June 2021

SGV thought leadership on pressing issues faced by chief executives in today’s economic landscape. Articles are published every Monday in the Economy section of the BusinessWorld newspaper.
28 June 2021 Wilson P. Tan

Lessons from Mr. SyCip

Washington SyCip, Founder of SGV & Co., would have been 100 on June 30 this year. Well into his ’90s, Mr. SyCip stayed vital and many were confident that he would reach his centenary effortlessly because he had remained active — both physically and mentally — throughout his prolific life. When he suddenly died on board an airplane on his way to scheduled meetings in New York City, there was a collective reaction of disbelief, even if he was already 96 years old at the time.For us in SGV, Oct. 7, 2017 would be “the day the music died” because in so many ways, Mr. SyCip was our rock star. He had a great following, he could command thousands to listen to him, he would get thunderous applause after he spoke, and there would be kilometric lines of people hoping to get selfies with him. However, the analogy ends there because Mr. SyCip’s career was obviously not in music; he was a business icon who contributed immensely to professionalizing Philippine accountancy and to advancing national development.Mr. SyCip is the only person I know who had met all the Philippine Presidents from Manuel L. Quezon to Rodrigo Duterte. He met President Quezon as a young boy when he accompanied his father on a certain occasion. He had been a witness to milestones in Philippine history for nine decades, which included his active service during the Second World War in India as a cryptographer. He returned in 1946 to Manila, a city in ruins, and immediately set up his accounting firm because he knew that reconstructing the economy would require sound financial services. He was only 25.A FATHER FIGURE WITH VISION AND PURPOSEFor the next 50 years of his life, Mr. SyCip saw the phenomenal growth of SGV from a one-person office to a multinational entity called The SGV Group, which had member firms in several countries. He helped establish the leading accounting firms in Taiwan, Thailand and Indonesia, among others. In the 1980s, when he saw that IT would heavily influence the office of the future, he made sure that SGV would have the necessary resources by collaborating with a global professional services firm. His mind, it seemed, was at least 20 years ahead of the present time; he had this unique gift of envisioning the world and how to make it a much better place.With Mr. SyCip’s passing, we were orphaned but not abandoned — because as a father figure, Mr. SyCip had made sure that even without him, SGV would be able to maintain its stature. From the very start, he had already articulated his purpose for SGV and that is for the firm to aid in national development. One of his most frequently quoted statement goes, “SGV can only prosper if the nation prospers.” He instilled a discipline that fostered integrity, excellence and quality work. In turn, these became values that evolved into a culture that also includes meritocracy, inclusiveness and stewardship. Mr. SyCip ingrained in each of us that the firm was not owned by a single person and, for SGV to thrive, its current leaders must take good care of it for generations yet to come.Propitiously, a year before his demise, SGV had undergone an institutional exercise in revisiting and articulating its purpose in terms that can be better understood by a younger generation. When all had been said and done, we reverted naturally to Mr. SyCip’s vision of contributing positively to national development. The updated 21st century articulation of that vision led to SGV’s Purpose Statement: To nurture leaders and enable businesses for a better Philippines. This is how we continue to carry out Mr. SyCip’s legacy in everything that we do.However, it is not always an easy task to live that purpose. As simple as it sounds, there are multifarious and complex behaviors, skills, and relationships that impinge upon our Purpose. In trying to live that Purpose, I draw on four life lessons that Mr. SyCip impressed upon us.The first lesson is to WALK FAST.In a personal encounter I had with him, he told me to STEP ON THE GAS! The statement connotes speed, which is something that Mr. SyCip emphasized — to work quickly and diligently but with precision and accuracy. Time was valuable to him and wasting even a second was unacceptable. You had to be punctual and he practiced what he preached. Most of the time he would be the very first person in the office and when he called partners in their offices at 8 a.m. (the official start of work hours), they had better be there to personally answer his phone calls.In the office, he would chide staff members if they took their time