2022 Articles - Suits the C-Suite - Page 6 | SGV & Co. | EY

10 January 2022

Smith C. Lim

Accelerating growth in the post-pandemic world

As the pandemic continues to impact businesses across global economies, it has also fueled a reset in strategy for many organizations who now place focus on thriving instead of merely surviving. More than half of the respondents surveyed in the latest EY Global Capital Confidence Barometer, which gathered insights from more than 2,400 C-Suite executives globally, even expect a recovery in profitability that matches pre-pandemic levels by 2022. Most of these executives share satisfaction with their performance in response to the pandemic in comparison to their competitors, with more than half of the Southeast Asian respondents (which include Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam) believing that their organizations outperformed their competitors in engaging with local communities, operational stability, and digital performance.However, this progress does not change the reality that disruption will continue at an accelerated pace not seen before the pandemic. Startups are rewriting the rules of the game, challenging business models in all industries as products and services enter markets much faster.This makes it imperative for companies to continuously review how they can future-proof their strategy and business fundamentals. They must also critically review their portfolio to determine if it will remain relevant and profitable in the long term. A constant strategic and portfolio review process will allow companies to identify areas of growth at the earliest opportunity, as well as more quickly address areas of underperformance. To take advantage of opportunities to drive transformation for success beyond the crisis, executives will need to make bold moves and act with urgency.DIVESTING UNDERPERFORMING ASSETSThe act of divesting distressed and underperforming assets is a conventional trend during a crisis — and it should also be expected to continue beyond the pandemic. It should be noted, however, that if it does not fit with an organization’s strategy, then even a strong-performing business might be tying down capital that can be better deployed in investments that deliver higher impact.While business unit management bias is understandable, it can obscure the holistic view of the business that the review process should yield. Top-down assessments by the management and board can sometimes conflict with a bottom-up review process, especially when it comes to assessing synergies and the value of business units as stand-alone entities or potential divestitures. Companies will need to consider their divestiture by identifying assets at the risk of disruption as well as those that are facing future growth challenges.MAKING TRANSFORMATIVE, STRATEGIC ACQUISITIONSThe survey revealed that over half of the Southeast Asian respondents at 56% seek to actively pursue mergers and acquisitions (M&A) in the next 12 months. This beats the average of 44% in the previous 11 years, and has been the highest number since 2012. Some of the drivers that increased this appetite for M&A include issues relating to regulations, the strengthening of technology, tariffs and trade flows, talent and new capabilities, and growth into adjacent business sectors or activities.Most of the deals that survey respondents intend to pursue this year target the acquisition of specific capabilities as well as bolt-on deals, where smaller companies are acquired and added to an existing business. Many Southeast Asian corporate M&A deals tend to have bolt-on characteristics due to them being easier to execute. However, it remains to be seen if these smaller acquisitions will be sufficient for companies seeking growth in an environment that may look very different in the wake of the pandemic. Some companies also attempted roll ups, which consolidates multiple small companies so that the resulting larger entity can take advantage of economies of scale, but it should be noted that these transactions hold a much greater risk and a higher degree of difficulty to execute.The success of the M&A approach depends on several factors. This includes ensuring that the acquisition is part of the business strategy, adequately considering and mitigating transaction risks, having a deep and well-structured analysis of the market and target, and securing correct financing of the acquisition. The extent of a detailed value-creation thesis with proper ownership and implementation actions will also make a difference between success and failure.SUSTAINABILITY AS A CORE CONSIDERATIONManagement and the board will also need to be strong stewards of the community as companies acquire and grow, making environmental, social and governance (ESG) considerations an important component of the corporate acquisition playbook.Companies will need to update their ESG and acquisition frameworks to reflect various topics, with examples that include sustainable practices, environmental compliance, and operating with integrity from the perspective of all stakeholders.TRANSFORMING AND TRANSACTING TO EMERGE STRONGERIt has been established that companies capable of transforming and transacting in previous crises have emerged stronger than their competitors. This means that embracing transformation accelerated by the right acquisitions will be key now and beyond the pandemic.In this time of rapid disruption, boards must ask themselves whether their business strategy helps maintain market leadership and growth, and if their current portfolio strategy is sound or needs to be reshaped through divestments and investments. By taking advantage of the right M&A opportunities, organization will be able to drive long-term success beyond the COVID-19 crisis. 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.Smith C. Lim is a strategy and transactions partner of SGV & Co.

