On Your Own

The writer is an entrepreneur who hopes to share his experience and insights with readers who want to take that giant leap into business but are not sure if they should.

18/2017 – Staying ahead of the curve

Saturday, 14 October 2017

THE older I get, the more difficult it is for me to change or to adapt to changes. Just ask my wife and she will not only confirm but add on additional truths that her husband has also become more stubborn, forgetful and temperamental.

It is because of the fact that she will be celebrating her 30th wedding anniversary next month that she has decided not to change her marriage status quo… as of now anyway.

Big telcos like Maxis have been going through major changes in the last 10 years. From providing mobile phone services with SMS services to provision of mobile Internet services currently. Going forward, the intense competition within the telco industry will lead to commoditisation of data services with compressed margins in a heavy capex business model.

Recognising this threat, the CEO of Maxis Morten Lundal, a well known telco veteran is taking Maxis through another transformation, this time going fully digital. From a paperless office to a clarion call for the employees to get on board the digital train or be left behind, Morten is fully aware of the need for this telco giant to change or to transform its business model.

Since the bulk of e-commerce or digital transactions will be conducted over mobile devices in the future, Maxis will have to up sell or plug itself into this digital ecosystem to stay relevant to its data consuming customers. The new digital services will provide additional revenue streams plus the high margins needed to justify the continuous capex investment into the unknown digital world.

On a similar note, Astro has been transforming itself from a subscriber based cable operator to a complete digital company selling customised entertainment content, e-commerce via home shopping and selling gaming and merchandise over cable TV and digital devices.

Henry Tan, COO of Astro and a media veteran, is fast tracking the transformation journey recognising the vast disruptions to its original business model.

The brick and mortar retail industry is facing tremendous challenges from a fast growing e-commerce tsunami of online consumers. As the biggest retailer of personal care and cosmetic products with over 400 personal care stores in Malaysia, Caryn Loh, veteran retailer and country manager of Watsons is stepping up online business via investment in a dedicated online team and a separate online shop. To counter the invasion of online purchases of Korean cosmetic products, Watsons shops now have a dedicated display of Korean offerings which is also retailed online.

There are many similarities amongst these industry market leaders. They have experienced leaders who recognised the forthcoming changes that will affect their existing business model. Though they are very successful and sitting comfortably on top of the heap, they understand that they will have to disrupt their existing model to stay ahead of the curve.

All these market leaders have an existing large customer base. Their new business model must not only continue to keep their millions of customers in transaction and engaged, it must be able to up sell new products and services with a higher margin and all this via a new distribution channel – the digital channel. The digital revolution will restructure every society in terms of consumption habits, employment opportunities and shift resources within the industry.

Market leaders who take the risk stay ahead of the curve. Previous market leaders like Kodak and Nokia (smart phones) that did not change when faced with new technology developments are no more around. In his presentation in an event earlier this week, Henry Tan of Astro put up a slide that says “Same old, same old is a RISK. Not taking risk is BIG Risk”. Chew on that.

My main concern with the digital revolution is how well will our SMEs cope with the changes in their industry? Are they even aware that disruptions are happening along their industry value chain?

If you are in the manufacturing industry, the digital revolution might not affect you directly. Are your customers disrupted? If yes, is there a need for you to go direct to your customer’s customer? Can your manufactured goods be sold online? Will it be a digital B2B, B2C or B2B2C distribution model? Or a combination? Or should you still stick to existing distribution model – selling to a disrupted importer/distributor who has no clue as to how to compete in the new digital world?

E-commerce is just another distribution channel option for manufacturers to go direct to consumers bypassing the distributor middleman or brand owners going direct to consumers bypassing traditional retail stores.

The Alibaba/Lazada DFTZ digital online platform will enable China factories to ship goods for storage in LCCT Sepang, DFTZ zone and Pos Laju direct to online consumers in Malaysia thus bypassing Malaysian importers, distributors and retail stores. The entire “import from China” value chain will be disrupted. For the entrepreneurs involved in this value chain, be afraid or as Morten Lundal puts it, ‘Be very afraid!’

Entrepreneurs of SME’s must identify the risk of disruption along their entire value chain. When you have a clear understanding of how your industry will be disrupted then only will you be able to change your business model or at worse scenario pivot out of the industry.

