THE LEADING EDGE: THE NEW ROLES OF THE SUBSIDIARY TO HELP GLOBAL ENTERPRISES DRIVE TRANSFORMATION AMIDST THE POLYCRISIS

Subsidiaries are an important lever for enterprises to drive transformation by increasing their capacity for change and enhancing their ability to win.

By Mohit Mehrotra, Executive Director, Monitor Deloitte, Deloitte Asia Pacific; Samrat Bose, Director, Monitor Deloitte, Deloitte Southeast Asia; Bill Jarmuz, Senior Manager, Monitor Deloitte, Deloitte US; Ashwini Vaidya, Senior Consultant, Monitor Deloitte, Deloitte Southeast Asia; Jasmine Doo, Consultant, Monitor Deloitte, Deloitte Southeast Asia; and Fathan Amartya Mahardika, Strategy Analyst, Monitor Deloitte, Deloitte Southeast Asia

Transformation and adaptability are fundamental for 21st century leaders to tackle a highly dynamic and disruptive operating environment. The global enterprises of today have had little respite from new and unprecedented risks. In order to navigate this polycrisis, winning enterprises, which Deloitte refers to as “Exponential Enterprises”, need to orientate their businesses around two dimensions – the ability to win and the capacity for change.

The two dimensions of Exponential Enterprises

Exponential Enterprises have the capabilities to stay ahead of technological, social, and governance trends, and set themselves apart from their peers. They embrace volatile market conditions by incorporating the ability to win and capacity for change in their business strategies.

The ability to win comprises all-weather value drivers that grow an enterprise through a wide range of potential future scenarios. It is a distinctive advantage that enables the enterprise to retain its value and competitive advantage in the long term.

The capacity for change complements this ability to win and provides the foundation for an enterprise to adapt effectively to shifts in the market and operat- ing environment – it monetises a company’s ability to win.

The subsidiary

Exponential Enterprises can leverage their subsidiaries as important levers to increase their capacity for change, enhance their ability to win and support their ‘always-on’ transformation capability. On average, Exponential Enterprises that do so earn valuations that are 176% higher and 30% less volatile than industry competitors that do not adhere to this fundamental enterprise design principle.

To activate this lever, a new relationship paradigm between a global enterprise and its subsidiaries must be established, so that the relationship is more integrated, seamless, real time, and bi-directional. A subsidiary should go beyond its role as a “Resource Deployer”, which is simply tasked to deploy headquarters’ resources to drive sales and run capability centers.

Deloitte’s recent report, The Leading Edge, explores three subsidiary archetypes that will enable a subsidiary to make the transition from a “Resource Deployer” towards future states aligned to the aspirations of Exponential Enterprises.

Firstly, the subsidiary’s role as “The Observer” – to sense, interpret, and communicate local market insights and knowledge to the global team that enable the enterprise to make the most advantageous strategic and tactical choices. This will give the global enterprise the necessary ‘nimbleness’ to stay ahead of competitors and maximise value creation and capture.

Secondly, the “Playbook Developer” – where the subsidiary not only takes on the role of an observer; it also demonstrates new pathways the global enterprise can take to respond to local market trends. The subsidiary effectively becomes the source of new playbooks that the global enterprise can tweak and scale in other parts of the world as and when the need arises. The Playbook Developer role can manifest in three ways – to be empowered to develop ‘new to the world’ strategies to overcome immediate uncertainties, serve as a ‘sandbox’ for testing new business models, and act as an ‘incubator’ for new internal and marketing-facing innovations.

Thirdly, the “Mandate Owner” – where the subsidiary is given ownership of specific areas of transformation on behalf of the global enterprise. This model enables the subsidiary to work alongside global teams to think through the vision, strategy, and operationalisation of that mandate. It navigates the tension of transformation and provides feedback to the global team based on its implementation.

Moving forward: A new agenda for the Global Management team

Exponential Enterprises are those that can stay ahead of the curve in their response towards the polycrisis, not just to gain a competitive advantage, but also to ensure the longevity of the business. Reimagining the role of their subsidiaries is important for organisations to become winning enterprises. Deloitte’s insights and expertise can help provide valuable guidance for global enterprises to explore the new roles of their subsidiaries and drive transformation. To find out more, read the full report, “The Leading Edge”, which is downloadable here.

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