A Trilogy On Entrepreneurship: Growing the Enterprise: Book Three
By Eduardo A. Morato and Jr.
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Self Mastery: Learning to Think, Learning to Intuit, Learning to Feel, Learning to Do, Learning to Communicate, Learning to Lead, Learning to Be Rating: 3 out of 5 stars3/5A Trilogy On Entrepreneurship: Preparing for Entrepreneurship: Book One Rating: 4 out of 5 stars4/5A Trilogy On Entrepreneurship: Creating the Enterprise: Book Two Rating: 0 out of 5 stars0 ratings
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A Trilogy On Entrepreneurship - Eduardo A. Morato
AUTHOR
FOREWORD
Book Three, Growing the Enterprise, nurtures and propagates the business venture. The first chapter documents the formation and evolution of three entrepreneurs and their enterprises. Lessons from the three case studies are abstracted into general guidelines for the gestation of enterprises into robust corporations. This is supported by a framework on the Enterprise Life Cycle and Life Forces originated by the author.
The next four chapters of Book Three immerse the entrepreneur in the four functional areas of enterprise development: Marketing. Operations, Human Resource and Financial Management.
Finally, Book Three tackles three more case studies on Asian family enterprises, spanning two or three generations, to highlight alternative enterprise growth strategies and expansion models. Again, the chapter abstracts invaluable lessons for the entrepreneur with a far-sighted vision and highly ambitious goals.
Chapter One
The Formation and Evolution of Entrepreneurs and their Enterprises
The age old debate about entrepreneurs rages on. Are they born or are they made? Do they spring out of their parents’ foreheads, Athena-like, to assume their destined role in society? Or are they nurtured, bred and groomed, shaped by circumstances and situations, molded by experience and strengthened by life’s crises and adversities? There is actually a bit of both in every entrepreneur, but in varying degrees. Some seem to drop on this earth like manna from heaven. Others need the hard-boiling effect of many dog-life years before finally maturing into full-fledged entrepreneurs.
The lives of three entrepreneurs are sampled from the broad expanse of Asia to shed some light into the debate. They were chosen for their passion to succeed, their business creativity and their strong entrepreneurial leadership. They appear to be modern quixotic venturers out to change and challenge what is
in order to realize what could be.
¹
The first entrepreneur is Lim Bee Huat. He seemed to have fallen from the sky. He was born in 1952 in Bukit Ho Swee, a slum neighborhood in Singapore. His parents were factory workers and he was the third child among four boys and girls. When he was six, a big fire engulfed the neighborhood and the family was resettled in a two-room flat with their grandmother. Life was miserable. Fending for himself, he would pluck fruits from the trees growing along Orchard Road. He sighed at the sight of big houses lining the street, wondering if he would someday live in one of them. Bee Huat wondered whether their wealth was inherited. He deeply minded being poor and resented the unfairness of life. He then resolved to improve his lot at the tender age of eight. He wanted to work for a living right away. That is when he decided to be a kok-kok nee
boy peddling noodles for the street hawkers. He also worked as an errand runner.
At the age of nine, Bee Huat moved downtown to work as a kopikia
serving coffee, wiping tables and washing spittoons off the floor." Schooling by day, moonlighting by night, Bee Huat continuously disobeyed his parents who told him to stop working. He tried learning everything about the kopitiam business and other vending trades. He eventually left home to live in the hawkers’ center and park. At eighteen, a friend borrowed money on Bee Huat’s behalf to help the latter open his very own kopitiam. Bee Huat never stopped expanding since then. In 1998, he opened the Kopitiam Food Court branch at the ground level of Le Meridien Hotel and Shopping Center at the upscale Orchard Road. It cost $3 million to renovate. It was the fourteenth outlet of Kopitiam Investment, Pte. The company owned numerous dessert shops all over Singapore, 22 of which were company franchises.
The second entrepreneur is Jay Bernardo. Born and bred from a relatively well-to-do family, Jay studied in one of the best schools in the Philippines. His father was a professor and one-time dean at the Asian Institute of Management, one of the top MBA institutes in Asia. Jay’s entrepreneurial lust likewise developed during his growing years. His best friend and constant business partner, Allan Reyes, was an entrepreneurial wannabe like him. They tried all sorts of businesses in school such as selling food, t-shirts and others. We tried and failed many times,
Jay recalled.
After completing his college course, Jay worked for four years with Johnson & Johnson (J&J) as a night shift production supervisor in the first two years and as an industrial engineer in charge of employee involvement programs, productivity improvement and cost reduction in the last two years. This would be the expertise Jay would use to the hilt in his own business ventures years later. While at J&J, Jay and Allan cooked up the idea of video case advertising which they broached to Pepsi Cola. They conducted surveys, observed consumer behavior, made a feasibility study and worked on a high-tech computerized presentation before facing their potential client. Pepsi was impressed with the novel concept and decided to launch Jay’s innovative proposal of printing advertising material on the front and back sides of Betamax video tapes. Pepsi was scheduled to roll out this video ad campaign in Metro Manila and, in the entire country when a major promotional fiasco in a numbers game humbled Pepsi. They had to stop the video advertisement project and Jay’s multi-million proposal went kaput.
