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BCL2011 Indonesia Innovation Dec2012

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For now, optimism continues to reign in Indonesia with foreign direct investment rising 22 percent in the third quarter of
2012 from one year ago, after posting 30 percent growth at the previous quarter.

The question is, how long will this optimism
last? What stands in the way of sustainable growth? As pointed out in the government’s
MP3EI masterplan, the key lies in building an “innovation-driven economy”.

And yet, innovation is a loaded buzzword.
What does it look like in terms of
organizational behavior? What are the conditions that will allow it to flourish?

This was the topic of Hay Group’s 2011 study
in to the Best Companies for Leadership
and is extensively discussed.

However, in this section of this paper, we will focus on the lessons that organizations in Indonesia can learn from the Best Companies for
Leadership (BCLs) when it comes to
fostering innovation.

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BCL2011 Indonesia Innovation Dec2012

  1. 1. Leadership reloaded: Innovating in the next decadeThe rules have changed again. To succeed in the new normal, Asian leadersmust be game-changing innovators. How can companies in Indonesia buildsustainable businesses based on innovation?
  2. 2. Contents Innovation in Indonesia 2 Redefining ‘business as unusual’ 12 The business of innovating 14 Leading innovation in Asia 16 Latitude for new ideas 18 Braced for long-term challenges 22 Plugged-in to virtual participation 26 Lessons on innovating leadership 30 Leadership reloaded 32 About BCL2010 34
  3. 3. 4 Best Companies for Leadership in Asia Innovation in Indonesia Indonesia has a grand vision to become a top 10 advanced economy by 2025, and within the top 6 by 2045. To achieve this lofty goal, Indonesia has to attain real economic growth above 7 percent every year for the next four decades. For now, optimism continues to reign in In this section of this paper, we will focus on Indonesia with foreign direct investment the lessons that organizations in Indonesia rising 22 percent in the third quarter of can learn from the Best Companies for 2012 from one year ago, after posting 30 Leadership (BCLs) when it comes to percent growth at the previous quarter. fostering innovation. In short, BCLs excel the following practices: The question is, how long will this optimism last? What stands in the way of sustainable ƒƒ Create room for ideas to be heard growth? As pointed out in the government’s ƒƒ Welcoming diversity MP3EI masterplan, the key lies in building ƒƒ Grooming the next generation an “innovation-driven economy”. ƒƒ Setting the stage for innovation And yet, innovation is a loaded buzzword. What does it look like in terms of organizational behavior? What are the conditions that will allow it to flourish? This was the topic of Hay Group’s 2011 study in to the Best Companies for Leadership and is extensively discussed in the following chapters.©2012 Hay Group. All rights reserved
  4. 4. 5“ Innovation is embodied in our values. Since the 1980s we have been running annual programs called Innov-Astra that helps channel new ideas and innovation from the lowest levels of the ” organization up to senior management. Mr Ekuslie Goestiandi , Head of Management Development Institute, PT Astra International
  5. 5. 6 Best Companies for Leadership in Asia Figure 7: Create room for ideas to be heard Create room for ideas to be heard Every innovation is the result of a new way and may sometimes be viewed negatively. of thinking: different points of view creating Subsidiaries also perceive that the headquarters new insights, or new perceptions brought are not listening to them; that is, their ideas to bear on the status quo. BCLs know that will not be implemented anyway. they need to create room for new ideas to be At home-grown diversified conglomerate heard (Figure 7). PT Astra International, things are different. Leaders in Indonesia are doing well when Mr Ekuslie Goestiandi , the Head of Astra’s it comes to gathering viewpoints from Management Development Institute at pointed within the company for solving problems. out that, “Innovation is embodied in our Structures are also provided for ideas to filter values. Since the 1980s we have been running upwards. annual programs called Innov-Astra that helps channel new ideas and innovation from the However, unsolicited ideas are not so lowest levels of the organization up to senior welcome in companies here. Bypassing the management. There is healthy competition to chain of command is not always welcomed secure the best idea for the year and we offer attractive prizes to reward employees’ efforts.”©2012 Hay Group. All rights reserved
