Returning from a recent trip to Asia Pacific, I remain fascinated and impressed with the dynamic confidence of the business community in the region. Business is booming and new inter-regional ecosystems are complimenting the outsourcing/offshoring models which have proliferated over the past thirty years.
First of all, let us have another look of the numbers in order to understand fully the implications of the increasing significance of the Asia Pac Region, in terms of population/education/age and its corollary, economic development/growth potential/business opportunities.
Population:
Asia Pac is home to two-thirds of the world’s global population, and two countries – China and India – account for more than half of this total. In other words, these two countries alone make up over a third of the entire world’s population.
China’s total fertility rate (TFR) is now a very low 1.5 children per woman. Should China become concerned about population aging and relax its strict “one-child” policy, as it may in future years, projections of China’s population may have to be raised in successive generations. In India, the TFR has fallen from about 5.5 children to 2.4 over the past generation.
India will pass China by 2030 in total population. But the sheer numbers hide another fact: Asia Pac countries are producing more engineers per year than the rest of the world combined. And the gap is getting larger, both quantitatively and qualitatively.
This well-educated and hard-working labor force is young, skilled and eager to gain the advantages of the extremely comfortable lifestyles we have come to take for granted in many industrialized countries, especially in North America and Europe.
Ball park figures for world population growth over three centuries:
1800= 1 B ; 1900 = 2 B ; 2000 = 6 B ; 2100 = 12 B (estimate).
Economic Development:
In terms of economic opportunities, China, India, Japan, Korea, Australia and Indonesia are all trillion dollar economies and all (except Japan) continue to expand at impressive rates. The second tier economies of Asia Pac are not as powerful yet, but are growing very fast as well.
The outsource/offshore is now more inter-country within the region than inter-regional across the continents.
China is the world’s second largest economy and will soon pass the US as number one (indeed, some economists believe this is in the process of taking place right now). The rise of the middle class and the entrepreneurial spirit of economic opportunity which have arisen among the millennials are breathtaking.
Shanghai city center has built 1,500 miles of road in the past decade. That’s three Manhattan’s worth of streets. China’s largest city currently counts more than twice as many skyscrapers as New York City, and they are all new and stunningly modern architecture.
India is by far the world’s largest democratic country and the recent peaceful transition of power is a model for the region and the world. The degree of complex social and economic structures, articulating the national, regional and local laws and customs are forms of advanced value networks and sophisticated ecosystems in and of themselves.
The Republic of Korea is extremely vibrant and Seoul is beginning to become an economically viable alternative hub to Tokyo in North East Asia. Many observers believe that as soon as China removes its support for North Korea, the communist regime will fold very quickly and the reunification of Korea will provide the same type of energetic economic boost to the country and the region as the reunification of Germany did at the end of the last century in Europe.
The new ecosystems in Asia Pac are inter-country and inter-regional. The old model of simply outsourcing/offshoring production of goods and services to Asian firms, then to be repackaged and distributed for consummation throughout America and Europe are still highly applicable.
But the more interesting developments concern the partnerships within the region. For example, China-to-China business has the entrepreneurial community as excited as the China-to-USA or China-to Europe model. The huge, well-to-do consumer middle-class is appearing before our eyes, at least in the cities, and they all want cars and other commonplace products.
Western educated engineers are less interested in staying in their new country to create value than they were a generation before. Many are now returning to the Asia Pacific region and their home countries to launch their start-up businesses. The Asia Pac professional networks are developing into high value ecosystems.
Ecosystems are business-to-business partnerships designed and implemented to allow companies to combine their resources and capabilities for a stronger value proposition than they could develop on their own. The new ecosystems in Asia Pacific are cross-functional and span different industries. This is not simple vertical integration as we have seen in the past.
Traditional supply chain processes (supplier-company-client) are being replaced by multiple alliances where clients and suppliers and sometimes even competitors are organized in complex, sophisticated relationships. There is dis-intermediation of the supply chain itself as it morphs into non-linear, geodesic models.
The bundling of products and services, as well as distribution and sales channels, are creating advanced value networks within the region. Some of these partnerships are entirely new, such as in the professional services and life sciences/healthcare industries, whereas some of them are a reworking of existing channels and partnerships, such as in the automotive & industrial goods sectors.
The new ecosystems in Asia Pac are just another development in the fastest growing region in the world. The organizational design features are teaching us how to work in partnership models and how to grow revenues and capabilities by making alliances work locally, regionally and globally. The Asia Pacific region is fostering exciting new business models of collaboration.