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Synopsis
At any point in time, businesses will face some degree of a challenge - whether it is with regards to funding, innovation bottlenecks, lack of partnerships, or mismatch of resources. What is critical is how they pick themselves up, re-strategise, and pivot to continue their journey of innovation and growth. In this episode, we explore the pivot points of enterprises and how these are fundamental in the next step of success.
Transcript
0:01
Yvonne Chan
Welcome to futurepulse, a podcast series brought to you by IPI, your innovation partner for impact. Together, we will explore how ideas, creativity and collaboration drive impactful innovation. Welcome to this episode of futurepulse where we'll be talking about the pivot point for enterprises. I'm Yvonne Chan, and I'm joined by Bill Padfield, Innovation Advisor at IPI, and advisor to NTT Venture Capital and Wavemaker Venture Capital, and Chok Yean Hung, Innovation Advisor at IPI and Board Member at AEM Holdings. Welcome gentlemen. At any point in time, businesses have faced some degree of challenge, it could be funding, innovation bottlenecks or a lack of partnerships. So what is critical though, is how they restrategise and pivot to continue their journey of innovation and growth. So before we start our discussion, I would like both of you to briefly describe your current roles in the tech and innovation space, as well as your roles as an innovation advisor at IPI. Let's start with you first Bill.
1:08
Bill Padfield
The innovation advisor role is really helping small to medium enterprises in Singapore to grow their business using different levels of innovation and technology. Often these companies want to grow market share or move into new markets, or they may wish to move into new geographical parts of the world as well. So the other part of my role is advising start-ups in Singapore that are part of a community that's trying to raise funds, whether it's start-up seed money all the way through to series C, D, and beyond. And I do that with two different venture capital funds who have different views in life, but it's all really to try and scale up businesses in this part of the world.
1:49
Yvonne Chan
Thank you, Bill. Chok?
1:52
Chok Yean Hung
Maybe I just do a little bit on the background of myself before I talk about IPI.
1:56
Yvonne Chan
Sure.
1:56
Chok Yean Hung
I've been in the semiconductor electronics industry for probably more than 30 years. Last year, I just retired from an active role as a CEO of AEM Holdings. Since then, I stepped into the AEM Board as a board member. Through my 30 years prior to AEM, I had actually started two companies, dealing with the semicon IC assembly and test services and had successfully brought them to the IPO. Since I'm retired, I volunteered myself into IPI's initiative as an advisor, as part of the giving back to the community where I would help the SMEs or start-ups to see how to help them to grow and scale in this industry.
2:38
Yvonne Chan
So I'm hearing a lot of scaling up, helping businesses grow and scale. But from your individual perspectives, what is a title like "The Pivot Point" encapsulate? Bill?
2:49
Bill Padfield
Gosh, pivot point can be moving into an adjacent new market, it could be a small move for the business that you've noticed an opportunity, it could be both offensive or defensive. Or it could be a full-blown transformation of your business because of some new threat that's come in, some disruptors have entered the marketplace, or you just see a sizable, sizable opportunity that you want to pursue. So it can be small, it can be massive, but it's a point that you make decisions and decide to change where you commit people, resources, capital, into a new opportunity.
3:23
Yvonne Chan
So that pivot point, it can be small, like you said, it can be massive, it could be a full-blown transformation even. Thanks, Bill. Chok?
3:32
Chok Yean Hung
I think Bill put it very nicely. Maybe I'll just say one or two sentences around it. Actually pivot point talks about transforming a company, the true leveraging on its resources, and possibly even its IP, towards either for survival, like what Bill had said, or maybe for growth. So you actually see how to use the existing resources and IP.
3:58
Yvonne Chan
Using existing resources and IP, I like that. Coming back to you, Bill. You know, you've helped turn many failing businesses into profitable success stories. I want to ask did you spot common pivot points in the businesses that you helped? I mean, do you have any examples to share with us today?
