Maximising the Conglomerate Advantage (?) – Takeaways from AIBP Insights, 16 October 2020
Conglomerates have always played a key role in ASEAN economies, fueled by size, diversification and close government connections (If you don’t know yet, two-thirds of the largest family-owned firms in the world are based in Asia).
The Covid-19 crisis today throws a wild card into the picture: Will diversification help these conglomerates survive and thrive? Or will they struggle to take the decisive steps required to ensure survival and reposition for success?
As the finale of our week-long discussion series of AIBP Insights “in” the Philippines (well - they were all held online), we had the opportunity to bring together regional executives leading digital transformation within their relatively large organisations to discuss the topic of “Building a Sustainable Innovation Portfolio”.
Led by Han Chung Heng, Senior Vice President, Systems, Alliances, Channels & ISV, JAPAC of Oracle and YY, Vice President of Industry Platform, the discussion featured some of the most difficult issues that business leaders have to address.
Are we moving as fast as we should be?
Setting the stage, we looked at a study done by Bain which compared the performance of businesses in Southeast Asia.
- From 2010 to 2014, the annualized total shareholder return (TSR) for conglomerates outperformed pure plays by 3 percentage points.
- Yet, looking at 2014 to 2018, they have underperformed pure plays by a substantial 6 percentage points annually.
In this presentation by Irza, CEO of Industry Platform, he pointed out several things:
- Intuitively, shouldn’t conglomerates have a data edge (a 360 degree view of their customers, so to speak) with businesses cutting across multiple functions?
- What are the differences between conglomerates that have continued to outperform, when compared to pure play companies?
- Are we adapting to change fast enough? Is innovation even a top of mind?
Where is the ROI?
In fact, this is an issue that was constantly brought up in past discussions. Everyone knows that innovation is no longer just a good-to-have option, but more often than not, when it comes to new investments, it is not so simple to get buy-ins from all stakeholders involved.
Frank, Group CIO of Metro Pacific Hospital, mentioned that in the Philippines, hospitals are one of the sectors that have the least IT budgets. He has to make sure to get a very strong sponsor, understand the business requirement, the goals, the pain points, and make sure that the business case is really strong.
David, Data Committee Chair of Aboitiz Group shared his approach of making incremental investments. “Start small, demonstrate, and get the equity of trust - not to forget doing it in a manner such that it can scale.”
Drawing parallels between the various companies and industries that he has worked within, Sandeep, Business Analytics Head of NTUC Enterprise, brought up a crucial point:- some organisations often look for the best technologies, not realising that they are already sitting on data which are not being looked at, and acted upon, effectively. It is important to have a long term view, not oversell it, and have a little patience.
Drawing an example of where he helped one of the biggest oil & gas companies in the Philippines with a digital transformation project, Winho CEO of Magnifi Machines felt that having realistic expectations set, coupled with open and honest communication, is important to help service providers design the right framework or solution.
Steven, Group CIO of Kingold raised an interesting perspective: Inaction and indecision is the biggest (opportunity) cost. Before the group started their digital transformation 4 years ago, most of the decisions were made relying mostly on past experiences. With the right data strategy, they are now able to uncover opportunities that they did not know before (as simple as helping their sales group identify 25% more opportunities).
KPIs may be different for different people, different stakeholders - It's not just financial, but also the purpose and what the company wants to represent. Referencing the above, Han noted that data governance is, and will continue to be a tough journey - but we can start by integrating different sets of (messy) data, be it from social media, from graphs and traditional excel spreadsheets, from databases, to have a single source of truth. The size of data will only grow moving forward and by breaking down silos and putting together all information, the outcomes (aka numbers) will show.
How can we build the culture of innovation to drive agility?
This is the most difficult problem to solve as resonated across the panel.
Cong, Vinsmart’s Director of Transformation shared that Vingroup has very strong support from the chairman and board members to reshape their portfolio, with the vision of expanding into automotive, healthcare, education, etc. The challenge now is people. How can I roll this ambition down to employees, and shift their mindset and reluctance in embracing new ways of working, new technologies to get things done fast enough?
Myanmar has a different problem. Rita, CTO of Yoma Group spoke about her experience since joining the company 3 years ago. Most of the businesses were being run on multiple Excel spreadsheets or Microsoft forms. “When you have a new problem, let's add another person and add more spreadsheets. All these tasks can be easily automated which saves tons of time. But this is how people have been trained here.” Her role now is then to change the thought process and show the impact to stakeholders.
Having led the Innovation team of Ayala Corp for the past 10 years, Vince recognised that culture is not something that can be changed or built overnight, especially for conglomerates that have a solid, long established way of doing things. “But we can creep towards a general direction: be curious, have a problem solving mindset, be collaborative, be customer obsessed - the reason companies get disrupted is not because they didn't have the technology, it's usually because they've lost touch of what the customer was wanting or how the customer had wanted the solution.” Being in the VUCA (Volatile, Uncertain, Complex, and Ambiguous) world, Vince highlighted the importance of having the ability to adapt - test, fail, learn quickly.
This is echoed by Han, who creatively turned VUCA to CAVU (Clear And Visibility Unlimited) - how can we provide more clarity to the team using data? In Oracle, he himself is experimenting with the concept of agile team organization, breaking down the old traditional, bureaucratic departments to virtual teams to focus on certain areas/projects with a common purpose. The aim is to help make division much faster, to make change more impactful.
Creating Value with the Right Data Insights
Closing off the session, Han summarised the key pointers discussed and gave us some food for thought on the areas large organisations can prioritize to become more digitally native: be agile, empower your employees and then customers, collaborate to innovate. It all boils down to value creation leveraging data to have clearer visibility on what needs to be done.
It was a really enriching discussion, as we carry on with our upcoming discussions across Asia, we look forward to connecting with each of the leaders again and explore how we can further create value for their organisations, and reimagine new businesses.