Shine With Grace: Big Picture and Foresight

Big Picture And Foresight

Published January 20th, 2008 in Success, Business, Entrepreneurship.

Michael Backman and his “Asia Future Shock”

A dear friend who is always willing to give a helping hand to my new start-up forwarded a very long but interesting email to me, in which his friend summarised the key points of the whole business book, “Asia Future Shock- Business Crisis and Opportunity in the Coming Years” by Michael Backman, during his/her flight.

My business is still at its infant state. It’s going through it’s share of trials and errors, it’s searching for its direction. And this summary article comes at a perfect timing - on top of listing out the major trends of Asia, which are all insightful, it also reminds me one very crucial point - in order to find a right direction, in order to stand out, we always have to have (i) the big picture in mind, so that we know where we are and where is our destination; and (ii) foresight, so that we can ride on prevailing trends, rather than wasting time and energy on slow routes and obsolete items.

We easily allow ourselves to get too busy, to be pre-occupied by the daily nitty-gritty, the emails that flood in, the meetings, the calls… We easily allow ourselves to be influenced by people and events around us, we get emotional, and we become short-sighted. Technology and the Internet are changing the world in light-year speed. What’s hot today could be outdated tomorrow. All these changes affect the skills that we need to acquire, the lifestyle we pick, the career/profession we choose, the business we get into. Therefore it is critical for us to develop a macro perspective, and a forward-looking capability.

Readers, the summary email is attached below and I highly recommend you to spend a few minutes on it. The writer is trying to predict the future from his observations and research. Get ready to be inspired…

The summary:

