Innovation in the Time of COVID-19

Innovation in the Time of COVID-19

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When Daniel Tu was hired as the Group Chief Innovation Officer at Chinese insurance giant Ping An in 2013, the country had just transitioned to the mobile and digital world, he said. His mandate was to drive growth through innovation and technology, formulate the digital transformation strategy for the group and its subsidiaries, and help the company achieve status as one of the world’s largest financial services groups. He was also tasked with creating Ping An Ventures and supervising investments, incubation projects, and strategic business partnerships.

Tu, who has since returned to leading Active Creation Capital, the family office he founded in 2000, spoke to GLG about how executives and their companies can craft strategy in uncertain times like these. Following are a few select excerpts from our broader discussion.

How has the business landscape changed, not just in China, but throughout APAC?

It’s almost impossible to disregard the COVID-19 pandemic and the geopolitical war between the United States and China. We’re at an inflection point, which will bring three clear situations. There’s a possible decoupling of the economies and bifurcation of technology, including the security and military sphere. Large enterprises operating globally must be cognizant of that. Second, we are seeing fast decision-making on the rebalancing of supply chains from onshoring  to nearshoring, amid debates between efficiency and resiliency. Last, there’s been a mass adoption of online and digital consumption. Asia is undergoing structural change. It’s fragmented by country, culture, consumption habits, and so forth. The super apps, including China’s big tech companies trying to get into Southeast Asia, are facing myriad challenges they’ve never faced within China.

Asia, demographically speaking, is much younger than the U.S. and Europe, and so they’re all digitally native. They will be the drivers of future growth. In the past decade, of every $2 spent on investment, $1 went into Asia. These are opportunities to capitalize on. The earlier projection by McKinsey was, by the end of 2021, Asia will have private wealth of approximately USD 75 trillion. COVID will delay it by a year or two, but it won’t be inconsequential. It will surpass the EU and North America. Fintechs operating in the region should understand these factors. Do start-ups have enough funding to extend the runway? Do their products fit the market now, given all these factors? Are companies in the data wheelhouse? With COVID and the collapse of economies, are start-ups, fintechs, or insurtechs able to better serve those who are marginalized and disenfranchised, not only with products, but their financial health?

With COVID, a lot of traditional businesses have had to pivot toward digital at an even quicker rate. As a lot of businesses are unable to directly interact with customers, how can they maintain good relations, or analyze their data without their offline pipeline?

It’s a big question. It speaks to operational resiliency. It speaks to their business models and understanding of the industry. While companies may be compromised in terms of offline data, the question to ask is, during this pandemic, was the company able to build out a virtual presence, engage with consumers and engage a supply chain? Is a company able, in real time, to aggregate and look at industry numbers based on data sets from other companies and third parties, so it can better understand the trends going on in the industry?

Is a company’s technology, product, or solution a good fit with large potential partnerships that allows it to have and build a holistic data set? These are things that all companies must be looking at, or should be looking at, because going forward, while the new normal will be different for different industries, companies, and so forth, the one thing that is common is that they must be digitally ready. Do companies have the infrastructure to serve not just customers, the front end, but throughout the mid and back offices, so it is seamless?

How do companies plan for the uncertainty around COVID?

We’re in a situation where the future, while we’re hopeful, looks murky. Without a vaccine, no one can pinpoint a date where things will get better. The return to the normalcy of the past is a fallacy. Everyone has to be prepared and vigilant and be able to pivot in order to survive. A key question I always ask is, not just about funding, but is a company’s business model able to earn at least the cost of capital? If not, a company is failing at unit economics and won’t survive — especially for start-ups that are seeking capital, because investors are getting smarter and more practical. They’re looking at companies that are truly on the path to profitability, or on a revenue-based sharing funding model. Second, the solution, or the question that a company pre-COVID was trying to solve, is it still relevant? If not, how can the company pivot? The product a business is building, can it meet the accelerating demands of the online community?

Can companies seek out the right partnerships that, especially if they’re market- or retail-facing, allow them to access a bigger customer base and balance sheet? As Warren Buffett used to say, as an investor he’s always looking for the company that has an unbreachable moat. If a company builds a large enough moat, it’ll have a secure business. In the digital world, scale and production means nothing. Scale is no longer the barrier for new market entrants. It’s that scale that attracts new market entrants to partner with. Even legacy players are looking at fintechs and start-ups to see if they can provide a slice of the solution, so they don’t necessarily have to build in-house and race against time.

How do you define the new normal?

It’s so varied. One thing for sure is, never let a good crisis go to waste, like Churchill said. Business leaders have to better understand the predicament their industry is in. Clearly by now travel and hospitality is dead. However, online education, online delivery, and health care are booming. Leaders must ask themselves, is my company in the right industry? If not, how can it survive? Second, is a digital transformation in place? Is it completed? Does the company have the ability to build out a virtual presence that can speak to consumers, and tie it in with the mid and back offices, especially in insurance and financial services, because everything has got to be in real time.

For financial services firms, the key thing is, do they have the ability to tighten up their underwriting? Because they’re operating in a low- to negative-interest environment, and so everyone’s chasing yield. If they don’t have the ability to do that, they won’t survive.

Finally, the new normal means that in the digital age, the mass consumer is dead. Meaning that, if companies want to grow, it has to be through customization or personalization. It’s easy to say, but if they don’t have the data sets to provide those kinds of services, they’ll be marginalized.

How would you advise executives to prepare themselves and their businesses to pivot? How do you be nimble?

COVID accelerated many phenomena and developments. One of the key things is digital transformation, because without that, there wouldn’t be the requisite data sets and proper analytics. We often talk about AI and the algorithms. Algorithms can’t be smarter if they’re not trained consistently, so companies won’t be able to identify and provide solutions and products for customers. Simply said, leaders have to be in position to conduct and operate the business. I think all CEOs understand that. Whether they’re able to do that, and do that in a timely manner, is the other question. This is why a lot of entrenched legacy enterprises are stuck, such as some of the large banks competing against the virtual banks. They’re now having to drop transaction fees and all that, but those are just piecemeal, temporary solutions. The question always is, can they compete for the cost of capital while serving customers, and provide better margins for the corporate balance sheet?

If there was one bite-sized key consideration for executives defining their 2021 strategy, what would it be?

Lifetime value going forward, in the digital age, is the quality of engagement with the customer. How executives define that will define the value of their franchise, business, and the products and solutions they’re trying to build. It’s easier said than done, but with the proper mindset both at the leadership and rank-and-file levels, a company will have a better chance of succeeding.


About Daniel Tu

Daniel Tu is the Founder and Managing Director of Active Creation Capital, a family office. Prior to that, he served as the Group Chief Innovation Officer at Ping An Group from 2013 to 2017. In that role, Daniel was one of the chief architects in driving growth through innovation and technology. Prior to Ping An, Daniel led two subsidiaries at Chinatrust Commercial Bank in Taiwan. Daniel has over 30 years of experience in financial services, sales and marketing, PR, media, and related executive leadership positions, specifically in the Greater China region.


This article is adapted from the October 22, 2020, GLG webcast “Crafting Strategy in Uncertain Times.” If you would like access to this teleconference or would like to speak with Daniel Tu, or any of our more than 700,000 experts, contact us.

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