Change or face extinction, businesses told
CHANGE or face extinction.
This was the message of Udenna Corp. founder, Chairman and Chief Executive Officer Dennis A. Uy in his keynote speech during the BusinessWorld Economic Forum 2018, titled: “Disruptor or Disrupted?” at the Grand Hyatt Manila in Taguig City on Friday last week.
As one of the new faces of the Philippine economy, Mr. Uy is behind the rapid diversification of Udenna beyond oil retailing and shipping with the acquisition of a controlling stake in logistics company 2GO Group, Inc., investment in a school and two integrated resorts outside Metro Manila and purchase of a sprawling mixed-use project in Clark, Pampanga among others, in anticipation of disruptive trends and changes in the economic landscape.
Mr. Uy also fueled the aggressive expansion of Phoenix Petroleum Philippines, Inc., an upstart from Davao, to become the country’s leading independent oil company that has been closing in on the three biggest local oil firms in terms of market share.
“We must embrace change, otherwise we become products of the past instead of being brands of the future,” Mr. Uy said.
Kristine Romano, managing partner at McKinsey & Company, said that growth in disrupted industries can be reduced by 6-12 percentage points if digitization reaches full scale and companies do not adapt.
Turning her attention to the top 25% of companies that were quicker to respond to digital disruption, Ms. Romano said they sustained growth momentum because of scale, partnerships and they took competition seriously.
The rest, however, saw significant slowdown in growth rates.
First- movers also have a significant economic advantage over those late in the game, she said, noting that the former are better at arresting any slowdown of profit growth.
“Disruptors coming from outside the industry — for them the biggest problem is encountering incumbents who wake up and fight back because technology is free,” Union Bank of the Philippines President and Chief Executive Officer
(CEO) Edwin R. Bautista said, noting that incumbents have domain knowledge and a bigger war chest.
The Aboitiz- led lender, which aims to be the country’s first digital bank, is “fighting fire with fire” by using new technologies like cloud computing, blockchain and artificial intelligence, even venturing into mining cryptocurrency.
“We believe we can’t be for or against anything we do not completely understand,” Mr. Bautista said.
There are questions about whether old guards can radically transform themselves to stay relevant and keep up with the speed and flexibility of disruptive startups, but change should start in the boardroom.
“If traditional companies want to disrupt, it has to come from the very top. Disruption is a CEO thing,” said Orlando B. Vea, president and CEO of Voyager Innovations, the digital innovations unit of telco giant PLDT, Inc. (Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has a stake in BusinessWorld through the Philippine Star Group, which it controls.)
“The decisions of the boardroom will be different from what it was before. The question that will be asked is: ‘How do we change? How do we automate? Do we take big leaps or small strides?’” said Luis Miguel O. Aboitiz, executive vicepresident at Aboitiz Power Corp.
Even disruptors need to constantly innovate. After initially coordinating taxi rides in a dozen cities in Southeast Asia, Grab launched a premium chauffeur service GrabCar in 2014, which now accounts for 95% of its business.
“Moving and growing incrementally allow you to sit within increments of existing processes. If you think about growing 10 times, it requires changes in processes (and) mind-sets you currently have,” said Brian P. Cu, country manager of Grab Philippines.
Regulators have been working on building an ecosystem that allows businesses to stay competitive while allowing innovation to flourish. The Bangko Sentral ng Pilipinas, for instance, employs a testand-learn approach to help drive innovation and at the same time understand risks from the adoption of new technology, said Pia Bernadette Roman-Tayag, managing director at the central bank.
Mr. Cu said start- ups cannot work in silos and must collaborate with all stakeholders, including regulators.
“Technology is unstoppable. No matter how much we resist, the market will choose what is beneficial for them,” said Miguel Antonio C. Cuneta, cofounder of SCI Ventures, Inc.