>There is a very interesting business book on the market called “Asia
> Future Shock- Business Crisis and Opportunity in the Coming Years”-
> Michael Backman.
>
> With some time to kill on the plane I thought I would summarise the key
> points from the book which may be of general interest for some of you
> interested in the wider future events shaping the Asia markets.
>
> The transformation of China, India and much of the rest of Asia is
> seismic. Never has the region changed so much in a short period of time
> and with change comes huge opportunity and risk!
>
> The numbers are staggering:
>
> Within 10 years, funds under management in China will grow to at least
> US$1.5 trillion; 100 million mainland Chinese tourists will pour out of
> China annually; Singapore will be a major haven for hidden offshore funds
> (!); Thai hospitals will be important providers of healthcare in Asia,
> the Middle East, and to underinsured Americans; and shortages of
> management talent in China and India will be even more acute.
>
> Within 20 years, a billion more people will live in Asia’s cities than
> do so already; China will be a major sophisticated weapons exporter;
> Malaysia will have almost run out of oil; and divorce and family
> breakdown will mean that the size of the average Asian household will be
> substantially smaller.
>
> Within 25 years, Japan’s population will have shrunk by 20 million;
> there will be 250 million more men than women in China and India; half
> the world’s nuclear reactors will be in Asia; the world’s biggest
> community of English speakers will be in China; and Asia-wide water
> shortages will see big hikes in food prices.
>
> “Asia Future Shock” breaks this down into the following sections to help
> identify opportunities and risks and below are some of the sections
> which may be of interest.
>
> 1. Population Dynamics: How Asia’s Face is Changing.
>
> * China and India’s population will each reach 1.5 billion in the 2030s
> and , based on current trends, at some point India’s population will
> overtake China’s.
>
> * But the current population of pre-partition India already exceeds
> China’s by more than 100 million.
>
> * 1.1 billion more people will live in Asia’s cities in 2027 than in
> 2007
>
> * South Korea has the world’s fastest ageing population. By 2050, more
> South Koreans will be aged over 50 than under.
>
> * Current trends suggest that, by 2050, for every 10 people who work in
> China, there will be 7 not working- a massive dependency ratio of 70%.
>
> * Singaporeans are dying out. For every 8 that die, only 5 are born.
>
> Suggestions for Business Strategists and Scenario Developers
>
> > Population-wise, the relative importance of the various Asian
> economies will change considerably in the coming decades. These changes
> need to be incorporated into medium to longer term business strategies.
>
> > Labor forces are changing too. Many will shrink, affecting wage
> competitiveness. China’s, for example, will shrink considerably, whereas
> those of “younger” countries such as Vietnam and Thailand will not,
> meaning that changing demographics alone will see China’s wage
> competitiveness decline in coming decades compared with other countries
> in the region.
>
> > Asia’s cities are growing quickly. Most major cities are coastal. This
> will reduce distribution costs- more and more people in Asia are
> relocating closer to ports.
>
> > Retirement income provision is a huge emerging sector across Asia.
> > Many Asian governments will require help with providing solutions to
> > ensure adequate retirement incomes, suggesting a major role for
> > pension fund managers
>
> > Ageing will also change the structure of demand for many products and
> services. This will vary between countries and within countries. China’s
> urban population is ageing more quickly than its rural population for
> example.
>
> > Growing wealth means that better nutrition and so people in Asia are
> physically changing. They are getting taller and their bodies bigger.
> Clothing and footwear manufacturers need to supply a greater range of
> sizes than before, for example. This need is magnified by greater
> migration within Asia, leading to a greater diversity within
> populations.
>
> > Migration means that Asia’s populations are becoming increasingly
> diverse. This also will lead to a growing restructuring of consumer
> demand. Singapore, for example, will need to dramatically increase
> immigration simply to keep its population stable. This will see the mix
> of products demanded in Singapore change to reflect its changing
> ethnographic composition.
>
> 2. The Internet, Big Business and Freedom
>
> * A new pattern of growth is emerging in Asia: economic freedom with
> political control. The internet was meant to undermine totalitarian
> regimes. But for Asia’s more authoritarian governments it will become an
> increasingly useful tool in the coming decades as they search and
> destroy dissidents and would-be dissidents. All the while the greater
> flow of information afforded by the Internet will allow Asia to reap
> huge economic benefits otherwise denied by an underresourced
> conventional media.
>
> Suggestions for Business Strategists and Scenario Developers
>
> > Internet usage is spreading rapidly in most of Asia, even in those
> countries with more authoritarian regimes. Those that are more
> authoritarian are realizing that the Internet can be censored
> effectively and it can be used to track down opposition. And so rather
> than standing in the way of rising Internet usage many are realizing
> that they have an interest in promotiong its spread.
>
> > This means that the Internet will be an effective way in Asia for
> advertisers to reach various targeted audiences. But selling direct to
> consumers over the Internet will continue to be problematic where such
> selling relies on distribution via the postal network. Many postal
> services in Asia are very poor for parcels with theft rates being
> relatively high.
>
> 3. The Rush Out of India by Indian Companies
>
> * India’s biggest companies have announced dozens of M&A deals
> abroad.Why? Not because they want to show the world how powerful they
> are but because they want to diversify away from India.
>
> * The desire for Indian business to diversify away from India will
> remain a powerful urge for as long as India remains a relatively
> unattractive place to do business even for homegrown businesses. So get
> set for a new phenomenon- the Indian multinational.
>
> > Would be investors in India should take note of where cashed-up Indian
>
> > companies themselves are choosing to invest- its increasingly not in
> > India
>
> > The eagerness of Indian companies to invest outside India means that
> those in developed markets with assets to sell should consider marketing
> those assets in India.
>
> 4. Asia’s Nuclear Future
>
> * The economies of China and India are growing fast. Neither produces
> enough power even for existing requirements. And the power that is
> produced comes largely from the dirtiest and most harmful possible-
> burning coal. The situation is unsustainable. Nuclear power is an
> obvious solution and so probably by 2030, Asia will be home to at least
> half of the world’s nuclear reactors.
>
> > Mining companies involved in uranium exploration and extraction,
> particularly those in Australia and Canada, will be big winners from the
> growing nuclear power generation in Asia. So too will suppliers of
> nuclear technology and know-how. Specialised services associated with
> transporting nuclear fuel, monitoring its use, maintaining nuclear
> reactors and treating spent fuel will all offer big fee-generating
> opportunities. The sector will also need specialised translation
> services for highly technical reports and manuals.
>
> 5. Water Wars
>
> * Asia’s populations are getting bigger and richer and this means there
