A thought provoking report entitled “Match Fit: Shaping Asia Capable Leaders” was recently released by Asialink Business, PwC and the Institute of Managers and Leaders. The report details research conducted on the current capability of ASX200 Boards and senior executives to capture opportunities in Asian markets.

There are some real home truths highlighted for Australian business leaders to consider. Some high level findings in the report are as follows –

  • 67% of ASX 200 board members surveyed showed no evidence of extensive experience operating in Asia while 55% demonstrate little to no knowledge of Asian markets.
  • The average Asia capability score of an ASX 200 board is only 6.42 out of possible total of 30. Senior executive teams on the ASX 200 were even worse, with an average score of just 3.79 out of a possible 30.
  • The most Asia capable companies were twice as likely to be large capital companies rather than small capital companies.
  • Female senior executives on the ASX 200 were at least four times more likely than their male counterparts to demonstrate Asia capabilities.
  • Non-listed companies are more agile in Asia. On four of the six capabilities measured, senior executives from private companies score twice as high as their ASX 200 counterparts

So what does this mean? Australian business needs to adjust its thinking dramatically and invest in Asian capability to take advantage of the Asian market opportunity.

In my view the Australian business needs to focus on the following key success factors –

  1. Adopting an Asian Mindset

“A first step to more effective engagement with Asia and improved Asia capability among Australian business leaders is a shift in mindset about the importance of Asia to securing Australian economic growth and prosperity.” Match Fit: Shaping Asia Capable Leaders P.34

The Australian economy is closely linked with a number of markets in the Asian region. Given the Australian domestic market is unlikely to deliver significant growth for many Australian businesses, then not investigating the opportunity that Asian markets present is not good business.

As a starting point business leaders need to adopt an Asian mindset. They will need to demonstrate their willingness and flexibility to adapt to the local market, understand Asian culture, respect local business etiquette and look to build long-term personal relationships.

It is accepted as this may be a daunting task for many business leaders. However a non-commitment to the adoption an Asian mindset is a recipe for failure in any Asian investment.

  1. Returns in Asia will take time

“Both investors and Australian businesses need to look at Asia strategies more as vehicles for long- term investment growth and viability than as avenues for short-term profit extraction.” Match Fit: Shaping Asia Capable Leaders P. 34

Directors and senior management in Australian businesses are under pressure from shareholders to make investment decisions that deliver short term returns. As a result Australian businesses have become highly risk averse. Generally they will assess an Asian investment as higher risk than an investment in the local market.

Investment in Asia may offer businesses the chance to achieve high growth. However these returns are generally achieved in the medium to long term. Despite the promise of double digit returns the majority of Australia business leaders do not see Asian investment as a viable option because it does not appease their shareholder’s thirst for short-term returns.

Clear communication to shareholders and the investment community of the long term benefits of investment in Asia is a key strategy for any company. Likewise the demonstration of the companies’ capability in Asia will help to negate the perceived risks with doing business in Asia.

  1. Asian business capability is essential

People who have had in market Asian experience is an indicator that they are able to deal with complex business issues.

Companies looking to improve their Asia capable leadership talent should consider harnessing the knowledge, experience and networks of returning expatriates as well as Asian diaspora’s now residing in Australia.

Australian expatriates returning from Asia are a goldmine of Asia capability that often goes largely untapped. There is a large Asian diaspora in Australia, many of whom are migrant or first-generation Australian, with a strong understanding of the cultures and consumer preferences of countries in the region.

Unfortunately many Asian capable leaders may have been employed for their overall business experience, rather than to specifically drive an Asia strategy. Leaders with Asian experience will create more creative and diverse thinking in a company.

Alternatively companies may consider engaging an Asia capable advisory board to support their strategic positioning in the region. The advisory board can help establish connections with suppliers, investors and other key stakeholders for the organisation in the Asian region, as well as provide sound strategic advice and offer new ideas.

  1. Understand the Market

“Companies must seek to understand the risks of a market in the context of their own business, through market research, scoping opportunities and due diligence.” Match Fit: Shaping Asia Capable Leaders P.34

This statement speaks for itself. Any new market investment no matter what region it is in requires companies to do their homework in terms of market research. Business decisions made on perceptions or anecdotal evidence are very risky and could lead to poor or ineffective investments.

The process of assessing Asian market opportunities requires Asia capable expertise. An external resource will most likely need to be engaged. In saying this utilising internal resources can also help to build Asia capability among an organisation’s existing leaders.

Summary

“The report demonstrates that despite the centrality of Asia to Australia’s long-term economic future, many of our nation’s top business leaders are yet to take seriously the need to build knowledge of and skill in doing business with the region.” Match Fit: Shaping Asia Capable Leaders P.1

The hope of the authors of the report is that will serve as a wakeup call to Australian business leaders. In the end we all must take seriously the need to develop an Asia capable workforce, beginning with board and senior management, in order to secure Australia’s future prosperity in Asia.