In the second decade of what has been termed ‘The Asian Century’, Western multinational corporations (MNCs) are increasingly looking eastward, as they seek to benefit from gross domestic product growth rates often double that of their home markets. Although opportunity abounds, not all Western MNCs have succeeded with their foray into Asia.
Asia is a complex region. One that is incredibly diverse in terms of language, religion, government and business practices. Even sub-regions like Southeast Asia and East Asia are based far more on proximity than on actual similarities. However, some common denominators do exist. Across Asia, talent is a key issue, with 85% of Asia-Pacific Economic Cooperation leaders citing a shortage in leadership talent as a major problem for their organisation in the region. The challenge of disrupting established local companies is another recurring issue. Termed the ‘globalisation penalty’ by McKinsey & Co, global companies often have a harder time championing a shared vision, maintaining professional standards, and forging important relationships in the community than local companies.
What are Western leaders bringing to the table to help overcome these barriers? HQ Asia interviewed the heads of two major Western companies, Holcim Ltd and Novartis AG, to learn about their personal leadership styles and strategies for Asia. On paper, these two companies are quite different. Holcim is one of the world’s leading building materials suppliers, specialising in innovative, ready-mix cement, while Novartis operates in the pharmaceutical and health-care sector.
However, there are similarities. Both Holcim and Novartis are Switzerland based companies that are increasingly active in Asia. Both utilise relentless and meticulous attention to detail: in both the building and health-care industries, oversight and human error can be catastrophically costly. Both organisations employ data-driven people, so it is unsurprising that leaders at Novartis and Holcim are typically rational, grounded types. Finally, both companies have gleaned similar insights through their experiences in developing markets. We juxtapose the experiences of Bernard Fontana, CEO of Holcim, and Dr Jörg Reinhardt, Chairman of the Board, Novartis AG, to bring out these insights.
Bernard Fontana CEO, Holcim
Holcim has been steadily increasing its footprint in Asia, and has operations from India to the Philippines. As HQ Asia spoke to Fontana to get a sense of his leadership style, we discovered a measured leader open to new ideas.
1. A humble, learning-oriented leadership style
It is perhaps unexpected that the leader of a construction materials company would be so soft-spoken and humble. Fontana explains that his low-key humble persona is a part of who he is and not a strategic aim. “Humility should not be instrumental. I choose to be humble because that is me. Its only value is that it helps me to be self-aligned. Be authentic, and trust will come,” he said.
Although it is part of his nature, Fontana does believe that this modesty is beneficial in trying times. In his view, leadership is all about developing leaders who can sustain the transformation and growth of the organisation, and humility is crucial to that. “Being humble and soft-spoken does not interfere with leadership. It helps you to learn, listen, and grow from other people,” he said. When you consider some of the uncertainties affecting his company – the cyclical nature of the materials market, the pending merger with former competitor, Lafarge, and recent expansion into emerging markets like Asia – the ability to learn and adapt is key.
Fontana advises that it is important to take the time to learn how things work in a new environment. He talks about a period in his career, when he was learning from others at a young age. “I was just starting out as a plant shift worker and later as a process engineer. I learnt from fellow workers, from plant managers, and saw exactly how plants operated and grew,” he said.
This willingness to take the time to learn and see things through is all the more admirable when the world is changing at such breakneck pace, but Fontana notes that this provides benefits. “Change requires speed but you should also stay and see how things work out. If you yourself change too quickly, you cannot see the effects of what you implemented,” he advised. Speed, it appears, is not always incompatible with a longer-term perspective.
2. Using local talent
We asked Fontana about his perspective on filling roles in his Asian operations. Having earlier asserted that “Asia needs Asian leaders”, Fontana says Holcim is looking into the quantity and quality of its Asian pipeline. “We use less expatriates because it is essential that we allow local talent the space to grow and be mobile,” he said. He also suggests that it takes time to amass the leadership experience Asian leaders require across different international assignments.
Fontana shares that the rapid development of Asia acts as a template and role model for other developing regions, like Africa and the Middle East. Rather than sending American and European expats to these regions (the de facto strategy for most MNCs expanding into emerging markets), Holcim sees huge synergies in the experiences of Asian leaders and the skill sets required to set up shop in new economies. To effectively utilise these synergies, though, Holcim is committed to developing a strong pipeline of Asian leaders. “We already have examples of Asians who are in key leadership positions in our company, but we want more,” Fontana remarked.
Dr Jörg Reinhardt Chair of the Board, Novartis
HQ Asia spoke with Reinhardt about his philosophy on people management and global talent. Having begun his career as a pharmaceutical scientist, it is perhaps fitting that he prioritises competence and integrity in his own leadership, as well as in his expectations for others.
1. Data-driven and accountable leadership style
Competence is not about knowing when to use the right buzzwords, argues Reinhardt. He prefers a “no nonsense” approach to giving presentations and argues that you can only “hide behind a PowerPoint” for so long before a lack of deep competence becomes obvious. “For presentations at our company, people are asked to assume that the audience has read all 250 pages of their presentation before the meeting. When I come in, I often jump to page 125 and ask the presenter for an elaboration on a particular number. They need to know their data well to be able to answer that.” Reinhardt’s scientific background has provided him with a datadriven approach to leadership and decision-making. “Show me the data and then I will trust you,” he said.
Reinhardt also believes that it is his integrity that helps him to be a successful global leader. In spite of the less strict criterion in less-developed countries, he maintains high regulatory standards for drug trials across the company’s operations in 140 countries. Holding such high standards is not only the company’s way of recognising its responsibility to consumers, but also a sign of the times. “The financial crises of the past decade have really cast doubt over the motives of large organisations and their leaders. It is imperative for us to lead with integrity and earn their trust,” he explained.
2. The challenges of growing in Asia
When asked about the challenges he has faced in driving innovation in Asia, Reinhardt cited a lack of top scientific talent as the biggest barrier. He points out that Novartis currently has around 5,000 scientists conducting quality biochemical research in Cambridge, Massachusetts, but only has about 250 in Shanghai. “Such a situation will not change dramatically within the next 10 years,” he observed. The pipeline of worldclass scientists, and an environment that catalyses and encourages development of cutting-edge research, is not something that can be developed overnight, he says.
Still, there are some signs of improvement for the Asian scientific talent landscape. For example, there was enough expertise to open an epigenetics research centre in Shanghai in 2012. Given improvements in Chinese infrastructure, graduates are coming back from the US with world-class scientific education. “This is something we can build on,” he argued. In addition, Novartis has set up a ‘leadership council’ in Asia where leadership principles can be taught to up-and-coming leaders with a regional focus. “Although these contain some local colour, they still fit our international standards for our company culture,” he said.
Reinhardt also says it can be difficult for Western leaders to interact in Asia due to cultural differences. “I am a very direct and decisive person, so I struggled with Chinese and Japanese clients who would not give me a decision within the meeting itself. They wanted to discuss it after the meeting, leaving me to twiddle my thumbs and wait for their official announcements,” he recalled.
Consumer preferences too are different in Asia. He notes that the brand consciousness that is pervasive among Asian consumers places a huge emphasis on consumer-centric marketing. “In the US, no one asks about the brands of drugs that they are prescribed, but to Asians, these mean a lot – they place a high level of trust in some big-name brands and proactively ask to be prescribed drugs from these brands.”
The building of the Novartis brand and the reputation of certain drugs thus takes on huge significance both for prescriptive and over-the-counter drugs in Asia, often representing the crucial factor in sales numbers. In short, Reinhardt suggests that science and medical knowledge is coming from the West to Asia, but that branding and consumer-oriented marketing are going back in the reverse direction.
Overall, it seems that both Reinhardt and Fontana appear to be successful Western entrants into the Asian markets because they are careful, learning-oriented, contemplative leaders. These traits are likely needed to overcome differences in culture, business processes, and consumer preferences to compete in high-growth Asia.