Jay decided to enter the Asian Institute of Management (AIM) for his MBA degree right thereafter. At AIM he chose to do a venture thesis where the student could set up a small business venture and write about the experience, lessons learned and management processes undergone. His venture was on children’s books with fellow student, Dina Go, who subsequently became his wife and co- partner in the JAD Group of Enterprises along with Allan Reyes, his best friend.
Upon graduation, Jay agreed to work with his wife’s father on two conditions. First, he would only stay for two years. Second, he would be allowed to set up a business while working with Mr. Go. Jay exercised the second condition by entering into a subcontracting deal with J&J. In the subcontracting venture, Jay applied his productivity and cost reduction know-how to deliver cheaper but quality products. He started with cotton buds and plastic sticks for J&J and subsequently graduated to warehousing operations, trading, distribution, information storing, manufacturing of diapers and panty shields and R&D work on household products not competing with his principal. Thereafter, JAD added new clients such as Pfizer and SC Johnson to broaden its client base.
JAD’s success as a subcontractor, warehouse operator and distributor lay in the fact that they could deliver international quality standards at lesser costs, oftentimes borrowing the equipment and financial strength of their principals.
The third entrepreneur is Iwan Tirta of Indonesia. His metamorphosis from a career man to an entrepreneur was more of an insidious, long drawn-out love affair. Entrepreneurship came late in life. And it was not because he was faced with poverty and adversity or because he dabbled in little ventures during his youth. It began, I guess, as an emotional bonding with the Indonesian batik, nurtured by constant exposure to his native culture, and to the art of fine living. His father would bring his children to the best hotels and restaurants to absorb good taste.
As children, they had to know Javanese dances, play the piano, learn languages and put on wayang kulit performances (Javanese shadow puppetry). His mother shared this passion for culture and art. She maintained a very impressive batik collection. Iwan’s aesthetic sense heightened under this maternal influence.
Patterning his life after his father, who was a Supreme Court judge in Central Java, and hailing from a brood of lawyers, Iwan pursued a career in law. As a university freshman in 1955, he attended a batik exhibition by Goh Tik Swan who would jazz up ancestral batiks with modern design and combined conservative Java court motifs with vibrant cosmopolitan colors. Iwan followed Goh around the university like a puppy.
That was the turning point in his life. Still, Iwan finished his law degree and assumed a faculty position. He then continued studies at the London School of Economics. But Iwan’s love affair with batik did not diminish. He began his personal research into batik in 1961. Three years later, he left Indonesia again to obtain a master’s degree in law at Yale University in the United States. While in the US, he obtained a grant from the Rockefeller Foundation to systematically document Indonesia’s disappearing culture.
He chronicled Indonesian music, dances and costumes, primarily those made of royal batik. He carefully catalogued his mother’s collection. He scoured the villages for unique designs and wrote a book on batik. In 1968, Iwan exhibited 100 of his batik collection which got sold out in less than two hours. He began toying with the idea of entering the batik business but an essay award on international law landed him a job at the United Nations for two years.
Returning to Indonesia in 1970, Iwan resumed his teaching. But he was in a dilemma about what career to really embrace: go on being a distracted lawyer/professor or be a full time designer. In 1971 he chose batik design and fashion. He devoted his life to the craft. He turned artisan-businessman. His works landed in the fashion centers of the United States and Europe. His dangerous experimentations with silk batik caused the burning of 30% of his body. But silk batik catapulted the fabric to the international high fashion scene. He experimented with other fabrics, incorporating uncommon, even wild motifs, into his designs.
Iwan Tirta’s batik business has since become large. In 1997, sales reached US$1.4 million. He has adopted entire villages of batik workers to produce top-quality products. His strategy was off-beat. Take a dying, long neglected ancient craft, make it more costly and labor intensive, then create an upscale market where none previously existed…. He favored a return to elitism… and simultaneously entered the mass market to subsidize his art.
Both tracks proved controversial.
Born and Made to be Entrepreneurs
The three entrepreneurs from Singapore, the Philippines and Indonesia represent three distinct and yet similar profiles. First the distinction.