4:18
Bill Padfield
Common points are very good in hindsight. You can see it after the effect. But when you're in the middle of it, or if it's being imposed on an organisation, often it's very difficult to see. Companies will often maintain businesses that aren't contributing properly. They'll keep it because of tradition, they'll keep it because of the people, they'll keep it for a whole range of reasons. There is also businesses where they need to be looking to accrete gross margins in particular. Where can you see opportunities? And to me, this is one of the roles of a CEO is to look at where can i enhance my gross margins every single day? And there're some of these opportunities may come and in the past I've seen businesses where they've been pivoting into services in the IT space. For example, they used to resell products or be product vendors and they've realised that that shift has happened in the marketplace over the last 10 years or so, where you're getting margin accretion from services now, rather than just selling products. So building out a service business, understanding how to move and pivot the business into a service-led business, particularly with annuity services, such as X as a Service, Platform as a Service, Software as a Service. Whatever it may be, it becomes highly value accretive to the organisation. So often, that's been the case in helping companies pivot so far.
5:41
Yvonne Chan
Thanks for those examples. Bill. How about Chok? I want to ask you too. Why do you think restrategising and pivoting has to be so difficult, that it comes with so many challenges? It is necessary, right? How do you spot the telltale signs?
5:57
Chok Yean Hung
This is probably a very long question. First of all, to research, strategise, and also to pivot is that it's about making a change. And as usual, making a change is always never easy. So, to get started, when to get started, as well as how do you make a change, to bring the company to the desired outcome. And that is always not easy. But at a certain point in time, making these changes is probably very important. If you imagine a year at every business, there's a runway, and if you're not careful and not making all these changes and transformations, your competitors may actually eat your lunch one of these days and you actually end up with your runway being truncated and you have nowhere to go. Apart from that, the market dynamics may change over time, there may be an inflection point, at a certain point in time. And during this inflection point, it may be a case of opportunity or may be a case of making your business irrelevant. You will need to be prepared for that. You need to transform and pivot and be prepared for this opportunity or else you actually run to the end of your runway. So when do you need to pivot? Where the telltale sign is, it's probably not easy. I believe that Bill mentioned some of it. You probably will see your business revenue would have stagnated and worst of all, you may see revenue actually going down. And you may even see that your profit has gone down. That's probably one of the telltale signs. The other telltale sign is really that you have a very lethargic organisation, where you cannot retain talent being one of it, or you cannot even attract talent into your company. But I prefer always to not to deal with it until we reach a telltale sign. When you reach to a telltale sign like this, you probably will be reacting and try to pivot and that's very stressful. It's probably a better thing to do if you periodically every few years, take a pause, look into where the company is and how healthy is your runway. And at that point, at a certain point in time, you'd need to decide you probably need to pivot to keep yourself healthy.
8:17
Yvonne Chan
So having a periodic review of the company's runway right and not wait till the signs are so obvious by then like you say either it's too late or you're just picking up whatever reactive proposals or solutions out there. Still sticking with you now Chok. You know, AEM just delivered some of its best results then despite the challenges of the pandemic. I know you've just retired from your role as CEO there but still a board member. Perhaps you could share with us how the focus on innovation transformed the company into a global leader in the semicon and electronic test solutions market?
8:53
Chok Yean Hung
AEM used to be just an equipment contract manufacturer, and we actually have a very good anchor customer. A few years ago we took a pause like what I just said earlier. We took a pause and made an assessment as to what we have, what we have the capability to do, which are the spaces that we are playing in within this market. Then we actually took a look and assessed where the market is heading - what are the mega trends, the pain points behind the mega trend and the market needs. From there we attempted to make a few mapping as to what can we do to innovate to provide solutions or products to address these pain points and market needs. And it's actually going through a few iterations of this, we identified a possible path where we need to go. Moving from there, there was nothing that we need to address. There were obviously gaps with respect to our resources and our IP. And over here, we have to attract the right talent to backfill the gap. We also went out to acquire technology company as a way to bootstrap us up to the level that is needed. This has transformed AEM from being an equipment contract manufacturer to be a product company. It has been quite an interesting journey and we are still pivoting. Today, we are probably at a market value of a billion dollars, we used to be below $100 million market value. So pivoting is still ongoing, but it became a very exciting company today.
10:31
Yvonne Chan
I like that point, I want to come back to that later, your company now valued at over a billion dollars, you are still pivoting your journey has not ended, right? So there's no finite point when it comes to transformation. Thanks Chok. I'll come back to you on that point. I want to circle back to Bill and to have you expound a little bit more on some of your earlier sharing. What key factors then do you think enterprises need to consider when they're undergoing a transformation or major or minor changes of any sort?