If the major corporations are reinventing their business model to survive in the new digital world, the SMEs being smaller and more agile should move faster to stay ahead or to be more creative with innovative solutions. In a constantly changing environment, the early birds who risk the unknown might just catch the juicy worms.

To those of you who are stubborn and resistant to change, be prepared to sail into the sunset like me. I assume you are ready for retirement, at peace with yourself and with not a care in the world on what your wife thinks of you. Welcome to my analog world.

Published: http://www.thestar.com.my/business/business-news/2017/10/14/staying-ahead-of-the-curve/#FS7AM3QJQhvl5dPe.99

Advertisements

17/2017 – Humility and integrity start from the top

Saturday, 30 Sep 2017

EVER since my parents passed away some 25 years ago, mum in 1991 and dad in 1993, my one and only older brother, Thiam Ser will call me towards the end of March every year and ask me when I will be able to go back to Klang for Qingming (Ching Ming in Hokkien).

For the benefit of the younger generation, Qingming festival normally held in April 4/5 is also known as Ancestors Memorial Day or Tomb Sweeping Day.

In China it is a declared one-week holiday to enable the people to travel back to their hometowns to celebrate the Qingming festival. Traditional Chinese families will organise or the whole family to visit the columbarium, graves or burial grounds to remember and honour their ancestors.

Young and old pray before their ancestors, sweep the tombs, offer food and burn joss papers. Since I am always travelling and busy with my business life, my brother will ask me to fix a date as long as it is 10 days before or after April 4/5. I would normally pick a Sunday morning, reach his house by 8am or so (to avoid the searing hot sun) and my sister-in-law would have prepared some food offerings, incensed joss stocks and joss papers and a disposable lighter in two plastic bags.

The two of us would then visit our parents’ grave site which is just a 10 minutes’ drive from my brother’s house. As the elder son, my brother assumed the responsibility and the obligation to perform this annual ritual, leading always to clean the grave site, display the food offerings, burn the joss papers and I would silently help him with the chores.

He would then light the joss sticks and we would kneel side by side to pray to our parents. In our early years of parenthood, he would ask for guidance and pray for the successes of our children’s education. The last few years, he prayed for my good health and I for his as we were both facing health problems. At the end of our prayers, he would take out two coins and ask my parents if they are happy with their offerings before throwing the coins and letting it drop to the ground.

If it is head and tails, yes they are happy and we can then collect and repack our food offerings and with a last look depart from the grave site. Another year of obligation fulfilled. For me, this ritual is like an annual renewal of bonding with my brother. We have never missed a year since 1992.

Unfortunately for me, my brother passed away last Sunday and I will for once in my life miss his phone call come next March reminding me of my obligations to attend Ching Ming. Thiam Ser has led a simple and humble life.

After attending Chinese primary school, he was enrolled in Remove class in Catholic High School and being a poor student struggling with English language, he failed his Form Three LCE exam then known as Lower Certificate of Examination. As a school dropout at 16 years old, he had to work as a helper in a noodle stall to supplement our family income. He eventually got a machinist job at Furukawa Electric Cable in Shah Alam with the help of a recommendation from my seventh Uncle.

With a steady job and living frugally, he managed to buy himself a second-hand motorcycle to get to work, saving hours of waiting and travelling on Tong Fong buses which dominated the PJ to Klang route at the time. With constant overtime work, he managed to save enough money to buy a brand new Honda C70 motorbike.

I remembered I had just passed my Form 5 at that time and was going to continue my Form 6 in La Salle PJ while my family was in Klang.

As I had to stay out on my own, I had requested for a second hand bike from my mother. My brother let me have his new bike and without any hesitation and bought himself a second-hand bike.

After he got married, Thiam Ser decided to learn a new trade driving back hoe tractors as the construction boom in the late 1980s offered new opportunities.

Within a few years, he decided to venture out on his own by buying a second-hand back hoe tractor and offering his services to construction companies and plantations. To earn more money, he took on dangerous jobs that paid very well like being hoisted into the cargo hold full of bulk fertilisers and working 24 to 48 hours non-stop clearing the fertilisers while the ship was docked in Port Kelang.

