This great interview is with Hari Nair. Hari is the Group Chief Strategy & Innovation Officer for Sime Darby. Many of you may not know Sime Darby, but you should. They are a huge multinational conglomerate located in Malaysia with approximately $12 Billion in revenue. Their divisions include plantations, industrial equipment, motors, ports and property and energy.
Hari executes strategy and innovation across all of these sectors.
Hari actually grew up in Wisconsin and went to the University of Wisconsin. Of course Flyover Labs is located in Madison, Wisconsin.
I invited Hari on the show to talk more about his role at Sime Darby and how he approaches strategy and innovation.
Here are some other things we talk about:
-Are you looking at entering new verticals, new geographies?
-How do you think about innovation? What’s your process to test an idea, and then bring it to market? Do you have an example at Sime Darby?
-We talk abut Sime Darby’s fully connected experience in in Malaysia.
David Kruse: Hey everyone. Welcome to another episode of Flyover Labs. Today we are lucky enough to have Hari Nair with us, and Hari is the Group Chief Strategy and Innovation Officer for Sime Darby. So many of you have probably not heard of Sime Darby, but you probably should. They are a huge conglomerate with about $13 billion in revenue and they are based in Malaysia and their divisions include plantations, industrial equipment, motors parts, property and energy and somehow Hari is supposed to execute strategy and innovation across all of these sectors. So it must be a fascinating challenge. So I invited Hair on the show to talk more about his role at Sime Darby and his background and how he approaches innovation and strategy. So Hari, thanks for coming on the show today.
Hari Nair: Dave, glad to be here.
David Kruse: I definitely appreciate it, and I want everyone to know that Hari actually grew up in Wisconsin, the home of Flyover Labs and went to the University of Wisconsin in Madison, so kind of a special treat. He’s not in Madison anymore or hasn’t been for a while, but nice to have him on the show. So with that Hari, do you want to just give us a brief overview of your background?
Hari Nair: Sure Dave. Yeah, I am a Cheesehead believe it or not from a long time ago. I still love my Badgers and I still love my Packers even though I’ve lived in Asia for the last 14, 15 years. I keep up on the games and still a huge fan. So a little bit about me; I’m a you know chemical engineer from the University of Wisconsin and started my career with Proctor & Gamble. I spent 14 years there, both at the headquarters in Cincinnati and then later on in China with Proctor & Gamble for about four years and then I left Proctor to go work with a Harvard Business School Professor named Clayton Christensen and he had a small firm called Innosight, which really dealt with disruptive innovation and really trying to make that more of a – its understanding more like companies who are large like Sime Darby or Proctor & Gamble struggle with sort of these, sort of what we call disruptive innovations that come in and they usually come in from sort of the entrepreneur or some smaller guy, right. And so I was really fascinated with that. So I went to work with him for six years. Helped set up the Asia practice for his firm and he also had a little venture point called Innosight Ventures and then later on…
David Kruse: Well, how did he get – I mean, because he’s kind of a legend, so how did you get involved with Christensen?
Hari Nair: Oh! You know it’s interesting, because I – for me it was unlike a lot of the other people who work in consulting companies, I was viewing myself as a practitioner. So I read his book about Innovators Dilemma which came out in, I think in 1997, ’98 and I was actually fascinated with that whole concept, because at that time I was a relatively young manager in R&D in Proctor & Gamble and I could see you know even though we weren’t directly getting disrupted in you know North American laundry business, which is what I worked on, on the type business, I could still see the challenges he was writing about. I mean this is it. So I was really fascinated with that. And then I read the – then I went to China and I really saw the real issues of trying to innovate when you’ve got disruptive threats, whether its private label or kind of the rules and things, systems that as an incumbent you have to follow versus the challenger, right. So I was really saying again you know, how do we reconcile these two things. So I was just starting to think you know it’s interesting, just that it was out of the blue I was reading an article and said hey, you got this firm called Innosight. So I kind of resented CBN and I had a chance to see him within 24 hours. Somebody contacted me saying, we’d like to talk to you, because at that time I had no idea he was setting up an office in Asia. Two weeks later I took the leap of faith and said, yeah, I’m going to do it and you know, I really thought it was going to be a couple of years Dave as Chief Consulting. I didn’t think it was going to last me longer than that, but its ended up being six fantastic years and you know each year was a new learning opportunity for me and then the last – when I left that to go to join Kimberly-Clark, you know another company well routed in Wisconsin and led their innovation out of Korea. They have a large innovation center at Korea and they recruited me to basically help set that up and get that up and running and then finally just a year ago I joined Sime Darby as the Group Chief Strategy & Innovation Officer. So it’s been a great journey, having a lot that I’ve been fortunate to be part of and you know I’m still learning I would say, you know 25 years into my career I am still learning every day.