11:01
Bill Padfield
I think it really comes into the three buckets of people, processes and systems, and people being the hardest. I'll probably leave that to the last. For systems, do you have the right systems in-house to enable you to move into a new market? Are they agile enough? Are they flexible enough? Do you have that capability to pivot with the systems that you have? Who's going to assess that? Who's going to create that knowledge for you to decide? Processes - can they scale up? Can they change? Can they be modified? Who is going to be responsible for that transition? And then the last one, and the toughest one of all is the people. And this is where I would go back to just a simple rule of thumb, which is 33% of your staff will normally get it and will embrace the change, 33% would probably get it with training and encouragement, and then 33% probably won't. So you need to be prepared to make changes with your people.
11:56
Yvonne Chan
But it can be a pretty painful process too, can't it?
11:59
Bill Padfield
It can be very painful, it can be emotional, and the amount of hours that you go as a company can be incredible. So you need to make sure that you're not just generating heat, you're actually generating light, you know that you really are creating extra work for a purpose, rather than just extra work for extra work's sake.
12:17
Yvonne Chan
Generating light and not just generating heat. I like that one. Thanks, Bill. Chok, you want to weigh in on that the people part like you said, you guys had a shortage of the right talent, you had to go out there and look for them, right?
12:30
Chok Yean Hung
People is probably the toughest thing to address. It is never an exact science. There are two types of people that we're talking about here. There's actually the people that you have and people that you don't have. For the people that you have, how do you retain them? And like what Bill said, there are some you can retain and some you cannot retain. Then they're also the right people and the wrong people. So there is never an exact art when it comes to people. But this is where a good leadership team does have to come in and make the assessment. And if they do it correctly, you will have a good group people working for you.
13:07
Yvonne Chan
It's tough. I think finding talent, the right talent these days has got to be one of the toughest challenges. I want to ask you then Chok, how does a company on the brink of pivoting also ensure that the cash cow part of the business is not marginalised during this transformation?
13:27
Chok Yean Hung
This is precisely what Bill talked about - managing the people, and it's probably the hardest part. Like what he said it's not exact science. And like what I say, the leadership team probably needs to do this critical part. The first part of is really, they need to be able to rally this team which actually support the cash cow business, to believe in the journey that you're embarking on, buy into it, and then take it as a shared journey. Along the way, some things within this group, probably have to be brought up and discussed openly in a transparent manner with this team. What is their role today? And what is their role post-pivoting? If they see it nicely, then you have a chance. The second part of it is really like this. How do you actually ensure this current team actually feel they have been treated fairly and in an equitable manner? And that is not easy. You can actually address these two items: getting them to believe in you and getting them the feeling that they have been treated fairly and in an equitable manner, then you have a chance. You have a chance of getting this team to be highly motivated, to hold the fort within this cash cow business and then looking forward to work with you, for you, in this company, post the transformation. But like what Bill had said earlier on, not everybody will make it, you just have to try your best. Be transparent. Be as genuine as you can, i.e. the leaders within the leadership team, and then knowing who are your critical few is probably important. There'll be probably some fallouts along the way. And Bill has a right equation, 30:30:30? That's probably a very right equation.
15:18
Yvonne Chan
Bill, let's have you also weigh in a little bit more on this one?
15:21
Bill Padfield
It's going back through experience, I could even get quite cynical about it, you've got those that are supporters that are actually saboteurs. They will say that we're absolutely in line with this, we really want to work with it and we'll help in every way we can, and then go away and do everything they can to stop it. You've got others that are really on board and really help and those are your change agents. And those are the ones that you will identify pretty early in the process, and they can help you lead the change because you can't do all this on your own. It's an absolute super challenge to do it as a company, never mind as an individual. So bringing those over is a process and often you will use different change models to help you spread that word internally so that people will realise that the future is in this new world that you're transitioning to. And no matter what they do, the old world is going to go. Otherwise, they will try to do everything they can to kill off this new initiative to keep the old world and keep it in their comfort zone. It's human nature.
16:22
Yvonne Chan
Yeah, it is.
16:23
Chok Yean Hung
You want me to add something else?
