- Every company is looking to drive sustainable growth, especially in Asia-Pacific. But knowing when, and how to achieve it can be difficult.
- Some of today’s high-performing companies are embracing the future while maintaining their core operations — a strategy we call the Wise Pivot.
- By addressing three key constraints, companies in Asia-Pacific are pivoting wisely to unlock new growth opportunities. Here’s how.
In business, wisdom plays a crucial role
It allows executives to commit to new opportunities, adjust their pace and take corrective actions to bring a legacy business into the future.
Accenture research shows that leading companies — those that outperform others in terms of sales and Earnings Before Interest, Tax and Depreciation (EBITD) growth — embrace the future more decisively than others while still maintaining their core operations. We’ve dubbed this approach the Wise Pivot.
of companies expect to make a decisive shift to new businesses across Asia-Pacific.
While many companies have high ambitions, the reality is that a shift to new businesses can be painfully slow — some companies are tied to the old, rigid ways in which many legacy firms conduct business. Across Asia Pacific, 63% of companies are generating less than half of their revenue from new-business activities.
What’s holding them back? Our research points to three key issues: investment constraints, innovation constraints and synergy constraints.
Many C-level executives in Asia-Pacific report a lack of investment capacity to pivot. However, what we found is that leading companies know how to invest wisely: They are ambitious and laser-focused on achieving success in the long-term, rather than rapidly investing in the short-term.
of executives report that their companies have enough investment capacity to pursue growth activities in their existing businesses.
Take the Changi Airport Group (CAG). Over the last three decades, the company has successfully established Changi Airport in Singapore as the world’s most awarded, and certainly most ambitious, airport. What’s more, it recently opened Jewel, the largest shopping mall in Singapore, at Changi. But ambition never rests.
Over the next decade, CAG plans to double the airport’s capacity to 150 million passengers a year — up from 82 million. The construction of a new passenger terminal, Terminal 5, is expected to begin in 2020, and will employ nearly 20,000 workers when construction peaks.
Given the magnitude and complexity of the project, Terminal 5 is designed to be built in scalable modules and constructed in phases. “This is a practical approach to avoid over-investment and being caught wrong-footed, should our projections turn awry," said Transport Minister Khaw Boon Wan.
According to Liew Mun Leong, CAG’s chairman, planning ahead has always been part of the CAG modus operandi. Its strategy, "supply drives demand," means that infrastructure must be planned and built ahead of capacity demands. In doing so, CAG is chipping away at its investment constraints, tackling the venture piece by piece so it can scale operations in a way that won’t cannibalize its core business.
Innovation is the beating heart that propels companies forward. Businesses in Asia-Pacific, along with other regions, are constantly looking for new ways to capture value through new ventures. And while innovation may come from within, issues arise when it’s not dispersed throughout the entire enterprise.
of C-level executives in Asia-Pacific recognize that their companies have pockets of successful innovation, but that innovation is not pervasive throughout the organization.
Even worse is when innovation is not being used to its full potential. Only 21% of business leaders acknowledge that innovation is being used strategically to unlock value in their legacy businesses. This suggests that a large majority of companies across Asia-Pacific are missing the opportunity to give their legacy businesses a longer shelf-life through new initiatives.
The wisdom gleaned from leading companies shows us that emerging technologies can help challenge, and even redefine a company’s old ways of operating. For instance, Cathay Pacific, the flag airline carrier of Hong Kong, is harnessing blockchain technology to transform its rewards program, Asia Miles. In turn, they’re enhancing user experience and business efficiency.
By leveraging blockchain technology in a marketing campaign, Asia Miles and its ecosystem of partners and members are achieving a near-real-time ability to manage rewards. “Cathay Pacific is committed to benefiting customers through innovation and technology,” said Lawrence Fong, Cathay Pacific General Manager IT Solutions.
When preparing to scale new businesses, decision makers often miss the opportunity to establish synergies with their legacy business. Perhaps they’re cautious of eating away at their core. Yet leading companies, those who are making the Wise Pivot, know how to turn an existential threat to their legacy businesses into an opportunity for true reinvention.
of C-level executives in Asia-Pacific say that potential to cross-sell between the new and legacy businesses is taken into consideration.
Look no further than the digital revolution in photography to see where some companies have embraced synergies, and where others have not. Despite patenting the first digital camera in 1978, Kodak had to file for Chapter 11 bankruptcy in 2012. Fujifilm, however, survived by finding new ways to diversify their product portfolio. How? By leveraging their photographic film technology to expand into new businesses.
When the first wave of digitalization arrived in the 1980s, Fujifilm Chairman and CEO Shigetaka Komori called it cannibalism and acknowledged the company would eat into its own analog division. Still, the company decided not to reject digital technologies. As sales from film developing and printing began to dwindle, the company leveraged its in-house expertise, bringing technologies (such as those on collagen and nanoparticle formulation fostered through the photographic business) to new areas such as cosmetics and medical imaging.
What’s more, the company went on an investment spree to support its long-term vision. Finding synergy proved to be difficult as some believed the resource allocation decisions would be “damaging” to the firm’s short-term profitability. But the bet paid off. In the words of Komori, "We have more 'pockets' and 'drawers' in our company," — a metaphor for hidden gems that have the potential to bring in new revenue.