Bamboo nnovatorBamboo nnovator                                                                                            ...
Overview                                                                                                         Bamboo nn...
Resilience: The Ability to Replicate & Scale from Scratch &                                                      Bamboo nn...
Shanghai Index (6000 in Oct 07 to 2300): Investing Is All                                                         Bamboo n...
Yunnan Baiyao: Intangible Know-How in Hemostasis                                                                 Bamboo nn...
“Nobody in China – and the world - can copy our                                                                  Bamboo nn...
Mental Model: Bamboo InnovatorBamboos Bend, Not Break in the wildest storms that snapped the mighty resisting             ...
iBamboo! Electricity-free, wire-free…                                                                             Bamboo n...
American Bamboo Innovators: Not Your Typical List…                                                                Bamboo n...
American Bamboo Innovators: Not Your Typical List…                                                                Bamboo n...
American Bamboo Innovators: Not Your Typical List…                                                                Bamboo n...
American Bamboo Innovators: Not Your Typical List…                                                                Bamboo n...
American Bamboo Innovators: Not Your Typical List…                                                                Bamboo n...
“Emptiness” in Business Model Analysis(1) “Indestructible Intangibles”: Know-How, Trust and Support in Community          ...
“Emptiness” in Business Model Analysis(1) “Indestructible Intangibles”: Know-How, Trust and Support in Community          ...
Bamboo nnovator                                                                                                           ...
So It’s About Technology? What’s the Big Deal Then? Can                                                           Bamboo n...
Wal-Mart: Scaling in a Tough Industry by Technology                                                                  Bambo...
Bamboo nnovator                                                                                                           ...
What “Emptiness”! It’s All About Having Resources and                                                                     ...
More Resources/Tangible Assets, More Weaknesses?                                                                  Bamboo n...
Bamboo Innovators Are Easily Overlooked… Having a                                                                    Bambo...
American Bamboo Innovators: Not Your Typical List…                                                                Bamboo n...
“Emptiness” in Trust and Support from Community of                                                                Bamboo n...
How About Asia? Japan? Strong Yen = Death of Exports                                                              Bamboo n...
Do You Want to be the CEO of Keyence (<1% global market                                                                 Ba...
Nidec (1973, $8.4B) Vs Keyence (1974, $17.3B): Both Are                                                           Bamboo n...
Nidec (1973, $8.4B) Vs Keyence (1974, $17.3B): Both Are                                                           Bamboo n...
Keyence: Laser in Instant Noodles (Turning Commoditized                                                           Bamboo n...
Kakaku.com ($2.2B) & M3 ($2.8B): “Emptiness” in Trust &                                                           Bamboo n...
Kakaku.com ($2.2B) & M3 ($2.8B): “Emptiness” in Trust &                                                           Bamboo n...
Kakaku.com ($2.2B) & M3: “Emptiness” in Trust & Support                                                                   ...
Kewpie ($2B), Heinz of Japan, “Mayonnaise King”:                                                                  Bamboo n...
Kewpie ($2B), Heinz of Japan, “Mayonnaise King”:                                                                         B...
A Favorite Due-Diligence Question for Asian Entrepreneurs                                                         Bamboo n...
Bamboo nnovator                                            Quick Summary                                                  ...
(1) Does the Company Have                                                       Bamboo nnovator                           ...
(A) Decentralization/                                             (2) Does the Company                                    ...
(3) Does the Company                                                        Bamboo nnovator                               ...
Asia: Monolithic Bloc? Land Mass/Mess for Value Investors                                                                 ...
The Revenge of the Geographical Value Investor;                                                                     Bamboo...
Why Does India Have So Few Listed Internet Companies                                                                Bamboo...
Bamboo nnovatorIndia: Parsi Power! Parsi Bamboo Innovators                                                                ...
Bamboo nnovatorAsian Paints: India’s “Sherwin-Williams”                                                                   ...
Pitfalls in Asia: Chinnovation ≠ Resilient Compounders                                                            Bamboo n...
Pitfalls in Asia: Chinnovation ≠ Resilient Compounders                                                            Bamboo n...
China’s Tencent: 65X from US$900m (Jun 2004) to US$65bn                                                           Bamboo n...
Just Another Copycat? Tencent Monetized IM When                                                                   Bamboo n...
Kingdee: ERP Software King in China for SMEs; Disrupted                                                           Bamboo n...
Bamboo nnovator                                                                                                           ...
Li Ning: Nike of China; Disrupted by Nike in 2011…                                                                    Bamb...
Invest in Asian Fallen Angels whose valuations are                                                                      Ba...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innova...