There were no protective respirators in those days despite the dangerous fumes in the cargo hold. The long and irregular hours and lack of workplace health care took a toll on his health and he was struck with severe diabetes and he eventually lost one eye.

He had to sell his tractor and look for another occupation to look after his family of three growing kids. With a smattering of English, he sat for his insurance test and eventually became an insurance agent selling both life and general insurance. He was already into his late forties but being a responsible husband and father, it was his obligation to provide for his family and he has never shirked from his duties. Despite his irregular income, Thiam Ser seldom asked me for money.

He lived frugally with his family, always spending within his means. Only when his eldest son got a place in Nanyang Technological University in Singapore and having exhausted his EPF monies, did he call me for financial assistance.

Subsequently the other two children also graduated from local private universities and I still remember the relief on his face and his pride of having fulfilled his obligation as a father.

Thiam Ser’s story is nothing extraordinary. In fact, his story is the story of millions of wage earners and small entrepreneurs struggling to provide for their families.

Like every immigrant kid, as long as he has a healthy body with two hands and two legs and a willingness for hard work, he will always survive and hopefully build a better life for his next generation through education.

Entrepreneurs who have not forgotten their humble backgrounds tend to be kinder and more considerate bosses. Being humble and staying humble is a strength and not to be seen as a weakness. You will gain respect and loyalty from your staff and suppliers.

Building a culture of humility and integrity in your organisation starts from the top and the entrepreneur must assume this obligation and responsibility.

Just before my mother passed away, she had asked me to look after my brother who is eight years older than me. Worried for my brother’s well-being, my wise mother asked me to keep him out of harm’s way and to look after him.

Come next April, I will have to humbly ask my mother for forgiveness for failing in my duties. Without my brother at my side, I will be at a loss for words, feeling lonely and heart broken.

Published: http://www.thestar.com.my/business/business-news/2017/09/30/humility-and-integrity-start-from-the-top/

16/2017 – The world of marketing is changing fast… Are you?

Saturday, 9 September 2017

I started my first business importing razor blades from India when I was barely 25 years old. Well, to be more precise, 24 and ¾ years old. Without any experience, I plunged into a distribution battle with the biggest razor blade company in the world, Gillette.

Looking back to 1985, I was pretty confident then, with a low priced Topaz stainless steel double-edge blade that was taking market share from Nacet Super Stainless (Gillette low-priced brand) and the potential of a very-low-priced systems twin-blade cartridge going against Gillette G2 premium blades. Armed with fresh knowledge of 4P’s in marketing, I applied my theoretical strategies in text book fashion against one of America’s most successful marketing company.

Product – segmented and matched – double edge versus double edge, systems versus systems and disposables versus disposables. Checked.

Price – 30%-40% lower for each product segment. Checked.

Place – distribution through wholesalers for mass consumption double-edge market. Systems and disposable razors through Chinese medical halls, pharmacies, mini markets and supermarkets. Checked.

Promotion – consumer contest for mass selling Topaz, prizes like Honda Cubs, Toshiba Boombox etc. Small display stands for mini markets and full floor display stands with hooks to merchandise carded system blades in supermarkets with a basket to hold packs of Disposable 5’s. Checked.

Gillette reacted like what market leaders do. They sent me a legal letter saying that my Indian system twin blades violated their patented trade mark design. I had to backtrack and asked my Indian manufacturer to apply for payment of royalties.

For those outlets where we successfully put in our display stands, many of our hanging carded system blades were torn from the hooks and our sales staff had to mend the card with cellophane tape and you can imagine how ugly our displayed products look like. We also found Gillette disposable pouches stacked on top of our disposable pouches in our display baskets. That was the golden era of human merchandisers being used to activate marketing strategies.

Gillette went to the supermarkets and modern trade of that time and signed them up on exclusive retailing of Gillette razor blades only by offering an additional 5% profit margin. Their rationale was that since 80% of razor blade sales in their stores were Gillette products, the 5% additional margins on 80% of sales were more than enough to cover the loss of 20% sales of other brands. This campaign was so successfully implemented across the nation that other competitive brands like Schick and Wilkinson Sword practically vanished from the marketplace for a few years. Legally speaking, 30 years ago, there were no Anti Monopoly Act or Fair Trade Rules.