  6. 6. 7“ In fact, all five of our businesses units in Indonesia are led by Indonesians. ” Mr Handry Satriago, President-Director & CEO, GE Indonesia“ The opportunity to shape the minds of future leaders was very enticing. I see that my role as Chief Learning Officer is to setup and build a curriculum that would institutionalize leadership development into the core of the ” Bakrie Group of businesses. Mr Effendi Ibnoe Bakrie Learning Centre
  7. 7. 8 Best Companies for Leadership in Asia Welcoming diversity However, companies in Indonesia not recruit Because different ways of thinking are enough minorities and top management essential raw materials for innovation, positions are predominantly filled by the BCLs ensure that their organizations international talent. comprise a breadth of experience and perspective, pursuing multiple strategies to At General Electric (GE), who is ranked incorporate diversity into the fabric of their number one in the global BCL Top 20 list, companies (Figure 8). localization of top management has been undergoing since 2010. Mr Handry Satriago, Leaders in Indonesia are fairly adept at President-Director & CEO, GE Indonesia juggling local and global demands that commented that although GE is a foreign – come with working in a multinational owned company, they have been accelerating environment. They are culturally sensitive the development of local leadership and and can work with culturally-diverse teams. talent. “In fact, all five of our businesses units in Indonesia are led by Indonesians,” he adds with pride. Figure 8: Welcoming diversity©2012 Hay Group. All rights reserved
  8. 8. 9Figure 9: Grooming the next generationGrooming the next generationMany companies have good talent Then there is also the element of personaldevelopment programmes – giving satisfaction. As Mr Effendi Ibnoe of Bakrieemployees stretch targets, providing training Learning Centre said, “I have spent severaland encouraging employees to learn outside decades with multinationals, including astheir areas of expertise. GE’s Vice-President of HR for South-EastHowever, there is a vital ingredient missing. Asia. The opportunity to shape the mindsNot enough CEOs and business leaders in of future leaders was very enticing. I seeIndonesia are personally grooming their that my role as Chief Learning Officer is tosuccessors (Figure 9). Perhaps they view this setup and build a curriculum that wouldas grooming their rivals. But, we’d like to institutionalize leadership development intoencourage a different perspective – if there is the core of the Bakrie Group of businesses.”no one who is capable of taking your place,then it will be harder for you to move upyour career path.
  9. 9. 10 Best Companies for Leadership in Asia Setting the stage for innovation Under President S.B. Yudhoyono’s vision for merely fixing existing problems. Future Indonesia, the country must to transform revenue streams can be generated by offer- ing customers what they will need in the into one of the 10 major economies in the future. world by 2025 through increasing value-add ƒƒ Leaders need to celebrate innovation and innovation in the way things are done success and treat failure as opportunities here. for learning, instead of punitive actions. For this to be achieved, certain In a society where respect and deference organizational behaviours in Indonesia must are still accorded to rank, leaders must be be changed (Figure 10): visible in supporting efforts at innovation. ƒƒ Employees must be given time and credit ƒƒ Bite the bullet on short-term profits and for discussing customers’ future needs. try new things that may produce long- The key here is not just to focus on term revenue stream. customers’ current requirements as this is Figure 10: Setting the stage for innovation©2012 Hay Group. All rights reserved
  10. 10. 11Innovation reloadedCompanies need innovation for growth. And in order to have the best execution, weAnd as noted earlier in this paper, there is believe that by concentrating on the fourno shortage of clever people and smart ideas principles discussed earlier, companies inwithin our workforce in Indonesia. Hence Indonesia will achieve real growth and takethe competitive edge comes from having their rightful place on the global economicthe best execution – from the time the idea stage.is first identified, shepherded through thecorporate maze, and into the hands of thepaying customer.About Hay Group’s Best Companies for Leadership in IndonesiaHay Group’s Best Companies for Leadership 2011 was announced in May 2012. Globally,6,921 individuals (managers and above) participated in the study. Out of this pool, 305respondents are working in Indonesia from both locally-grown companies like DepoBangunan, PT Astra, International, PT Pertamina, Kaltim Pasifik Amoniak and Semen Gresikand global MNCs like Nissan, Beiersdorf, Zuellig Pharma, Panasonic and CIGNA Insurance. Contact the author Nidthia Chelvam, Managing Consultant for Hay Group Indonesia, helps multi-national companies and international organizations transform their business strategies into results. Nidthia also has extensive line and operational management experience with global companies across three continents. E| Nidthia.Chelvam@haygroup.com
