LEADERSHIP : A Step Beyond – Taking business to the next level

After performance that earned it the ‘Company of the Year’ accolade at the 2006 Top 200, Fletcher Building hasn’t been resting on its laurels. Its recent purchase of US-based Formica for close to billion dollars makes it the world’s biggest laminates maker – and Kiwi company with growing global reach.
That, says Fletcher Building’s chief executive Jonathon Ling, is part of taking the company step beyond its traditional business models and established markets.
“If you look at our performance from 2001 to 2005, that was all about turn-around – taking company that wasn’t performing to its potential and actually getting it to that level. By the time we get to 2005, we’ve got business with high market share and excellent business metrics – so it’s performing very well.
“The question in the chase for growth – particularly from the sharemarket’s viewpoint – is how to grow from that position. And there’s only one answer: back to basics – back to developing new products and new services, and creating new business models. That’s where we’re focusing lot of attention – on creating new business model and new business chain.
“Also, given our size, we’re now looking at broadening our geographic horizons. As company with six billion in revenue and six billion in market capitalisation we’re finding that growth opportunities by acquisition are just not there for us in New Zealand and Australia. If we want to continue growing, we have to go beyond these shores.”
While start-ups are now being encouraged to think global almost from first breath, Fletcher Building’s growth model has been one of steady expansion.
“It’s been focused on managing the risk, generating the performance and doing it step-by-step on learn-as-you-go basis. You can’t sprint before you walk or run,” says Ling.
But there are other models of going global from New Zealand, notes Deloitte chairman Nick Main.
“The reality is that you are never going to become world leader in finite market and typically lot of start-up companies are working in areas where early movers have an advantage – they have to get out there pretty quickly. And there are now models of how companies have done that successfully from small capital base. But to make it work you have to have lot of confidence, ambition, sense of restlessness about what you can’t achieve in the New Zealand market.”
While our export challenge is demanding, says Main (ie, equivalent to adding three Fonterra scale companies or 150 extra Pumpkin Patches to our economy by 2020, according to the New Zealand Institute), it doesn’t mean we give up.
“In some ways we under-scope the challenge but also under-scope the opportunity. I think we’ve demonstrated we can produce competitive product; we have competitive people; we’ve shown how we can succeed in all sorts of areas. We just have to package them up better – and don’t sell out and give up when we get to $100 million turnover or NZ-dominant position.”
What about other means of generating offshore income?
As an (Australian) ‘outsider’ Ling questions the Kiwi fixation on exports and “having to reinvent something New Zealand offshore”. Why not buy an existing offshore enterprise?
“I don’t know whether there are statistics around ratios of offshore ownership as percentage of GDP but I bet New Zealand would be lower than just about anyone else. The thing is all I have to do is take some of the New Zealand resources and cash and buy something overseas. I don’t need to reinvent it – just own it and run it well.”
Too much of New Zealand’s equity goes into property but, adds Ling, just like the rest of the world owns New Zealand, we need to have equity in the rest of the world. “If we get too much imbalance then there’s no future for the next generation – they’ll be toll manufacturers or toll service providers…”
Or we lose our best and brightest offshore.
New Zealand, observes Ling, has always been very good at exporting its talent around the world at an individual level – why not at company level?
“What that says to me is that New Zealand managers and leaders are very good at adapting when they actually need to succeed offshore as individuals in international companies but don’t learn to adapt New Zealand companies or corporate cultures to offshore environments – and that’s the missing link.”
But shortage of large New Zealand owned companies means there are limited opportunities for talented people to gain offshore experience within local organisation.
“If you really wanted to go out and conquer the world with New Zealand company – there’s only handful of targets. So it’s about creating more locally owned world-scale, world-competitive and world-class businesses.”
Ling has list of just three essential skills needed to create top company. They are: picking great people to have around you; ensuring you do everything necessary to help them succeed; and creating alignment in terms of company objectives and directions.
He also describes the ability to create wealth as an underrated skill for CEOs. In his own career path, it was something he sought as part of deliberate acquisition of the skills and capabilities he felt he needed.
“At an early age I had good mentors. One told me there were three things I needed an apprenticeship for: first, find some of the best business people you know in terms of creating wealth; second, find person you think is most inspirational and learn how to inspire others; third, find someone who always seems to be battling the odds because they’re going to tell you what real perseverance and courage is all about. Most people give up too easily.
“That art of survival is very important skill to have. The media loves failure – even small failures – and you have to have the resilience to go beyond it.”
In terms of the leadership skills needed to ‘step beyond’, Ling says our education sector does good job of delivering functional skills but doesn’t know where to start when it comes to teaching leadership skills.
“How can they even begin to understand what some of the leadership challenges are vis-a-vis creating wealth, inspiring people, creating vision, developing people, building interpersonal skills and open mindedness – the things leaders need today.”
Companies like General Electric have, he says, recognised this and started using the people they have within their own organisation who are proven leaders to impart some of their skills to others.
“I don’t think you can institutionalise this into science – it’s not just one formula, it’s about experience, gut feeling, about coping with the unknown, about being able to manage and be comfortable with ambiguity and uncertainty. Those are things not taught in classroom. And I think one area where Australia and New Zealand are not doing good job is finding the mechanisms and frameworks to teach business leaders that sort of stuff.”
Fletcher Building shifts its managers around to provide cross fertilisation of ideas and expose them to greater diversity. It also uses lot of non-academic teachers such as sports people to try and “create the diversity of mind” that takes people who have good functional skills that step beyond, opening them to more radical ways of thinking, says Ling.
Diversity increasingly means overseas experience. Since Fletcher Building has decided geographic expansion is part of its strategy, having leaders with international experience is fairly important criteria in terms of succession planning, says Ling.
“If you’re very good New Zealand manager who spends all your life in New Zealand, then you’re disadvantaged in that situation.”
We do need to get out more, suggests Main.
“I think one of the things that tends to drive ambition in people as well as identifying opportunity is to see what is happening in the rest of the world because it is very easy to get complacent here – given we have relatively good lifestyle at reasonably good cost.”
But that might not last, he warns.
“So we do need more people w