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Deloitte China INED Quarterly

January Issue: Disruptive Innovation

In the 1920s, the average life span of an S&P company was 67 years.  Today, it is 15 years.  On average, an S&P company is replaced every two weeks.

Are legacy organizations today positioned to sustain success in an era of disruption?  The answer is yes.

One of chapters in Director’s Alert 2017 which is released by Deloitte Global — Embracing Disruption | Innovation — gives a comprehensive elaboration on this topic.

Disruptive Innovation and Role of the Board

Boards need to stay educating about disruption and truly understand the dynamics and nuances of disruptive technologies, disruptive business models, and the changing geopolitical landscape.  They need to ask smart questions and encourage creative thinking with respect to all of the organization’s products and services.   Boards should also confirm that management has a comprehensive plan for tracking disruption and the progress they are making toward developing fundamental solutions.

Most importantly, boards and management need the courage to disrupt the organization’s own business model.  This can be a challenge, especially when the business has been highly successful in the past and continues to be effective.  But every organization will undergo disruption eventually, and those that are successful embrace change as a way to secure their businesses in the future.

To truly sustain success and capitalize on disruption, organizations need to democratize innovation.  It is critical to equip all parts of the organization with tools and incentives that encourage experimentation and innovation in the course of day-to-day activities.  Innovation focused on improving the core business is critical to complement truly transformational innovation, which often happens on the edge of the organization.  Building a balanced portfolio of core and transformational initiatives that are tested and adopted across the organization is what distinguishes successful companies who use disruption to their advantage from those who are disrupted.

Please click here to download the full English report.

INED Interview

In the Financial Services and Telecoms industries, boards have a good understanding of DI, but this does not appear to be the case in other sectors.  In HK, there is a lack of available talent/expertise in DI to plug this gap in understanding and to equip boards with the knowledge they need.  Thus, overall, apart from Financial Services and Technology, most boards are not yet at the point where they are vigorously incorporating digitization into their strategies or changing their business models.  Companies tend not to have human resources strategies to address talent issues relating to DI.

Displacement of labor is definitely the #1 risk for companies adopting DI.  This almost seems inevitable and unavoidable.  In Mainland China, the position seems more favorable as companies there seem more able to leapfrog technological developments (i.e. in such areas as mobile payment. ) HK has a challenge to adapt as quickly and as effectively.  It should strive to learn from the Mainland.

Overall, Mr. Tse is optimistic regarding the impact of DI on companies which will have to adapt and will do so.  However, this first requires boards to focus more on risk issues relating to DI and deal with them as part of their standard agenda, in order to initiate, embrace and manage change.

 

Mr. Tse Hau Yin, Aloysius

is currently an Independent Non-Executive Director of China Telecom, CNOOC Limited, Sinofert Holdings Limited, SJM Holdings Limited and China Huarong Asset Management Co., Ltd., etc..

Mr. Tse was interviewed by Deloitte's Global Center for Corporate Governance in December 2017 for our annual publication, Directors' Alert (2018 edition).  Mr. Tse shared his views on digital innovation ("DI") and related risks.

This is a summary of his points of views. For more details, please look forward to the report.  English version will be launched in February 2018.

Event Review

GFSI Industry INED training was successful held in Beijing

As we enter into the year of 2018, Deloitte INED Program launched new training programs and hosted an all-day financial industry training in Beijing on 18 January.  INEDs and executives from well-known enterprises in Insurance, investment, consumer finance, and securities sectors participated in this training.

Experts in investor services and corporate governance from Tricor Business Services in Hong Kong were invited to share their insights on provisions regarding director's responsibilities and new requirements for INEDs under Hong Kong's listing rules.  In addition, Deloitte partners and experts from different service lines expounded on hot topics of  INEDs' concerns such as financial transformation, fin-tech, listing rules, executive compensations, changes in accounting standards, corporate governance risks and responses, etc., and exchanged views and opinions with the guests.  Deloitte China INED Program Leader David Lung delivered an opening speech for the training, and GFSI Audit Leader Barry Man gave a closing remark.

The training was highly recognized by the participants, who further expected Deloitte to expand such event in other cities or host special workshops on specific topics to allow more opportunities for learning and discussions.  Deloitte China INED Program will draw on experience of this training and host more impactful events to build a platform where INEDs, industry experts and scholars as well as peers interested in corporate governance/company director related works could share information, exchange experience and seek win-win cooperation.

Upcoming event

TL and seminar on INEDs of listed companies in China

In mid-December 2017, Deloitte China INED Program launched a survey on INEDs of listed companies and received positive feedbacks within the month from distribution to collection of questionnaires.  We highly appreciate our colleagues to promote this exercise, as well as the INEDs who took time out of their busy schedules to answer those questions.  Your support and participation will help us start with first-hand information and accurately understand the performance of INEDs in fulfilling their corporate governance duties, so as to analyze and gain insights into the roles and positions of INEDs.

Based on this survey, Deloitte China will issue a Report on INEDs of Listed Companies in China (working title) in March 2018.  Upon the issuance, we will also host a seminar to introduce major findings of the survey, and invite senior INEDs and experts to share their valuable experience.  INEDs participated in the survey will also be invited to the seminar.

Stay tuned with us for more information about the event via Deloitte China INED Program's emails, Deloitte China website and WeChat official account.

About Deloitte China INED Quarterly

Deloitte China INED Quarterly is compiled by Deloitte China INED Program with an aim to serve as an information sharing platform for Deloitte staff, INEDs, executives, and any people who are interested in INED-related topics.

You are encouraged to introduce this journal to your friends and business contacts. Please subscribe or let us know your opinions and suggestions via AuditCDC@deloitte.com.cn.

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