Upcoming SlideShare
Loading in …5
×

Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innovators

6,997 views

Published on

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
6,997
On SlideShare
0
From Embeds
0
Number of Embeds
2,842
Actions
Shares
0
Downloads
65
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Emerging Value Summit April 2013. R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innovators

  1. 1. Bamboo nnovatorBamboo nnovator R.E.S.-ilience in Value Creation R.E.S.-ilience in Value Creation 《竹经:经商经世离不得立根创新》R.E.S.-ilient Compounders in (the Next) Crisis:Buffett + Bosch + Baiyao= Bamboo Innovators April 9-10, 2013 www.valueconferences.com/reg/emerging13/ Presented By: KB Kee, Singapore 1(1) Buffett + Bosch + Baiyao (2) Mental Model: Bamboo Innovator (3) Boobytraps in the Asian Capital Jungle (4) An Asian Stock Discussion
  2. 2. Overview Bamboo nnovator R.E.S.-ilience in Value Creation Topic (1) Buffett + Bosch + Baiyao (2) Mental Model: Bamboo Innovator (3) Boobytraps in the Asian Capital Jungle (4) An Asian Stock Discussion (5) Summary & Conclusion (6) Q&A 2(1) Buffett + Bosch + Baiyao (2) Mental Model: Bamboo Innovator (3) Boobytraps in the Asian Capital Jungle (4) An Asian Stock Discussion
  3. 3. Resilience: The Ability to Replicate & Scale from Scratch & Bamboo nnovatorThe Indestructible Intangibles to Bounce Back From Crisis! R.E.S.-ilience in Value Creation $173B $48B >$150B $68B Mkt Cap Sales Value Sales Robert Bosch (1861-1942) worked as apprentice at German “If you gave me $100 billion and companies, in US under Thomas Edison, in UK at Siemens said, ‘Take away the soft-drink 1st breakthrough: Magneto ignition device (1887) 2nd breakthrough: MID to vehicle engine (1897, 1902) leadership of Coca-Cola in the Global expansion: 1898-1913 world, I’d give it back to you and WWI (1914): Lost it all! Factories and plants all destroyed! Never give up: Electric horn (1921), windshield wiper say it can’t be done.” - Buffett (1926), power brake system (1927) Boat engines, jet skis, garden and forestry equipment, gas Burn and destroy all the engines, water pumps and emergency generators… tangible assets! 2012: 11 billion spark plugs produced by Bosch Ownership: 8% Bosch family, 92% Foundation (1938 will) 3(1) Buffett + Bosch + Baiyao (2) Mental Model: Bamboo Innovator (3) Boobytraps in the Asian Capital Jungle (4) An Asian Stock Discussion
  4. 4. Shanghai Index (6000 in Oct 07 to 2300): Investing Is All Bamboo nnovatorAbout Catching the “Timing” of “Cycles”? R.E.S.-ilience in Value Creation Shanghai Stock Exchange Composite Index $8.6B Mkt Cap Resilience during Crisis; Bamboos Bend, Not Break Even in the wildest storm that would snapped the mighty oak tree 4(1) Buffett + Bosch + Baiyao (2) Mental Model: Bamboo Innovator (3) Boobytraps in the Asian Capital Jungle (4) An Asian Stock Discussion
  5. 5. Yunnan Baiyao: Intangible Know-How in Hemostasis Bamboo nnovator(Blood Clot & Circulation) that Scaled from Drugs to Pain- R.E.S.-ilience in Value CreationRelief Aerosols to Toothpaste etc. Shanghai index +16% (2000 in Sep 00) “Innovation is the trump card of our success.” – Wang Minghui, Chairman/President “稳中央,突两翼” Yunnan Baiyao is invented in Yunnan in 1902 by herb collector Qu Huanzhang (曲焕章) (1880-1938) and carries theseemingly contradictory effects of both helping blood to clot and promoting circulation of blood through the body. Yunnan Baiyao pills are rumored to have first come to the attention of the United States during the Vietnam War.American soldiers are said to have discovered Vietcong soldiers carrying small brown spherical pills of Chinese originthat when eaten allowed them to survive otherwise mortal gunshot wounds. Yunnan Baiyao is one of the most famous herbal medicines in China and the secrecy surrounding its ingredientscarries a similar mystique to the Coca-Cola formula. Baiyao is one of the only two Class-1 protected traditionalmedicine and a “National Treasure”. Qu was murdered by KMT party leaders in 1938 when he refused to divulge the secret prescription. He was 58.After ROC was formed, his wife Liao Lanying donated the secret prescription to the government in 1956. 5(1) Buffett + Bosch + Baiyao (2) Mental Model: Bamboo Innovator (3) Boobytraps in the Asian Capital Jungle (4) An Asian Stock Discussion
  6. 6. “Nobody in China – and the world - can copy our Bamboo nnovatortoothpaste!” ….. “Who would be out of their mind to buy a R.E.S.-ilience in Value Creation20-dollar toothpaste?” Intangible know-how in hemostasis (blood clot & circulation) that scaled from drugs to transdermal (pain-reliefaerosols, adhesive bandages, ointment) to toothpaste (inc daily personal care products such as shampoo, body wash,facial masks, cosmetics, functional sanitary napkins). Experts predict Baiyao’s death in its “innovation” dream in expanding into toothpaste: (1) Fighting MNCs establishedforeign brands, (2) Zero experience in FMCG, (3) High ASP at RMB 20, five to ten times more expensive than peers. Toothpaste sales reached RMB 1.6 billion in 2012 (industry sales RMB 20bn), up from RMB 3 million in 2005-06.Pricing power: Toothpaste price has climbed to RMB 28. Baiyao has eight billion-dollar brand products. Sales contribution: Drugs (19%), Consumer (59%), Health (11%),Transdermal (8%), Others (3%) “Open innovation” business model: Baiyao partners with German Beiersdorf ($20b mkt cap, PE 32x, PS 2.6x, PB 4.7x)in wound-care and transdermal products, with 3M ($70b mkt cap, PE 15x, PS 2.4x, PB 4x) etc.. 6(1) Buffett + Bosch + Baiyao (2) Mental Model: Bamboo Innovator (3) Boobytraps in the Asian Capital Jungle (4) An Asian Stock Discussion