  11. 11. 12 Best Companies for Leadership in Asia Redefining ‘business as unusual’ Business ideas: check. Good talent: check. Performance strategies: check. Alas, the wheels are barely in motion as a ‘new normal’ rears its head. Increasing globalization is a given, with Additionally, advances in technology international competition likely to grow convergence will continue to blur the fiercer and markets even more diversified. boundaries between private and working The rise of India and China, coupled with lives. More business is conducted ‘virtually’, the global economic power shift towards and power is shifting to employees – Asia, is reshaping the world before our very particularly the rising class of digital eyes. In the West, the number of jobs is knowledge workers, who can work anywhere. falling; in the East, leaders have to learn how However, while technological prowess can aid to manage in new markets as they expand innovation, digital natives’ over-reliance on westward. technology and their lack of social skills do not make them ready for leadership roles. Technology convergence and the evolution of social media have raised the bar on Hence, talent will continue to be at a customer engagement. Customers now premium and retaining employees with key expect an instant response to their queries; skills will be a challenge. The “youth bulge” and even be involved in the process of in Asia poses significant leadership challenges. product development in services like IT and In 2011, the median age of Asians is 29.5 communication. years, compared to 40.3 years in Europe and©2012 Hay Group. All rights reserved
  12. 12. 1337.3 years in North America1. What will Coupled with shorter economic cycles,it take to accommodate and motivate the hyper-connectivity and restless digital natives,“me” generation that form our next band of we believe that the only way for companiesleaders? to succeed is to innovate. Not just in new products and services for customers, but alsoThe hunger to capture Asia’s abundant in the way they treat and motivate employees,business opportunities is challenged by groom leaders and conduct business.higher expectations, greater businessrisks and stronger market competition. As we know, innovation is easy.Meanwhile, the growing scarcity of strategic Commercializing it and buildingresources such as water, minerals, metals and organizational discipline around it is muchfossil fuels will cause price hikes and lead to more challenging. In this paper, we willsocial instability. look at the dynamics of leadership required for disciplined innovation, especially for companies operating in Asia. 1 Source: Population Division of the Department of Economic and Social Affairs of the United Nations Secretariat (2011). World Population Prospects: The 2010 Revision. New York: United Nations. “ Asia’s best companies are also more receptive to criticism than their peers – with 77 per cent embracing negative feedback and performance difficulties as opportunities for improvement and ” growth.
  13. 13. 14 Best Companies for Leadership in Asia The business of innovating While there is no silver bullet for success, the results of Hay Group’s 2011 Best Companies for Leadership study reveal specific organizational practices that market leaders have adopted to enable and encourage innovation. “Leading companies have recognized that 1 Enable agility meaningful innovation requires a strong Agile organizations are better able to respond and lasting commitment,” says Susan to challenges with innovations, and capitalize Snyder, co-leader of the study and head of on their successes. The global Top 20 the leadership and talent practice for Hay structure their organizations for speed and Group’s US life sciences sector. “They have flexibility. taken a disciplined approach to a notoriously fickle process, and focused their efforts on creating an environment throughout their 2 Create the context organizations that invites and supports Smart innovations require a fundamental innovation and allows new ideas to flourish.” understanding of customer needs, and a willingness to risk rethinking them. To establish and sustain a climate that is The global Top 20 ensure that employees conducive to meaningful innovation, the understand customer needs, and support global Best Companies for Leadership new approaches to address them. (Figure 1) have initiated four business practices:©2012 Hay Group. All rights reserved
