Business Chief Asia - Feb 2018 by Business Review Asia

February 2018 • ASIA EDITION

XIAOMI

FROM BILLIONDOLLAR STARTUP TO WORLDWIDE GROWTH

TOP 10

CHINESE IPOS

CITY FOCUS

SINGAPORE

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FOREWORD WELCOME BACK TO the Asia edition of Business Chief. We have an exciting issue this month packed with a wide variety of content. Our first feature offers exclusive insight from Xiaomi’s Senior Vice President Wang Xiang about the Chinese smartphone unicorn’s foray into the Indian market, where smartphone uptake is set to mimic that of China. We also have global features offering advice from CEOs around the world on retaining the right talent and how new technologies can help companies manage risk more effectively. In addition, Ben Mouncer speaks to Conrad Fritzsch, Director of Digitalisation, Marketing & Sales at Mercedes-Benz about why he thinks people are essential to digital transformations. This month’s top 10 looks at the biggest IPOs Asia had to offer in 2017. Finally, our city focus for this month examines Singapore’s place as a trading hub as it develops into a global smart city. Be sure to check out our exclusive company reports on Burger King and Marriott International, too – global businesses with exciting news to share. We hope you enjoy reading this issue as much as we enjoyed putting it together. We welcome any feedback as always on our new @BusinessChief Twitter account.

Enjoy!

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TECHNOLOGY

XIAOMI From billiondollar startup to worldwide growth

CHANGE FOR THE PEOPLE, BY THE PEOPLE

LEADERSHIP

PEOPLE

What’s the key to keeping your best talent?

SINGAPORE

CITY FOCUS

S U S TA I N A B I L I T Y

Why operational risk management is vital – and where it’s headed

54 Top 10

Chinese IPOs

TOP 10

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Supply Chain

Burger King

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L E A D E R S H I P & S T R AT E G Y

XIAOMI From billiondollar startup to worldwide growth Business Chief speaks to Wang Xiang, Senior Vice President of Xiaomi, about the fifth largest smartphone producerâ&#x20AC;&#x2122;s plans to dominate the Indian market Writ ten by OLIVIA MINNOCK

Click to watch the MI Product launch Event Summary

IT’S BEEN QUITE a few years for tech unicorn Xiaomi. In 2014, just four years after beginning, the company was the top-valued startup in the world, but supply chain issues and missed shipment targets in 2015 led to an opening for smaller competitors and decline for Xiaomi. Now, the fifth biggest smartphone provider in the world is back and more ambitious than ever as it sets its sights on India’s 1.4bn strong market. UPS AND DOWNS Where did it all start? Senior Vice President, Wang Xiang explains: “Xiaomi was founded in 2010 by serial entrepreneur Lei Jun, with our Android-based operating system MIUI as our first product. In 2011, we launched our first smartphone Mi 1, henceforth delivering on our mission to bring innovation to everyone through high quality products with honest pricing. “Subsequently, we also developed a series of lifestyle technology products as part of our Mi ecosystem range by investing into and incubating hardware start-up companies expanding further into the customer electronics sector. “Although Xiaomi is a very young 10

February 2018

‘ 2015’s decline was attributed by CFO Shou Zi Chew to doing too much too fast, which is understandable given the company had risen from nothing to a $10bn revenue business within four years’ Xiamoi produces not only smartphones but drones company, we are growing at an unprecedented pace,” he adds. The Beijing-based tech company, branded simply as Mi, produces not only smartphones but drones, rice cookers and all kinds of technology. Its 2015 decline was attributed by CFO Shou Zi Chew to doing too much too fast, which is understandable given the company had risen from nothing to a $10bn revenue business within four years.

L E A D E R S H I P & S T R AT E G Y

Having regained momentum, shipment surged again by 59% yearon-year in 2017’s second quarter, totalling 21mn at that point. Xiaomi is now the firth largest smartphone supplier in the world and isn’t far off rival Oppo, which has an 8.1% market share to Xiaomi’s 6.2%. The Big Three, of course, dominate the market, with Samsung holding 23.3% as of 2017’s second quarter. For 2016-17, Xiaomi grew from

10,000 to 14,000 employees. The Financial Times has named Xiaomi “the third biggest handset seller in Indonesia and fourth in Russia”. So, what does Xiaomi have to offer in competition with the giants? “Our vision ‘innovation for everyone’ is what makes us so different,” Wang explains. “We are committed to delivering quality products with honest pricing to our customers. We are able to do this because of our unique ‘triathlon’ 11

L E A D E R S H I P & S T R AT E G Y

Xiaomi’s Mi range includes the Notebook Air business model with three pillars: hardware, internet and new retail. “This model allows us to be the most efficient consumer technology company that can offer products with great technology and great design, at great prices, to our customers. Last, but not least, Xiaomi has a very strong engagement with Mi Fans and users: together we develop loyalty, passion and a strong bond that feels like a sincere friendship.” So, after such a tough journey, the future looks positive for 12

February 2018

the Chinese Unicorn. Wang points out that the company displayed a year-on-year growth of 102.6% during this period. “We just became the number one smartphone vendor in India,” he adds, with IDC having cited Xiaomi as holding a 23.5% market share in the country for 2017’s third quarter. “To date, we have a presence in more than 60 markets around the world including Spain, our first market in Western Europe. We have opened 264 Mi Home retail stores in

“ While we focus on our core products, we invest in companies that are able to take us into new and exciting categories. We have reached a huge scale in just seven years because of the partnership/ affiliation model” – Wang Xiang, Senior Vice President, Xiaomi

China and 158 Authorised Mi Stores with partners across the world.” TO INDIA Now, Xiaomi is setting its sights more fully than ever on the Indian market, and last year announced it will make the subcontinent a priority over its other markets. India has a similar size to China with around 1.4bn consumers, and demand is high for cheap electronics in a more price-conscious market. While Xiaomi currently has 60

markets, Chief Executive Lei Jun stated last year that India is one of the most promising in terms of shipment and scale of work, saying: “We have adopted the India number one Strategy, which includes design, research and development, manufacturing and supply… we became number one because our company is so small, so we focus all our energy on India. That’s why we have really supported India on the supply front.” Wang goes on to explain: “India has a huge population and as more and more Indian people are set to come online over the next decade, many of them will likely do so through mobile devices. We made the decision to focus on India as we saw the huge demand for high quality products at accessible prices, and in turn the huge potential. “In fact, India has increased priority in the company in some aspects, for example R&D to make India-focused products, and ensuring enough supply and stock for product lines sold in India. We are committed to sustaining the momentum in India.” Xiaomi has opened a research centre in Bangalore, hiring local 13

engineers while sending staff from China to support their new Indian team. At present the firm sells a range of about 100 products in China and 20 in India, but within three to four years it aims to sell 200 in India as well. Having reached its 2017 target in October of that year, with sales reaching $15.07bn and 20mn smartphone shipments, Xiaomi has an aggressive target of 100mn shipments for 2018 – which it aims to fulfil by replicating its

“ Xiaomi is focused on making innovation available to everyone by delivering our user quality products with honest pricing” – Wang Xiang, Senior Vice President, Xiaomi

Xiaomi’s Mi range 14

February 2018

domestic success in India. Other producers such as Huawei have chosen to stay focused on Chinese and European markets, as demand for pricier handsets is higher, so Xiaomi could avoid such competition by providing the cheaper handsets the market demands. Xiaomi is not along in putting its faith in India’s burgeoning internet scene. Alibaba Cloud has confirmed it will open a new data centre in India, banking is consistently becoming

L E A D E R S H I P & S T R AT E G Y digitised in the country, and Google has recently launched its Cloud Platform for India in Mumbai. STAYING PUT IN THE WORLD’S BIGGEST MARKET However, Wang is quick to point out that Xiaomi’s Indian adventure does not mean abandoning the lucrative Chinese market. “China is the largest smartphone market in the world and will always be a key market for us. Meanwhile,

the Chinese smartphone market is now largely a replacement market. This means that competition is even more intense. In this regard, user experience becomes extremely important to a smartphone company’s success in the Chinese market. “There are undoubtedly a lot of challenges, however, competing on home ground with other Chinese smartphone companies helps us to further hone our business model and keeps us on our toes, as we believe

L E A D E R S H I P & S T R AT E G Y “ India has a huge population and as more and more Indian people are set to come online over the next decade, many of them will likely do so through mobile devices” – Wang Xiang, Senior Vice President, Xiaomi