> will be greater consumption of water. But the problem is that the
> absoloute quantity of fresh water is falling and this will be especially
> pronounced in China and Indonesia, and in India the challenge will be
> urban water sanitation.
>
> * China’s current plans for water engineering are worth more than US$200
> billion
>
> > Billions of dollars in contracts are becoming available around Asia
> for building and upgrading water distribution and treatment facilities.
> Many open to foreign bidders.
>
> 6. China to Have the World’s Largest Number of English Speakers
>
> * English proficiency is not as high in India as is commonly believed-
> 38 million adult indians are proficient in English. But 56 million adult
> Filipinos are.
>
> * China is producing 20 million new English speakers each year
>
> * China will soon overtake the US as having the biggest number of
> English speakers
>
> * At the same time the use of Mandarin in China will rise signifcantly
> from half the population today to three-quarters within two or three
> decades
>
> > With so many in China learning English, Mandarin speaking skills are
> > not going to be as necessary as many forecasts predict
>
> > China will emerge as an important centre for BPO, taking business away
>
> > from India
>
> > China will emerge as a new and rapidly growing market for
> English-language magazines, films, books and other media.
>
> 7. China’s HR Nightmare
>
> * China has plenty of workers but few are management material. Fewer
> still are creative, lateral thinkers and this is the most important
> supply-side constraint that threatens China’s great march to sustained
> prosperity.
>
> * China will need 75,000 top-level Executives with global experience by
> 2010 according to one estimate. In 2005 it was thought to have just
> 5,000 (McKinsey).
>
> * More than 100,000 of China’s brightest go overseas to study each year.
> Most don’t come back.
>
> > There is no shortage of graduates in China but getting good local
> staff with leadership and management potential is extremely difficult.
> The dearth of such talent means that many Chinese are promoted too
> early. Many also have inflated perceptions of their abilities. All of
> this helps to limit the growth of many enterprises in China irrespective
> of the demand they face. Companies strategies need to take a realistic
> view of the talent shortages they will face in China and allocate
> sufficient resources to internal staff development.
>
> > Recruitment costs in China are high. The truthfulness of CVs need to
> be assessed as academic transcripts and qualifications are often fake or
> embellished.
>
> > To generalise: Chinese graduates are good at following instructions
> and are hardworking. They are not good at teamwork, sharing information
> with colleagues, dealing with ambiguity and undertaking tasks that call
> for creativity. Managers in China need to allow for this and to
> implement training programs that foster teamwork and creativity. Its an
> enormous task that requires expatriate managers to be patient and
> nurturing, and have strong mentoring skills.
>
> 8. India’s HR Nightmare
>
> * India underspends on education like it underspends on infrastructure.
>
> * Like China they will suffer from a lack of management and leadership
> skills from the local workforce
>
> * India has too few good business schools and gaining entry is
> incredibly tough
>
> > Hiring the best local managers in India is phenomenally expensive.
> > There are just too few relative to demand. Nor is the Indian
> > government taking steps to alleviate the process. Many companies will
> > need to grow their own managers or have the right strategies in place
> > to find strong local staff
>
> 9. Vietnam: The New China?
>
> *this is the claim but it isn’t as with a population of 85 million it
> can’t compete with China’s 1 billion plus population. A more realistic
> sobriquet is that it will be the next Guangdong with a significant
> economy.
>
> * Per Capita income in Vietnam will have likely increased 5 times in the
> 15 years to 2010
>
> *Already Vietnam is one of Asia’s open economies with trade accounting
> for a far higher proportion of GDP than in China and India
>
> * Wage costs are more competitive in Vietnam than in China.It has a
> young labour force and adds almost a miilion a year to its population
> and at least a million a year to the labour force- and it will stay that
> way for decades to come.
>
> * Vietnam’s government is another that is pursuing the economic freedom
> but little political freedom model
>
> > Vietnam is a good alternative to China for investment if China is
> beginning to look expensive. Also for companies that have China exposure
> already, diversifying into Vietnam may be prudent.
>
> > Vietnam is still a very poor country and companies looking to win
> favour with government officials should consider making contributions
> towards social development. The government remains socialist and so
> appearing too profits focused could attract criticism.
>
> > Vietnam’s banking and retail sectors show considerable promise for the
> coming years, particulalry in light of Vietnam’s ascension to the WTO in
> 2007.
>
> 10. China’s Healthcare Sector to Boom
>
> * China’s population is ageing. Its healthcare system has fallen apart.
>
> * But China is getting rich fast. And so hospitals and other healthcare
> facilities in China are set to be huge business in the coming decades.
>
> > Healthcare in China has a very bright future- China is becoming
> wealthier very quickly, the current healthcare system is in a mess and
> the population is ageing. The government needs to act fast.
>
> > Currently Chin spends relatively little of its GDP on healthcare but
> in coming years expenditure can be expected to rise faster than economic
> growth.
>
> > Health insurance will be a big market in years to come.
>
> > Pharmaceuticals also has a big future. There are few national brands
> and the industry is ripe for restructuring.
>
> > Hospitals will be big business in China. So will many ancillary
> services such as medical waste management.
>
> 11. Medical Research to Shift to Asia
>
> * Animal right activists are making it very difficult to perform
> laboratory testing on animals in the West. But animal testing will not
> go away.It will simply shift to Asia, particularly China and Singapore
> where authoritarian governments keep activist groups under control and
> constrain debate in the media.
>
> * Other types of research such as stem cell which also generates ethical
> concerns in the West is shifting to Asia for similar reasons.
>
> > Western universities, pharmaceutical and cosmetics companies are
> > likely to contract animal testing services in Asia
>
> > China will be a huge market for pharmaceuticals so establishing
> research facilities in China will be one way for foreign pharmaceutical
> companies to better position themselves for entering the Chinese market.
>
> 12. New Switzerlands: Private Banking and Money Laundering Shiftin to
> Asia
>
> * Millionaires are being created all over Asia including around 300,000
> in China alone.
>
> * China’s fund management industry is likely to be worth US1.4 trillion
> in 2016
>
> * Singapore is set to become a world centre for private banking and
> hidden offshore funds
>
> * China wiil be one of the world’s biggest markets for private banking
> and fund management
>
> > Fund management and private banking are set for astronomic growth in
> > Asia
>
> > To attract a greater slice of the market, the region’s governments
> > will come under competitive pressure to improve their banking
> > regulations and enforce these regulations in a clear and transparent
> > manner
>
> > Singapore is emerging as a prominent international banking centre that
> will serve not just Asia but Europe and the rest of the world in coming
> decades.