16:25
Yvonne Chan
Sure.
16:26
Chok Yean Hung
In going through this process, the constant communication and open communication will probably make a lot of difference. And in two-way communication, it will allow you to actually identify who are the guys who support it and who are the guys who probably are maybe cynical or may sabotage these things and things like that. So along the way, probably action have to be taken within the company.
16:52
Bill Padfield
So that's a point that Chok's just brought up there that's absolutely correct. You can't over-communicate in a change process. A lot of companies, going back again, through experience will companies will under-communicate. And the answer will be: everybody knows the new strategy. And yet you bump into five people at random down the corridor, not one of them understands what you're trying to do. So you've got to communicate once, twice, three times, over-communicate, and then even walk the corridors, listening to people, listening to people with their objections, listening to their misunderstandings, helping them correct. And making sure that they see you're completely accessible, that you're not just somebody there that's giving them all pain and problems, you know. Share those challenges that you've got with them and they'll happily open up and talk to you in most cases.
17:41
Yvonne Chan
So over-communicate, be accessible, be transparent.
17:44
Bill Padfield
Yeah, make them feel they're in a safe environment.
17:48
Chok Yean Hung
May I add one more point, apart from over-communicating something like this, you need to be very passionate when you communicate. It cannot be like reading from a script. This passion - people will feel it. So being passionate about what you intend to do is probably very important. People see it, people feel it.
18:09
Yvonne Chan
So you have to be genuine and authentic then you know, as a change agent and someone who's really like you said, the evangelist for this pivoting right, for it to happen to take place. The people challenges aside, what are the other, besides the systems and processes to that Bill talked about, some common challenges that companies face now in order to transform? Is it too short timelines when they realise that they need to pivot when it's too late? Is it a lack of funds, a lack of partnerships? Is it mismatched resources, Bill?
18:38
Bill Padfield
Well, it's people, speed and cost and we've covered people a little bit. But speed and urgency. Why are we pivoting? If you can really focus on the why, you know, why are we doing this? Why do we need to do this now in particular? And this can be based on an event, a compelling event, we need to change by this date. Because if you just say we need to change and you know, we'll chat about it again in three years’ time, that's not going to get you anywhere. So one of the things that I've seen people do successfully is create artificial compelling events. It may not be you know, the old expression about a burning platform, but if you don't have one, create one. So that it gets that sense of urgency running through the organisation. And then people will focus on the "why" and the "why now" gets answered. And they get that sense of urgency and combine that with the comment that Chok just made about passion, and all of a sudden, great things start to happen.
19:36
Yvonne Chan
Thanks Bill. Urgency, even create that platform for that fire to start burning, right, even if there isn't one. How refreshing. Chok?
19:46
Chok Yean Hung
I like the the way Bill puts it in terms of people, speed and the last one, cost. I think that covers everything. Maybe instead of going on a macro level, I'll go to a new microscopic level and some of the items within these three segments. I think the one of the things that most people actually will face is really getting the right talent externally to help them, the technology to help them. So it's probably not easy to stumble onto them at this stage. This is probably one of the hurdles to get through. The other thing that I'm abit worried sometimes when you try to pivot and transform for the sake of changing. You need to do a lot of validations. That's part of a process that actually Bill talked about. You need actually a lot of validation to ensure when you pivot, you pivot to a place to actually have market value, rather than the pivot to a place that actually you ended up has no value to anyone. So those are the small items within the three big buckets that Bill talked about - the people, the speed and cost. You need the right people, you need the process behind it, you need to actually validate it periodically so that you don't pivot and transform your company to something that has no value.
21:05
Yvonne Chan
Don't pivot for the sake of pivoting right? Do you see a lot of companies now, in your roles as advisors, having a bird's eye view of the industry, do you see many companies trying to pivot for the sake of pivoting, they have to be seen to be doing something?
21:20
Bill Padfield
I don't tend to see too many major pivots now because most of the companies I'm working with are start-ups. So they're, you know, almost too young in their lifecycle to really pivot. Otherwise, they know they're not going to survive anyway. But they will often be bringing innovative technology to their clients who are being forced to pivot, which is obviously been their business opportunity. But some of the larger groups that I've worked with in the past, pivoting is something that they will get a clear roadmap on and they also spend time making sure they define what success looks like, so that we're not just pivoting for the sake of it. You know, you can have a CEO that walks into a new business and says, right, we've got to change everything. Well, why? Because you're a new CEO, or because the markets changed or what fundamentally so it all goes back to locking down that "why", locking down roadmap and understanding and defining what success looks like.