I had to withdraw from the razor blade business, tail between my legs but luckily I was able to pivot into a national distributor business for consumer goods. It was and still remain my most humbling experience in my marketing journey.

Then back in 1994, after selling our share in the distribution company, I restarted my trading company and again, I went back into the razor blade business. Now older, heavier and wiser, I avoided a head-on fight with Gillette. Staying out of the systems market where Gillette makes its most profits, I focus on a single product – twin blade disposable razors on a hanging card retailing each razor for one ringgit with high margins for retailers and wholesalers.

Keeping my overheads low (one staff only), I engaged Yeo Hiap Seng Trading to help me distribute direct to the grocery shops and mini markets. YHS at that time had the biggest direct sales team as their soft drinks and canned food division covers the entire national retail census. Gillette ignored me this time as I did not threaten their golden egg – the high margin system blades which had gone triple blade by then.

It was a pretty successful exercise for me as I sold more than two million disposables a year at its peak. And then I discovered the beauty of the cosmetic business and I pivoted again.

All over the world, Gillette has maintained its supremacy in the premium high-margin blade business and they were finally acquired by Proctor & Gamble in 2005 for US$57bil. It was a marriage of two marketeers – one that knows about men and the other that knows all about what a woman needs.

Then last year, Unilever bought Dollar Shave Club (DSC) for US$1bil. DSC is a 4-year-old startup doing online supply of system blades to male consumers in the US. Based on a subscription model, razor blades are delivered to homes. With investor funding, DSC acquired more than three million customers in four years via online sales, avoiding Gillette’s traditional distribution stronghold of brick-and-mortar pharmacies and hypermarkets.

To Unilever, DSC was a great opportunity to get into the male grooming business via an alternative distribution channel avoiding a costly battle with the market leader in that category. It is also a steep learning curve for the traditional marketeers of brick-and-mortar retail distribution. Only time will tell if this alternative distribution channel can be a profitable business model.

Entrepreneurs should not be afraid to explore alternative solutions in delivering products and services. Whether it is Amazon or Walmart, it is all about delivering the right products or services to satisfy the needs of the consumers at the lowest possible price.

Marketing 101 has never changed despite all these Hoo-Ha on online e-commerce. Marketeers have to understand that the 4P’s have evolved. Consumer consumption habits have also evolved through different generations. Technology is enabling direct transactions and direct communications with consumers. Efficient logistics reduce the need to step out to shop for necessities.

The world is changing fast… Are you?

Published: http://www.thestar.com.my/business/business-news/2017/09/09/the-world-of-marketing-is-changing-fast-are-you

15/2017 – Merdeka! Merdeka! Merdeka! (Unpublished Article)

(Not printed in Starbiz)

If there is a Facebook page for Malaysia, I would have typed ‘HBD Malaysia!’ just two days ago. Having to be in London for medical treatment sucks when you miss two important end August birthday celebrations, that of my daughter and my country. My daughter just turned 20 and must be looking to the future, full of hope and aspirations.

My country just turned 60 which in our Chinese culture is considered significant and important. The Chinese people believed that when a person reaches the age of 60, he or she has completed a full cycle of life. Based on Chinese astrology, twelve animals with five natural elements: metal, fire, water, earth and wood results in a 60 year cycle. Following the 60th birthday, the person begins a new life.

Assuming Malaysia starts a brand new cycle, a new life, what kind of Malaysia would you like to have at the end of the next 60 year cycle?

As an entrepreneur, would you like to build a company or a brand that lasts at least 60 years and beyond? As a student of marketing all my life, there is nothing more satisfying than building a brand that can last through generations. It could be a product brand, a company brand or personal branding.

If you look at all the brands that has lasted for more than 60 years, the standout feature has always been brand integrity. A brand that is honest and have strong moral principles will survive through a history of turbulence and changes. A brand that is fair and consistent inspires loyalty.