entering and exiting the elevators. In a calm but forceful voice he would say, “You are delaying the progress of the nation!” For him, there was never enough time to meet with people and read his issues of The Economist and voluminous reports. He led a frenzied work schedule with his calendar filled up for at least a year and a half; he would even have trips scheduled three years in advance. For Mr. SyCip, time was gold.The second lesson is to EMBRACE CHANGE.Needless to say, in his 96 years he had experienced the rise and fall of governments, trends in fashion, the evolution of technology and others. The accounting profession has traditionally been a conservative one but upon his retirement, Mr. SyCip discovered new things that awed him — like denim jeans, for example. He was in his 80s when he was presented his first pair of jeans which he found comfortable and suitable for traveling. In time, he took to wearing them to the office in bright colors too. He likewise owned a pink iPod following the recommendation of a granddaughter and would listen to his playlists of classical and Broadway musicals.He enjoyed speaking with young people to find out what kept them preoccupied. He went to bars that they frequented and attended the concerts of Madonna and Taylor Swift. Mr. SyCip once dressed up as Jedi Master Yoda for an SGV event but only after he received a mini lecture on Star Wars and what it meant to be one with the Force. He loved the fact that Yoda was over 800 years old and still fighting menacing characters! For Mr. SyCip, one had to accept change in order to thrive in an ever-changing world.The third lesson is to LISTEN TO OTHERS.By listening to others, Mr. SyCip didn’t just listen to clients, government officials, diplomats and other business leaders. He also listened to the plight of the poor and uneducated, he listened to the problems of farmers and fishermen who could barely send their children to school, and he listened to struggling women who had difficulty making ends meet. It was in listening to others that Mr. SyCip was able to acquire the knowledge he needed to give sound advice. Hearing from others provided him with the wisdom that people sought.Mr. SyCip was known to be an excellent speaker and while his voice was soft, I have witnessed how an entire auditorium would be hushed in complete silence once he started. Perhaps he was simply returning the favor of listening when he wasn’t the one doing the talking. For Mr. SyCip, listening was essential to human connectedness and problem solving. It was also basic good manners.The fourth lesson is to NEVER STOP LEARNING.The training program in SGV is legendary and it was Mr. SyCip who early on determined the need for continuous learning for staff members to progress in their careers and personal lives. He encouraged potential partners to pursue graduate school and earn MBAs either in foreign universities or at the Asian Institute of Management, which he co-founded. He would test partners of their knowledge of current events and if he found it lacking, the partner would be gifted with a subscription to The Economist. His advocacies later focused on education, particularly in advancing basic public education. He believed that it would be education that would eventually eradicate poverty.Mr. SyCip had an unquenchable thirst for new knowledge because that kept him in touch with current issues. He would also use the information in giving advice to others. When a staff member’s son contracted dengue fever, he asked questions on its cause, care and recovery to the last detail. Why? So that he would understand its severity and why the staff member had to take a leave to personally care for her child. He found joy in gadgets even if he never learned to send text messages. Why? Because it made his assistants more accessible and saved him time. He relished all knowledge, whether it affected the global economy or a teenager’s fragile health. For Mr. SyCip, learning was a lifelong passion.A LEGACY THAT GUIDES OUR PURPOSEOn his centenary, I now reflect on the enormous impact Mr. SyCip made on my life, and the lives of thousands who were fortunate to have known him. It is daunting to have been given the responsibility of leading almost 6,000 professionals amid the pandemic in a precarious moment in human history. I am indebted to Mr. SyCip for his lessons and his legacy that serve as guideposts toward our Purpose. It is now our turn to remind the next generation to walk fast, to embrace change, to listen to others and to never stop learning.Thank you, Mr. SyCip.This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinions expressed above are those of the author and do not necessarily represent the views of SGV & Co.Wilson P. Tan is the Country Managing Partner of SGV & Co.