Xiaomi’s Mi VR Play that only the smartphone company with high-quality products and an amazing user experience will be able to breed user loyalty and sustain their business in the long term.” SUPPORTING OTHER STARTUPS It’s clear Xiaomi hasn’t forgotten its beginnings as a startup, and over the past few years it has invested $4bn 16

February 2018

in 300 Chinese companies. It now says it will invest $1bn in up to 100 Indian startups by 2022 – a key aim of which will be to gain more apps for their smartphones in the local market, thereby increasing use. It was also announced in December 2017 that Shunwei capital, a venture capital firm partly owned by Lei Jun, will be investing in the Indian start-up scene. The company expressed faith that India’s mobile sector will mirror that of China, as more Indian users more from feature phones to reasonable-priced smartphones. The VC firm, which manages three US-dollar funds worth a collective $1.7bn, is currently investing in several mobile app companies, which in 2017 have included ShareChat, Slip, Mech Mocha and Pratlipi. Wang explains: “Xiaomi has invested into a range of companies to provide a rich array of internet services and hardware products. While we focus on our core products, we invest in companies that are able to take us into new and exciting categories. We have reached a huge scale in just seven years because of

XIAOMI HAS INVESTED $4BN IN 300 CHINESE COMPANIES – BY 2022, XIAOMI WILL INVEST $1BN IN UP TO 100 INDIAN STARTUPS – INDIAN SMARTPHONE MARKET: 1.4BN – XIAOMI EMPLOYEES: 14,000 – XIAOMI’S MARKET SHARE IN INDIA: 23.5%

Xiaomi’s beautifully designed Mi products extend through to its packaging

the partnership/affiliation model.” “For our Mi Ecosystem in particular, Xiaomi has developed a unique approach of incubating and investing in specialised companies to effectively expand our product line. In turn, they drive traffic to our e-commerce site and our offline stores and play a key role in enabling us to become a well-known brand for IoT and other lifestyle technology products.” LOOKING FORWARD There’s no doubt that Xiaomi is now going strong and is eyeing future

success and a bigger slice of the smartphone market. “We definitely have plans to become a worldclass and truly global technology company that is present everywhere in the world,” says Wang. He adds that the most important part about Xiaomi’s growth is that “Xiaomi is focused on making innovation available to everyone by delivering to our user quality products with honest pricing. In the international arena, Xiaomi is committed to the global market and we will continue to launch new products in more countries worldwide.” 17

TECHNOLOGY

CHANGE FOR THE PEOPLE, BY THE PEOPLE Writ ten by BEN MOUNCER

Digital transformations are now seen as mission critical to businesses large and small, yet Conrad Fritzsch, Mercedes-Benzâ&#x20AC;&#x2122;s Director of Digitalisation, Marketing & Sales, explains why people as much as technologies are the true drivers of change

TECHNOLOGY

SPEAK TO THE leader of any ambitious business in any region of the world, and it won’t be long before you arrive at one particular topic in the conversation. ‘Digital transformation’ may well rank as the buzziest of buzz phrases from 2017, a year that also made convincing commentators ‘influencers’, heralded any progress points as ‘nextgen’ and redefined an employee’s (human, not robot) working capacity as ‘bandwidth’. While quirks in language come and 20

February 2018

go, however, the plans and processes that define a ‘digital transformation’ are here to stay. This is no fad. Like the office chairs you sit in and the screens you’re reading on, technology as the vertebrae of a business – and installing it quickly - is becoming less desirable and more just plainly essential. Yet a recent study, conducted by Vanson Bourne, reported that nine out of every 10 digital transformation projects fail. The research called on input from 450 CIOs, CTOs and

The parent company, Daimler, knows the pairing of its mobility platforms with the trends and futuristic technologies of tomorrow is the answer to the individual needs of its customers

Chief Digital Officers at sizeable companies in the United States, the United Kingdom, Germany and France. This startling rate of derailed disruption is consensus, not just a manufactured statistic. Why does the embedding of digital in businesses prove so problematic, when the very people charged with managing that business have, more often than not, made it their priority? Are they trying too hard, losing sight of its true purpose?

“When you have true customerobsession, then this is what will drive your transformation because you see what’s important and what’s not so important” CONRAD FRITZSCH Director of Digitalisation Marketing & Sales at Mercedes-Benz 21

Video: An insight into the experience and shape of digital transformation at Daimler with the Digital Life Day 2017

CONRAD FRITZSCH Director of Digitalisation Marketing & Sales at Mercedes-Benz

Conrad Fritzsch, born in Berlin in 1969 joined Daimler AG in August 2017. He is the Director of Digitalization Marketing & Sales Mercedes-Benz. He is the driver of the digital transformation. In order to promote entrepreneurial creativity and cooperation, Fritzsch brought digital marketing and IT together within a swarm organization. In his function, he leads the digital transformation and Mercedes me, which offers a digital, personalised ecosystem and is all about to satisfy customer demands. Besides, he promotes a seamless customer journey, which is ensured through the new website in frontend and backend â&#x20AC;&#x153;OneWebâ&#x20AC;?. Further he is responsible for eCommerce. With the creation of new international delivery hubs, Fritzsch is also very active in worldwide recruitment of digital high potential employees.

February 2018

TECHNOLOGY Conrad Fritzsch is Director of Digitalisation, Marketing & Sales, at Mercedes-Benz. As the overseer of a digital transformation in a worldfamous company steeped in tradition, he is keenly aware of the challenges. For him, the focus shouldn’t be on technology itself, but on people. “Customer-obsession is the starting point for any transformation,” he tells Business Chief from the automaker’s headquarters in Stuttgart, Germany. “In the past (at Mercedes-Benz), often we built things because we can. Technical things, more driven by innovation, more driven by what us as engineers can build. Now we’re trying to find out what our customers want today and tomorrow. “What is important for our customers? When you have true customer-obsession, then this is what will drive your transformation because you see what’s important and what’s not so important.” Fritzsch joined Mercedes-Benz’s parent group, Daimler AG, in August 2016. In the short period since he has started the long journey to change, trying to impart his expertise on a company boasting 280,000 employees; a weight of work he

admits being surprised by initially “Coming from start-ups, I really underestimated how huge and complex the company is,” he remarks. The 48-year-old’s primary role is to weave innovative digital products into modern working models, all with the customer’s requirements as the motivation. For example, Fritzsch lead on ‘Mercedes me’, the manufacturer’s range of mobile services and apps that come together to deliver a best-inclass digital service to its customers. His most notable change so far, though, has been to merge MercedesBenz’s marketing and IT provisions, creating a swarm mentality that has hastened the pace of change from both a technical and personnel perspective. He claims its most crucial aspect has been the buy-in of the employees. “The first point that you have to really solve is, does the company want to change or not? Not only the Board, not only the top management, everyone. We have to create a working and culture model that works for all of us.” explains Fritzsch. “Digital transformation in big companies is more a transformation of the people, from A to B. It’s not too much about digital only; you have to 23

TECHNOLOGY understand that the people are the core in this changing process. Daimler is a fantastic company and it knows that we have to change because the world is changing, the customer is changing. “In our department, there were around 250 people from IT and the business unit together. We said, ‘Okay, these are our problems we have to solve and these are the people we have’. Then you see white spots because there are new roles we didn’t make! When you build digital products like apps, you need all kinds of experts – so we built a team from both outside experts and inside experts.” A vital part of the process was establishing the new working models, with the scale of change broken down into step-by-step parts – an approach

“Digital transformation in big companies is more a transformation of the people, from A to B” CONRAD FRITZSCH Director of Digitalisation Marketing & Sales at Mercedes-Benz 24

February 2018

to transformation that Fritzsch likens to developing a key piece of software. “When you build software, you go out with beta, the version one, version two etc. This is the same method. With the people, we said ‘let’s change in this direction’. We built a Daimler blueprint which combines the strengths of start-ups and global company,” he adds. “Everybody was on the boat, they had the right mindset. They didn’t say ‘so we made something wrong and now some guy’s come here and has some big answer?’. We built a solution together and everyone could see that solution. That is super important when you want to change.” Fritzsch’s energy for his mission is career, and it’s a passion that powered a unique career ahead of him taking up the role at MercedesBenz one and a half years ago. Back in 1993, he co-founded the advertising agency Fritzsch & Mackat, where he served as Creative Director, leading on all creation and consulting. His innovative spark saw him launch tape.tv in 2008, an online music video streaming service that, at its peak, serves 3.9mn unique users, hosting videos from high-profile

DigitalLife Days is a method for the Group to keep staff informed of technological developments and show digital transformation in action artists from around the world. Fritzsch left the company in 2016, with Daimler picking up the phone. “I have never worked on this scale. And I thought, ‘okay, the transformation of the car industry is a fantastic challenge’,” he reveals. “In my life, I had built my own companies but I had never had one of these corporate challenges, as they described; when a corporate company really wants to change. I thought, with all the skills and experiences I gathered in the past, that I can do it.” Is he content with how it has gone since he picked up the baton in August?