  7. 7. Mental Model: Bamboo InnovatorBamboos Bend, Not Break in the wildest storms that snapped the mighty resisting Bamboo nnovator R.E.S.-ilience in Value Creationoak trees; it survives and therefore it conquers. “The first rule is that you can’t A “Good-to-Great” checklist really know anything if you just approach might overlook the remember isolated facts and try Empty hollow center resilient Bamboo Innovators. and bang them back. If the facts After all, there are much larger don’t hang together on a impressive trees in the forest. By latticework of theory, you don’t comparison a bamboo looks smaller, thinner, and fragile. The have them in a usable form. list of Bamboo Innovators is a Youve got to have models in surprising one; many of them are your head. And youve got to not the typical ones that one array your experience - both would come across. vicarious and direct - on this latticework of models.” – Charles Munger, “A Lesson on Elementary, Worldly Wisdom As It Relates To Investment R “Rootedness” in cultivating a culture of kindness, trust and Management & Business ”, USC Rootedness cooperation to contend with and heal creative dissent and incentivize innovative experimentations Business School, 1994 “Emptiness” in taking flight with “indestructible intangibles” and E Emptiness a simple yet elegant “core-periphery” business model that imbue the periphery with distributed intelligence to sense its own state, sense its environment for new opportunities, anticipate disruptions, and respond locally to dynamically modulate its scale. “Sheath” in leadership to create the context, adaptive-govern, S coordinate, synthesize and weave diverse networks and groups Sheath who might otherwise be excluded into a coherent whole, rather than the typical command-and-control “positional/title-based” leadership. 7(1) Buffett + Bosch + Baiyao (2) Mental Model: Bamboo Innovator (2) Mental Model: Bamboo Innovator (3) Boobytraps in the Asian Capital Jungle (4) An Asian Stock Discussion
  8. 8. iBamboo! Electricity-free, wire-free… Bamboo nnovator R.E.S.-ilience in Value Creationhttp://ibamboospeaker.com/: iBamboo is an electricity-free speaker madefrom a single piece of bamboo -- a natural material. The natural resonanceof the bamboo amplifies the sound produced by the built-in speaker in theiPhone 4/4S and the iPhone 5. iBamboo is 100% eco-friendly, efficient tomanufacture, and produces little waste. These speakers combine the high-tech of the modern day with the simplicity and aesthetics of nature. Sincebamboo is a natural material, no two iBamboos are alike. Every piece hasthe same functional parameters, but each one is unique in its appearanceand beauty. As an added benefit, iBamboo improves the feng-shui of yourdesk or any other environment in which it finds itself. 8(1) Buffett + Bosch + Baiyao (2) Mental Model: Bamboo Innovator (3) Boobytraps in the Asian Capital Jungle (4) An Asian Stock Discussion
  9. 9. American Bamboo Innovators: Not Your Typical List… Bamboo nnovator R.E.S.-ilience in Value Creation S&P 500 index Ticker: ORLY 9(1) Buffett + Bosch + Baiyao (2) Mental Model: Bamboo Innovator (2) Mental Model: Bamboo Innovator (3) Boobytraps in the Asian Capital Jungle (4) An Asian Stock Discussion
  10. 10. American Bamboo Innovators: Not Your Typical List… Bamboo nnovator R.E.S.-ilience in Value Creation S&P 500 index Ticker: SHW 10(1) Buffett + Bosch + Baiyao (2) Mental Model: Bamboo Innovator (2) Mental Model: Bamboo Innovator (3) Boobytraps in the Asian Capital Jungle (4) An Asian Stock Discussion
  11. 11. American Bamboo Innovators: Not Your Typical List… Bamboo nnovator R.E.S.-ilience in Value Creation S&P 500 index Ticker: ODFL 11(1) Buffett + Bosch + Baiyao (2) Mental Model: Bamboo Innovator (2) Mental Model: Bamboo Innovator (3) Boobytraps in the Asian Capital Jungle (4) An Asian Stock Discussion
  12. 12. American Bamboo Innovators: Not Your Typical List… Bamboo nnovator R.E.S.-ilience in Value Creation S&P 500 index Ticker: RKT 12(1) Buffett + Bosch + Baiyao (2) Mental Model: Bamboo Innovator (2) Mental Model: Bamboo Innovator (3) Boobytraps in the Asian Capital Jungle (4) An Asian Stock Discussion
  13. 13. American Bamboo Innovators: Not Your Typical List… Bamboo nnovator R.E.S.-ilience in Value Creation S&P 500 index Ticker: BCPC 13(1) Buffett + Bosch + Baiyao (2) Mental Model: Bamboo Innovator (2) Mental Model: Bamboo Innovator (3) Boobytraps in the Asian Capital Jungle (4) An Asian Stock Discussion