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21 June 2021 Marie Stephanie C. Tan-Hamed

Time for CEOs to redefine their growth paradigm (Second part)

(Second of two parts)In the “new normal,” it is imperative for CEOs and business leaders to consider how they should reimagine, redesign and redefine their growth strategy. The COVID-19 pandemic has triggered widespread and systemic disruptions in every country, industry and sector, and has resulted in significant economic downturns globally. However, as countries begin the road to rebuilding and recovery, there arises an opportunity for companies to likewise transform and redirect their energies to purpose-driven growth.In the first part of this article, we discussed the current environment and some of the considerations as discussed in a recent article on ey.com, The CEO Imperative: Rebound to more sustainable growth. We began the discussion on some key themes that CEOs may wish to consider as they lead their organizations into post-pandemic recovery. We started off talking about the importance of trust and sustainability. Now we will discuss other aspects, such as trade, technology and people.TRADE IS VASTLY DIFFERENTWhen the pandemic began spreading, it exposed underlying vulnerabilities in the areas of trade, supply chains and logistics. This situation has been compounded by turbulent geopolitical conditions that further hamper how CEOs can manage their global business operations in the face of complexities they cannot control. Examples include the tensions between the US and China, post-Brexit complications between the UK and EU, and unrest and severe COVID numbers in parts of Asia and East Asia.With the heightened uncertainty, CEOs and business leaders are under constant pressure to revisit their supply chains, talent development and other enterprise resilience considerations. Where previously globalization was considered inevitable to drive business growth, several countries seem to be becoming increasingly nationalistic as they close borders to both trade and travelers to limit the spread of the virus in their respective demesnes. Some governments are also encouraging the reshoring of investments into certain key activities and for domestic companies to invest in self-sufficiency, particularly in the areas of basic pharmaceuticals, vaccines, energy and industrial materials.Given this, CEOs may need to put a greater emphasis on managing supplier risk. Numerous organizations are already trying to find ways to shorten their supply chains by identifying more near-shore or even on-shore sources. As supply chains become increasingly fragmented and geographically diverse rather than globally integrated, CEOs need to consider how to make supply chains more resilient to weather geopolitical events as well as the limitations created by the pandemic. This will be particularly important when economies reopen. Companies with a purpose-led growth strategy can more agilely adjust to new opportunities, including possibly reducing or consolidating asset portfolios and exploring new technology-driven directions to growth. With a clear purpose, CEOs can better decide whether to transform/develop existing assets to support entry into new market opportunities, or whether to acquire assets for faster entry.WILL TECHNOLOGY SWING THE BALANCE?When the pandemic struck in 2020, many companies were caught off-guard and found themselves scrambling to not only acquire sufficient technology assets to support a dramatic and unexpected business transformation, but many also had to hastily evaluate whether their digital infrastructure was strong enough to support the business. Having to suddenly transition to remote working also made many companies re-evaluate their operational agility and resilience. Moving forward, companies will need to consider whether their post-pandemic operations will return to traditional on-site work conditions, retain remote working, or develop a hybrid of both. Regardless of the format, future working conditions will make it even more imperative to be purpose-led — which means leaders will also need to identify how to effectively and consistently inculcate their purpose into their people and align them to the company’s long-term goals.Because of what happened last year, which is still happening today, CEOs are now considering data and technology investment as priority areas for the coming year. Many have been suddenly forced to consider how technology and innovation can support their business — and many are also suddenly seeing the benefits of incorporating digital throughout the enterprise.One very important consideration to investing and upgrading technology, however, is to evaluate the human-technology interface in one’s operations. There has been increasing public awareness of the ethical, privacy and security risks of technology, and many customers still do not trust companies with their personal data. CEOs will need to not only consider whether they need to upgrade the technology competencies of their people, but also how to build up the trust of their customers in their digital ecosystem while ensuring the safety and security of their digital systems.PEOPLE AT THE CENTEROne thing that remains true regardless of whether we look at the “old” or “new” normal is the reality that people are still central to any strategy. This is particularly true for purpose-led growth strategies where actions need to constantly be measured by their impact on people — not just on employees, but also customers, stakeholders and partners. Even businesses that are almost wholly digital still need the right people, talent, and competencies to thrive. Human values will always be needed to underline and drive ethical, purposeful innovation. This is a critical consideration in today’s environment when the pandemic may be forcing some organizations to consider taking shortcuts to ensure business viability.CEOs and leaders need to understand the value of empathy towards people, not only putting themselves into the shoes of their employees and customers, but also sincerely engaging with people by applying emotional intelligence, compassion as well as adherence to shared values. They also need to understand the experience and motivations of their clients and customers, and how their personal and consumer behaviors have changed due to the pandemic.WHAT WILL YOUR NEW GROWTH PARADIGM LOOK LIKE?As the world continually moves toward eventual resurgence and recovery, CEOs and business leaders need to understand that new opportunities to build a sustainable future will likewise arise. By focusing on building trust, emphasizing sustainability and ESG considerations, understanding new trade challenges, evaluating technological opportunities and always keeping people central to every action plan, companies can be prepared for a strong, purpose-led drive to recovery. Certainly, the time is ripe for organizational reflection.This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinions expressed above are those of the author and do not necessarily represent the views of SGV & Co.Marie Stephanie C. Tan-Hamed is a Strategy and Transactions Partner of SGV & Co.