“Am I happy how it goes? 100% yes. Are we done? 100% no. It’s a really tough journey for us,” he summarises. “In my world, when I made it my plan in August, September 2016, I thought it will be much quicker. We’ve decided that we need more people, to move forward and to change more dramatically. “With digital transformations, don’t make a plan and think it will just work. There is always a change, there is always a new idea from outside, there is always a distraction. But you have to take everyone on this journey with you.” 25

PEOPLE

Whatâ&#x20AC;&#x2122;s the key to keeping your best talent? Stuart Hodge looks at the main challenges companies face in terms of staff retention and some of the novel approaches big companies are taking to create a positive culture Writ ten by STUART HODGE

PEOPLE FOR ANY BUSINESS, ensuring that you keep hold of your most talented members of staff in an often increasingly competitive job market can be the difference between sustained success and the possibility of stagnating or going backwards. Indeed, a recent Willis Towers Watson study showed that more than half of all organisations globally have difficulty retaining some of their most valued employee groups and that more than a quarter of employees are considered ‘high-risk’ for turnover. Most scholars would agree that motivation is at the heart of keeping a workforce happy and, according to a recent report by Forbes, establishing an emotional connection with staff is the key to ensuring a cohesive and inclusive culture around the company. The Forbes study asked HR professionals what their biggest challenges are related to corporate culture and they said overwhelmingly that creating a cohesive culture (55%) and retaining talent (41%) gave them the most concern. Lola Gershfeld, Psy.D, Board Dynamics Specialist and CEO at 28

February 2018

52% of executives feel culture is primarily set by the current CEO Level Five Executive, says creating that emotional connection can be done using a three-stage plan called Board/Team Dynamics Process. “When everyone is familiar with and understands one streamlined process the culture becomes much more cohesive,” she says. “Team members start speaking

W H AT ’ S T H E K E Y T O K E E P I N G Y O U R B E S T TA L E N T ?

the same language and using the same tools to work through conflict. This is where you start to see some really positive changes. “In our work, we’ve found that culture has to start from the top. Everyone tends to look up to learn behavior. This is backed up by a recent study from Duke University

that says 52% of executives feel culture is primarily set by the current CEO. And, while boards of directors do not directly choose the firm’s culture, they influence the choice of culture by picking the CEO. “Boards also modify the eventual success of the culture by reinforcing or undermining it through their 29

PEOPLE

“Addressing emotional connection is the way to arrive at a cohesive culture that retains and attracts talent” - Lola Gershfeld, CEO, Level Five Executive approach in addressing challenges together and making that emotional connection with the executive team. “So, to have a long-term effect on culture, you have to start with the board and the executive team. This might seem overwhelming, but in that same study, 91% of executives said culture is important at their firm and 78% view culture as one of the top three or top five factors that affect their firm’s value. 30

February 2018

Executives and boards understand the value of culture and they are looking for long-term solutions. “Improving culture is within arm’s reach. We know how to fix culture for the long haul; it’s just a matter of committing to it. Addressing emotional connection is the way to arrive at a cohesive culture that retains and attracts talent.” But this is just one approach to creating a positive culture within

a company. For some companies, such as the Star Entertainment Group in Australia, it’s more about creating an operational identity and sense of belonging for employees. “With over 4,500 staff, the real trick is to ensure that everyone is willing to act autonomously,” says Dino Mezzatesta, COO. “It’s important to have confidence and faith in your employees and support them to give their best. There are four things

we ask our employees to do: live it, bring it, own it and deliver it. “By ‘live it’ we mean that people need to understand guests and their expectations to ensure that what they provide is in keeping with what a customer wants. When we talk about ‘bringing it’, we want our people to always give of their best and to bring everything that they can to offer to our customers. ‘Own it’ means step up, don’t be afraid to take ownership of situations, to be brave and not to be scared to do things differently. And ‘deliver it’ is basically the final step, because if you do the top three then you should be able to be the perfect host.” Given the Star Entertainment Group’s award-winning hospitality offering, there can be no doubt that this approach is working, but another important factor for businesses is ensuring that they are helping to develop the leaders of tomorrow as well. Figures in the TalentKeepers Workplace America report show that a disappointing 36% of organisations are taking steps to develop leaders to drive engagement. “Leaders need to be trained in 31

PEOPLE

A US study shows 36% of organisations are taking steps to develop leaders to drive engagement

employee engagement skills and must understand their role in retaining and motivating people,” says Christopher Mulligan, TalentKeepers CEO and author of the report. “The first step in leveraging leaders is determining how well they are currently doing and understanding specifically what training they need to become successful. Every leader should have engagement and retention goals, incentives to meet those goals, and consequences for failing to do so.” 32

February 2018

Clearly the pressure to keep your best staff has never been greater and the lengths companies will go to in creating a positive working culture and environment are more creative than ever. For Paul Alexander, Head of Indirect Procurement for EMEA with BP, the best way to ensure staff loyalty and to keep them happy in their work is by engaging employees on an intellectual level to stimulate and challenge them. “My view is that inspiration and

W H AT ’ S T H E K E Y T O K E E P I N G Y O U R B E S T TA L E N T ?

learning is really what people are turned on by these days and that’s what creates a successful team,” says Alexander, who is a bonafide leadership expert and speaker with a passion for the subject. “Something that compounded my thinking was research by Zenger and Folkman. They’ve written a couple of books, the first of which is called ‘The Extraordinary Leader’ and their research is absolutely fascinating. “They’ve found many things in their studies and they’ve used very, very large sample groups to test their assumptions. They have

“Inspiration and learning is really what people are turned on by these days and that’s what creates a successful team” - Paul Alexander, Head of Indirect Procurement for EMEA, BP

found very clearly that the ability for leaders to inspire interest and the resource and sincerity you put into development and learning are the things that will drive success. “I do believe in a knowledgebased economy and a productive economy: you need to have people who want to work for you and are motivated and want to succeed. “The research on the millennial generation really underlines all of this, I think what they’re asking for which is to be treated with respect, not to be hugely well rewarded but to be sensibly and adequately rewarded but to be treated well and given the opportunity to learn and fulfill themselves. “I think that’s what we all want; the difference now is that a lot of work has gone into listening to millennials who have a loud voice and I think and hope our workplace is evolving the way it needs to do for the benefit of us all. “Another thing I would point to is the work of Dan Pink. What he says is three things really turn people on: autonomy, the freedom to do the job the way they want to do it; mastery, giving them the 33

PEOPLE Employees who are â&#x20AC;&#x153;engaged and thrivingâ&#x20AC;? are 59% less likely to look for a job elsewhere

February 2018

W H AT ’ S T H E K E Y T O K E E P I N G Y O U R B E S T TA L E N T ?

support to excel at what they do; and purpose, helping them find a reason to do what they do. “If I could crystallise everything that I’m saying about leadership into one word it would be: inspiration. Within procurement, they can be the kind of people who turn up, place orders and do a commodity task, or they can be the people who save the company. “My very strong belief is that when people come to work they should be able to have a good time and I don’t know why so many organisations struggle with that.” Indeed, when Alexander breaks it down like that it is hard to fathom why so many companies find it difficult to create such a positive environment for staff to work in, and no doubt this issue is becoming increasingly important. Research from Gallup shows that employees who are “engaged and thriving” are 59% less likely to look for a job with a different organisation in the next 12 months. Companies like German online clothing retailer Spreadshirt have an even more novel approach to creating that positive culture and ensuring that work is a fun place

for employees to come into, as Philip Rooke, CEO, explains. “We have a Feel Good Manager whose job it is to make Spreadshirt a great environment to work in and a big part of this job is organising the company events. We always have a big summer party where family and friends, but also former Spreadsters, come together. Now we also have a “Spreadster exclusive” event, called Wandertag, like a summer outing. “Talent retention isn’t a big problem for us. We have a great product and a great company, but we do not take that for granted. Like any company we have our bad days. Our culture and talent retention is led by our Head of Recruiting and Feel Good Manager. “She’s responsible for the onboarding process for each new Spreadster, and improving workplace culture. In particular she has brought in programs on management communication to improve the way we work with talent. If you respect and empower talent, it wants to stay.” Words which should perhaps be borne in mind by companies who are worried about competitors poaching their most talented employees. 35

S U S TA I N A B I L I T Y

Why operational risk management is vital – and where it’s headed

Writ ten by STUART HODGE

Business Chief looks at how operational risk management has developed in recent years and what we can expect in years to come...

