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GLOBAL INNOVATION

Fusion Series

How World Class Innovators Create the Unexpected

The Swiss-South-African-Asian Joint Venture

Innovative Methods in New Markets: Growing Despite the Odds

 

The Fusion Series Part 4: Sensing

Sean Leas fuses:
- JV parent organizations 
- new services across countries, cultures, & development stages
- corporate, entrepreneurial, & multi-stakeholder perspectives

"Two companies come together in what seems to be an ideal match. Demand for the planned product or service is strong. The parent companies have complementary skills and assets. And together they can address a strategic need that neither could fill on its own. But in spite of such advantages, revenues decline, bitter disputes erupt, and irreconcilable differences emerge—and managers call it quits.… even companies with many joint ventures struggle, even though best practices are well-known and haven't changed for decades."*

 

 

Welding companies together fails 40%—60% of the time. * We know the key success factors—strong business rationale, good governance, structural fairness & alignment, effective decision processes, and even thoughtful exit planning. Despite that, many fall victim to underlying competition, cultural differences, poor integration, and poor or unclear leadership.

The potential is there, but we don't really know how to make it work. Something's missing.

Global expansion also offers much—rich new markets to explore—but delivers little:

"In an analysis of 20,000 companies in 30 countries, we found that companies selling abroad had an average Return on Assets (ROA) of minus 1% as long as five years after their move. It takes 10 years to reach a modest +1% and only 40% of companies turn in more than 3%." **

So, joint ventures and global expansion seem doomed to failure. Why would anyone try?

Most companies expand internationally to escape stagnation at home. Predictably, they usually need help with research, marketing, market analytics, sourcing, distribution & logistics, sales, and after-sales service. DKSH, a 150-year-old market-expansion company based in Zurich, not only helps clients expand successfully into foreign markets, but in the process expanded its own business to 780 locations in 36 countries, with over 30,000 employees serving 1,500 clients and 500,000 customers with 4,000 suppliers, 150 distribution centres, and 26 innovation centres.

Innovation is key at the 86-year-old Smollan Group, as well, one of the world's biggest field marketing businesses. They help clients with retail sales and field execution (e.g. shelf and stock management, promotion management, enticing brand choice, and introducing new product innovations), brand activation and point-of-sale brand management, retail advisory services, and advanced IT solutions and analytics. Headquartered in Johannesburg, the international company employs over 70,000 people and is known for its sophisticated systems.

So, one company has broad expertise in Asian expansion, and the other has deep expertise in retail sales and advanced field execution. Together, they can help clients grow internationally with advanced systems and solutions in a way that neither can do alone—nor can many others.

 

 

DSFM

In 2008, they formed an international joint venture—DKSH Smollan Field Marketing Southeast Asia (DSFM). Smollan's retail execution, client-facing analytics, and processes would leverage DKSH's internal services and infrastructure. Both would be put to use in one of the fastest-growing regions in the world with countries across a broad range of economic development.

Their first six years were refreshingly successful and drove staff expansion to nearly 1,400 full-time staff. Having developed and customized successful offerings and fostered new client relationships, they needed a new leader to scale up.

They found one with extensive experience in retailing across multiple markets and industries and an unusual combination of entrepreneurship (a former retailer and cross-industry dot-commer) and corporate experience. He'd worked for Smollan for 14 years and had run every business in South Africa except one. A top salesman, he had injected sales culture into the business and founded the Growth Division. In four years, headcount grew to 2,500—the fastest-growing division in the company. Both DKSH and Smollan agreed to mandate him and to accelerate the capability and growth of DSFM.

Despite the statistical odds, DSFM not only survived its first six years, but in the following three years more than doubled its headcount to over 4,000 full-time employees; opened up five new markets; built regional and country capability; developed client-specific solutions; and invested heavily in its technology and employees' development.

Commercially, DSFM became increasingly margin-accretive to both DKSH and Smollan, delivering strong double-digit revenue and EBIT results, at more than double that of its industry peers. DSFM's ambition is to be a partner of choice to its clients and customers alike, offering solutions that deliver real results; provide meaningful employment to its staff; expand its coverage to over 150,000 outlets; and employ over 10,000 staff by 2020.

Given their success so far, it looks like they'll be one of the rare companies to both (1) survive as an internationally-expanding JV and (2) yield substantial returns. How is DSFM's leader able to keep the partners together and continually integrate new practices into new clients in new markets?

Is there a secret sauce on a shelf somewhere for sale?

