The Secret to Business Resilience: Be Like the Bamboo, Not the Oak
SMUPublication: TODAY, p 26Date: 8 April 2013Headline: Be like the bamboo, not the oakBe like the bamboo, not the oakCOMMENTARY BYKEE KOONBOON singapore is Loo small andits talentpool is too small toproduce a world-class man-ufacturing giant of the Fortune 500class," Singapores founding PrimeMinister Lee Kuan Yew once said. Acryptic remark, indeed,becauseitdocsnot imply that he thinks Singaporecannot produce knowledge-basedgi-ants, ot·1·esilicmt"bambooinnovators".Why bamboo innovators? Bam-boosbend,notbr~ak, even in the mostterrifying stormordevastatingearth-quakethat wouldsnapthe mightyoaktree.Tt~urvives, therefore it conquers.Disruptive industry t rends andblack-swan crises have become apermanentfixture in todays market-place. How wonderful it would be ifcountries,companiesand individualscanstaya·esilient amid such upheavalsand unorthodox challenges.The study of bamboo innovatorscould inspit·e companies to be pro-ducth•e innovators in ordertosurpassstall-points in their business modelsduring tumultuous periods, particu-larly for small and medium enterpris-es aspiring to scale up to become glo-balchampions.Butwhy is it that Asian companiesare predominantlyproduct manufac-turea·s in the first place? This couldironicallybe a r·esultofthe Asian val-ues ofhard work and sacrifice.ll is far easier for the Asian entre-preneur to be the middleman lakingorders fr·om a few important anchor·multinationalcorporation customerswith acce~s to t he end-customers,take capital risk investing in tangiblee Kee Koon Boon.a formtrlecturerofaccounting at theSingaporeManagementUniversity.has beenan investmentprofessionalfor thepast decade. Heisapresenter at theEmerging ValueSummit2013on April9-10.assets and work hard to produce therequired products with quality andefficiency- than to attempt to buildbusiness models thathavedirectown-ership ofthe hundreds and thousandsofend-customers.As a result, these ent repreneursare unwilling to share the rewardswith their "undeserving" staff whotook neither risk nor sacrifice. Theytreat employees as expenses and notintangible assets, make most or all ofthedecisionsand hoardmost resourc-es and information, running the firmasa "one-man show". Eventually, theyma.v face thechallengeofbusinesscon-tinuity arising from succession woes.HEW IDEASKeyence is an example of the uncon-v<mtional Asian flrm. Founder lake-mitsu Taki:1.aki liberated the firmfrom manufactua•ingconventions andbuilta knowledge-basedenterprise inlaset· sensors for factory uulomation,serving morethan 100,000 customersin 70 countries.Despite having less than1per centglobal market share In a commodity-like product and only around 3,000employee~. Keycnce commands aUS$17-billion (S$21.1 billion) marketvalue-approximatelysimilartoSing-aporesKeppelCorp,agloballeader inoft~shore oil rig design and building.Mr Takizuki understood keenlythat Keyence cannot improve on Ja-pans legendary manufacturing effi-ciency. So, unlike its manufacturing-based competitors who leave sales t~distributors, wholesalers and agents,itdeliberatelyavoidsmakingproducts,except for manufacturing steps thatinvolve trade se<:rets kept in-house.Most of its employees are either"sales"or"research" staff. In theirdi-rectcontactwith the cu5~tomers, Key-ences in-house "sales" team picks upnew product. ideas on frequent fac-tory visits. For instance, its front·liners observed from the productionlines at instant noodle factories thatthe noodle qualityWU!; compromisedbecause lhe noodles were manufac-tured at variable thicknesses. Lasersensors that.could measure noodlesto 1/IOOthofa millimetrewere devel-oped to ensure consistency.A quarter of sales at Keyeneeis generated from such new prod-ucts every year, more than what SMachieves. Toexcel in theseareas,Key-ence had to cultivate a meritocraticculture, and it is known fm· havingsome of the highest-paid employeesin corporate Japan.Bright young people from rivalfirms are attracted to Keyencc bythe performance-based pay. The av-erage sulary t here is US$100,000.Engineers also get to do their ownresearch, rather than labouring foryearsundergrey-hairedsupervisors.THE EMPTY COREKeeping the front line or the "periph-ery resilient and innovative, and thecentre or the "core" diffused, and en·forcing mcritocrutic values atall lev-els have compounded immense valueat Keyence. lhis "cot·e-periphet·y"growthpat.tem is alsothat ofthebam-boo: Thevitality ofitsgr-owthrevolvesaround its "empty" centre.Instead orconstructing itselfinchbysolid inch,like a tree, the nutrientsand moisture that would have beenexhausted making and maintainingits empty centre can be utilised forgrowth of its periphery in the stem.From a builders viewpoint,the archi·tecture ofthebamboo presentsupow-erful configuration:Fibresofgreateststrength occur in increasing concen·tration towards the periphery.Manufacturing and project-basedcompaniesoften tout the si1.e oftheirorder book and their idea of"team" isabout having high-profiledealmnkerswho can bring in thesales orders; thejob of"everyonc else" is to execute ef-ficiently and "productively".The well-connected dealmakersmay be able t.o pull in high-dollarprojects, butbecauseofthedifficultiesin coordinating and executing large-scale complex projects, these dealscannot be repeated and the hype as-sociated with a big order book startsto fade, particularly when costover-runs and delivery delays rear theirugly heads. Bigger becomes ri~kier·.Even in manufacturing, the onlyway to perform and execute large-scale complex projects repeatedly istocreate a cultureofexcellence wherethe interests ofemotionally engagedlrontrliners matter in the innovationand value creation process.Customers arc attracted to thiscontagious performance culturerather than to the d<!almakcrs on arelationship basis, resulting in a val-uation breakthrough beyond the bil-lion-dollar murket value barrier thntmany Asian companies find difficultto bn!ak.Fortune 500! With "emptiness"in business model design, Singaporecan instead aim for its own resilient"Bamboo Innovator500" powerhou~with a US$10-trillion value.