S U S TA I N A B I L I T Y MITIGATING RISK. IT’S a challenge that every company faces but it’s sometimes a difficult thing to confront or to feel that you’re maximising the potential from. It can mean anything from having more money set aside for workers’ compensation to an awareness of transaction risk in crossborder deals – that’s why there can often be a reticence in certain sectors to properly address it. Michael Rosenberg is from WPV Corp, a company which claims to have developed technology that almost completely mitigates the risk of harassment/sexual harassment and workplace violence, using a validated risk assessment and an incident reporting system that is held outside the organisation. “Managing risk can literally mean the difference between a company being profitable and being bankrupt,” he says assertively. “Reactive cultures that ignore risk waste millions of dollars literally having to deal with emergencies. It’s like a car: if you don’t do the maintenance and ignore the risk, it will break down at the worst possible time and cost you a lot of money to fix and replace. 38

Feburary 2018

Many organisations still use spreads

“Ignoring operational risk leads to significantly higher insurance rates, turnover, lost time and most importantly brand degradation. “Identifying and preventing operational risk before it becomes a crisis literally is the single largest factor in ensuring a company’s survival.” But what exactly is operational risk and how do you manage it? “Typically, operational risk is a highly-siloed discipline in

sheets to manage risk

organisations,” explains Val Jonas, CEO of British consultancy company Risk Decisions. “Good risk management may be carried out locally, but this doesn’t necessarily meet the organisation’s need to achieve a connected view of risk. It also doesn’t encourage creativity in thinking about both up-side and down-side scenarios. This is exacerbated by the fact that most organisations still use spreadsheets

to manage risk in each silo. “Those organisations most effective at risk management embed a culture of risk awareness and management as a top-down imperative. This encourages more informed risk taking, drives creativity and increases business performance. “Key strategies include establishing a consistent approach to give panorganisation visibility of risk, while allowing different operational areas to 39

We asked

Tim Ng…

Operations is an oft used word in the business world, but what does it really mean? “As a Chief Operating Officer, my challenge is multifaceted. It is not a role that is well defined. It is a role that is integral to the company but is also unique to the sector I am in. The role of a Chief Operating Officer for a financial services firm is very different from one in manufacturing, technology or health. “The maturity of the business impacts greatly on the skills necessary to ensure that the company operates in a manner that allows it to react to internal and external pressures. “With market uncertainty and volatility caused by Brexit and the pressure on the currency markets, companies have required a sustained pursuit of greater efficiencies and major business transformations. “The nature of the position is diverse with a wide variation in operational roles from one sector to another, but the core lies in supporting the CEO and determining the optimal strategy for the future and then help implement it. “As a CTO, it made sense to move into a broader role within the company which is primarily a technologyenabled business. The ability to marry technology and development skillsets to operations gives us the capability to take our operational agility to another level. We are not wedded and reliant on third parties, we can develop and create our own solutions to operational challenges. “The challenges facing operations are varied and can be likened to guerilla warfare – you just don’t know where you will have to be next.”

Feburary 2018

S U S TA I N A B I L I T Y

manage risk as appropriate. This will increase and improve collaboration which can lead to valuable insights e.g. supply risks impacting multiple areas of the business. Another strategy is to implement regular audits of key suppliers’ risk policies and processes to ensure they deliver. For example, pharmaceutical companies ensuring that the third-party companies running their clinical trials will do so ethically and in the required time-frames. “Finally, all business cases should include an assessment of risks, with clear explanations of how they will be managed.”

One of the key facets of operational risk management companies have to address in this day and age is the prospect of cybercrime. Figures in last year’s Accenture Cost of Cyber Crime study showed that the average annual cost of cybercrime is $11.7mn, increasing annually by 22.7%, with the number of breaches increasing by 27.4% to an average of 130 each year. “Operational risk management is getting more important in recent years due to the new and more stringent regulatory requirement while organisations are keen to embrace the digital transformation which essentially increases the risk exposure as a result,” says William Tam, Director of Sales Engineering, APAC, for global cybersecurity expert Forcepoint. “The continuously shifting ‘threat landscape’ requires an equally transformative view on behaviourcentric security. To manage cybersecurity risk, companies need to include measures that understand the nature of human intent and the ability to dynamically adapt security response. That’s the path forward to stop cyberattacks dead in their tracks. “Cloud computing has been 41

S U S TA I N A B I L I T Y a key disruptor to operational risk management. As business critical data continues to move to the cloud, and be made available to anyone anywhere, traditional perimeter-based security and riskmodelling are becoming obsolete. “Organisations need to concentrate on when and why people interact with critical data. Additionally, as malware continues to evolve, the risks will multiply, leaving traditional security controls ineffective.” It’s an ever-evolving space, and requires companies to be clear in their thought process and implementation. Jeff Skipper, an expert in organisational psychology who runs his own consulting firm, Jeff Skipper Consulting, believes it is an area which companies often fail to address. When asked how important operational risk management is in the business world, he responded assertively. “Very,” says Skipper. “And it’s too often overlooked because risk management doesn’t seem like ‘productive’ work. You only feel the gap when something goes off the rails. However, the impact of that can be measured in revenue hits, reputational 42

Feburary 2018

damage, and employee exits. “In my work with leading organisations in both the public and non-profit sectors, risk management is most commonly only given lip service. The leaders whom I advise are the ones who continually surface risk as a lever to remove obstacles and act. “Combining high risk awareness with the strategic use of what I call ‘leadership capital’ is a critical combination for successful initiatives. It has made the difference between 10% and 100% cost overruns.” Skipper believes that poorlymanaged strategic projects are often at the root of organisational failings with regards to risk management. “It’s very common for the best people to try and avoid key projects because they are very demanding,” he says. “But having the best people with strong skills and leadership is key in these situations. “Secondarily, there are major gaps in future anticipation. We don’t give people time to think about the ‘what ifs’, which can be the greatest source of risk avoidance as well as innovation.” One of the key areas where innovation is expected in the ORM

“Managing risk can literally mean the difference between a company being profitable and being bankrupt” - Michael Rosenberg, WPV Corp space, as it is in so many others, is by embracing cognitive technology. David Cahn is the Director of Product Marketing for Elemica, a leading business network for supply chains of process businesses, discussed how that might, and might not, change things. “Cognitive risk management involves the decision by a human to follow the risk mitigation procedures, but knowing the risk of something doesn’t prevent us from taking a chance anyway,” says Cahn.

“However, cognitive science is being incorporated into technology to create powerful tools that tackle complete problems. Advanced analytics and automation will increasingly play bigger roles as tactical solutions to drive efficiency or to help executives solve complex problems. “The real opportunities lie in re-imaging the enterprise as an intelligent organisation – one designed to create situational awareness with tools capable of analysing disparate data in real or near-real time. 43

“Organisations need to concentrate on when and why people interact with critical data” - William Tam, Director of Sales Engineering, APAC, Forcepoint “The goal of cognitive governance, as the name implies, is to facilitate the design of intelligent automation to create actionable business intelligence, improve decision-making, and reduce manual processes that lead to poor or uncertain outcomes. In other words, cognitive governance systematically identifies ‘blind spots’ across the firm then directs intelligent automation to reduce or eliminate the blind spots.” 44

Feburary 2018

Tim Ng, COO of Europe’s leading digital health business Now Healthcare, casts an eye even further forward. “A key challenge in the future will be the necessary integration of new and future technologies into core processes, world-changing technologies like artificial intelligence and machine learning,” says Ng. “Data is at the heart of operations, and those who can harness it will be more