 

 

Travel, Listen, & Learn

Sean Leas grew up in a middle-class South African home and after high school started buying and selling things—second hand bicycles (to fix and sell), cars, radios—anything. He took a "gap year" backpacking with his girlfriend (now wife) across Europe from the UK to Turkey, attending the World Expo in Saville, watching the final opening ceremony practise of the Barcelona Olympics, and haggling in the markets of Turkey for carpets and leather jackets to sell back home. He earned money along the way to keep backpacking, learning, and seeing new places and perspectives, but has never been motivated by money alone. He's motivated instead to pursue the experiences that life offers.

In 1997, dot-coms were taking off, and in many cities around the world, techies, venture capitalists and entrepreneurs were gathering on the first Tuesday of every month—called "1st Tuesday." Sean's second oldest friend taught him the power of networking, and every alternate Tuesday night, they began inviting the smartest-they-could-find doctors, lawyers, dentists, social anthropologists, architects, process engineers, and more for an evening of drinking and talking. He collected contacts and ideas that he incorporated into a dot-com business for which he left his full-time retailing job and moved into the online world of retailing and financial services. Sean's 20's & 30's were focused on listening, learning, and experiencing.

"I learned a fortune during that time."

Formal learning—college and graduate school—were all part time, including the MBA dissertation he wrote in 9 days (always finishing what he starts). He happily travelled all over Africa, Europe, and the US as a retailing executive—and developed a cycle of learning, thinking, and implementing. He's comfortable—adaptable—and has a voracious appetite to challenge the status quo and move ahead of the herd.

After 20 years of travel, and having married and started a family, he accepted his first overseas posting with DSFM to give his kids a new perspective. His financial goals remain simple—to be able to give back, be independent, and travel to wherever his kids will be in the future. Financial goals at work are important, but whatever he does as a businessperson—whatever innovation he brings to people—must be meaningful, repeatable, and leave an organizational legacy.

 

 

Search, See, Hear, & Feel

Still a dot-commer (and learner) at heart, Sean is a serial Googler. Not a day goes by that he doesn't Google at least once before 9 am.

He's also highly observant. He knows when figures aren't right on a spreadsheet, perceives a client's hesitation, notices when a visitor is cold in the meeting room, watches an employee's nervousness, sees when something's out of place in the office, spots the dirty car in the carpark, scans the calendar for deadlines, and more.

He listens to what's said—and what's not said—positive and negative—and asks questions constantly, in order to learn.

"It's all about listening and observing. I listen to my staff. I listen to clients. I listen to colleagues. As the former head of sales at Smollan, we didn't just sell. We listened and developed new solutions for clients while selling. Where do ideas for training and development come from? I don't just wake up and think of them. I listen to people, and it becomes evident when I see or hear them having problems or gaps in fulfilling our strategy."

Not only does Sean listen, he integrates the perspectives of organizational clients, retail customers, employees, and parent companies—even more challenging when managing expatriates, locals, and organizations across a variety of markets. In doing this, culture is key, and Sean focuses on ensuring that the organizational culture remains true and is carried forward from recruitment to delivery.

He constantly sees, hears, questions, adjusts, integrates, and crafts ways forward. DSFM supports clients in gaining "customer intimacy," and Sean develops it with his own clients, too.

Generous and compassionate, Sean is quick to help, and he's very perceptive emotionally, as well. So, he shows all three types of empathy—cognitive perspective-taking, active compassion, and emotional. He pays full attention when he's with someone, calls people by name, puts them at ease, and is a gracious host. People respond by sharing what they're thinking and feeling. Emotionally-stable, he's described as "uplifting." Soft-spoken, you might not know when he's annoyed.

Although Sean earns a living crossing company and country boundaries, he maintains healthy boundaries with staff and is adept at drawing and maintaining boundaries with difficult, over-demanding clients. You have to sense and respond to needs but run your own business.

 

 

Empathic Leadership

Research shows that empathy is a key component of leadership effectiveness and that it's even more important in certain countries, like China, Hong Kong, Malaysia, New Zealand, Singapore, and Taiwan.

Important for leadership in general, empathy is critical for global executives and may even be the secret sauce for joint ventures.

Sean's leadership style is described as open, egalitarian, authentic, competitive, and led-by-example. Inspirational and results-driven, he creates vision, expands goals, sets clear objectives, clears a path for achieving, and increases performance. Instead of driving the process, he drives specific deliverables, measures, budgets, and deadlines, and supports people to achieve them. The firm is growing too fast to have employee-dependants. He wants (and needs) people to take ownership—not orders—make decisions and be independent. Bi-directional communication is key. He expects clear and concise feedback of deliverable, but is also comfortable letting his executive team vent when they need to.