David Kruse: Well, that’s great and that’s of course the best attitude, right, we’re all learning. As we get more into it, I think we all realize how little we know, so we have to just keep learning, but…
Hari Nair: Absolutely.
David Kruse: So, you know when you went to Kimberly-Clark or Sime Darby, like how do you approach kind of from the innovation perspective? Like what do you do in your first you know 100 days? What questions do you start to ask you know and who do you talk to? Yeah, how do you approach that?
Hari Nair: Yeah, that’s a great question. You know my approach, first of all I think it’s just really interesting having worked in large companies and being an entrepreneur, I’ve started up company. You know one thing about innovation that I noticed whoever you talked to, is everybody has sort of a different definition for innovation. You ask a 100 people what innovation means, you will get a 100 different sort of meanings of it. So the first thing I try to do is come to some kind of common you know landing on what does innovation really mean for the company I’m working for and it means different things for different companies and for me it’s really important that innovation is tied into the strategic you know plans of the company. In fact the innovation part is the execution of the appropriate strategy. So people kind of make it really complicated, like oh! Now you got strategy and you got innovation. Sometimes we call R&D, but you know I also had a very simple definition, which is innovation is what helps execute your strategies, whatever your strategy is. And so with that definition in mind, and that was what attracted me to this role here is Sime Darby was, it was one of the few places of the world where strategy and innovation worked combined. Often you have a strategy department sitting somewhere in headquarters and you got an innovation department such as literally scattered across multiple parts of the world. And there are times where there is really good connection between those two but more often or not something gets lost in the translation of when you convert a strategy into your execution/innovation plan. And this is what drove me to this job, because I saw that was a big problem in a lot of areas with the companies I consulted for as well as companies I worked for, where you know the strategy would be there, but what was being executed wasn’t really consistent with the strategy. So I think that’s actually important, coming to a definition and then defining your strategy and aligning your innovation, that’s step three, is aligning your innovation to enable your strategy to come to fruition and that’s really starts with setting up capabilities, whether its generating ideas, how you manage a portfolio of ideas, how you value the ideas getting a panel of portfolio values you created, implementing things like stage gate that allows you to sort of take ideas to commercialization, setting up a venture lab that allows you to do experimentation that big companies can do very well, but we have to start doing it. And then the final part is talent. You know you got a really as a CIO I think you know 60% of my job is really working with the talent, making sure we got the right talent that can execute these ideas. That requires you to get very close with HR and the business partners to make sure that you got the right people. If you don’t, you have also find the right people, whether it’s outside of the company or you can look at it as sort of contractors if you need to get things going. So those are a summary, but those are the key areas that I tend to focus on.
David Kruse: No, that’s great. And yeah, you can tell you are well versed. That’s good, that was a very good response and before – and I kind of like digging that a little deeper, but before we do can you give folks an overview on Sime Darby. I kind of gave a brief overview, but maybe you can – and then kind of your priorities as Head of Innovation and Strategy there.
Hari Nair: Yeah. I mean a British company. It’s a 110 year old company. It has roots in the British Colonial area where you know parts of Malaysia and Indonesia and other parts of the British Colonies were used to supply materials for the British Empire. And in the case of Sime Darby it was really Palm flexi sheets or Palm Oil which was where I think you know Palm and Rubber I should say. So there was rubber, palm and at this part of the world, you know it is very lucky in the sense that it gets nice weather all the time. Its tropical and you also have almost daily rainfall, all though nowadays with the climate change that’s getting increasingly unpredictable, but you get rainfall, you get sun, you got rain, and you have really nutritious soil. So you end up having a place that’s very fertile to grow these things like palm. So the British realized that and they started building the palm plantation. So that’s how the roots of the company is really associated with the palm plantation business. But you know over time the company has evolved and it was involved in a lot different businesses. But today we are really involved in I call it really four core businesses. We have the plantation business which still continues and we are the one of the largest plantation companies in the world and we also are in a very differentiated position in the sense that we reproduce sustainable palm oil, which you know palm oil got a lot of different components to it. But you we are the pioneers of what we call sustainable practices, you know related to palm oil production. So palm oil is kind of our key focus area. We are the world’s largest producer of that and then we have other divisions also today. There are there other major divisions we have, it’s a property division. So we develop property across Malaysia and we also have a big project going on in the UK, in London called Battersea; and then we also have a division called Boarder, which is really a motors distribution business. So we distribute a lot of cars in this part of the world, in Malaysia, China, Australia, Hong Kong, Singapore and there are brands like BMW, we also do Ford here and Land Rover, Jaguar, Hyundai, so quite a lot. In fact by revenue, motors business is probably – it’s our largest contributor I mean to the company. And then finally we have a business unit called industrial, which is largely a Caterpillar distributor. They are very much focused on the mining business, particularly Australia and in China and so it’s really a true conglomerate. You know you got four very different business units and that makes the innovation challenge that much more interesting and you know it kind of drew me to this, because while you get common philosophies around innovation, you can’t really impose a one size that’s solves a solution to each division. So you got to have a tailor make if you will, the program that again links back to those individual division strategies so that we can actually execute those. So that’s been really interesting for me and intellectually very stimulating.