  14. 14. 153 Broaden perspectives 4 Reward collaborationNew and different points of view are If innovation is the product of differentessential precursors to innovation. The global perspectives, collaboration is the process thatTop 20 encourage and embrace different brings them together. The global Top 20 docultural and generational perspectives, and not merely preach collaboration; they requirework to broaden the viewpoints of their and reward it.employees.Figure 1: Global Top 20 best companies for leadership, 2011 1. General Electric 11. Toyota Motors 2. Procter & Gamble 12. Nestle 3. IBM Corp 13. 3M 4. Microsoft 14. Southwest Airlines 5. The Coca-Cola Company 15. Exxon Mobil 6. McDonalds 16. PepsiCo 7. Accenture 17. Siemens 8. Wal-Mart Stores 18. Shell 9. Johnson & Johnson 19. Dow Chemical 10. Unilever 20. FedExSource: Hay Group Best Companies of Leadership 2011 survey
  15. 15. 16 Best Companies for Leadership in Asia Leading innovation in Asia This year, Asia’s five Best Companies for Leadership – PETRONAS, Samsung Group, Sony Corporation, Tata Group and Toyota Motors shared the limelight with globally renowned brands like Coca- Cola, IBM, Nestle, Procter & Gamble, and Unilever (Figure 2). For its transformative technologies and life-changing product innovation, Samsung has also earned a spot among giants like Apple and Google on the list of global honorable mentions. When it comes to innovation, what can we learn from Asia’s Top 10 companies? “ The hunger to capture Asia’s abundant business opportunities is challenged by higher expectations, greater business risks and stronger market competition. Meanwhile, the growing scarcity of strategic resources such as water, minerals, metals and fossil fuels will cause price hikes and lead to ” social instability.©2012 Hay Group. All rights reserved
  16. 16. 17Figure 2: Asia’s Top 10 best companies for leadership, 2011 1. Samsung Group 6. IBM Corp 2. Toyota Motors 7. Sony Corp 3. Unilever 8. Procter & Gamble 4. Nestle 9. The Coca-Cola Company 5. Tata Group 10. PETRONAS
  17. 17. 18 Best Companies for Leadership in Asia Latitude for new ideas Overall, Asia’s Top 10 companies are driven by future-oriented innovation. Furthermore, employees – and not just the managers – are constantly involved in addressing customers’ future needs (Figure 3). The ability to translate future trends into new product offerings has kept Asia’s best ahead of their competition. The Tata Nano, despite its glitches, remains Furthermore, no good deed goes unnoticed. an achievement for the Tata Group – one Leaders regularly recognize and publicly of Asia’s top 10 companies. It fulfils the celebrate innovation in most of Asia’s top need for safer transportation as Indians 10 companies. This simple but vital act is a travel through the streets, sometimes with critical part of maintaining discipline around four family members piled atop a wobbly innovation. motorcycle. By all measures, the “one-lakh car” has been regarded a breakthrough innovation, making a fuctional vehicle available to India’s masses at an extremely low cost.©2012 Hay Group. All rights reserved
  18. 18. 19Figure 3: Innovating for the future 100% 100% 90% 90% 90% 80% 81% 70% 60% 59% 56% 50% 40% 30% 20% 10% 0% My company’s leader Employees spend much time Employees spend much time regularly celebrate innovation discussing customers’ future needs discussing customers future needs Asia Top 10 Rest of Asia Global Top 20
  19. 19. 20 Best Companies for Leadership in Asia Toyota: Steering performance to new heights It takes true innovators like Toyota to show us that kaizen can lead to more than just better quality. The fact that Toyota is focused on improving factory processes rather than showroom products can make their innovations difficult to see. However, a “value innovation strategy” is proof that it’s not about cost-cutting on Toyota’s shop floor – it is about delving deep into design processes to achieve savings spanning entire vehicle systems2. By 2008, both strategy and disciplined process paid off – for Toyota was no longer just the industry’s most profitable and innovative firm3, it also overtook GM to become the world’s largest car manufacturer. According to Forbes, Toyota topped a list of 25 multinational firms in 2011 in terms of corporate R&D budgets4. It is clear that what differentiates Toyota is innovation philosophy – its way of thinking. Here is a company that cared enough about customer requirements to have a dedicated team observing how people used their trucks before it developed the Tundra. And certainly, one example of Toyota’s success and long-term view towards product innovation is the Prius hybrid. According to Toyota Motors’ spokesperson in North America, the Prius was not about “a fast investment return” but a slow and long-lasting one. Ten years ago, he said, when the Prius made its debut, the questions were: “Will fuel get cheaper or more expensive in the long term? Will oil become more or less plentiful? Is the air going to become cleaner or more polluted? Do we do something proactive and innovative, or do we hold on to where we are, and don’t let go to the bitter end?5” Thanks to the Prius hybrid, Toyota is garnering greater respect as product innovator. It is also ramping up collaborations with suppliers to generate greater innovation6. As number-two among Asia’s Best Companies for Leadership, it is obvious that Toyota’s innovative edge does not lie in rolling-out new products – it is about transforming business processes and identifying new markets for future customer needs. It is about driving the right culture, and having the tenacity to see things through.©2012 Hay Group. All rights reserved
