'Capability building critical' for Asian firms

While global financial instability is testing the mettle of corporations across the world, many Asian companies, fuelled by high aspirations, continue to seek growth.
“This is an exciting time to run a company in Asia. Many of the large regional players are just beginning to seek regional and global expansion, and capability is an entry ticket to the global game,” said Dr Tomas Koch, a senior partner with McKinsey & Co.
“Unfortunately, these ambitions are being stymied by capability shortfalls. Our work in the region has shown how to break through these obstacles quickly and create long-lasting improvements that link directly to profitability.”
McKinsey analysis shows that by the end of this decade, Asian companies will likely account for more than 40 per cent of the 250 top global corporations, a 70-per-cent increase in Asia’s share of the world’s top companies from today. But capabilities at these companies are being stretched to the point that shortfalls in skills and abilities are the greatest hindrance to further growth.
In a recent McKinsey global survey of 1,440 executives, nearly 60 per cent of respondents said building organisational capabilities such as supply-chain and capital-project management was a top-three priority for their companies. In Asia, building capabilities to drive growth and sustain organisational performance is even more crucial.
Sixteen per cent of survey respondents in China and 20 per cent in India noted capability building as a top priority versus 10 per cent overall and 8 per cent in North America. This is not surprising given the spectacular growth of many Asian companies over the past decade, resulting in bigger, more global and complex entities, in many cases managing broad-ranging business.
Increasingly, this poses tremendous challenges for their executive teams struggling to build the institutional capabilities needed to manage and sustain this growth. McKinsey’s proprietary research on organisational performance confirms that Asian companies on average lag their global best-practice peers on organisational capabilities and effectiveness.
In its new publication, “Capability for Performance – The Path to Excellence”, McKinsey experts detail an optimal programme for building the capabilities needed to support growth, increase profits, and sustain these improvements.
Drawing from the management consultancy’s experience in the region and globally, the authors offer a step-by-step framework and detailed case examples of how businesses can build the internal capabilities needed to improve performance and increase profit.
In addition, the book closely examines successful efforts by a diverse group of Asian companies that have employed the McKinsey framework to trigger improvements across a wide range of critical business functions.
And finally, the authors discuss the structure and role of “model factories”, an innovative approach teaching new capabilities to large groups of employees using functioning business environments to explore improvement potential.
“Our framework can be valuable to companies all over the world, but in Asia the need to support growth by building new capabilities is critical at this point in time,” Koch said.
“The spectacular growth Asian companies have seen over the past decade means business models are threatened by the lack of management and front-line personnel with the right capabilities. Capability-building has to be the top priority for CEOs in the region.”