22:16
Yvonne Chan
That's such a good point - locking down the "why". I want to just emphasise that again. Thanks, Bill. Chok, you also wanted to say something.
22:25
Chok Yean Hung
So the companies that actually tried to change for the sake of change, and those are the ones that you needs a lot of resources, money and things like that. So I always like to use the McKinsey three horizons, the action of bucketing the different timelines for different things to do. What do I do in the first horizon? What do I do in the second horizon, and in the second and third horizon is where I need to bring in resources and pivot to change, based on the market/evolving market or the mega trends coming in. And these are potentially the inflection point(s). So you always bucket yourself in the three horizons and I think McKinsey has a very good system around it, helping you to map out these executions.
23:10
Unknown
Yvonne Chan: Thank you. Thanks for that Chok. Gentlemen, coming back to the point of what Chok mentioned earlier right, AEM Holdings for instance, is still pivoting. So what do you have to say, Bill, when someone asked you "Is this company's digital transformation complete?" I mean, you've spent all these resources so much time and talent, all this change? Are you done yet?
23:33
Bill Padfield
First reaction is I laugh because these are journeys, these are not destinations. And if you realise the speed of innovation that's happening. There was one of the consulting groups recently was saying, "You're never gonna see change at the slowest pace as it is today ever again." It's only ever going to get faster. So right now, if a company says that we've you know, introduced a new MRP II system or we've introduced a new enterprise financial system, or we've introduced whatever it may be, and we're now digital. Absolutely not. And there's always areas of the business that you can look at. Have you implemented robotic process automation? Are you really expanding on machine learning? Have you optimised your artificial intelligence capabilities? Are you using analytics? If so, how? Have you got predictive analytics, pre-emptive analytics? It just goes on and on and on as you refine your business more and more, but there are some very big steps companies can make upfront that gets them onto this journey that has a significant impact on their income and their client experience, which is incredibly important. It can speed up their time to market, it can speed up their time to client acquisition, it can do so much, but that's not the end of it. There's always more to do on this journey.
24:53
Yvonne Chan
Always more to do. I would like to invite Chok to share your thoughts on this question, please.
24:59
Chok Yean Hung
I probably have nothing much to add over here. I like what Bill said, it's always a journey. And you should look at it as a long journey and how to actually continuously create your runway again and again. It is never about an end destination.
25:18
Yvonne Chan
Would it be right to say it's about extending your runway, your company's runway to make sure that you have legs to go on for as many years as possible?
25:27
Bill Padfield
Very much so. I would go so far as to say it's survival.
25:31
Yvonne Chan
Gentlemen, what do you think then, if you had to leave our listeners with, you know, a key piece of advice? What two components do you think a company must have when trying to pivot, if I had to ask you to narrow it down to just two?
25:48
Chok Yean Hung
Definitely leadership. You must have a competent lead, group of leaders, and leadership, and probably visionary. The second part is probably that you must have enough funds to support you to do this transformation.
26:02
Yvonne Chan
So enough funds and...
26:04
Bill Padfield
I would only add one to that, if I may, which is the mandate, get it done. Somebody needs to make sure, let's get this done with the support of the CEO and the board to really get that transition underway.
26:15
Yvonne Chan
So it's visionary leadership, making sure you have enough funds and getting the right mandate out there. Whether you need to over-communicate it, be extremely accessible and transparent about it, just making sure that all those that need to get on board are on board. Am I right, guys?
26:32
Bill Padfield
I would say so.
26:33
Yvonne Chan
Thank you so much. Thank you very much, Bill and Chok for your advice and sharing today. You've both provided some really stellar examples of how pivot points are part of a company's growth journey. It isn't a destination, like you said, and it's also really important as to why we need to identify the "why" before we pivot, and challenging as the process might be. It is still fundamental for the next step of a company's success. Thank you so much. My name is Yvonne Chan. Thank you once again for joining us. We will see you next time for another exciting and insightful episode.