INSIGHTS EDITION 3 • DECEMBER 2008
The New Business as Usual, by Peter Andrew, DEGW Asia Pacific
DEGW expects that the corporate lockdown on spending, the immediate response to the economic crisis, will not be temporary but will become part of corporate DNA through the coming years – the new business as usual.
However, beneath the media hype of “doom and gloom” we are already seeing signs of clever corporations putting in place strategies to rebuild and restructure their businesses to survive and then thrive in this new environment. This is a time of great opportunity.
These organisations will be lean and more agile through the empowerment and connection of their people and the complete integration and leveraging of information and communication technologies. They will truly seek to understand and implement virtual collaboration technologies. They will be faster to market. They will be acutely aware of risks and how to manage them. They will exploit opportunities ruthlessly.
Dinosaur corporations will be those who become trapped in cycles of spending paralysis, unable to invest to survive and caught in a never ending spiral of cost cutting and resource contraction.
As weaker corporations fail the strong will acquire, merge and grow – strengthening their grip on their markets. This will bring the challenge of technological and cultural integration in “low spend” environments and raise significant real estate and workplace challenges.
Whilst many people fear for their jobs and fear for the longevity of their employer corporations the current situation has actually exacerbated the war for talent. Lean, agile organisations still need to attract and retain the very best people to help them survive and thrive - and they certainly need to keep their people focused, motivated, productive and innovative.
The critical real estate risk that CRE leaders need to be conscious of is to avoid destroying the potential of their corporations through short term decisions made in the context of the immediate economic conditions.
Implications for the Workplace
The immediate reaction of corporations in the current economic turmoil has been to focus on their core business – to sell products and services and then recover the cash -
“Cash is King” is the mantra!
Workplace has very quickly taken a back seat in corporate priorities. Decision making on new projects has been delayed whilst organisations absorb the impact of the current climate on their businesses. Many organisations are preparing to “live with what they’ve got” … at least until the dust settles.
Behind the scenes, however, there are dramatic changes unfolding within corporations that will impact significantly upon how they use real estate going forward into the future. The key challenge for corporations is how to transform work processes and shift organisational culture to new models – without investing significantly in real estate. Ideally, real estate costs should be reduced as an outcome of this transformation.
Many corporations pay little attention to the value of their space and focus only on cost. The challenge in the current environment is to make buildings work harder for the corporation:
- Fixed assets used more dynamically
- Flexibility of space increased
- Interaction and innovation stimulated
- Better morale and esprit de corps
- Brand and values reinforced
Clear communication and careful management of change are increasingly important skills when aligning the workplace strategies with evolving lean and agile organisations.
The Asian Context
Asia is clearly not as “de-coupled” from the global economy as it had hoped it would be. Japan, Hong Kong and Singapore have all moved into recession. People are watching China and India closely to understand how much growth will slow as a result of the global economic situation.
South East Asia has a broad diversity of economic circumstances. Vietnam is on a boom that will likely slow or bust. Indonesia was just moving into growth – will the crisis affect this growth?
Complicating the Asian market is the growing political uncertainty. Recent events in Thailand and India underline this but there are also many other challenges in the region.
Despite this uncertainty recent research in Asia (as recently as early November) suggest that many corporations are still expecting to grow over the next year in Asia and only 5% expect that they will contract. The degree of growth has certainly reduced but the growth is still predicted none-the-less. The challenge is to do this whilst minimizing “the spend.”
Emerging demographic and economic trends in Asia also throw out some significant opportunities and challenges to global corporations:
- The demographic age of the workforce
- Asian leadership
- Innovation.
The demographic mix of professional workforces in Asia has a typical average in the late twenties compared to the early to mid forties evident in many western economies. The expectations and work life issues of these workers as they marry and have children over the next five years will have a significant impact upon the workplace.
These Generation Y workers are, perhaps, better placed to adapt to the new culture and work practices of corporations reinventing for survival in this age of economic challenge than their counterparts in the west. They are also increasingly more demanding in their expectations of support spaces, workplace ergonomics and work life balance and they are much more open to modern concepts of workplace than the older leadership they are rapidly replacing.
Another significant change in the Asian workforce has been the rapid shift in recent years to Asian leadership in corporations, both global and Asian based. More often now, Asian expats are returning to Asia from the West to run corporations in the region. These leaders understand and can exploit local talent and ideas far more effectively than their western counterparts, and they have great pride in helping raise the contribution of their home countries. Only five years ago, or so, perhaps as little as 5% of local leadership had Asian heritage, today it is common to be greater than 50%.
Finally, Asia wants to be a global innovator. The development of cost effective products in local Asian markets is driving significant innovation which will spill out of Asia into western markets. Witness the $3,000 Tata car in India.
Global corporations are also leveraging this desire to innovate. Workplaces have to respond and support this capability – dumb boxes in paddocks no longer pass muster – but neither do western concepts of work and workplace applied without thought or understanding across Asia.
*DEGW has had extensive involvement across Asia for more than 20 years, supporting organisations as they make the transition to new ways of working. The firm delivers bespoke workplace solutions in both newly created working environments and in improved or reinvented existing facilities. Peter Andrew has been at the forefront of that support for the last eight years and, in 2008, established the firm’s new base in Singapore.