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One World
By Michael Alan Hamlin
November 22, 1999
The results of two recent surveys,
one conducted in Asia and the other in the North America, suggest
that the perspectives of top managers in both regions are pretty
closely aligned. For instance, the PriceWaterhouseCoopers/World
Economic Forum survey released in October showed that 67 percent
of respondents — executives in Asia from a broad array of industries
— believe that e-business will have a significant impact on
competition in their industries in the next three years.
Similarly, an IndustryWeek survey
conducted with the Thomas Group released this month shows that 66
percent of respondents — mostly U.S. manufacturing executives
— "expect increased sales from e-commerce within the next
three years." However, managers overall in Asia appear to be
more optimistic about the growth of e-business — 85 percent
expect it to grow significantly — than U.S. manufacturers,
in large part because U.S. manufacturers haven’t yet figured
out how to sell directly to consumers without upsetting retailers,
according to IndustryWeek editor-in-chief John Brandt.
When it comes to e-business and supply
chain management U.S. respondents’ views are more closely aligned
with their Asian counterparts. Seventy-six percent said they are
currently using e-business as a manufacturing/value chain strategy.
That makes sense. International Data Corporation (IDC) believes
the value of e-business in 2001 will reach US$1.2 trillion globally,
and 75 percent of that total will involve business-to-business (B2B)
transactions.
Those projections will have a significant
effect on business outside of North America according to IDC. By
the end of this year, the research firm expects about 60 percent
of the global online population to be outside of the United States.
That shift will translate into dramatic growth in non-U.S. e-business
from 26 percent this year to 46 percent by 2003.
IDC also expects the number of Internet
users in Asia Pacific to quadruple from 21 million in 1998 to more
than 81 million by 2003, and during that period e-business should
expand dramatically from US$2.7 billion to 72 billion. Much of that
growth will be accounted for by Japan and China, where growth in
PC penetration and Internet usage is white hot. But liberalization
also means that those markets will become increasingly open —
as well as attractive — to other Asia Pacific e-business enterprises.
But although e-business has captured
the imagination of post-crisis Asian enterprise — Asiaweek
reported last week that the Internet is now a lot more attractive
to Asian companies than office buildings and the PriceWaterhouseCoopers
survey focused almost exclusively on e-business — the IndustryWeek
survey showed that top managers are spending more of their time
on internal leadership issues than external strategy.
When asked how they spend most of
their time 95 percent said that building a strong executive team
was a top priority. While visioning and missioning might seem old
stuff these days, the results of the survey showed that they still
count. Eight-three percent of the respondents said "establishing
and communicating a company vision" is among their principal
responsibilities.
The next top three concerns were:
1) establishing company structure (75%); evaluating the competitive
climate (68%); and, 3) having personal contact with significant
global accounts. IndustryWeek’s "CEO of the Decade,"
GE’s legendary Jack Welch’s management habits mirror these
results according to Mr. Brandt.
Mr. Welch’s internal focus is
comprised of three components. First is emphasis on teams and their
development. The task is to identify, nurture, deploy, and stretch
leaders to enable them to achieve their full potential. Next comes
an emphasis on simplicity. Although GE might seem a hugely complex
conglomerate to many, Mr. Welch has its many activities revolving
around just 10 basic businesses. And he championed GE’s famous
work-out program to simplify business processes — taking the
work out of processes — to increase efficiency and productivity.
Finally, Mr. Welsh works tirelessly
at communicating vision. Communicating effectively means that he
and other key executives must convey developments throughout the
organization quickly, in a manner that is easy to understand throughout
the ranks, and with great confidence. These three priorities together
account, Mr. Welch believes, for the conglomerate’s capacity
to be the number one or two player in every industry it competes
in.
The IndustryWeek survey validated
its respondents’ priorities by asking how they and their organizations
should be evaluated. The number one performance indicator was profit.
While that not seem surprising to many, it underscores the declining
importance of market share in favor of increasing share of profitable
customers. Shareholders returns, or earnings per share came next,
followed by economic value added, or the capacity of the organization
to generate real wealth.
The other performance indicators
in order of their perceived importance by respondents were return
on capital and return on equity, market share, revenue growth, and
stock price. Fewer than five percent of respondents thought that
stock price should be the key performance indicator, probably because
if profitability and earnings per share are taken care of, stock
price naturally follows — unless perhaps you are running a
tobacco company.
There were other interesting findings.
For example, about 40 percent of the respondents are increasing
levels of outside contracting in order to concentrate resources
on their core businesses. Close collaboration with both suppliers
and customers was seen as key to successful implementation of a
supply chain management strategy.
Almost nine out of 10 respondents
felt that new product development was the key driver of growth and
profitability, reflecting recent trends toward ever-compressed product
lifecycles. Finally, most felt that Europe would offer the greatest
opportunity for revenue growth over the next three years. But that
was before the U.S.-China trade agreement, and visions of Asia’s
crisis likely prejudiced respondents away from Asia Pacific. In
my view, while Europe is likely to grow dramatically over the next
decade, Asia is getting back on its feet and at worst will give
Europe a good run for its money in terms of both growth and opportunity.
But as it does get on its feet, it’s
important for Asia’s managers to remember that if e-business
and the Internet is their strategy, they are likely to face problems
because these digital tails will wind up wagging their dogs. While
e-business is intriguingly seductive from a strategic perspective
— and besides it’s fun and sexy — e-business is just
a component of an organization’s strategy — and not the
strategy — along with other key priorities, like leadership,
teambuilding, and structure.
So despite the Internet, plain good
management still counts most.
Copyright © 1999 The Events
& Awards Managers of Asia and
Hamlin-Iturralde Corporation. All rights reserved.
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