  20. 20. 212 “The World’s Most Innovative Companies”, BusinessWeek, 24th April 2006.http://www.businessweek.com/magazine/content/06_17/b3981401.htm3 “The Open Secret of Success”, The New Yorker, 12th May 2008.http://www.newyorker.com/talk/financial/2008/05/12/080512ta_talk_surowiecki#ixzz1rbBNOu1A4 “Top 25 Corporate Innovation Budgets”, Forbes, 5th July 2011.http://www.forbes.com/sites/williampentland/2011/07/05/top-25-corporate-innovation-budgets/5 “From 0 to 60 to World Domination”, The New York Times, 18th February 2007.http://www.nytimes.com/2007/02/18/magazine/18Toyota.t.html?pagewanted=3&ei=5090&en=27f821bf31ad515b&ex=1329454800&partner=rssuserland&emc=rss6 “The World’s Most Innovative Companies”, BusinessWeek, 24th April 2006.http://www.businessweek.com/magazine/content/06_17/b3981401.htm
  21. 21. 22 Best Companies for Leadership in Asia Braced for long-term challenges In Figure 4, we see that the global Top 20 companies are not only good at planning and budgeting for innovation, they also beat their peers at managing the peaks and troughs of research and development. Interestingly, Asian firms do better than companies are prepared to postpone short- their global counterparts when it comes term profits in order to continue investing to ‘biting the bullet’. In other words, even in innovation, compared to 65 per cent of when projects do not turn profitable at the global best companies. expected juncture, 71 per cent of Asia’s best “ Asia’s best companies are also more receptive to criticism than their peers – with 77 per cent embracing negative feedback and performance difficulties as opportunities for improvement and ” growth.©2012 Hay Group. All rights reserved
  22. 22. 23Asia’s best companies are also more receptive organizational resilience, the best companiesto criticism than their peers – with 77 per exemplify that acceptance of feedback – evencent embracing negative feedback and negative ones - is necessary if they are seriousperformance difficulties as opportunities for about gaining market share.improvement and growth. As a measure ofFigure 4: Biting the bullet100% 94% 95%90%80% 65% 77%70% 71% 61%60% 56% 53%50% 47%40%30%20%10%0% My company runs unprofitable My company is willing to In my company, negative feedback projects to try new things postpone short term profits in order and performance difficulties are treated to invest in innovation as opportunities to learn and grow Asia Top 10 Rest of Asia Global Top 20
  23. 23. 24 Best Companies for Leadership in Asia Asia’s top-ranked company, Samsung to new ideas, different cultures and best Electronics, posted record profit 1Q2012, practices – wherever they can find it. thanks to phenomenal sales of the new Analogically speaking, Asia’s Top 10 Galaxy Note – a ‘pha-blet’ half the size companies do more than plant new trees – of an iPad. The device typifies the kind they weather the seasons and persist through of innovation that creates new markets. bad harvests. They do not just grab at low- According to news reports7, market-driven hanging fruits, which competitors also do. innovation has also improved Samsung’s Instead, they balance current prospects with global rankings for smartphones, which long-term investment returns and are willing commanded nearly one-fifth of market share to explore new paths to success. Coupled in 2011, up from just 3 per cent in 2009. with resilience, Asia’s best companies recover The ‘willingness to improve’ corroborates our quickly from their setbacks and are more findings in an earlier paper “Leading Asia: It’s responsive to challenges, compared to their time to change the rules”, where we identified peers. openness as a key competency among Asia’s best companies. This includes receptivity 7 “Samsung posts record quarterly profit “, The Globe & Mail, 6th April 2012. http://www.theglobeandmail.com/report-on-business/samsung-posts-record-quarterly-profit/article2394031 8 “Samsung aims to become a global innovation power”, Bloomberg News, 5th September 2010. 9 “Apple reigns as world’s top smartphone vendor in Q4”, CNET, 26th January 2012. http://news.cnet.com/8301-1035_3-57367213-94/apple-reigns-as-worlds-top-smartphone-vendor-in-q4/ 10 “ Samsung Electronics Announces Fourth Quarter & FY 2011” news release, 27th January, 2012. http://www.samsung.com/us/aboutsamsung/news/newsIrRead.do?news_ctgry=irnewsrelease&news_seq=20096 11 “Samsung Chairman Lee Urges Innovation as Global Economy Slows”, Bloomberg Business Week, 2nd January, 2012. (http://www.businessweek.com/news/2012-01-02/samsung-chairman-lee-urges-innovation-as-global-economy- slows.html©2012 Hay Group. All rights reserved
