The Pivot Point

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.

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.

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.

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.

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.

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.

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.

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.

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.