The culture he builds is intended to get results but also be fun. He invites everyone to contribute their perspectives, and with a safe environment, people share, build on ideas, and explore new businesses and markets.

To do that, learning and development are priority, and thankfully Sean loves teaching. Short of time and attention, his staff knows in meetings to give him the facts (and quickly). He takes prolific notes to help him stay focused. However, he has a special reserve of patience when teaching. Actually, he sees himself mostly as a teacher, although he found traditional schools frustrating and detested the exams and general inefficiency. Tolerant of first-time mistakes, he says, "if we don't learn, we will not grow."

Beyond the above, friends and colleagues describe him as humble, hardworking, street-smart, detail-oriented, hands-on, and extremely aware of "all the little intricacies." A voracious reader, he tries to remain at the forefront of the industry and keeps an eye on innovations, always probing (internally and externally) into what's next—market conditions, business moves, a local engagement that can become regional, new technologies and opportunities, etc.

Extremely energetic, he wakes at 4:30 to exercise. He gets energy from people and cultivates an ever-expanding collection of contacts. He says key to growth is collecting new dots in your network (and growing the relationships, of course).

 

 

Sense & Integrate

DKSH and Smollan started with an advantage—a long history of cross-border operations. Nonetheless, even companies with a long history of cross-border and cross-organizational activities struggle with joint ventures, and large, old, successful organizations can find themselves unable to handle new ventures.

Integrating them requires creative adaptation and is itself an act of innovation—crafting something new out of pieces of the old. Bringing innovative services to new places is the same, since clients rarely want to buy exactly what companies want to sell. It's usually a better idea to alter and integrate than to simply transfer.

Knowing what to adapt and how starts with superior sensing.

Whether it's the secret sauce (on a field-marketer's shelf) for international Joint Ventures or not, seeing, listening, sensing, and empathy are key leadership skills for this Fusioneer. Sean sees issues between organizations before they blow up, hears what clients want and need to buy, and has a feel for the needs of his staff and the organization. He senses what will work in another culture, be it national or organizational.

Will you travel and see, whether around the world or around the corner?

Will you listen and question—to whom?

Whose perspectives and needs will you integrate, and how?

 

fusioneer
ˈfjuːʒ(ə)nɪə/
noun
1. one who innovates across domains of industry, field, country, social class, etc.
◦ s radical innovator, interdisciplinary creator, T-shaped person, borderless freethinker, boundary-crossing integrator, oddball;

Sean Leas is the Chief Executive APAC for the Smollan Group and Managing Director of DKSH Smollan Fieldmarketing South East Asia. He is "from" South Africa and Singapore (lived 6 months+), has travelled extensively across most continents, and has many "found stories" from innumerable places. For more information on his work, see : LinkedIn, DKSH, Smollan, and DKSHSmollan.com.

I thank the participants in this study (Fusioneers and Friends) for your insights, sharing, help, and patience. You inspire me, and I am honoured to know you. Special thanks go to Gladys Lee for her marketing excellence and video- and podcast-production brilliance, as well as the host of creative professionals involved in producing the videos and podcasts (you're all listed on YouTube, iTunes, etc.). I extend a warm thanks to Fusion Research Assistant Dr. Lee Poh Chin for her continually-wise and dedicated contribution to this research, as well as i2i Executive Shareff Uthuman for managing the rats-nest of global research travel and budgets. I thank Nitish Jain and the S P Jain School of Global Management for supporting this research—you're the foundation that enables the whole project. You are all God-sends. It takes a village to write a paper.

References:

* John Chao, Eileen Kelly Rinaudo, & Robert Uhlaner, "Avoiding Blind Spots in Your Next Joint Venture," mckinsey.com article January 2014. "Failure" as used here includes both cessation of operations and significant underperformance.

** Christian Stadler, Michael Mayer, & Julia Hautz, "Few Companies Actually Succeed at Going Global," Harvard Business Review, June 2015.

*** William Gentry, Todd Weber, & Golnaz Sadri, Empathy in the Workplace: A Tool for Effective Leadership, Center for Creative Leadership (whitepaper), 2007.

Photo/video cuts courtesy of Sean Leas, Depositphotos, and our own creative team.

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