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14 June 2021 Marie Stephanie C. Tan-Hamed

Time for CEOs to redefine their growth paradigm (First part)

(First of two parts)In the current business environment, we keep hearing the term “new normal” being used by business and government leaders to provide context to the sweeping changes that have disrupted the global business ecosystem due to COVID-19. The question is, how can CEOs today realign their businesses to thrive in this “new normal?”Reimagining and redefining the company’s growth strategy has become a new imperative for CEOs. As discussed in a recent article on ey.com, The CEO Imperative: Rebound to more sustainable growth, CEOs need to accept that a post-COVID growth strategy simply cannot rely on previous assumptions and principles. In order to create long-term value as the global economy recovers, CEOs need to shift their business paradigms to both redefine their strategy as well as focus on new platforms that are anchored on a clear purpose-led vision.WHAT’S CHANGED?With the numerous restrictions implemented by governments to help manage the pandemic, businesses’ growth has been severely and negatively impacted. But even as we plan for and work towards a global recovery, companies recognize that the basics of their business have changed. Even more so, companies also understand that their stakeholders — their employees, investors, regulators and especially, their customers, have developed a different perspective on the role of companies. Market forces have also changed, with governments taking more active and interventionist positions in creating policies, stakeholders increasing their scrutiny on sustainability programs — notably on the environment, social and corporate governance, customer behavior changes, more competition to find or develop the right talent to drive post-pandemic recovery, and an increasing need to invest in technology to sustain business continuity.With these changes, it becomes even more imperative that organizations revisit their purpose in order to meet changing expectations. For some companies who have not yet firmly established their organizational purpose, this may mean a complete reboot.PURPOSE AS AN ECONOMIC IMPERATIVEBeyond financials, companies are now seeing that being purpose-led can have significant benefits such as stronger people and customer engagement and fostering a culture of innovation in the organization. In terms of metrics, studies have shown that companies with a focus on ESG can better find ways to lower their cost of capital, as discussed in a 2020 MSCI report, as well as promote long-term engagement.It is worthwhile to note that establishing a purpose is a continuous and long-term journey for most companies. It goes beyond simply creating a purpose statement; there is also a need to drive fundamental organizational change to lay a solid foundation for purpose-led transformation.For example, the SGV Purpose to nurture leaders and enable businesses for a better Philippines has been deeply embedded into our culture, programs and long-term strategy focusing on internal people development as well as external programs and activities to support business development, with a long-term vision of participating in and supporting national socio-economic development.DRIVING PURPOSEFUL, SUSTAINABLE GROWTHTo drive a truly purpose-led strategy, CEOs may wish to consider incorporating these considerations into their programs, with an overarching emphasis on keeping people at the center of every decision.TRUST AS AN ASSET WITH AN EMPHASIS ON SUSTAINABILITYWhile trust has always been critical in the business-customer relationship, the disruptions driven by the pandemic have created fundamental changes in this relationship. With more people being online and expecting faster, near real-time responses to their needs, building and sustaining trust becomes even more important. In a sense, trust has also become a form of intangible currency for many companies.What is also significant is that many sectors see the COVID crisis as an opportunity for large companies to reinvent themselves, with a shift to purpose-driven metrics on people, customers, communities and the environment. In fact, a number of business leaders believe that the pandemic has increased the expectation on businesses to drive, measure and report on social impact, sustainability and inclusive growth.At the core of this need to strengthen trust is the need for greater transparency. There is now a stronger need for corporate reporting to include non-financial metrics, especially since doubt in corporate reporting has grown in recent years.In the Philippines, the Securities and Exchange Commission in 2019 had mandated that companies produce an annual sustainability report to promote wider adherence to the principles of corporate governance. The benefit to companies of this requirement is the ability to disclose to the wider public their non-financial assets — including culture, intellectual and technology assets — and how they are used to create long-term ESG value under a purpose lens and not just a matter of compliance.In a nutshell, for CEOs to gain the trust of stakeholders, they may wish to integrate more in-depth non-financial or sustainability reporting into their strategy while paying attention to the changing needs of their stakeholders and being transparent in articulating their purpose-led strategy.In the next part of this article, we will discuss the other areas for CEOs to consider as they explore how they can redefine their companies’ growth paradigms. These include trade, technology, and people.This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinions expressed above are those of the author and do not necessarily represent the views of SGV & Co.Marie Stephanie C. Tan-Hamed is a Strategy and Transactions Partner of SGV & Co.