  14. 14. “Emptiness” in Business Model Analysis(1) “Indestructible Intangibles”: Know-How, Trust and Support in Community Bamboo nnovator R.E.S.-ilience in Value Creation(2) “Core/Periphery” Network: Decentralization/Empowerment, Technology(3) “Open Innovation” Low barriers to entry to open an auto parts and repair services shop. As the number of shops increase, so too do the inventory, type of products, management issues etc. To run a chain of thousands of shops takes a decentralized core/periphery system. Leveraging upon the technology and 23 distribution centers (DC) system at the “core”, the 4000 “periphery” stores keep few inventory and tie up less working capital with greater agility to respond to and focus on servicing customers’ needs such as fast availability of hard-to- find parts which can be delivered fast from the “core” to capitalize on “long-tail” demand, managing 120,000 SKUs per DC (twice the industry average) and yet increasing “Emptiness” in business model is perhaps far higher inventory turn while fulfilling customer requests all the time. A primary factor the most misunderstood and underrated for DIY and DIFM commercial customers is parts availability. Each store inventory is virtue in resilient growth and value modeled to match the specific market demographic. creation. Bamboos are among the fastest- growing plants in the world. The vitality of Traditional paint manufacturers used to package all the possible different colors in its growth revolves around its “emptiness”. paint cans and ship them to the retail store. This made it very difficult to forecast the Instead of sanely constructing itself inch variety of colors and also created stockpiles of inventory. Sherwin Williams underwent a by solid inch like trees, soberly climbing decentralization process in empowering decision-making at the store level for its 4000 into the contested forest air, bamboo over stores. Only primary colors are shipped and colors are mixed on-site at the retail sprints sunward to complete stature in store based on customer demand. Controlled distribution to have direct relationship with about two months. After this initial vertical the customer/end user enables pricing responsiveness and accounts for 70% of burst, bamboo unfolds branches and consolidated sales. uncoils leaves to capture the sunlight it leapt up to get. The nutrients and Old Dominion, founded by the Congdon family in 1934, operates in the tough LTL (less- moisture that would have been exhausted than-load) niche with a hub-and-spoke system with 219 shipping centers to do both long- making and maintaining this empty center haul loads and short distances and serve over 48,000 direct points in US and Canada. can be utilized for growth of other culms. Most long-haul truckers pick up and deliver and dont need to own warehouses. Whether As a survival tactic among many plant cans of tomatoes or cases of machine parts, shipments get the white-glove treatment at species reaching up to compete for Old Dominion. Old Dominion keeps its focus on employees, paying them well, showing available light, the growth pattern of flexibility when they have personal needs and using consistent management - so every bamboo is shrewdly designed. From a worker knows how to do his job. Workers load trucks and also can drive them and builder’s viewpoint, the architecture of the supervise other loaders. Its part of the training the company emphasizes to keep bamboo culm presents a powerful workers engaged and productive. Old Dominion gives workers the tools and the time to configuration: fibers of greatest strength fit boxes precisely, cushioning them with inflated brown paper pillows. As forklifts pull up occur in increasing concentration toward with pallets, operators tap their touch screens to enter each step into a mainframe the periphery of the plant. computer. Over time, that information, entered by every person touching a shipment, builds a database that top managers can use to shape Old Dominions entire system. 14(1) Buffett + Bosch + Baiyao (2) Mental Model: Bamboo Innovator (2) Mental Model: Bamboo Innovator (3) Boobytraps in the Asian Capital Jungle (4) An Asian Stock Discussion
  15. 15. “Emptiness” in Business Model Analysis(1) “Indestructible Intangibles”: Know-How, Trust and Support in Community Bamboo nnovator R.E.S.-ilience in Value Creation(2) “Core/Periphery” Network: Decentralization/Empowerment, Technology(3) “Open Innovation” Intangible know-how in packaging that is leveraged into its lucrative in-store merchandising point-of-purchase display which is critical to the customers’ success Innovation: Design, creative, retail insights, new technology, supply chain solutions, IT, global partnerships, world-class efficiencies to drive clients’ ROI Merchandise display is the fastest growing division in Rock-Tenn and this “periphery” is able to tap on and integrate the “core” corporate resources of low-cost efficient packaging products to deliver an innovative service/solution. The alternating pattern of intangible (hollow emptiness) internodes and Intangible know-how in microencapsulation protective coating designed tangible (solid) nodes gives the bamboo culm great strength, light weight and to “control, protect, and deliver” a wide range of ingredients. flexibility in a raging storm. The upward Encapsulation controls undesirable chemical interactions in foods, climb of the bamboo is attained by supplements and pharmaceutical actives, thereby improving product throwing a horizontal truss across at quality and extending shelf life. This intangible “emptiness” is leveraged distances carefully determined by stress upon to applications in food, pharma, nutritional ingredient markets, as levels in the ascending culm, hence the expression “the bamboo blossoms at ever well as in the animal nutrition and health (eg nutritional products for dairy higher nodes”. cows to boost health and milk production). Balchem also provides “packaged” chemicals for use by contract sterilizers of medical devices and for fumigation of spices and nut meats. 15(1) Buffett + Bosch + Baiyao (2) Mental Model: Bamboo Innovator (2) Mental Model: Bamboo Innovator (3) Boobytraps in the Asian Capital Jungle (4) An Asian Stock Discussion
