOs can take include embracing diversity and inclusion (which has been found to correlate to a company’s performance), connecting your purpose to your company’s “superpower,” and getting the most from ESG to meet and exceed social expectations. Shareholders and society alike look to you for action and ballast over the long term. Effective leaders acknowledge the toll—both physical and mental—that the pandemic is having on us all. It’s become increasingly important to demonstrate traits such as “being supportive and caring,” “being employee focused,” and “promoting open and trusting environments.” Putting your company’s values into action now will have a lasting impact over the long haul. Wood described a three-pronged role for the board during COVID-19: “What do we need to do immediately to address the health crisis to keep our people safe and support local communities? What do we need to do in the medium term to make sure that our business is protected? And what does the long term look like? … We do not want to lose the opportunity for a different conversation, a different way of thinking to come to grips with what the world is going to look like when we emerge on the other side of this.”
- Learn to walk the tightrope. The post-COVID-19 environment in Asia is simultaneously exciting and volatile, and leading a business in this climate is a balancing act: as a leader, you need to attempt to grow your company’s global presence but heighten its sensitivity to local tastes in new markets; warily eye geopolitical shifts while strengthening ties with Asian countries and companies; and consolidate power by doubling down on your unique strengths while simultaneously diving deeper into the digital ecosystems that are increasingly accelerating the Asian economy. Given that it’s easy to “stub your toes,” as Gupta put it, the modern Asian CEO needs nimble balance and the ability to discern and define a clear vision.
The global impact of COVID-19 has been profound, obviously. In business, its short-term impact has been devastating for many companies. But in Asia, as in the rest of the world, leaders are using this period to distance themselves even further from the laggards by doubling down on attributes they believe will secure their place in a future thats’s hard to divine and sure to be volatile. In so doing, CEOs and other business leaders are emerging from this difficult period with renewed conviction about what it takes to be a successful Asian company in the 21st century.