  24. 24. 25Samsung: Innovating new frontiersGlobal electronics giant Samsung has come a long way from being“manufacturer” to “innovator”. Scoring top spot in Asia’s Best Companies forLeadership for the second consecutive year, there is no doubt the Galaxy Tabinventor and pioneer of the seven-inch tablet market transformed the world ofconsumer electronics by first reinventing itself.In making Samsung a responsive market player, CEO Choi Gee-Sung said hisjob was to re-orientate the organization for the next generation so that it isconstantly ready to evolve. Not surprisingly, its culture of top-down managementand obedient employees were among the first to go8.The Korean conglomerate has also not allowed the shifting strategies of a fast-paced industry to faze its innovation mission. Where other global corporationshave hesitated, Samsung has gone ahead decisively to create and capture newopportunities. Its long-term goals are backed by a USD20 billion investment planfor new technologies by 2020.In the last decade, it has dug deep to overtake Sony Corp. as the largest flat-screen TV maker. It also superseded Hewlett-Packard in the market for all-in-onecolor laser printers, and became the biggest brand for LCD TV sets and computermonitors. In the smartphone arena, Apple and Samsung went neck-to-neck in2011. While Apple took the top spot in terms of handsets shipped on a quarterlybasis Samsung became the market leader in annual terms for the first timewith19.7 per cent global share, beating Apple’s 19 per cent9.With the Galaxy Note, Samsung is poised to set new trends in consumerelectronics. The timely introduction of this half-phone-half-tablet has bolsteredannual revenue – an all-time high of USD145 billion in FY201110. Not resting onits laurels, Samsung is intent to more than triple this to USD400 billion by 2020.At the core of its lofty ambitions, Chairman Lee Kun Hee says, is greater opennessand stronger collaboration amidst the intensified competition: “Samsung’s futurehinges on new businesses, new products and new technologies. We should makeour corporate culture more open, flexible and innovative.” 11Today, Samsung is responding to Lee’s call by encouraging creativity overobedience. “We are at an inflection point,” says Choi. “We want to transformourselves to create new value.” As a progressive company at the forefronts oftechnology, it owes its success to a great knack for spotting emerging trends.Annually, the Samsung Advanced Institute of Technology has a USD300 millionbudget to explore technology that is deemed to become “mainstream” in thenext decade.
  25. 25. 26 Best Companies for Leadership in Asia Plugged-in to virtual participation With openness to feedback, geographical distance is no hindrance to productivity among Asia’s Top 10 companies. In fact, they are more likely to solicit ideas from everywhere within the company, harvesting the best suggestions for implementation. As seen in Figure 5, a majority of Asia’s Top 10 agree that ideas from subsidiary leaders are just as likely to be implemented as those from headquarters, compared to 63 per cent of their peers. With the rise of social media networks and Unfortunately, virtual networks and cloud cultures, today’s organizations are impersonal relationships are two sides of the bestowed with higher mobility, constant same coin. For such cloud teams to work connectivity and easier collaboration. optimally, we recommend that members Plugged-into the latest digital lifestyle, it is no forge an “analog bond” through face-to-face wonder that 84 per cent of Asia’s Top 10 cited meetings first; this will help seal the digital higher productivity even though their leaders one. are in different physical locations, compared to 49 per cent of their peers.©2012 Hay Group. All rights reserved
  26. 26. 27Figure 5: Crowd-sourcing for better results100% 90% 90%90% 84% 84%80%70% 63% 62%60% 49% 49%50%40%30%20%10%0% In my company, more work between In my company, ideas that come from leaders is conducted when they are subsidiary leaders are just as likely in different physical locations to be implemented as those from headquarters Asia Top 10 Rest of Asia Global Top 20 Rest of Global“ Kodak is one picture-perfect example. Today, not many remember that this 132-year-old company invented the first digital camera in 1975. And even if the digital onslaught did not ruin Kodak’s analog film and camera-making business, the arrival of smartphones complete with built-in cameras ” certainly drove the final nail into the coffin.