  16. 16. Bamboo nnovator R.E.S.-ilience in Value Creation Rootedness in Kindness Culture: An Asian or Singapore culture will definitely be “unkind” to this image (if it ever exists) in a “professional” presentation by a listed company! The typical culture showcases “title-based, pedigree and positional leadership” and “teamwork” is defined as having a few rainmaker/dealmakers at the top who bring in the dough and the rest to carry out instructions efficiently… 16(1) Buffett + Bosch + Baiyao (2) Mental Model: Bamboo Innovator (3) Boobytraps in the Asian Capital Jungle (4) An Asian Stock Discussion
  17. 17. So It’s About Technology? What’s the Big Deal Then? Can Bamboo nnovatorAlways “Make Money” First, Invest in Technology Later… R.E.S.-ilience in Value Creation K-Mart declared bankruptcy on Jan 22, 2002; cheap gets cheaper, cigar-butt value trap with the halo of a successful founding entrepreneur. Ironically, IT investments was the tipping point factor that “killed” Kmart. It spent US$2b in 2000/01 – and using IBM, the same IT supplier as Wal-Mart. Key Is discipline and integrating technology into business model to achieve “emptiness”: Wal-Mart shared its info with supplier in exchange for greater discounts to integrate with its EDLP business strategy, whilst Kmart simply “invest” and “collect data” without a purpose! "I think I was successful because I saved and because I heeded good advice … I worked—and I didnt work only eight hours a day, but sometimes 18 hours. When one starts at the bottom and learns to scrape, then everything becomes easy." - The pioneering hardworking and frugal Kmart founder SS Kresge (1867-1966), who had assets the equivalent of around US$6.5bn in today’s term by 1924 17(1) Buffett + Bosch + Baiyao (2) Mental Model: Bamboo Innovator (2) Mental Model: Bamboo Innovator (3) Boobytraps in the Asian Capital Jungle (4) An Asian Stock Discussion
  18. 18. Wal-Mart: Scaling in a Tough Industry by Technology Bamboo nnovator R.E.S.-ilience in Value Creation Kmart was bigger in 70s and 80s. 1975 100 $340M Busy acquiring Furr’s Cafeterias of Texas, Bishop’s Buffet chain, pizza-video parlors, Payless Stores Sales Drug Stores, the Sports Authority, and OfficeMax as outlets for its retained earnings. IBM; Electronic By the end of 80s, Kmart was at least ten years cash registers; $1B behind Wal-Mart in its operational capabilities. 1977 Electronic order Sales in 1979 As Kmart fell ever further behind, its need for from supplier outside-of-the-core growth platforms became a self-fulfilling prophecy. Wal-Mart now collects more data about Bar codes; stores $10B consumers than anyone in the private sector. 1983 were networked with satellite Sales Wal-Mart mined this data into actionable business intelligence to ensure that consumers have the products they want, when they want them, and at the right price. $100B For example, they have learned that before a 1992 Retail Link Sales in 1995 hurricane, consumers stock up on food items that do not require cooking or refrigeration. 18(1) Buffett + Bosch + Baiyao (2) Mental Model: Bamboo Innovator (2) Mental Model: Bamboo Innovator (3) Boobytraps in the Asian Capital Jungle (4) An Asian Stock Discussion
  19. 19. Bamboo nnovator R.E.S.-ilience in Value Creation 19(1) Buffett + Bosch + Baiyao (2) Mental Model: Bamboo Innovator (3) Boobytraps in the Asian Capital Jungle (4) An Asian Stock Discussion
  20. 20. What “Emptiness”! It’s All About Having Resources and Bamboo nnovatorTangible Assets! Pour Enough Water (Money) and the R.E.S.-ilience in Value CreationBehold the Powerful Tree! George Perry, Chairman Robert Wildman, Donald EVP Thomas, VP Frank Thomas, President of AE Larkin, President of Burger Chef General Foods This 1968 photo was taken in White Plans, New York, on the occasion of the formal signing of papers making Burger Chef Systems a wholly-owned subsidiary of General Foods Corporation. It had 1,200 stores vs McDonald’s 970, and opening at thrice the rate. “Water enough money into any company, even a fake one could become real some day.” – “Confessions of a S-Chip (Singapore-listed Chinese company) CEO”, April 24, 2009 20(1) Buffett + Bosch + Baiyao (2) Mental Model: Bamboo Innovator (2) Mental Model: Bamboo Innovator (3) Boobytraps in the Asian Capital Jungle (4) An Asian Stock Discussion
