Now is the time to prepare yourself for the AEC in 2015
June 22, 2012 00:00
By Apirak Jatukanyaprateep
One of the most important questions to ask executives today is whether their business is ready to operate in the Asean Economic Community (AEC) in 2015.
To answer it, one must understand the business environment that will unfold in 2015 and the essential preparation needed for such an environment.
The main change the AEC will bring to Asean is a freer flow of goods, services, investment, capital and people. The impacts of the change will be dramatic: the product and service markets will be the focus of intense intra-regional competition, the region will become the world’s production base, foreign direct investment and money will be more abundant, companies’ stock price will be more sensitive to their underlying performance, and employees will move (and be “poached”) more frequently across the region. In summary, the main impacts of the AEC will be intense competition and the flexible movement of people.
Our next question is, how can your business prepare for these impacts?
To survive in an increasingly competitive environment, the key ingredient is innovation. But this applies to more than just product or market innovation. While these are important, another type of innovation, just as important, often gets ignored. This is operational innovation, which simply means creating new methods of business activity to bring costs down, outperform competitors or provide the “wow” factor for customers. The reason why operational innovation is key is that it carries little risk yet provides maximum impact, with results that can be felt almost immediately. The idea of operational innovation is simple: your business’s operating model must always enhance shareholder value. In other words, you need to create an operating model that increases revenue growth, improves the operating margin or increases asset efficiency. Our research on hundreds of leading companies around the world shows that 75 per cent of operating models are forced to change when the external environment changes. Hence, why should we wait for external events to force change, while we have the time to bring about better change? To be properly prepared, your operating model needs to be highly cost effective, responsive and flexible. You need to start identifying which business processes should be outsourced, centralised or handled by business units; which business processes need to be improved or streamlined; which alliances or partnerships can level your playing field; and how your organisation should be structured to get your products or services to the market fast and to assist responsive decision making throughout the organisation.
Turning to the AEC’s second main impact, your business needs strategies to attract and retain talent in an environment where it is allowed to freely roam. Today, we operate in a changing world of work; businesses are increasingly reliant on intangible assets such as people, employees are less chained to traditional offices and set hours, “Gen Y” is bringing different attitudes to work and work is now done wherever and whenever. You must understand the changes that are coming your way and provide career-path customisation, learning programmes and flexible work arrangements that meet your workers’ needs.
Now, what about your blue-collar workers? Labour costs in Thailand are on the rise, while the opening up of our neighbours’ economies will soon draw many of their workers back home. The way to respond to the coming shortage of cheap labour is to use less people today, by eliminating low value-added processes, creating leaner business processes and using greater automation.
The biggest impacts of the AEC in 2015 will be on competitiveness and worker-mobility. And though we are still three years away, it is crucial that you prepare your business as much as you can, while you still have some breathing room.
Apirak Jatukanyaprateep is a partner in consulting services at Deloitte Touche Tohmatsu Jaiyos.