David Kruse: And can you walk us through, because you know you mentioned when you are going through how you approach the innovation strategy that Sime Darby combines the two, strategy and innovation. So can you walk us through an example of that at Sime Darby and how that might be different at another company, how they might spate that out?
Hari Nair: Yeah, I mean, I think whether Sime Darby or other sort of well run mission focused companies are quite a few, I think they would follow the approach I described. They would look at their strategy plan, whether it’s a five year plan or a 10 year plan and what they will try to do is they will try to forecast out what current kind of organic growth can give them in terms of both revenue or profit or whatever. And then they will try to see all right, here is what we could get and then there is – but our aspiration is something bigger and then that difference between the aspiration and what we can get sort of defines your bogie for innovation. It’s sort of the way I think that most companies are doing it well, at least start with that kind of a conversation. I mean but there are companies who sort of look at innovation still as a sort of a brain storming exercise or something where I just need ideas and I don’t have anything. We’re in a very structured or strategic. It’s more of I can – I’ll just do innovation for the sake of innovation. It sounds like a really good Try me, but it does work. So when we do innovation, and I mean to be honest with you, when I was consulting you would come across that sometime, you know especially in places where the business, you know in markets that are growing really well, right. I saw this a lot in India, in 2006 to 2009 and 2010 where the volume growth was 53%. I saw this is China as well I should say, where these markets were growing. You didn’t have to really innovate a whole lot, you could just grow, because the GDP was growing really fast and you could just put products out there and there was a time when that would work. But it’s when things slow down, it’s when you know market pressures start to really you know come in, that differentiates the well run organizations from the ones who don’t have those programs and sometime, and very often it is the case that by the time the company figures out they should have been innovating when times are good, its often too late, right. So when times are good generally innovation takes a second peek, because you know you are kind of out making all this profit, why would I want to invest in innovation. I’ll just rather you know take that profit and I think the smarter companies understand that there are cycles you have to prepare for and they tend to, at least even when times are good they would invest it in the innovation systems. But the other challenge I think a lot of companies have is the origination and talent teams, right. I think there is a max of underestimation of the talent, challenge around innovation by most large companies and I think it’s just, it’s the investment you got to do to develop the right talent, especially today, in 2016 when you see the capabilities that are outside. Often companies want to rely on their own systems to get stuff done, whether it’s their own IT systems or their own HR systems or whatever it may be and then you look outside you’ve got systems out there that you know whether from entrepreneurs who can, its more or less good enough to get stuff done, but you know companies are hampered by their internal systems and often they are not as fast and sometimes they are not as cheap as what’s on the outside. So that’s a real second issue right now, today people are facing. And even if you got the right strategy framework and you’ve got the right programs, how fast do you accelerate that. And that companies struggle with, even the good companies that are doing innovation struggle with that my view and so I’m trying to do a little bit of both. I’m obviously trying to build the strategy framework and the whole approach to driving it through innovation. But then in parallel I also set up the capabilities, some inside the companies, some outside the company to accelerate our innovation, because you need all those things to make it happen.
David Kruse: Got you and so, all right so are you looking for outside companies to partner with. Do you do much of that to help drive innovation?
Hari Nair: Can you say that I again, I lost you there?
David Kruse: Do you partner with outside companies, whether its startups or existing companies to drive innovation as well as, yeah.