  21. 21. More Resources/Tangible Assets, More Weaknesses? Bamboo nnovator R.E.S.-ilience in Value Creation Robert Wildman: “We sold out to General Foods because we thought they could finance our faster growth. It didn’t work out that way. They were used to running a Jell-O factory, filling up boxes and building demand through advertising. Our business was foreign to General Foods managers, who were inexperienced in dealing directly with consumers and with service people. When General Foods managers were assigned to Burger Chef, they felt as if they were being sent to Siberia. By 1971, it was obvious to everyone that Burger Chef’s expansion program was out of control: General Foods brought new store development to a screeching halt and took a $75 million write-off on its fast-food operation. In a single year, General Foods had managed to lose more money in the hamburger business than McDonald’s had earned in the preceding decade. Fast-food business was WHY? HOW? not the source of easy money that they had thought it was. We were in no position to duplicate McDonald’s “Emptiness”: Trust & base of entrepreneurial operators.” Support in Community 21(1) Buffett + Bosch + Baiyao (2) Mental Model: Bamboo Innovator (2) Mental Model: Bamboo Innovator (3) Boobytraps in the Asian Capital Jungle (4) An Asian Stock Discussion
  22. 22. Bamboo Innovators Are Easily Overlooked… Having a Bamboo nnovatorR.E.S.-ilient Mental Model Helps! R.E.S.-ilience in Value Creation One of the Greatest Enigmas in Value Investing: Why Didn’t Buffett Make McDonald’s a “Forever” Stock Like Coke? “It is a tougher business over time. People don’t want to be eating – exception to the kids when they are giving away Beanie Babies or something – at McDonald’s every day. If people drink five Cokes a day, they probably will drink five of them tomorrow.” “I like the products that stand alone absent price promotions or appeals although you can build a very good business based on that.” - Buffett’s reply in Oct 98 when asked whether he would buy McDonald’s and go away for 20 years. Berkshire Hathaway did purchase McDonald’s in 1995/6 when it was probably around US$17 to 20 billion, but Buffett sold in 1997/8 at around US$26 to 30 billion. Although McDonald’s grew to US$50 billion around a year later, it started its precipitous trend to fall to US$13 billion by February 2002 as it posts its first ever quarterly loss. $96B $18B 32,000 75% Independent Mkt Cap McProperty Restaurants Entrepreneurs 22(1) Buffett + Bosch + Baiyao (2) Mental Model: Bamboo Innovator (2) Mental Model: Bamboo Innovator (3) Boobytraps in the Asian Capital Jungle (4) An Asian Stock Discussion
  23. 23. American Bamboo Innovators: Not Your Typical List… Bamboo nnovator R.E.S.-ilience in Value Creation S&P 500 index 23(1) Buffett + Bosch + Baiyao (2) Mental Model: Bamboo Innovator (2) Mental Model: Bamboo Innovator (3) Boobytraps in the Asian Capital Jungle (4) An Asian Stock Discussion
  24. 24. “Emptiness” in Trust and Support from Community of Bamboo nnovatorCustomers/Suppliers/Partners… R.E.S.-ilience in Value Creation “I know we have the only clean, “This is going to be probably one of the most honest franchise.” competitive businesses in the U.S. and we have the only real solid approach to this business. The other ones are going to die like flies. They are rackets. They are fast-buck deals. Those fellows [the franchisees] are going to do any doggone thing they want to do, and the owners of the name are just going to let them do anything they want as long as they are McDonald’s “Rootedness” = No Kickbacks + No Up- getting money out of it. It will be a survival of front Fees + No Side Income + Sacrifice Quick Franchising the fittest, and we are going to be on the top Profits = Truly care about subsequent performance of partners. of the list of the fittest”. McDonald’s “emptiness” and a culture/system that “I want nothing from you but a good product. cultivates and acts upon ideas from the “periphery”: Big Don’t wine me, don’t dine me, don’t buy me Mac, Apple Pie, Fillet-O-Fish, Egg McMuffin, Chicken McNuggets, Happy Meal, “You Deserve a Break.” etc any Christmas presents. If there are any cost Flops (eg fried chicken, pasta, fajita, pizza, McLean breaks, pass them on to the operators of Deluxe, Arch Deluxe) were introduced from the central McDonald’s stores.”. HQ… same for “My McDonald’s” campaign. Ray Kroc was 59 years old when he bought McDonald’s in 1961 for US$2.7m (Very pricey valuations then!). 24(1) Buffett + Bosch + Baiyao (2) Mental Model: Bamboo Innovator (2) Mental Model: Bamboo Innovator (3) Boobytraps in the Asian Capital Jungle (4) An Asian Stock Discussion
  25. 25. How About Asia? Japan? Strong Yen = Death of Exports Bamboo nnovator(“Endaka Fukyo”)?; Samsung ($200B Mkt Cap) = 2X Japan’s R.E.S.-ilience in Value CreationCOMBINED Big Five (Sony, Panasonic, Fujitsu, Sharp, NEC)! 25(1) Buffett + Bosch + Baiyao (2) Mental Model: Bamboo Innovator (2) Mental Model: Bamboo Innovator (3) Boobytraps in the Asian Capital Jungle (4) An Asian Stock Discussion
  26. 26. Do You Want to be the CEO of Keyence (<1% global market Bamboo nnovatorshare, 3000 employees) or Nidec (#1 global market share R.E.S.-ilience in Value Creation>80%, 100,000 employees)? “Services/Solutions” V.S. “Products” Employees: Employees: “My firm belief is that if you are 3,000 100,000 number two, you are the bottom “Keep aiming high or youll of the pile. When I travel by air, become a fossil.” - A 350-million- my seat is always number one. In year-old ammonite fossil is the shinkansen bullet train, I displayed at the entrance of the always sit in seat number one. Japanese headquarters; other This building were in now is the fossils of long-dead creatures number one tallest building in align the corridors and meeting Kyoto. So it should come as no rooms. surprise that my technology is also number one.” Keyence’s founder Takemitsu Takizaki Nidec’s founder Shigenobu Nagamori Keyence: Laser sensors for Factory Automation (FA) Nidec: 80% global market share in HDD spindle motor 26(1) Buffett + Bosch + Baiyao (2) Mental Model: Bamboo Innovator (2) Mental Model: Bamboo Innovator (3) Boobytraps in the Asian Capital Jungle (4) An Asian Stock Discussion