Nothing damages a brand faster than the trust deficit syndrome. All the good work on building brand loyalty will disappear when a trust deficit problem is allowed to perpetuate with no solutions in sight. If you are a good brand manager, you must be able to identify the problems and offer quick solutions to restore the integrity of the brand. Examples would be to recall defective products immediately, acknowledge problems and apologize etc

Malaysia as a brand is suffering badly from the trust deficit syndrome and I am not even talking about politicians from both divides. As a citizen consumer over the last twenty years, I have seen branding issues with the independence of the judiciary, independence of the media, constitutional rights and lately the independence of the Force.

Since independence, the Malaysian brand was built meticulously and it became famous for being a harmonious multi racial country. Poverty eradication through Felda agricultural schemes, free education, efficient and hard working civil service and a capable Parliament and Cabinet of Ministers. A safe and fair environment provided by an independent judiciary plus a loyal army and police force helped the country grow into an industrialized country within forty years.

How much brand damage has Malaysia suffered over the last twenty years? As citizens of the country, we should be the managers of the Malaysian brand and we have failed in our most basic duties of brand management. We should have taken immediate action then when the integrity of the brand was eroded by the actions of the few in power. Instead, we have allowed the problem to perpetuate and now we have a brand image that is corrupted beyond recognition, a brand without an ounce of integrity left.

To all the great brand managers, how do you resuscitate a damaged brand? Do you discard it and start a new brand instead? Or do you believe that it is easier to keep the old brand image, do a post mortem, re strategise and re build? Whichever route you choose, just remember to restore integrity back into the brand DNA. To do that, you will need to scrap the bottom of our political vessel to find the last few decent and righteous leaders. Or maybe appoint new untainted ambassadors for the brand. Inexperienced ambassadors might actually be good for the brand as they do not bring old corrupted ideas and your advertising campaign will bring fresh hope to the consumers.

Rebuilding a national brand is not an easy task. It requires loads of hard work and dedication. Restoring integrity to a national brand is even more difficult. You have to identify all the problems that has tainted the brand integrity and remove these problems once and for all. These problems could be people, actions, policies and whatnots. Sometimes, brand managers have to be ruthless and decisive when it comes to the issue of brand integrity. No compromise.

Personal branding is not just for famous people or very successful entrepreneurs. As an entrepreneur and a human being, what kind of brand image have you built for yourself? Are you a person of high integrity? Trustworthy? A man of your words? Or are you known for your punctuality, smart dressing and charming disposition? Are you shrewd and pushy? Or just smart and fair?

Politicians believe they have the best brand image. They portray themselves as Guardian of the Galaxy, looking after the best interest of the people they represent whether it is their well being or religious needs. As a brand manager, I do believe that is the right brand image they should adopt. The smarter politicians who understands branding will be able to put up with this charade quite comfortably. Most politicians brand fail in the first instant, showing a glaring lack of integrity and worst of all adding stupidity to their brand image.

Nevertheless, most politicians will go down in history, their brand recognized and remembered for one goof or another. Some National leaders will be remembered for their outstanding contributions to the nation whilst some will be remembered for receiving outstanding contributions from the nation.

These irreversible deeds will be remembered for the next 60 or 600 years.

Happy Birthday Malaysia. See you in your next life.

14/2017 – Welcome to the new world business of customer acquisitions

Saturday, 26 August 2017

I JUST read a Bloomberg Technology news article online with a headline “Uber narrows loss to US$645mil (RM2.6bil), boosts revenue amid turmoil”.

Net revenue for the second quarter (Q2) of 2017 rose 17% to US$1.75bil, translating into an operating loss of 37 US cents per US$1 in revenue, which was 9% lower than the last quarter, which means Uber lost US$708mil in Q1 2017. This compares with US$991mil losses for Q4 2016. Losses are definitely decreasing as revenue grows. Travis Kalanick, the founder, was ousted as the CEO in the second quarter, hence the turmoil headline.

Gross bookings/fares for Q2 2017 was US$8.7bil, which means net revenue by commission on the bookings/fares is about 20%. Gross bookings for 2016 was US$20bil, with losses of US$2.8bil excluding China, so losses do exceed US$3bil for the entire year of 2016. Gross bookings for 2015 was about US$10bil, so Uber is growing booking revenues at a staggering rate, from US$10bil (2015) to US$20bil (2016) to US$15.9bil (first half 2017).