S U S TA I N A B I L I T Y successful than those who can’t. “The greatest impact and trend will be the use of artificial intelligence. This is a logical next step from business intelligence – systems that can consume data from multiple data streams and provide actionable intel in a format that is easily digestible to the management. Say goodbye to huge teams of analysts: AI will be the new norm. “Technology in general will drive greater change, so operations people will need to thrive on the adrenaline of complexity and change. The operational canvas will be changed forever and this needs to be embraced. “The world economy has faced and is still facing large structural changes on the way to bringing business to the international stage. Technology has impacted hugely with the world becoming a much smaller place – globalisation of businesses has significantly accelerated with small companies able to enter the global markets through the use of technology. It is no longer an honor reserved for large companies and SMEs. “Because of this, agility is required. Agile operations allow the companies

to react to market conditions and plot routes through the minefield of consumer demand. I expect operational processes to be more agile with changes made almost instantaneously, as technology allows access to real time KPI (key performance indicator) management to an unprecedented level. “Deeper integration of systems and data will be necessary with mobilisation and real time access a key enabler. With executives able to access data anytime and anywhere, leading to strategic and tactical decision making many factors quicker than previously possible. Micro services will be the new fabric for operations with the reliance on the large monolithic enterprise systems no longer necessary. Imagine if you could piece together the services you needed like a jigsaw. Able to add, update and discard as necessary when new technologies or better AI became available. “These are just the beginnings – it is no longer enough to be a safe pair of hands. It is now necessary to have the mindset of an innovator and creator to ensure that operations are able to support the needs of the business.” 45

SINGA CITY FOCUS

Headline

Seque rest volorum aute velestio intem illibus es qui ut alit et, sita iuntur? Writ ten by AUTHOR

APORE LETâ&#x20AC;&#x2122;S TAKE A LOOK AT THE CITY-STATE OF SINGAPORE, TRADITIONALLY A TRADING HUB AND NOW PAVING THE WAY FOR THE SMART CITY REVOLUTION Writ ten by OLIVIA MINNOCK

CITY FOCUS

â&#x20AC;&#x153;Since it has a lack of natural resources being just 100km from the equator, Singapore developed mainly as a trading hubâ&#x20AC;?

February 2018

SINGAPORE IS A city-state made up of a main island, of which its official capital takes up about 30%, and several smaller adjacent islands. With an area of 716 sq km and a population of about 5.3mn of which 36% are nonSingaporean, the city-state boasts a diverse range of cultures including Chinese, Malay and Indian. 100% of Singapore’s population is considered urban. In 2005, 8% of the population was over 65 and 20% were under 12. Singapore has four official languages, with English being the main language for government and commerce, spoken by 23% of the population, while 35% speak Mandarin, 14% Malay and 3% Tamil. The city-state’s major trading partners include the US, Malaysia, Hong Kong and Japan, and since it has a lack of natural resources being just 100km from the equator, it has developed mainly as a trading hub. Its major industries nowadays include shipping, banking, tourism, electronics, chemicals and oil refining, according to singaporeexpats.com. The site also praises the city’s

top-class infrastructure, citing the “award-winning Changi Airport” which “provides air links to major cities around the world”. It adds that “the train and subway systems are clean, fast and efficient”. Singapore is connected to the nearby western port of Malaysia by a 1,056m (3,465 ft) causeway across the Johore Strait. Singapore is one of the seven ASEAN countries and according to encyclopedia.com, “has played a leading part in this important regional grouping, which has sought to maximise economic growth among its member states, to regularise politics consultation on the part of the constituent governments, and to limit foreign political and military interference in the area”. The Ministry of Trade and Industry’s 2018 GDP Growth forecast is 1.5%-3.5%, and Statistat says local employment growth is likely to match this. A smart city Singapore is fast becoming known as a major smart city. Savills.com stated that the historic trading hub “has evolved into a modern, 49

CITY FOCUS cosmopolitan city that is leading the race to become a global smart city”. Savills cites everything from the super-fast broadband network and free public wi-fi to, more broadly, the city’s water management system. The city is also trialling the use of smart products to collect waste and look after the elderly in their homes. Smart Nation Singapore is a government initiative with the goal of harnessing infocomm technologies, networks and big data to create techenabled solutions. It was launched in 2014 by Prime Minister Lee Hsein Loong and for 2017 dedicated $2.4bn to working with the private sector. Rather than awarding grants, it used the money to support tech startups, spurring innovation. According to the state, “Singapore strives to become a Smart Nation to support better living, stronger communities, and create more opportunities, for all”. The five key domains for the initiative are transport; home & environment; business & productivity; health & enabled ageing; and public-sector services. The government intends to “look to citizens and businesses 50

February 2018

Population

5.3mn

to co-create impactful solutions to address our challenges” and “put in place the infrastructure, policies and enablers to encourage innovation”. So far, milestones for last year included the announcement of the five Strategic National Projects (SNPs), including an e-payment drive, a national digital identity framework, and an urban mobility programme. The Land Transport Authority (LTA) also announced a 55km expansion

to the existing 12km autonomous vehicle trial route to include areas like the National University of Singapore. 2017 also saw the launch of AI Singapore, a new national programme to “catalyse, synergise and boost Singapore’s AI capabilities to power our future, digital economy”. In addition, Singapore was ranked the eighth best city for transport on Arcadis’ 2015 Sustainable Cities Mobility Index. Overall, across

categories entitled planet, profit and people, Singapore scored a respectable 62.7, and Arcadis said it has “the best balance” across all three. Under the people category, the city scored 100% for transport and digital applications. Arcadis also said it was one of the safest places in the world to drive or be a pedestrian, with traffic fatalities very low per capita and an overall safety score of 86%. It also scored 100% for encouraging 51

CITY FOCUS residents to use electric vehicles. Tim Risbridger, country head for Singapore at Arcadis, told sbr. com, “Singapore ranks as one of the world’s most sustainable cities and its achievements, especially in relation to the encouragement of electric vehicles and its focus on digitalisation, are to be lauded”. Singapore’s startup scene Singapore is currently home to two of Asia’s most valuable startups, tech unicorns Grab and Sea. Grab According to Tech in Asia, Grab is now totalling $2.7bn in funding and is at its series G stage. The company is a ride-hailing platform, and as such is Uber’s South East Asian rival. Grab was founded in Malaysia but is now based in Singapore. Started in 2012 by Anthony Tan and Tan Hooi Ling, the unicorn moved to Singapore in 2014 and now serves approximately 156 cities in 8 countries: Singapore, Malaysia, Indonesia, Philippines, Vietnam, Thailand, Myanmar and Cambodia. In November 2017 it

February 2018

reached its â&#x20AC;&#x153;billionth rideâ&#x20AC;? and said it had 2mn driving partners, 68mn app downloads and 3.5mn daily rides. The company has had investment from big players like Didi and Softbank, who in 2017 led a funding round worth over $2bn. Sea With $1.4bn funding to date, Sea is at series E of its funding and is a general internet company which owns three distinct brands: Garena, Shoppee and Airpay. The company itself is named after its operating area, South East Asia, and it employs around 5,000 people across seven key markets. Garena is an online gaming platform which curates and localises mobile and PC games across seven markets, operating popular games like League of Legends and FIFA. Shopee is an e-commerce platform tailored to South East Asia, and is the major platform in that region. Airpay is a digital financial services business providing e-wallet services through the AirPay App to consumers, and through the AirPay counter application for businesses.

TOP 10

Top 10

Chinese IPOs Here’s our compilation of the top 10 Chinese IPOs by proceeds, according to KPMG’s third quarter review from 2017 Writ ten by SHANNON LEWIS

TOP 10

9 YEALINK

NETWORK TECHNOLOGY â&#x20AC;&#x201C; 1.7BN RMB

10 GUANGZHOU PORT â&#x20AC;&#x201C; 1.6BN RMB

Guangzhou Port is a shipping company centered in the Guangzhou District in China. According to KPMG, its proceeds for the third quarter of 2017 were of 1.6bn RMB, or $0.24bn. It offers port and harbour logistic services, including storage, loading, and warehousing. It was listed on the Shanghai Stock Exchange on March 29 2017, having been established in late 2010, according to Port of Nansha. Its reach extends to four ports across China: Inner Downtown, Huangpu, Xinsha, and Nansha. KPMG sets its Initial Public Offering (IPO) Price-Earning Ratio at 15.8. 56

February 2018

Yealink Network Technology provides voice and video services as a solution to unified communication. According to its company website, it is the second-largest Session Initiation Protocol (SIP) phone provider in the world, and the largest in China. KPMG places its proceeds at 1.7bn RMB, or $0.26bn, and its IPO Price-Earnings Ratio at 15.8. Formed in 2001, it serves over 100 countries worldwide, according to its company website. It was listed on the Shenzhen Stock Exchange in 2017, with headquarters in Xiamen, China.