Hari Nair: Yeah, we need to. I would say you know, in Sime Darby that’s an area where we really started to ramp up since I’ve been onboard, is to become much more clear that we would like to partner. Now that sad, if you partnering makes a lot of sense, but often you have to define what you are willing to partner on and again, that goes back to the strategy itself, right. So being really clear about what you, where our areas would love to get partnerships on is also very important. And in this case for example, in Sime Darby right now, in all our key sectors we were looking for areas where we can partner with other companies to help accelerate you know some of our innovation. So it is I mean that we are actively looking at and in other companies like Procter & Gamble in my previous experience I think also have done a very good job of either bring in technology from the outside or partnering with companies to help accelerate ideas.
David Kruse: And we are almost out of time here unfortunately, but is there – do you have one project that’s not too confidential you can share that you are working on at Sime Darby that your especially excited about it or I mean a new initiative?
Hari Nair: Well, I mean, really there’s – like in Sime Darby there are lots of things that we are excited about. I think one of the things that I would say that I’m most excited about is the opportunity. I call it our digital revolution in Sime Darby right. I think the – if you look at whether it’s out plantation business or even some of our other business that I mentioned, I think with the connectivity that people have with smartphones and frankly the internet itself, I think it allows us to transform just about everything we do and largely, initially they drive productivity. But more importantly I think it could be you know – there is a unique opportunity here in Malaysia that I’m really excited about, because we actually got four what I call consumer facing divisions in Malaysia. I mentioned two of them already, properties and motors, those are the two big businesses that are here in Malaysia. But there is the two other businesses that are small businesses, but they are actually you know interesting to look at because we’ve also got our healthcare business, which is a 50/50 joint venture with an Australia company called Ramsay Sime Darby and we also have a minority interest in Tesco, which is a large super market chain in Malaysia. So if you combine these four business you are touching a lot of Malaysian consumers lives on a daily basis and if you think about it, its food, mobility, shelter and health. So like these are really you know common main points for many, many consumes. So I think one of the exciting things we’ve got going is that we call Sime Darby Connect, which is really going to be a platform that gives the consumer in Malaysia at least, because that’s where we have all four of these sort of really in play, a more connected experience. And this is not just about our loyalty program or like you know – I’m like those things are, those really do exist and they will be something about that, but it’s really making a customer experience much more integrated. So if you happen to own one of our properties and you show up at one of our hospitals, we will know you by name, we will be able to great you, we will be able to give them a much better you know customized experience than if you didn’t and I think that’s what I think is the opportunity. So I’m always looking for that intellectual challenge too and I think the digital revelation is already here, but I look at what people are doing with digital. Its largely cross marking and cross promotions, right. You get all these little you know blast and that tells you hey, you got discount here and discount there. So to be honest with you, I think that’s nice, but it’s not like really changing the consumer experience really, you are just giving the field. But if you can truly change the consumer experience, meaning by knowing your consumer better and you can given them a different experience of each of their touch points that you have with them, then you are on to something, then you are really doing something different for that person. So that’s what I’m really, personally excited about. I mean I have a lot more, but I’m excited to see how that thing – we are going into pilot on that later this year and we will be monitoring that pretty carefully.
David Kruse: Wow! What a wonderful opportunity to – I mean you are in such a rare circumstance really that you cross so many different sectors, you know kind of in a small….
Hari Nair: Yeah, when you see the super markets you know from traditional marketing company or FMCG companies or other things is they will sort of cross promote, you know Proctor & Gamble does this very well, Proctor & Gamble. They will say you know it tied as they bundle it down here or they will sell tooth paste with OralB. I mean that’s all fun, but really at the end of the day you are just cross promoting your products and that works. In our case it’s really about differentiating the experience to the consumer. So I really want this digital platform to help us give a better experience than they would otherwise get you know if it were any of our competitors. So I mean that’s what’s unique about it and I’m hopeful that you know, well yeah may be just as I said in the beginning of the call it’s about learning right. So we’ll learn some things here. I’m sure some of the things will be right based on our assumptions and some of the things we’ll learn in the market and we’ll have to change our you know and revector to the right model for us. But it’s important we get out and experiment where we stand.
David Kruse: Interesting. Well, that’s a good way to end the podcast, which is quite interesting. So I’ll be curious to see how that goes, the what you call it, the Connect project. So I’ll have to follow up on that. But I really appreciate your time Hari and to hearing your story and background and that you’re a fellow Cheesehead, that’s pretty sweet.
Hari Nair: It was my pleasure Dave. I think you are doing a great job and I will be happy to stay connected to you from time to time.
David Kruse: That sounds good, and thanks everyone for listening to another episode of Flyover Labs. I definitely appreciate it as always and all right, thanks again and we’ll see everyone next time. Bye.