Lim Bee Huat was challenged by his family’s poverty. He converted the challenge into a vision of a wealthy and luxurious life, the one he saw while plucking fruits in Orchard Road. For this vision he was willing to give up his childhood. He sacrificed his playing hours and full time studies to be a street-smart coffee boy. Jay Bernardo had a much easier life. He could afford to dabble in small-time endeavors during his youth. But this enlarged his entrepreneurial appetite. What was unique about Jay, in contrast to Bee Huat and Iwan, was that he used his education and professional work experience to fully exploit business opportunities. His university degree helped him find a job as people improver, productivity booster and cost reducer in J&J. This experience prepared him to be a good subcontractor for the multinational firm. His MBA at the Asian Institute of Management taught him to strategize, manage and run much bigger businesses. He used his MBA to build a mini-conglomerate
with his partners. Iwan Tirta’s journey was a different story. His was more of a passion for an art form, emanating from his childhood exposure to the finer things in life. He gave up his professional career for a business love affair with an Indonesian craft.
Second, the similarities. In all three, there were signs that they were born entrepreneurs. They possessed character traits that set them apart. Bee Huat differed from his siblings who faced the same poverty. He rose above them. He steeled himself to succeed. He was fully determined to become rich no matter what. Maybe he did not have the academic IQ but certainly he had all the EQ necessary to work with and lead people, assess and exploit situations, develop and nurture organizations. Jay Bernardo seemed to have inborn traits as well. As early as grade school, he was trying to make money in many little projects. He did not have entrepreneurial parents, but his childhood business attempts eventually paid off. When he graduated from AIM, he did not apply for the usual entry level job in a multinational company. He presented himself as a potential president for smaller firms. He set his eyes on entrepreneurship for the longer term. Iwan Tirta had the unique spirit of an artist. He left his lawyer colleagues and the diplomatic circle to be a batik fashion designer.
The three were similar in their desire to take the less traveled road. They refused to conform. They had an independent mind and resolved to be masters of their own fates.
The three entrepreneurs were also similar in the fact that they were influenced highly or made
by their environment. Lim Bee Huat immersed himself in the hawkers’ world. He drank, ate and slept kopitiam. His experience shaped him but he went beyond that in order to excel in all the others. Jay was also made
by his schooling and his work experience. He learned the technical and managerial tools that were crucial to establishing his network of related enterprises. Iwan Tirta was made
by his father and mother and by his batik idol. He learned from the works of other craftsmen. He learned about the ancient art form by going from village to village. Thus, the three entrepreneurs were all products of their environment which made them what they have become.
Genetics do play a large role in determining a person’s character. But the family and social milieu shape, alter and enhance that person.
The same is true for entrepreneurs. They manifest, even as children, traits of the introspective thinker, of the avid observer of situations, and the ambitious over-achiever. With this inborn trait, they easily absorb environmental opportunities like sponges.
Sources of Innovation and Creativity
Going beyond the gene
or scene
argument about the origin and molding of entrepreneurs, we can learn a lot more from the three subjects of this paper. The case histories of Bee Huat, Jay and Iwan give us valuable clues on the entrepreneur’s sources of innovation and creativity. These are:
1. Talent
The first and foremost source of innovation and creativity is talent. This comes in many forms.
Bee Huat had the talent to discern from his own personal situation what life could be all about. Some take entire lifetimes to understand themselves and what they want. Bee Huat saw his destiny at the age of eight. He was emotionally mature even then. He endured the rough life of the streets, the scoffing of his classmates and scolding of his parents. He possessed the talent to innovate and build on what others were doing. His capacity to observe, analyze and strategize came from an inborn trait of a very imaginative mind.
Jay’s superior intelligence allowed him to conceptualize projects and present them forcefully to would-be investors or clients. He had the ability to see things from his customers’ point of view. He understood what was important and what was not, as evidenced by the way he creatively packaged business deals.
Iwan’s talent is his creative mind. He is a whole-brain thinker that can fuse the logical reasoning of the left brain with the visual, spatial, emotional and intuitive qualities of the right brain. His designer collections, glitzy fashion shows and batik fabric designs captivated royalty, heads of state and dignitaries. And yet he had no formal training in art or design. He was a lawyer by profession. His creative talents extended to writing as proven by his Adlai Stevenson award for an essay on international law.
2. Adopt and Adapt
All three entrepreneurs adopted existing business practices, processes or technologies. But they went beyond the existing ways by adapting and innovating.
Bee Huat initially adopted the prevailing practices of coffee shops. His subsequent strategy was to put up a chain of shops. He integrated backwards when he set up a dessert factory to supply his outlets in 1992. During all this time he was watching the operations of McDonald’s. He concluded that McDonald’s success came from their marketing skills, strategies and promotions. They set up outlets in highly populated areas. From this observation he developed the concept of a big 24-hour, round-the-clock, upscale market and air- conditioned hawker-style food court with aggressive promotions and focused retailing.
In 1995, he grafted the McDonald’s strategy into the kopitiam business. The adaptation was a success when, in 1995, he took