7 ELECTRIC

CONNECTOR TECHNOLOGY â&#x20AC;&#x201C; 2.0BN RMB

8 ZHEJIANG JIHUA GROUP - 1.7BN RMB

Zhejiang Jihua Group is in the dye industry. It primarily offers dyes, dye intermediates, paint, polyurethane, sulfuric acid, thermoelectric and industrial raw material, and involving additives used in the industrial, pharmaceutical, and financial industry. According to KPMG, it made proceeds in Q3 of 2017 of 1.7bn RMB, or $0.26bn, with an IPO Price-Earnings Ratio of 23. Based in Hangzhou, China, it employs 2,272 people, according to Bloomberg.

Electric Connector Technology, based in China, deals in the development, design, manufacturing, and sale of electrical components. Its main products are micro-radio frequency connectors, cable connector parts, and electronic and electromagnetic compatibility components. According to KPMG, its proceeds were of 2.0bn RMB, or $0.3bn, with an IPO PriceEarnings Ration of 23. Its products are used in the manufacturing of smartphone and smart house elements, as well as car-networking terminals. It was founded in 2006, and now has 4,784 employs and headquarters in Shenzhen, China, according to Bloomberg. In mid2016, it placed 26th in the 29th Top 100 China Electronic Component Enterprises.

5 OPPEIN HOME 6 XIN FENG MING GROUP â&#x20AC;&#x201C; 2.1BN RMB

The Xin Feng Ming Group, founded in 2000, is a manufacturer of polyester and filament, as well as being involved in import-export business. KPMG places its proceeds at 2.1bn RMB, or 0.32bn USD. According to its company website, it is one of the biggest polyester manufacturers in China, with headquarters in Tongxiang, China, and has a daily capacity of 6,000 tonnes. According to Bloomberg, it employs 7,331 people, with products reaching South Korea, Vietnam, Pakistan, Turkey Egypt, Spain, and Italy, among other countries. It has 62 national patents, and has won the Provincial Prize for Progress in Science and Technology, according to its website.

GROUP â&#x20AC;&#x201C; 2.1BN RMB

Oppein Home Group is a Chinese corporation which designs, researches, develops, manufactures, sells, and installs customized homeware, including kitchen cabinets, bathroom vanities, wardrobes, and wooden doors. KPMG places its IPO Price-Earning Ratio at 23, with proceeds of 2.1bn RMB, or $0.32bn. According to HKTDC, begun in 1994, it is one of the top Chinese cabinet manufactures, selling over 200,000 kitchen cabinets, 150,000 wardrobes, and 100,000 bathroom cabinets every year. With headquarters in Guangzhou, China, it oversees 15,349 employees, according to Bloomberg, with products in over 118 countries, according to its company webs

4JIANGSU

PROVINCIAL AGRICULTURAL RECLAMATION AND DEVELOPMENT â&#x20AC;&#x201C; 2.4BN RMB

Jiangsu Provincial Agricultural Reclamation and Development deals in agriculture, oriented around cultivating wheat and rice, producing seeds, and the processing of rice. Based in China, it mostly produces DaHua brand wheat seeds, and SuKen brand rice. According to KPMG, it earned 2.4bn RMB, or 0.36bn USD in proceeds, with an IPO PriceEarnings Ratio of 22.1. According to the Financial Times, it has 12,820 employees. Reuters reports it received a subsidy in 2017 of 117.6mn yuan, or $18.02mn, from the government. According to Bloomberg, it is based in Nanjing, China, and was founded in 1956.

3CENTRAL CHINA SECURITIES â&#x20AC;&#x201C; 2.8BN RMB

Central China Securities offers financial services with regards to brokerage and investment, both in banking and in finding management solutions. According to KPMG, it earned 2.8bn RMB, or $0.43bn in proceeds, and had an IPO Price-Earnings Ratio of 11.2. Its headquarters are in Zhengzhou, China, and, having been founded in 2002, it now employs 2,542 people, according to 4-Traders. The corporation trades in stocks, funds, bonds, commodities, and future financial services, including advice, training and investment banking. 61

TOP 10

2 ZHESHANG SECURITIES - 2.8BN RMB

Zheshang Securities is a China-based financial services corporation. Its area of focus is in investment banking, asset management, and brokerage both for securities and for future business endeavours. According to KPMG, it had an IPO Price-Earnings Ratio of 23, having made 2.8bn RMB, or $0.43bn in proceeds. Founded in 2002, it is a subsidiary of Zhejiang Shangsan Expressway Co., Ltd. Its headquarters are in Hangzhou, China. 62

February 2018

1CHINA GALAXY SECURITIES – 4.1BN RMB

China Galaxy Securities is primarily a securities brokerage company. Its focus on financial security is divided into several segments: Securities Brokerage, Futures Brokerage, Propriety Trading and Other Securities Trading Services, Investment Banking, Asset Management, Private Equity Investment, and Overseas Business. KPMG placed its earnings at 4.1bn RMB, or $0.63bn, and its IPO Price-Earnings Ratio at 7. Founded in 2007, it now has 9,970 employees and headquarters in Beijing, China, according to Bloomberg. It places #868 on Forbes’ “The World’s Largest Public Company.” According to its company website, it has several subsidiaries including Galaxy Futures, Galaxy Capital and Galaxy International Holdings.

P U T T I NG PEOPLE FIRST Marriott Internationalâ&#x20AC;&#x2122;s approach to building better hotels, restaurants and bars WRITTEN BY F R A N R O B E R T S PRODUCED BY A L I S TA I R W E S T

MARRIOTT INTERNATIONAL’S PEOPLE FIRST CULTURE HAS CONSISTENTLY EARNED THE BUSINESS AWARDS AND RECOGNITION AROUND THE GLOBE. IN ASIA-PACIFIC, THIS CULTURE IS ENABLING THE COMPANY TO BUILD BETTER HOTELS, RESTAURANTS AND BARS

riginally from Switzerland, Ralph Frehner, Vice President, Food and Beverage, Asia-Pacific at Marriott International has enjoyed a diverse career that has seen him working across 12 countries for some of the world’s most prestigious companies and high-profile individuals – all of which gives him vast experience to leverage on in his current role. “Hospitality, obviously, is a people business and it’s focused on a lot of relationships but also interacting with guests, associates and team members. Having a diverse career helps you in adjusting to the different environment fairly easily and quickly. The second thing is, it also gives you a lot of experience on how to interact with different people in different countries from different cultures,” Frehner comments.

February 2018

“I think it was really helpful for me to adjust to these markets very quickly. It was very important also, to learn the culture of different countries and really understand how these cultures work. Respecting the local culture is very important. Really, once you live in the country, it’s very different than when you just visit because you really understand the culture. Today, I think it helps me a lot.”

FOOD AND DRINK

MARRIOTT INTERNATIONAL HAS 30 RENOWNED HOTEL BRANDS IN 122 COUNTRIES AROUND THE WORLD

RALPH FREHNER

asia.businesschief.com

M A R R I O T T I N T E R N AT I O N A L

In addition to overseeing the food service. “Obviously, every business and beverage operations, Frehner needs to have a vision, so we created is in charge of design development a vision for food and beverage today for Asia-Pacific. “When I look at for the company in Asia-Pacific. design development, it has taken Then we had supporting pillars and me the experience from all these one of those pillars is marketing. countries in Asia I’ve lived in to If I look at the marketing of our actually build better restaurants and business, it’s about how to engage build better hotels, which are much with customers differently because more tailored to the local the generations are changing, customers, rather than like the millennials,” just everything for Frehner comments. AROUND ASIAPACIFIC, THERE everybody,” he Marriott IS ABOUT 50,000 explains. “That is International’s food FOOD AND BEVERAGE very important. and beverage vision ASSOCIATES, WORKING IN 2,700 RESTAURANTS It’s a diversity of is to the favourite AND BARS ACROSS experience which destination for local MORE THAN 620 helps me fulfil my residents to eat, HOTELS position today and meet and drink. This is it’s very interesting but, supported by three pillars – ultimately, that always comes Go Local, which looks at growth back to people and with that, the coming from domestic customers, experiences you’ve had in the past.” F&B Marketing, which as mentioned is focused on attracting millennial ENGAGING WITH customers, and Talent Development. CUSTOMERS DIFFERENTLY “We are building the business Tailoring to local markets and being much more to the local market able to adjust to different cultures is than we used to do in the past. key to any multinational business, We obviously study local markets. especially when it comes to customer Customer service for us is number

February 2018

Collection

THE PASSIONATE LIFE The Crystal of Modern Asia At LUCARIS, we aspire to elevate modern Asian consumers’ lifestyle experience through World Class innovation crystal designs. It has been the great collaboration to deliver the world class quality lead-free crystal glass with exceptional clarity and brilliance with strength and durability. LUCARIS has created the world’s ﬁrst crystal stemware that distinguishes itself by the use of Aerlumer ® to elevate your passionate lifestyle experience. Aerlumer® is the uniquely beautiful bottom curl lines at the bowl to encourage micro-oxidation and soften the wine while swirling. LUCARIS today is the preferred partner welcome by the leading International hotels and restaurantsworldwide.

