I just got back from the Annual Meeting of the New Champions in the Chinese city of Dalian, a gathering of the world’s business and political leaders organised by the World Economic Forum. The China meeting is billed as the “Summer Davos,” a reference to the Forum’s main event held every winter in the ski resort of Davos in Switzerland.
These two meetings lived up to their names particularly this year. When I was at the Davos meeting in January, the impression I got was one of wintry worry. Sure, Bill Clinton was as compelling as ever and Bill Gates was open and accommodating. But the folks who in the past would have been ferried about by limousines were taking the bus or walking, and all the talk was about the death of the ancien régime and the painful birth of a yet unknown world.
Dalian was considerably sunnier. The location was no doubt a plus – China alone, among the major economies, is apparently growing at near pre-crisis levels. The recent spate of economic numbers around the world indicating a recovery also contributed to the optimism, although the possibility of a double-dip recession still cannot be discounted.
But I think it was the self-confidence of the ‘New Champions,’ as the Forum describes the up-and-coming globalising companies it gathered together in Dalian, that made the atmospherics there different. It seems that business leaders from enterprises like Chalco and Suntech Power in China, Reliance Industries in India and Sovico Group in Vietnam are beginning to realise that, in the post-crisis business world, it is companies like theirs that could come out on top.
Certainly many of the world’s venerable champions are now only shadows of their former selves (General Motors, Chrysler) or are gone forever (Lehman Brothers). For the foreseeable future, they will be repairing tattered balance sheets, purging their books of soured assets and aligning labour costs and perks with their straitened circumstances. They may need to reinvent their business model and operations to respond to a radically different post-crisis business environment.
In contrast, the new champions’ finances are generally in good shape after they emerged from the crucible of the 1997 Asian financial crisis. By and large, they are not burdened by supposedly triple-A financial instruments that are in reality stitched together from subprime mortgages in the U.S. And they do not have the legacy systems that afflict older companies, from huge pension obligations to sclerotic technology and processes to business models and strategies that date back to the last century.
These are the qualities that could give them the edge in the post-crisis world. In both Dalian and Davos, many a panellist mused about the business environment after the recession. The discussions typically ended up focusing on one theme: the emergence of low-carbon, green technologies, processes and products as key drivers of economic and business growth. Panellists and participants mostly agree that the days of the old-style, smoke-stack assembly line complexes that created today’s industrialised nations are nearing the end.
This is an insight that Asia’s CFOs should consider even as they steer their company to safety through choppy financial waters. They should not forget the larger picture. Are they cutting costs and laying off people mainly as a knee-jerk reaction to the global recession? Or is there a well-considered method in this madness? Are CFOs, in fact, streamlining and realigning human resources, finance operations and other business processes to reposition the company for a low-carbon, green-oriented business environment?
In other words, are you going to bask in the sun of Dalian or will you be stuck in the winter of Davos?
About the Author
Cesar Bacani is senior consulting editor of CFO Innovation.