18/2015 – Old or new economy, business principle remain the same
by Tan Thiam Hock
Saturday, 24 October 2015
TO continue my nostalgic week, I have Fleetwood Mac in the background telling me to go my own way, courtesy of my son’s installation of Spotify app on my smart phone.
The music of the 70’s and 80’s reminds me of the best years of my life.
Carefree and cashless years, life was simple then with minimal material needs. But after graduation, the responsibility of having to look after my parents financially, changed my narrow perspective of life.
Starting pay for graduates at that time was about RM1,000 a month and I still have to pay for my second hand car instalment and room rental.
Despite eating RM1.20 chap fun (mixed rice) every meal, it was difficult to have any savings at the end of the month.
So after working for IGB Corp for slightly over two years, I resigned to set up my first trading company importing Topaz razor blades from India, which I cut my teeth competing with the likes of Gillette and Schick.
I was not yet 25 years old back in May 1985 when I started this journey.
Naive but full of confidence, I plunged into my first business with gusto, travelling to Bombay (before name change to Mumbai) based on a telex confirmation (before the fax machine was invented) from the Indian factory export manager.
Luckily I had a more experienced partner who travelled with me to help me negotiate the distribution rights and helped set up the distribution contracts back in Malaysia.
Looking back, I would not have survived the first year if I did not have experienced advice from my partners.
Besides their trade and banking contacts, I was able to leverage on their experience to minimise my mistakes which would have been too costly to bear.
In those days, entrepreneurs who successfully set up trading houses would normally have at least 10 to 15 years of working experience in that particular industry before venturing out on their own.
That’s why most entrepreneurs start their journey when they are in their prime years which is usually between 35-45 years of age. Sufficient industry experience and knowledge coupled with relevant contacts developed over time.
Fast forward to the last 10 years, we see most entrepreneurs starting their business at a relatively young age normally in their early twenties.
You will be considered a late starter if you start your first business in your late twenties.
Every young entrepreneur is a founder or co-founder these days. Either they have found a business to invest in or they have found themselves.
Every idea is doable. Research is done via the Internet and conversations with friends. Parents are supportive. Go find yourself. How much do you need?
Thirty years ago, the founder title was reserved for patriarchs of a successful business normally after his children has taken over the business.
Tales of struggling years amidst Japanese and British occupation are met with oohs and ahhs from the audience. Admiration and respect grew for the founder as the storytelling gets more dramatic.
Nowadays, these young founders already have their own stories to tell. Tales of working on their Mac Pro out of homes and Starbucks (wherever there is free wifi) because they just could not afford an office space.
Maxing out their credit cards amidst dramatic scenes of pitching for finance first from their parents and friends, and when the business is more viable, from venture capitalist or angel investors.
Valuations based on potential and scalability rather than profitability with no timeframe on monetisation of ideas and concepts.
Call me an outdated dinosaur but for the life of me, I am unable to reconcile the risk and rewards involved to invest in these projects. Not even if my children ask me to.
At the risk of being labelled old fashioned, I am a firm believer in brick and mortar business.
After all, I made all my money from physical distribution via retail outlets and nothing is more solid than investing in properties.
But as I witnessed the velocity picking up in the disruption of the traditional supply chain, I have swallowed my pride and allow my “kiasu..ness” to surface.
I now invest in a company selling skincare products sold exclusively through e-commerce.
This business is run by a 25 year-old who has accumulated all four years of working experience in the cosmetic business. I am learning from her on how to promote the brand via Facebook, Instagram and the e-commerce site.
She is learning from me the virtues of patience, the joy of profitability and the complexities of building a solid business relationship with her customers and suppliers.
Her job is to navigate through the Internet of consumer behaviour.
My job is to keep her grounded with the freedom to express her ideas. It is her world now. Unpredictable but exciting. The transition to the new digital economy has started. Will the old fade away?
Amidst all the hype of the growing digital world, the traditional business of producing goods and services continue to thrive as the world population continues to grow.
Mouths need to be fed and bodies need to be clothed.
Greater mobility on the ground and over the air continues to shorten the distance travelled.
At the end of the day, the business principles of running any enterprise remain the same.
Solid business model, right strategies, prudent financial management and smart people to manage the business.
The main difference between the old economy and the new digital economy is managing the disruption caused by new technologies and ideas.
The digital evolution has made the world smaller through scalability and reach. Shorter product life cycles and changing consumer needs of the young have created new opportunities. The old entrepreneurs must evolve to stay relevant or risk early retirement.
Maybe it is time for me to just sit back, put on my headphones and enjoy Fleetwood Mac’s ‘Don’t Stop’.
For tomorrow will be here soon.