PROUD PARTNER

M A R R I O T T I N T E R N AT I O N A L

RALPH FREHNER Vice President, Food and Beverage, Asia-Pacific

Ralph Frehner is an experienced Vice President of Food & Beverage with a demonstrated history of working in the hospitality industry. Operational experience includes catering, food & beverage, budgeting, operations management, and integrated marketing. Frehner also holds a Dive Master Diploma Certificate from Scuba Dive Cocos Island.

February 2018

FOOD AND DRINK

FREHNER WITH MARRIOTT COLLEAGUES

one. I think I would say, if you take care of your associates, they will take care of your customers.” Around Asia-Pacific, there are 50,000 food and beverage associates, working in 2,700 restaurants and bars across more than 620 hotels.

CREATING MOMENTUM IN THE MARKET Marriott’s reputation for superior customer service dates back to J. Willard Marriott’s original goal for his business: good food and good service at a fair price. Over 90 years on, the team continues to uphold this reputation and business ideals. “I think the most important thing is for a company of our size is that you create an image that your food and beverage reputation is something that attracts people and you create a momentum in the market,” Frehner advises. “I think your actions need to speak

asia.businesschief.com

M A R R I O T T I N T E R N AT I O N A L

louder than words. The thing is, with the actions we take, we try to do things a little bit differently.” The Canvas concept lab is illustrative of how Marriott International does things differently. “We look at underutilised spaces in the hotels and we see how we can bring these spaces to life and make money with it. In return, we’re looking for the latest entrepreneurs in the market, who can actually operate these spaces,” observes Frehner. “Rather than hire an associate, which is normal for hotels, we have a different approach, where we put these spaces into the market and say, ‘we have the money, you have the expertise, if you would like to be considered for the entrepreneur opportunity, apply here’. Then we ask people to present their ideas for it.” Once a panel of judges has decided the winner, Marriott gives them the space and builds it for them according to their demands. “They then run that space as an entrepreneur,” Frehner advises. “We let them run it the way they want to. It’s a lot more in line with millennial thinking. We’ve had areas turned into a secret bar. We have food trucks attached to hotels, we have rooftop bars by different entrepreneurs and so, we’re creating momentum for the company. This is only one initiative, where we’re telling the market that we are doing things a little bit differently.”

February 2018

FOOD AND DRINK

“HAVING A DIVERSE CAREER HELPS YOU IN ADJUSTING TO THE DIFFERENT ENVIRONMENTS FAIRLY EASILY AND QUICKLY” – Ralph Frehner, Vice President, Food and Beverage, Asia-Pacific

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YOUR BRAND, YOUR MUSIC Our bespoke sounds are crafted with your business in mind, whether that is a prestige hotel, fine dining restaurant or boutique spa. The audio sensory experience begins the second customers cross the threshold of your business. Music can evoke memories of holidays in special locations, family gatherings in favourite hotels and time spent with good friends. Our unique branding approach can be experienced at over 3,000 luxury hotels around the world in over 10,000 individual music zones. From modern international lobbies to traditional Japanese restaurants and Hawaiian spa resorts to Chicago cigar bars, we have created bespoke music profiles for some of the most sought-after leisure destinations in the world.

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FOOD AND DRINK

A CULTURE OF CARE

HUGE OPPORTUNITIES

Marriott International has 30 renowned hotel brands in 122 countries around the world. Therefore, maintaining high standards throughout its operations is key. “I think Marriott has a longstanding culture of taking care of people,” Frehner comments. “I think even today, we are still living by that culture, that we are actually taking care of people now and we are working closely as a team. To us, it’s very important to take care of each other. Here, any action we take in terms of our associates is normally built around this philosophy and its culture. This culture is very much alive and this was set up by Mr Marriott originally. I must say, Marriott really lives by these standards.” These standards are reflected in the fact that within Asia-Pacific alone, Marriott International has 12 Michelin-Starred restaurants. The beverage offering at Marriott International’s Asia-Pacific properties doesn’t lag behind, with The Other Room, situated at the Marriott Tang Plaza in Singapore, ranking 35th in Asia’s 50 Best Bars 2017 rankings.

Looking ahead, Marriott International expects to continue building on this and expanding its portfolio in the region, with numerous projects currently in the pipeline. “The future, I think, is very bright for us. We are the largest hotel company in the world, so I think we should also have the largest pool of ideas. We had a merger with Starwood Hotels at the end of 2016 and there’s a lot of integration going on. I think we are still in the integration stage going into the second year. Obviously, we have huge opportunities for a much larger team, which has a lot more expertise, and bringing two companies together is obviously exciting because we can learn from each other,” Frehner concludes.

asia.businesschief.com

BURGER KINGâ&#x20AC;&#x2122;S ADVANCE INTO THE INDIAN QSR MARKET

Written by Laura Mullan Produced by Charlotte Clarke 79

With its infamous motto “be your way,” Burger King is renowned for its commitment to customer choice. Now expanding its grasp on the Indian market, the fast food giant reveals how its supply chain is helping to satisfy the nation’s appetite for taste, quality, and affordability

s one of the most recognisable brands in the world, Burger King is a company that needs little introduction. Every day, more than 11mn customers sink their teeth into the burger chain’s menu and now, thanks to its ambitious expansion plan, the company is expanding its reach in India. Embarking on a mission to become the nation’s leading fast food restaurant, Burger King India has strived to optimise its supply chain, drive innovation, and uphold its core values of taste, quality and affordability. The Florida-based burger chain has made a splash in over 100 countries across the globe. However, this isn’t a matter of taking the brand’s American success and duplicating it abroad, explains Chief Marketing Officer, Kapil Grover. Rather, the company’s entire strategy, brand, and

February 2018

menu have had to be tailored to fit the unique tastes of the Indian market. A unique market “Quick service restaurants (QSR’s) operate differently in the western world than they do in India,” explains Grover. “In the western world, QSR’s are focused more on the idea of convenience and so a large number of the consumptions happens via drive-thrus but in India, it’s more about the experience and the aspirational qualities of the brand. “Our overall vision is to be the leading QSR in the country, and we want to achieve that by offering the besttasting burgers, made with highest quality ingredients, offered at the most affordable prices,” he adds. It is an upward trajectory that tells the story of Burger King India. The fastfood giant launched its first restaurant

Kapil Grover, Chief Marketing Officer

BURGER KING

in November 2014 and, since then, it has carefully handpicked more and more metropolitan locations. Rapid growth “The response to our first 10 locations was fantastic. Our menu was well received, our experience was seen to be amazing, and that gave us the confidence to scale up. Now we are perhaps one of the fastest growing companies to launch 100 stores in the Indian QSR market,” notes Grover. Optimistic about the company’s growth, Sandeep Dey, Chief Supply Chain Officer at Burger King India, says that the brand’s franchise growth has offered more opportunities than challenges. “Our overall business philosophy has always been to grow deeper rather than grow wider; to strengthen our existing markets rather than

entering new cities,” explains Dey. “That philosophy is actually helping us to leverage the supply chain cost and make it much more efficient. “When we open a new store in a new city, the initial distribution cost is slightly higher, because we are not utilising the full potential of the warehouses and delivery trucks, for example,” Dey says. “However, when we open five or six stores in that region, the overall distribution cost will go down significantly and the stores will start becoming much more profitable. Therefore, scalability is driving profitability and vice versa.” Transforming the menu Making a mark in the Indian market was no easy feat; it involved adapting the Burger King brand, and specifically its menu, for an Indian market. Locally designed and blind tasted by

“OUR SUPPLY CHAIN HAS PLAYED A TREMENDOUS ROLE IN HELPING SET UP BURGER KING AS A BRAND IN THE INDIAN MARKET” SANDEEP DEY Chief Supply Chain Officer 82