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07 June 2021 Akhil Hemrajani

Digital ecosystems: A frontier for digital competition

After more than a year of COVID-19 impacting the global economy, organizations around the world are still struggling to pivot to a more sustainable digital strategy. A central theme for this objective is the ecosystem play, which maps out how a platform can help acquire new customers more efficiently whilst enabling and incentivizing them to continue transacting within said platform.THE ECOSYSTEM PLAYOrganizations are quickly realizing that it is not enough to onboard a new customer — they also need to consider how to organically encourage consistent transactional behavior from the customers to build ongoing dependency on the organization and its system. This can help protect organizations from losing their customer base to competitors. Hence, it is imperative to adopt an ecosystem strategy to increase the “stickiness” of customers to a platform.There are three kinds of ecosystems for companies to consider.Closed loop. A closed loop ecosystem only allows an organization and its affiliates to participate in the offering of products and services to its customer base. This kind of ecosystem is usually in response to a fierce competitive landscape.Open loop. An open loop ecosystem enables a company to increasingly collaborate with not only its partners, but also other competitors in the space. The motivation behind a company’s interest in maintaining an open platform is so that it can still participate in transactions that it typically would not have engaged in through platform fees and other payments.Hybrid. A hybrid ecosystem takes components of both previous types of ecosystems, allowing most players in the space to participate and the organization to have an “unfair advantage” over certain product and service offerings.BUILD VS PARTNER: A CRUCIAL QUESTIONAn increasing number of organizations are competing in the digital sphere. They face an inherent question — do they build features and products themselves or do they partner with other companies to maximize their online presence? Each option comes with its own set of advantages and disadvantages.Building a new platform could prove to be capital intensive, yet this would enable an organization to capture end-to-end customer value. On the other hand, embedding the products and services of other companies into the ecosystem through a purely partnership model helps the organization be more flexible with its resources. This model means, though, that the organization will need to forego a certain amount of revenue in the form of commissions or fees. Certain organizations have also adopted a hybrid model where they build certain verticals (or customer niches) themselves and then partner up with others to fill the gaps.For example, some local delivery service providers do this effectively by creating their own grocery marketplaces and onboarding other vendors, thereby creating a balance of competition and collaboration within their respective platforms.CUSTOMER AT THE CENTEREcosystems are primarily established in order to efficiently cater to as many customer demands as possible. This incentivizes organizations to focus on the digital delivery of not only products and services, but also a robust customer experience journey. Consequently, this enables organizations to either consolidate their market leadership positions or help the chasing pack make inroads to narrow the gap to the prevailing incumbent. For example, startups such as Grab and Uber originally started operating only in the ride sharing space, but then established other verticals such as food delivery to capture a larger piece of the digital services pie. In the B2B segment, banks are expanding their digital presence by moving beyond simply lending to providing enablement services to small and medium enterprises. By helping these enterprises scale their businesses, banks create additional demand for the banks’ loan products.THE IDEAL CUSTOMER JOURNEY: A BALANCING ACTAs more organizations look to create digital ecosystems, they face an important challenge: how to capture maximum value and how to go about providing a robust customer journey. Digital ecosystems are great tools to increase customer value, but they are at times done at the cost of customer experience. The challenge for any organization looking to establish or further its digital ecosystem play would be to strike a balance between sustainably providing an array of products and services on its platform while making it easy for its customer base to use. An additional layer of gamifying certain tasks to provide additional rewards can also increase the level of complexity of the ecosystem. Providing such features and maintaining a clean and precise user interface can prove to be critical, especially in hyper competitive sectors such as e-commerce and finance. To make customers “stick” to a platform, it is imperative that the platform be both simplistic and engaging — a challenging, but not impossible, task for any platform owner.During the pandemic, the desire and need for a robust digital ecosystem has increased at an accelerated rate. As platform owners enter new verticals, the propensity of competition with incumbents increases. The ever-changing competitive landscape among various platforms will prove to be an interesting watch. Only time will tell who will come out on top.This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinions expressed above are those of the author and do not necessarily represent the views of SGV & Co.Akhil Hemrajani is a Consulting Senior Director of SGV & Co.

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