  27. 27. 28 Best Companies for Leadership in Asia Kodak vs. Fujifilm: Turning negatives into positives Retailers say the strategy to success lies in knowing what customers want. But often, innovation is only half the battle – the downfall of great innovative predecessors being a grim reminder of the fact that innovation discipline remains the trickier issue. Kodak is one picture-perfect example. Today, not many remember that this 132-year-old company invented the first digital camera in 1975. And even if the digital onslaught did not ruin Kodak’s analog film and camera-making business, the arrival of smartphones complete with built-in cameras certainly drove the final nail into the coffin. It is hard to imagine that Kodak has entered into Chapter 11 given its industry dominance not too long ago. Back in the seventies, Kodak commanded 90 per cent and 85 per cent of the US market for film and camera sales respectively; and indeed, until the nineties, it was one of the most valued brands in the world. Yet, the main differences between Kodak and its long-time rival Fujifilm were a culture of complacency, failure to read emerging trends, sluggish market response and inability to adapt strategies from the lack of innovation discipline. News reports suggest that executives “suffered from a mentality of perfect products, rather than the high-tech mindset of make it, launch it, fix it.” While both companies saw their traditional businesses rendered obsolete, Fujifilm became a highly profitable business. Where Kodak sold cheap cameras and counted on loyal customers buying rolls of expensive film, Fujifilm diversified its operations swiftly and successfully. Leadership, too, played an important role – and Kodak’s inconsistency appeared to stem from strategies that changed with each new chief executive. According to Fujifilm’s President and CEO Shigetaka Komori, the organizational overhaul was a painful experience: “Without it, nobody could survive. So we had to reconstruct the business model.” For Komori, this involved the undoing of processes put in place by the person who handpicked him for the job. This was a big taboo in corporate Japan, but Komori understood the impetus for business survival. Driven by technology evolution, Fujifilm moved quickly into digital photography, but they complemented the strategy by diversifying. Harnessing their expertise in imaging solutions, Fujifilm went on to producing camera lenses, as well as mobile phones and pharmaceuticals. Applying its knowledge on anti-oxidation, it also produces cosmetics and is launching high-end skin creams in Europe. It also inked a USD995 million deal to acquire Sonosite, a US manufacturer of portable ultrasound machines. Where technology has turned the tables on Kodak, Fujifilm backed its strategies with something elementary: providing customer value – a plan that required innovation discipline. Today, profits from its analog films may have gone from 60 per cent in 2000 to practically zero, but it has earned six times more income from other businesses, including its 75 per cent share from the Fuji Xerox printer and photocopier company.©2012 Hay Group. All rights reserved
  28. 28. 29Sources1. “The last Kodak moment?”, The Economist, 14th January 2012. http://www.economist.com/node/215427962. “Kodak versus FujiFilm”, INSEAD blog, 23rd January 2012. http://blog.insead.edu/2012/01/kodak-versus-fujifilm/3. “One negative too many for Kodak”, Financial Times, 19th January 2012. http://www.ft.com/intl/cms/s/2/2a591538-42af-11e1-97b1-00144feab49a.html#axzz1ru8l8HdB)
  29. 29. 30 Best Companies for Leadership in Asia Lessons on innovating leadership In order to run globalized companies, Asian leaders must set the direction and discipline for innovation. Insights on individual leadership styles, ensuring strong leadership pipelines etc., have been useful preludes, but they are no longer enough for sustainable success in the new economy. Our latest research urges Asian firms to delegate their authority and decision-making catch up to global Top 20 companies in the power. This, we found, leads to higher following ways (Figure 6): employee engagement and motivation12. • Develop an organizational structure • Create personally meaningful work. Having that enables quick communication. This an innovation strategy is no guarantee of is fundamental to organizational agility, success, and the most innovative companies its decision-making frameworks and are interested in discretionary effort. responsiveness to market changes. Therefore, strategies must be decoded vertically and horizontally so that personal • The Asian tradition of directive leadership interests are aligned with corporate and inter- will not work. Everyone is expected to departmental goals. lead, even if they have no formal position of authority, and Asian bosses must learn to 12 2009 Hay Group study of 1,249 high-profile organizations in India, cited in Leading Asia: It’s time to change the rules©2012 Hay Group. All rights reserved
  30. 30. 31Figure 6: What Asia can learn from Global Best Companies100% 95%90% 85%80% 74%70%60% 58%50%40%30% 26%20%10% 5%0% My company has an organizational In this company, you are only Leaders in my organization work hard to structure that favors quick expected to lead when you have connect people with projects that are communication paths a formal position of authority personally meaningful to them Asia Top 10 Rest of Asia“ To develop this combination of skills and qualities – and adopt what is, in effect, a ‘post-heroic’ leadership style – they may need to abandon much of the thinking and behavior that propelled them ” to success.