03 January 2022

Wilson P. Tan

Transformative Leadership in the year of recovery

For many business leaders, the beginning of this new year will be a time to reflect on the lessons of the past two years and to resolve to take steps to improve their respective organizations. If the global pandemic has taught us anything, it is the need to ensure that our enterprises are strong enough to survive major upheavals and agile enough to adapt and evolve into healthier ones primed for future success.This is where “future-back” thinking becomes useful. Future-back thinking is all about having a clear purpose and a clear vision of what you want your organization to become and then working backwards and planning for the steps and strategies that will lead to that vision and help make it a reality. It’s strategizing for the transformation of your business as it moves toward reaching its potential.This thinking is even more critical for large, established enterprises, where transformation happens much more slowly and is likely to meet resistance. Every business needs to transform in order to thrive because change and disruption are inevitable.This becomes even more critical given the encouraging signs of recovery we are beginning to see in our country and economy. While there is a sense of cautious optimism and rising hope that the worst is behind us, leaders understand that obstacles will still arise. However, they also know that there can be no true success without challenges to overcome.Given the exigencies of our times and the challenges to come in what we all hope will be the year of recovery, we believe that the need for transformative leadership becomes even more urgent and important than ever. Transformative leadership is a framework that focuses on three value-driving pillars: people, technology, and innovation.HUMANS@CENTERAuthor and leadership guru Simon Sinek once said, “Business is about people. If you don’t know people, you don’t know business.” Your business would not exist without people, especially the two most important ones: your customers or clients and your employees. Your strategies and long-term vision should have them both at their center. Every decision, every technology implementation, and every product and service must be viewed through the human lens.Understanding your customer or client is paramount in delivering products and services that will delight them and create compelling value propositions. This is at the core of business success, but it is also critical to recognize the need to adapt to your audience constantly. As society shifts and trends emerge, having the pulse of your base and having a solid understanding of where they are going is essential for planning for the future.Meanwhile, understanding your own people is just as important. They are more motivated to perform when they see that leadership values them and sees them as humans with real needs instead of replaceable workers. Enacting organizational transformation becomes easier when we always consider the impact on our people and act accordingly. One such transformation that is necessary for businesses to be future-proof but has a high impact on people’s everyday work is new technology implementation.TECHNOLOGY@SPEEDTechnology can be a great disruptor, but it can also be a great equalizer. Nowadays, technology is a necessity for businesses to be competitive, and because markets can shift quickly and dramatically, rapid technology adoption is an important step that allows your organization to continue creating value for and meeting the ever-evolving needs of customers and clients.However, as we continue to move forward into a very interconnected world, the issue of trust becomes that much more important as well. Information security and integrity are now at the forefront of conversations regarding technology in business. Speedy implementation without enough attention given to safeguards means taking on undue risk. The balancing act between ease of access and security will need vigilance and constant adjustment.Internally, successfully leveraging and implementing technology requires upskilling and/or reskilling your people. One of the common causes of resistance to this kind of change is the need to learn new things which can be disruptive and gets in the way of people getting their work done.I am sure that many readers are old enough to remember businesses having to drag their operations kicking and screaming into the internet age. However, as technology never stops evolving, so should we never stop thinking of how we can make it work for us and make us better. As leaders, technology transformation for your organization can be very tricky and will need you to be patient, understanding, encouraging, and communicative. This is part of making sure your business adopts a culture of growth and innovation.INNOVATION@SCALEFor an organization to continuously thrive into the future despite shifts and disruptions, it must have a mindset of impatience and dissatisfaction, and a willingness or even an ardent desire to always seek new and better ways to operate and deliver what customers and clients need.On the human side of this, leaders should seek to embed the transformative mindset into company culture. Make it intrinsic in how people think and operate and empower them to experiment and take appropriate risks. With innovative thinking as part of company culture, strong resistance to transformation is far less likely.On the technology side, adoption and implementation should make business sense. Innovation should not be practiced simply for innovation’s sake. Thoughtfully scaling technology transformation allows you to learn and adjust as you go. In this way, the human impact is better managed and leveraging new technological capabilities is more effective.TRANSFORMING FOR THE FUTUREThe three pillars of people, technology, and innovation each are drivers that create long-term value for stakeholders. Together they comprise the transformative leadership framework that guides the necessary approach, planning, and strategies to ensure that an organization is built for the future and resilient enough to survive and thrive future disruptions — such as the Great Resignation.Anthony Klotz, a professor of Texas A&M University, proposed the concept of the Great Resignation. This idea predicts a large portion of the workforce leaving their jobs once the pandemic ends, as it is established that how work is organized and conducted will not return to how it was before the pandemic started. This makes it even more critical for leaders to adopt these value-driving pillars not just to simply retain its employees, but to even potentially bring about a potential resurgence in the constant war for talent. In essence, we believe that by applying the transformative leadership framework to their organizations, business leaders can shift their focus from worrying about the Great Resignation and instead proactively build trust and confidence in order to drive a Great Resurgence in the business. 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.

2022

Accelerating growth in the post-pandemic world

Transformative Leadership in the year of recovery

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