  27. 27. Nidec (1973, $8.4B) Vs Keyence (1974, $17.3B): Both Are Bamboo nnovatorGreat Companies Forged From the “Strong Yen” Period R.E.S.-ilience in Value Creation(1968-2000) When USD/Yen Went From 350 to 100 Nikkei index 27(1) Buffett + Bosch + Baiyao (2) Mental Model: Bamboo Innovator (2) Mental Model: Bamboo Innovator (3) Boobytraps in the Asian Capital Jungle (4) An Asian Stock Discussion
  28. 28. Nidec (1973, $8.4B) Vs Keyence (1974, $17.3B): Both Are Bamboo nnovatorGreat Companies Forged From the “Strong Yen” Period R.E.S.-ilience in Value Creation(1968-2000) When USD/Yen Went From 350 to 100 Nikkei index Nidec used to be as big, or even bigger than Keyence in terms of market cap. Now, Keyence is double that of Nidec. 28(1) Buffett + Bosch + Baiyao (2) Mental Model: Bamboo Innovator (2) Mental Model: Bamboo Innovator (3) Boobytraps in the Asian Capital Jungle (4) An Asian Stock Discussion
  29. 29. Keyence: Laser in Instant Noodles (Turning Commoditized Bamboo nnovatorLaser Sensor Products to Knowledge); “Emptiness” in R.E.S.-ilience in Value CreationDecentralization/Empowerment “Emptiness”/ Conventional Knowledge Focus on Observation of customer: manufacturing, leave Instant noodle thickness consistent? sales to distributors, R&D: Laser sensor that wholesalers and agents could measure noodle to 1/100th of a millimeter 25% 100,000 $18B 3,000 >$100K Sales from Customers Mkt Cap Employees Average Pay new products 29(1) Buffett + Bosch + Baiyao (2) Mental Model: Bamboo Innovator (2) Mental Model: Bamboo Innovator (3) Boobytraps in the Asian Capital Jungle (4) An Asian Stock Discussion
  30. 30. Kakaku.com ($2.2B) & M3 ($2.8B): “Emptiness” in Trust & Bamboo nnovatorSupport from Community R.E.S.-ilience in Value Creation Nikkei index $2.2B Mkt Cap 30(1) Buffett + Bosch + Baiyao (2) Mental Model: Bamboo Innovator (2) Mental Model: Bamboo Innovator (3) Boobytraps in the Asian Capital Jungle (4) An Asian Stock Discussion
  31. 31. Kakaku.com ($2.2B) & M3 ($2.8B): “Emptiness” in Trust & Bamboo nnovatorSupport from Community R.E.S.-ilience in Value Creation Nikkei index $2.8B Mkt Cap 31(1) Buffett + Bosch + Baiyao (2) Mental Model: Bamboo Innovator (2) Mental Model: Bamboo Innovator (3) Boobytraps in the Asian Capital Jungle (4) An Asian Stock Discussion
  32. 32. Kakaku.com ($2.2B) & M3: “Emptiness” in Trust & Support Bamboo nnovatorfrom Community R.E.S.-ilience in Value Creation Kakaku.com was started in 1997 by Mitsuaki Makino as a website which lists the retail prices of Akihabara, the Japanese electric market. Building upon its intangible quality – its trustworthiness and reliability amongst the Japanese community of consumers, wholesalers and retailers as an informative site which shows the best deals of electrical products – Kakaku.com is able to grow into new areas such as insurance, forex currency trade and finance site, restaurant ranking gourmet site tabelog, word-of-mouth travel site 4travel, last minute hotel reservation site yoyaQ.com, real estate and housing information sites Summaity and Mansion DB and so on M3 started out with its core MR-kun service, which is like a Google for medical professionals, used as a marketing tool by pharmaceutical companies to provide consistent, repeated delivery of information on products and diseases. MR-kun also provides a channel for companies to receive questions and feedback from doctors, strengthening company/doctor relations. Pharmaceutical companies signed up for MR-kun pay a basic annual fee of ¥70 to ¥100 million ($0.75 to 1 million) per electronic “e-detailing message,” which is the online equivalent of a sales visit by a MR (medical representative) to a physician’s clinic. In the pharmaceutical industry a sales visit by an MR to a doctor’s clinic is called a detail. M3 also charges fees for the production of promotional content and receives fees for other services such as facilitating the exchange of messages between pharma company MRs and their physician clients. A dominant platform used by 80% of Japan’s physicians, MR-kun is rated by over 92% of its users who said its usage “deepened their knowledge of diseases”. With this intangible trust built up amongst the community of users, M3 is able to leverage this relationship with its members to develop new online tools. These include online tools in clinical trials to determine the feasibility of trials and help with patient recruitment, market research and survey panels, and online job search and career information site for member doctors and pharmacists. M3 even expanded from B2B to B2C by providing a range of services for consumers including AskDoctors.jp, a subscription service that gives patients a chance to ask doctors questions about their ailments, and iTicket, whose more than 500,000 members use the service to make reservations at clinics. 32(1) Buffett + Bosch + Baiyao (2) Mental Model: Bamboo Innovator (2) Mental Model: Bamboo Innovator (3) Boobytraps in the Asian Capital Jungle (4) An Asian Stock Discussion
