The Business Times

What do executives in Asia really think?

What do executives in Asia really think?

Executives in Asia believe they waited too long to respond to the global downturn. And they are betting on international growth and on innovation to overcome the financial crisis.

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What do executives in Asia really think?

Executives in Asia believe they waited too long to respond to the global downturn. And they are betting on international growth and on innovation to overcome the financial crisis.

These are just two of the findings from Bain & Company's survey of executive views on business trends and management tools. Nearly 300 executives from a wide range of firms throughout Asia participated in this year's survey, providing new insights into how they think their firms are dealing with the turbulent economy—and what they think the future holds.

Bain has been conducting the survey since 1993 and it has been instrumental in helping to understand executives' changing views and pinpoint management trends. Based on more than 1,400 survey responses from around the world and completed in January, our findings reveal both common themes and distinct differences across regions and industries.

In Asia, several themes emerged. Among the most noteworthy: Asian executives are more optimistic than many of their counterparts around the world. Within the region, Indian executives are the most confident about an economic rebound this year, while Chinese managers are less hopeful and expect to make major layoffs in 2009. 

Asian executives are the most in need of international markets for growth.

When asked if international growth will be vital to their companies' performance over the next five years, an overwhelming majority (82 per cent) of the Asian executives said 'yes' and the figure shoots up to 88 per cent for Chinese respondents. Worldwide, only 66 per cent of the executives placed such importance on international growth. The response by Asian managers reflects emerging countries' dependence on global markets to sustain their fast-paced expansion.

Yet many economists now believe that the old model of growth in Asia driven by the seemingly insatiable appetite of American and European consumers will have to change. Are Asian companies well positioned for such a fundamental change?

Innovation is another way that Asian executives want to grow their businesses amid the worst downturn in their experience. In fact, Asian executives expressed the strongest commitment to innovation. When asked if innovation is more important than cost cutting for long-term success, 84 per cent agreed, compared with 76 per cent of the executives globally.

In North America, just 67 per cent of executives stressed the importance of innovation over cost cutting. More Asian executives also believe they could drastically boost innovation by collaborating with other companies. Yet Asia's success model over the last decades has been to produce more cheaply, and not to develop and market new and better products. Are Asian companies ready to shift to innovation-led growth?

Even as the downturn sweeps across Asia, confidence remains relatively high. Three-fourths of the executives expect to use the recession to improve their firms' competitive position—about the same as the global number. Indian managers are the most optimistic: eight out of ten expect to move up competitively. But it's clearly impossible for more than half of companies to improve their competitive position. Which companies in Asia are truly up for the drastic restructuring and bold bets required to move up competitively in a recession?

The region's confidence also is reflected in executives' downsizing plans. Only about three of every ten Asian companies expect significant layoffs this year. In other regions, it's closer to four in ten firms. Again, Indian firms are the most optimistic—only two of ten Indian executives are planning for major layoffs versus four out of ten in China.

Long-term impact

Asian executives also are less concerned than their counterparts in North America, Latin America and Europe about meeting growth targets in 2009. This might explain why, with the exception of the Chinese, Asian respondents aren't anticipating large layoffs.

Asian managers, like respondents worldwide, think that the economic turbulence will have a long-term impact. As a result of the downturn, almost seven out of ten Asian executives expect more government regulation of businesses over the next five years. In such a turbulent economy, they believe long-term success will depend on a company's ability to adapt, not only to new regulations, but also to shifting market conditions. When asked if the downturn will change consumer behaviours for at least three years, 71 per cent of the executives agreed.

Bain's survey also addresses the use of management tools. We asked about the 25 most popular tools and found that as Asia Pacific executives shift their objectives and priorities amid economic worries, they also are changing the tools they use to manage their businesses. We found stark differences in tool use within the region. Customer Relationship Management—used to track information and develop customer insights—was the most used tool throughout the region, followed by Benchmarking, a cost cutting-related tool.

Asia is the only place worldwide where Benchmarking is not the No 1 tool, underscoring the fact that, in general, Asian executives are more optimistic and less concerned about reducing costs. Again, the exception is China, where Benchmarking tops the Top Ten Tool list.

Ironically, while more than half of the Asian managers surveyed felt that unclear decision-making authority is hurting their performance, they made little use of a management tool that could improve their decision-making. Decision Rights Tools, a systematic approach to making and executing key operating decisions, is the least popular tool for Asian executives, who also give the tool the lowest satisfaction score.

Till Vestring is managing partner for Bain & Company South-east Asia. Suvir Varma is a Bain partner and leader of the firm's South-east Asia private equity practice.