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15,000 Number of restaurants operated at Burger King in approximately 100 countries and U.S. territories

11mn Number of guests that visit Burger King restaurants across the world

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local customers, Burger King India developed around 18 unique burgers for the Indian market that cannot be purchased anywhere else in the world. “India is a very different market compared to anywhere else in the world in terms of the country’s taste palate and unique vegetarian preference. Over 50% of the population here is vegetarian, so we couldn’t take the international menu and apply it here. It had to be completely redesigned. “Then we had to adapt our supply

chain to be able to manage that level of complexity, because although it offers unparalleled variety to the consumer, it also has to offer consistency in taste and quality.” Vendor partnerships Menu innovation has been integral to Burger King India’s success. Grover says that this is largely due to the brand’s vendors and processes such as the supplier-led innovation programme (SLIP), whereby

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BURGER KING

vendors are given the opportunity to innovate new menu options. “Our vendor partners really demonstrate a huge amount of agility, flexibility, and high speed to market when launching new products,” observes Dey. “The kind of collaborative effort they have demonstrated has been phenomenal. They have an equal conviction to the Burger King brand as our team and I think that’s so important.” Sandeep Dey Chief Supply Chain Officer

Quality, taste and value are the fundamentals at Burger King India and balancing these conflicting priorities is perhaps one of the biggest challenges facing the company today. Cost leadership By optimising the company’s distribution cost and leveraging shared services and infrastructure, Dey and his team are driving down transportation costs. Combined with the company’s relevant brand and flexibility in its supply chain, this has proven to be a recipe for success. “Our supply chain has played a tremendous role in helping set up Burger King as a brand in the Indian market,” asserts Dey. “To be able to find high-quality vendors who can deliver consistent quality at competitive costs has been challenging and a lot of effort has gone into the supply chain to ensure we can deliver our complex menu, but I think that has been the real trick which has helped us succeed in this market. We have developed a strong back end that can support our diverse, complex menu and which can fulfil our consumers’ needs.”

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BURGER KING

“THIS CATEGORY HAS HUGE POTENTIAL, AND WE HAVE JUST SCRAPED THE SURFACE” KAPIL GROVER Chief Marketing Officer

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Lean team Although they boast an intricate supply chain, Burger King India operates with an extremely lean team. By outsourcing everyday non-value-adding work to specialised logistic companies, Dey and his team focus on what matters - meaningful, value-adding, strategic work that truly makes a difference to both customers and employees alike. “Fundamentally, our organisation is based on three key pillars - hard work, hunger, and humility,” says Grover. “When we’re hiring talent, we hire those who actually believe in those core values. We provide them with enormous opportunities to demonstrate this in their day-to-day work life. They are culturally aligned, they’re getting tremendous job satisfaction because they could see the value they’re bringing to the table and making a meaningful contribution to the organisation’s growth.”

burger chain isn’t complacent about the work that lies ahead. Working alongside its vendors, Burger King India has created a meticulous plan to invest in R&D, system processes, and people capability; to create capacity ahead of time through new and improved technologies and to retain cost leadership. In doing so, it hopes to cement its position as the nation’s top fast-food chain. “This category has huge potential, and we have just scraped the surface” observes Grover. “Lifestyles in India are evolving rapidly, especially in metropolitan cities. Income levels are growing, Millennials and Gen-Z consumers are driving consumption and are much more open to Western experiences. There is a lot of opportunity to drive penetration, a lot of opportunity to drive frequency with our consumer cohort, and that’s why we are extremely bullish about the future.”

Huge potential As the brand has penetrated the Indian market, Burger King India has seen success after success - however, the

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Driving the Chinese e-commerce market Written by Catherine Sturman Produced by Charlotte Clarke

In order to remain competitive in the emerging e-commerce market, Staples has worked to transform its service delivery within the Chinese market

ince the 1980s, Staples has been fondly renowned as a professional office supplier for corporate businesses and those who have a passion for stationery. However, not one to shy away from growing trends and emerging markets, the company has worked to overhaul its service delivery to become a complete â&#x20AC;&#x2DC;one stop shopâ&#x20AC;&#x2122; for local governments, Fortune 500 enterprises, SMEs and local businesses. Staples, a Fortune 500 business itself, has grown exponentially in China, with ambitions to further cement its presence within the e-commerce market. With the growth of new, disruptive technologies and increased competition, long-standing businesses continue to face a number of challenges. Substantial increases in customer demand and quality of

February 2018

products have seen customers no longer content with waiting up to five days to receive an item. Now, customers expect to have the ability to receive items the very next day, delivered free of charge or at minimal cost. This evolving market has consequently led Staples to adapt its service operations in alignment with increased consumer demand. Entering the Chinese market back in 2004, the company has strenuously worked to diversify its service portfolio to appeal to the local marketplace. However, stark differences within consumer preferences has impacted its operations significantly. Whilst the US market encompasses a number of physical stores to enable consumers to fully browse and purchase office supplies of choice, China has closed all of its brick-and-mortar stores, where the Chinese government has

Staples delivery service

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Staples VIP Card

placed significant investment. Competitive edge Driving business growth has been central to Staplesâ&#x20AC;&#x2122; success within China. Adopting new categories and solutions for its corporate customers, the business has worked to strengthen its supply chain network and its relationship with suppliers through adopting reactive supply chain management processes. This has incorporated the re-evaluation and amendment of pricing structures to remain competitive, whilst investing

February 2018

in new technologies to guarantee the delivery of a service model which remains fully customer-centric. This approach has also filtered into the ongoing development of its staff, where employees have been given advanced knowledge and training surrounding products on offer, in addition to an awareness surrounding corporate expectations to deliver exceptional customer service. Boosting morale Focused on driving down costs, without losing the quality related

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to its products or service capabilities across its e-commerce platform, Staples has established five new warehouses in 2016 alone within the country to cater to increased demand. New technologies and improvements have also been implemented to further streamline this process. Overhauling its picking process, for example, has allowed the company to reduce potential bottlenecks within its internal sourcing operations, but has also improved the productivity and efficiencies of its staff. Building relationships with forward thinking, local suppliers has been essential to the growth of Staples in China, where it has partnered with those who utilise customer-centric technologies, such as GPS tracking. This has enabled consumers to gain greater

2004 The year that Staples launched in China Staples branded products

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ASIAâ&#x20AC;&#x2122;S PREMIER LOGISTICS SERVICE PROVIDER Kerry Logistics - a member of Kuok Group, is Asiaâ&#x20AC;&#x2122;s premier logistics service provider with a strong focus on China. Based in Hong Kong, Kerry Logistics has offices in 51 countries and territories with over 25,000 employees and a transportation fleet of 7,800 vehicles. In China (Kerry EAS), we have presence of 2,000 locations, providing warehousing, transportation, and customized VAS services. Self-developed WMS and TMS provide specialized and diversified system function to customers.

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â&#x20AC;&#x2DC; Staplesâ&#x20AC;&#x2122; use of technology, alongside its commitment to its customers and strong partnerships with its suppliers will see it further expand and penetrate new markets across China in the futureâ&#x20AC;&#x2122;

visibility and trace of products when they leave the warehouse. Furthermore, providing a personalised, efficient and tailored service has seen its suppliers not only deliver office items, such as paper, ink and toner, but also install these items for customers. Future growth Whilst the company has traditionally focused solely on office supply, Staples has become a complete, one-stopshop in office solutions. Although it is not immune to local challenges in China, Staples has worked to overhaul

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$800MN Annual revenue for Staples (US dollars)

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February 2018

We are pioneers who have built state-of-the-art water production facilities across China at our eight premium quality water sources, in order to satisfy the growing demand by consumers who are choosing to drink healthy water as a preference. Investment in modernisation means we also are confident of having great distribution channels possible, to provide our products to all parts of China through our significant and efficient logistics network.

Staples employees its work environment to appeal to a younger workforce and encourage the growth of its personnel. This has enabled the business to gain a greater understanding as to what its workers want long-term in order to sustain its advantage over its competitors and, in turn, sustain its growth rate. It is clear that the growth of e-commerce and the implementation of new, integrated technologies in China will lead to the rise of aggressive consumer demand within both the

B2B and B2C market. With further consolidation, competition is set to ramp up, with larger companies entering the B2B arena. Nonetheless, Staplesâ&#x20AC;&#x2122; use of technology, alongside its commitment to its customers and strong partnerships with its suppliers will see it further expand and penetrate new markets across China in the future.

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