I estimate Uber losses since 2010 at somewhere between US$8bil to US$10bil to date. Certainly not an investment for weak-minded investors!

Despite the continuing losses, Uber investors have valued the company at US$69bil. Some investors have started writing down their investments by up to 15% due to the boardroom turmoil but hey, Uber is still valued at a minimum of US$59bil by some investors!

For those accountants who do not understand the valuation rationale, don’t worry. We are in the same boat. I have thrown out all my financial management and valuation textbooks together with what I have learned in Universiti Malaya and Harvard Business School.

I do believe some of these learned professors in finance will be out of job soon. Their fundamentals of valuation books will never ever be reprinted and consigned to the history archives of an electronic library.

Welcome to the new world business of customer acquisitions. First, you need a brilliant idea of world domination via digital technology, then you look for super-smart, cash-rich investors who believe in you and your ideas.

Create a lofty valuation based on the concept of potential world domination understood by only super-smart fund managers, so that they will invest in you. Always promise the investors a higher valuation (at least 10 times) by the next round of funding to create the “fear of missing out” syndrome and you will see funds flowing into your bank account.

Now you can start your rapid customer acquisition strategy. In Uber’s case, they use the investor money to acquire customers, offering discounted fares to customers to switch them from taxis, but paying full fares to Uber drivers thus subsidising in the pursuit of customer acquisitions.

To get more Uber drivers on the road, Uber pays them lucrative incentives. This is a no-brainer consumer sales strategy, offering products/services at below cost with super discounts that are much, much lower than your competitors to boost sales and to acquire new consumers.

Costly exercise for the company or as they called it acceptable “burn rate” by the super-smart investors. But after five years of increasing losses, investors start asking for a roadmap to profitability. So Uber management have to start showing lower customer acquisition costs and since they are not able to reduce the subsidy for customer fares, they start cutting incentives for the drivers.

Uber drivers, having been spoilt by a combined income of fares, subsidies and incentives, suddenly find that they are not earning as much as before. So now Uber introduces a tipping policy in its app and the Uber consumer faces the same pressure of tipping similar to sitting in a yellow cab in New York.

Besides showing an impressive growth in revenue, Uber has managed to reduce customer acquisition subsidy from one dollar loss per dollar revenue to just 37 cents loss per dollar revenue as shown in its latest quarter results. Profitability will be achieved once they remove the fare subsidies for the consumers, which means Uber fares will be similar to taxi fares.

The cost for running a cab or Uber car is similar. The only difference being the licensing cost for a cab as compared to the 20% commission on fares paid to Uber by an Uber driver.

When no subsides are involved, it is a straight fight between two rival taxi companies. GPS apps will soon be made available to all, so no distinct advantage for Uber over the long run.

Realising that this taxi competitive business will eventually be a zero-sum game, and the road to profitability is fraught with potholes and broken spirits, Uber is now banking on driverless electric cars to provide some glimmer of light at the end of this endless tunnel.

Unless Uber is able to kill off its competitors and achieve monopolistic advantages, which means overall taxi fares will increase by 20% all over the world. I believe this is what the super-smart investors would like to believe. World monopolistic domination equals opportunity to raise fares by charging a premium for the services provided.

Back home in this part of the world, besides competing with local taxis, Uber has to contend with competition from Grab of Malaysia and Go-Jek of Indonesia.

Grab and Go-Jek have equally super-smart, super-rich investors funding their customer acquisition quest. Both companies have achieved unicorn status and unicorn valuations despite continuing losses.

I have no clue as to how long this charade will continue but as long as we have super-smart investors believing in world domination, the subsidies will continue. My advice to Uber, Grab and Go-Jek drivers will be to enjoy the lucrative rides while you can.

It would be nice if all of you consumers send an appreciative thank you note to the super-smart investors for their continuing subsidies in reducing your daily transport expenses.

Just remember to remind them on the same note that you will not agree to any increase in fares once world domination is achieved. That will be the end of the fairy tale ride of your lifetime.

Published: http://www.thestar.com.my/business/business-news/2017/08/26/welcome-to-the-new-world-business-of-customer-acquisitions/

%d bloggers like this: