Are professional services Asia-ready?
Professional services firms will need to keep pace with the needs of their clients, and tap into emerging markets which offer opportunities not just for growth, but more importantly for innovation. Indeed, the two are linked. See why Asia is the new battlefield in which to innovate or be phased out.
Overview
Take a moment to imagine the world of professional services in a future where the half-life of knowledge follows Moore's Law, where being a 'truly global organization[1]' is a condition for survival. Sounds like business as usual? Well, what if this is a world where clients are savvier in tax strategies than accounting firms, where big retailers are buying media agencies and creating content for advertising, where an elegant software solution is more in demand than a consultant with an MBA, and where lawyers need to be versed in common law, the civil code and the Shariah? This is a world where the professional services, such as consulting, law, accounting and advertising, are under unprecedented pressure to innovate.
Nowhere is this better exemplified than in emerging markets where hypergrowth is the name of the game. It no longer suffices to rely on tried and tested methodologies and management practices which secure steady percentage point growth in developed markets, it's a whole different ball game when you need to double the business every two years. Multinationals operating in emerging markets are having to make it up as they go along.
The challenge multiplies when multinationals start realising the diversity of the new operating environments they have to deal with. While it's well known that China has grown at an average annual rate of around 11% over the last decade, what often goes unmentioned is that markets such as India, Indonesia, Vietnam, and the rest of South East Asia have all grown at high single digits in the same period[2] and cannot be ignored. In fact, the GDP of ASEAN is larger than that of India[3] and the size of its consumer market is equivalent to that of coastal China[4]. "When people go into Asia they tend to look at a single country," says Kelvin Wong, Executive Director, Professional Services, Singapore Economic Development Board (EDB). "They go to China and think in terms of Chinese cities: first, second, third tier. But we realise the next battlefield is on a city by city level, Asia-wide, not country wide. If I'm already serving a second tier city like Suzhou, how might that apply to other second tier cities elsewhere in Asia? After all, the key to multinational success is being able to scale at speed and achieve economies of scale".
Facts on the ground
Even an area as sophisticated as legal advisory is under pressure to become "Asia-ready". This trend stems from the increasing number of merger & acquisitions and IPOs launched in rising Asian markets. Clients now require their lawyers to give advice across multiple jurisdictions. For instance, Singapore law is derived from English common law; Indonesia's code has its roots in Dutch law; and much of mainland Chinese law has elements of the German legal code. This has prompted firms like Watson-Farley to centralise their expertise in Singapore to advise on Pan-Asia deals even where the buyer, seller and asset are not in Singapore. The NYU School of Law has also recently set up an Asia campus to address the rising demand for truly global legal research and practise. "Clients operating in multiple jurisdictions need lawyers who understand and assist in their global operations," explains Simon Chesterman, Director for the NYU School of Law and NUS Dual Degree Program. "Whether it is compliance with ISO standards, managing the behaviour of multinational corporations or the regulation of the Internet itself, contemporary legal questions are frequently global rather than local. To operate effectively in such a world, individual lawyers need to be comfortable in multiple jurisdictions, often simultaneously."
In accounting, issues such as the increasing need for financial compliance and more stringent audits are global but firms are choosing to establish their global centres of excellence in Asia partly due to the rising capabilities of talent in Asia as well as the growing influence of Asian economies on these global issues. These centres of excellence represent a major restructuring of accounting firm operations to invest in knowledge and institutionalise on a firm-wide rather than functional level. For example, KPMG is launching a data analytics Institute in Singapore to develop predictive solutions in emerging areas of interest such as sustainability, mergers and acquisitions and cross border transactions. The Institute is a global centre of excellence for KPMG, but is based in Asia to serve as an accelerated learning platform for regional CFOs who face unprecedented challenges.
In advertising, the challenge is grappling with the rapid pace of technological innovation driving emerging media and marketing analytics. The need for integrated advertising solutions is particularly acute in Asia, which has the world's fastest growing online population and where online ad spend is expected to eclipse Europe's this year (US$122 Billion)[5]. Here, Asia offers not only one of the most digitally-ready (and indeed digitally-dependent) markets, but is also rich in talent in the science and technology field which can help advertising firms smoothen the process of transiting from a business model dominated by a creative director, to a more holistic approach. Wunderman, a global international marketing services agency, has pioneered professional training of digital and design talent by launching its Z AcademySM in Asia. "Singapore was the natural place for this program to start. It is rich with digital and design talent and the schools are eager to provide innovative learning experiences for their students with international companies," says William Manfredi, EVP, Global Talent Management at Wunderman. Wunderman is now bringing this innovation back to digital and design and social science schools in the USA and the UK.
The Singapore difference
Indeed, the importance of Asia lies not just in its markets but its potential to change the way the world does business. The rapidly emerging Asian middle class is changing paradigms about consumer behavior and preferences, massive urbanization may mean Asian cities leapfrog western ones in designing and delivering municipal services, and really, no one wants to copy Western-style healthcare.
The city-state of Singapore is doing brisk business in exporting urban solutions such as electronic road pricing, technology to make waste water drinkable, and integrated healthcare systems. Jeffrey Chua, Managing Director and Head of BCG Singapore, said "The intellectual property built up through these endeavours is extremely valuable and can be further applied in Asia and other parts of the world." In fact, the potential to work on first-of-kind projects in Asia and catalyse new knowledge in innovation from Asia has led McKinsey to establish the McKinsey Innovation Campus in Singapore. The Campus will focus on research with Pan-Asia relevance, and develop new tools and methodologies.
It is easy enough to ride along on the rising tide of emerging market growth. The danger is a false sense of complacency that masks the perils of importing existing business models and doing "business as usual". Some firms have already staked their claim to the high ground of innovation in emerging markets, where the battles for global dominance will be won and lost. Such firms have gone beyond Asia-Ready, to Future-Ready.
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