  31. 31. 32 Best Companies for Leadership in Asia Leadership reloaded In an uncertain business environment of rapid and irrevocable change, innovation is no longer a luxury. It is a necessity. To be successful, leaders need to be adept at conceptual and strategic thinking, have deep integrity and intellectual openness, find new ways to create loyalty, and relinquish their own power in favor of collaboration. To develop this combination of skills and Leading in the new normal environment qualities – and adopt what is, in effect, a will test executives’ virtuosity in switching ‘post-heroic’ leadership style – they may between leadership styles. To envision and need to abandon much of the thinking and then sell a concept of customers’ future behavior that propelled them to success. needs will require an authoritative style of What will be the required leadership leadership that many leaders in Asia already competencies to navigate this landscape? exhibit. However, to encourage and enforce©2012 Hay Group. All rights reserved
  32. 32. 33discipline around innovation will require a The global Top 20 and indeed, the Asianmore collaborative style of leadership – this is Top 10 companies already have a runningwhere Asian leaders need to step up. start in building innovative companies: canvassing the entire organization for ideas,In addition, keen influencing skills will thinking about customers’ future needs, andprove to be the key ingredient for managing postponing short-term gains. What aboutproductivity in the “cloud”, where leaders your company?are responsible for multi-function and cross-border teams, some of whom may not even Building discipline around innovation hasreport to them! become just as, if not more important, than innovation itself. And innovating leadershipFinally, leaders need to tap into their is perhaps the most critical step to survival.emotional maturity and lead their teams tobounce back from negative feedback andfailure. This calls for both emotional andmental resilience.
  33. 33. 34 Best Companies for Leadership in Asia About BCL2010 Leading Asia: It’s time to change the rules Asia has enjoyed an Likewise, our ability to leverage business as a enviable boom for the past social good has led to greater success in Asia. 20 years. However, will the What are the strengths and shortcomings leadership competencies of Asian talent management and leadership that brought us such development practices when it comes to success serve us well for sustaining the leadership pipeline? the next 20 years? Revealing insights from Hay Group’s survey on Asia has made great strides in leadership the Best Companies for Leadership will change competencies in the past 20 years. To meet the the way Asian companies manage to get better growing demands of business here, companies performance out of their people. have done a great job of developing and Click here to download whitepaper: accelerating talent. Is there more to be done? http://goo.gl/eyxzu (Registration is required The desire to be number one has driven and will take no more than 3 minutes.) greater openness to new ideas among Asian firms, bringing about stronger inter-divisional collaboration and diversity. Authors Vanessa Cen Leadership & Talent Practice Leader, Northeast Asia, Hay Group E| Vanessa.Cen@haygroup.com Mohinish Sinha Leadership & Talent Practice Leader, Southeast Asia & India, Hay Group E| Mohinish.Sinha@haygroup.com Andreas Raharso Director Global R&D Centre for strategy execution, Hay Group E| Andreas.Raharso@haygroup.com©2012 Hay Group. All rights reserved
  34. 34. Africa Frankfurt Charlotte Lima Name | version x | 01 Month 08 | CountryCape Town Glasgow Chicago SantiagoJohannesburg Helsinki Dallas São PauloPretoria Istanbul Edmonton Kiev HalifaxAsia Lille Kansas CityBangkok Lisbon Los AngelesBeijing London Mexico CityHong Kong Madrid MontrealHo Chi Minh City Manchester New York MetroJakarta Milan OttawaKuala Lumpur Moscow PhiladelphiaMumbai Oslo ReginaNew Delhi Paris San FranciscoSeoul Prague San José (CR)Shanghai Rome TorontoShenzhen Stockholm VancouverSingapore Strasbourg Washington DC MetroTokyo Vienna Vilnius PacificEurope Warsaw AucklandAthens Zeist BrisbaneBarcelona Zurich CanberraBerlin MelbourneBilbao Middle East PerthBirmingham Dubai SydneyBratislava Tel Aviv WellingtonBristolBrussels North America South AmericaBucharest Atlanta BogotáBudapest Boston Buenos AiresDublin Calgary CaracasHay Group is a global management consulting firm that works with leaders to transformstrategy into reality. We develop talent, organize people to be moreeffective and motivate them to perform at their best. Our focus is on making change hap-pen and helping people and organizations realize their potential.We have over 2600 employees working in 86 offices in 48 countries. Our clients are from theprivate, public and not-for-profit sectors, across every major industry. For more informationplease contact your local office through www.haygroup.com.

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