Businesses in Asia and Europe are facing a number of challenges in today’s market – but leaders should avoid taking a gloom and doom perspective and look instead to putting solutions in place.
This was the central message offered by Professor Olaf Plötner, dean of Executive Education at European School of Management and Technology (ESMT), on The Leaderonomics Show as he discussed the outlook of global business with the show host, Roshan Thiran.
Business approach between Asia and the West
As a renowned expert in business strategy, Plötner believes that one of the biggest challenges facing business in the West is growth, which has stagnated while emerging markets are currently enjoying a period of growth and development.
He advises, “If you would like to grow, you have to go to the emerging countries. These countries don’t only look for premium products, there’s also a lower willingness to pay, so you have to think about having products in your portfolio that fit with the low willingness to pay from the customers.”
Another challenge facing businesses across the board comes in the form of data management and technologically-driven advances. Taking the example of jet engines, Plötner talks about how technology is able to tell when a blade within an engine will break. As a result, companies have become less keen on buying engines outright, and instead lease them, paying manufacturers according to the amount of hours used – an approach Plötner describes as paying for “power by the hour”.
Commenting on the difference in business approach between Asia (in particular, China) and the West, Plötner suggests that the Chinese government’s approach is one whereby the government invests in businesses who in turn build up their research and development (R&D) in order to grow and expand.
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The European dilemma
Conversely, the European Union is becoming decentralised due to last year’s Brexit vote, which saw the United Kingdom (UK) voters choose to leave the European Union and, by association, the single market. “Instead of having the united states of Europe, we go a little bit back to national thinking,” says Plötner. “If you see this in terms of investment funds, the smaller you are, the less you can invest and bring everyone in the continent together.”
Roshan suggested that part of the reason for the current slow growth in Europe is perhaps due to the notion that developed countries reach a point where there’s nothing more to aim for, and so growth begins to see a decline.
In his response, Plötner acknowledged that growth is slow in Europe, adding, “If you see the market shares worldwide, usually most of the industries are going down. The big winner at this point in time is China, taking the lead in many industries.
“However, in the world there are always ups and downs. If I were to buy shares now, I would buy European, because they’re down… but maybe that won’t be the case in 20 years, and so we’ll see how this goes on. Of course, Europe has to change – we’re pretty much stuck – the structures are not there to be flexible, but that’s always the phase before you change.”
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Great challenges instigate change
According to the professor, businesses and economies will always have times where they are stuck in difficult situations. However, he believes the experience of facing difficult situations is precisely what instigates change.
When pressed to suggest areas in which Asia could learn from European practices, Plötner qualified his answer by acknowledging that Europe has many issues to overcome, and that issues on both sides are deeply rooted in culture. However, he suggested that one area of focus in Asia could be a commitment to quality improvement and control.
Using his native Germany as an example, he said that there exists a “deep-rooted passion for quality”, adding that “I talk to normal workers and if they produce a product, they are committed to quality.
“Once, somebody told me that in the US you work for your boss; in Japan, you work for your company. In Germany, you work for your task.”
“You’re committed that this product will have the highest quality. I’m not sure I would say that this is something for others to learn, but it has given us certain advantages in the global economy, and I’m very happy that you still buy German cars.”
With regard to how companies can grow and move forward in today’s market, Plötner says it’s all about having the ability and the willingness to change as the world changes. He advises chief executive officers to ask themselves, “Do you have the right people to do this, based on capabilities and, second, are they willing to change?
“If you talk to the people, usually everybody says change is needed. If you ask them ‘How will you personally change?’ people become very calm. So it’s about how to motivate people to come with you to change.”