  33. 33. Kewpie ($2B), Heinz of Japan, “Mayonnaise King”: Bamboo nnovator“Emptiness” in Know-How R.E.S.-ilience in Value Creation Nikkei index $2B Mkt Cap 33(1) Buffett + Bosch + Baiyao (2) Mental Model: Bamboo Innovator (2) Mental Model: Bamboo Innovator (3) Boobytraps in the Asian Capital Jungle (4) An Asian Stock Discussion
  34. 34. Kewpie ($2B), Heinz of Japan, “Mayonnaise King”: Bamboo nnovatorLeveraging “Emptiness” in Deep Intangible Know-How R.E.S.-ilience in Value CreationAbout Eggs to Scale from Mayonnaise to Fine ChemicalsUsed in Medical Treatment Kewpie leveraged upon its deep intangible knowledge about eggs, the main ingredient of mayonnaise, from handling over 10% (250,000 tonnes) of eggs in Japan over two decades, to pursue the full use of eggs to expand into new product categories and new customer segments without breaking the stress levels of the business model. Through fusing the proprietary technologies, products, information and marketing channels of the group akin to the alternating pattern of bamboo internodes and nodes, the resilient growth at Kewpie came from creating related table-top dressing and kitchen- use products in salad condiments, salads and cut vegetables, ready-made delicatessen, and cultivating latent demands such as nursing care food products for the elderly and baby food. In its fine chemical products business, Kewpie develops medicine stabilization technology using egg-yolk lecithin capsules and extracts hyaluronic acid from eggs that is used in cosmetics and in the medical treatment to strengthen functions in joints, such as knee osteoarthritis, and dry eye. 34(1) Buffett + Bosch + Baiyao (2) Mental Model: Bamboo Innovator (2) Mental Model: Bamboo Innovator (3) Boobytraps in the Asian Capital Jungle (4) An Asian Stock Discussion
  35. 35. A Favorite Due-Diligence Question for Asian Entrepreneurs Bamboo nnovator& Managers R.E.S.-ilience in Value Creation Most Asian companies are “one-man-shop” operations with the founder making all the decisions; the willingness to build a culture of decentralization/ empowerment and invest in a system to cascade decision rights throughout the organization is an important signal that the founder desires and cares to scale up the company in a sustainable manner by not hoarding knowledge. Technology is an important tool in empowering the employees and in giving them an informational advantage in their respective roles and responsibilities at work. “Once we had those scanners in the stores, we had all this data pouring into Bentonvile over phone lines. I like my numbers as quickly as I can get them. The quicker we get that information, the quicker we can act on it. What I like about it is the kind of information we can pull out of it on a moment’s notice.” – Sam Walton 35(1) Buffett + Bosch + Baiyao (2) Mental Model: Bamboo Innovator (2) Mental Model: Bamboo Innovator (3) Boobytraps in the Asian Capital Jungle (4) An Asian Stock Discussion
  36. 36. Bamboo nnovator Quick Summary R.E.S.-ilience in Value Creation 36(1) Buffett + Bosch + Baiyao (2) Mental Model: Bamboo Innovator (3) Boobytraps in the Asian Capital Jungle (4) An Asian Stock Discussion
  37. 37. (1) Does the Company Have Bamboo nnovator R.E.S.-ilience in Value Creation Indestructible Intangibles?(A) Know-How (B) Trust and Support in Community 37 (1) Buffett + Bosch + Baiyao (2) Mental Model: Bamboo Innovator (3) Boobytraps in the Asian Capital Jungle (4) An Asian Stock Discussion
  38. 38. (A) Decentralization/ (2) Does the Company Bamboo nnovator Empowerment ilience in Value Creation R.E.S.- Have a Core-Periphery (B) Technology Business Model?“If you cut off a spider’s head, it dies; if you cutoff a starfish’s leg it grows a new one, and thatleg can grow into an entirely new starfish.Traditional top-down organizations are likespiders, but now starfish organizations arechanging the face of business and the world.” 38 (1) Buffett + Bosch + Baiyao (2) Mental Model: Bamboo Innovator (3) Boobytraps in the Asian Capital Jungle (4) An Asian Stock Discussion
  39. 39. (3) Does the Company Bamboo nnovator Have “Open Innovation”? R.E.S.-ilience in Value Creation 39(1) Buffett + Bosch + Baiyao (2) Mental Model: Bamboo Innovator (3) Boobytraps in the Asian Capital Jungle (4) An Asian Stock Discussion
  40. 40. Asia: Monolithic Bloc? Land Mass/Mess for Value Investors Bamboo nnovatorWithout a (R.E.S.-ilient) Mental Model? R.E.S.-ilience in Value Creation Exchange Median Mean Mkt Cap <S$1B Total Mkt Cap Mkt Cap % by No. % by Value Mkt Cap (S$M) (S$M) (S$B) Singapore 78 1,072 88% 11% 735 Malaysia 46 644 91% 15% 562 Indonesia 172 1,243 80% 13% 512 Thailand 109 1,109 84% 13% 616 HK 195 3,445 76% 5% 5,054 Taiwan 88 577 92% 25% 974 Korea 85 780 91% 15% 1,350 India 52 533 >90% 13% 1,545 Singapore Australia 58 1,410 >87% 8% 1,673 Source: Bloomberg data in early Dec 2012. Data includes “common stocks” only and excludes stocks which are too illiquid, inactively traded or suspended. Source: “Asian rise in borrowings ring Observation: Many companies are still stuck in “Stage 1” of some alarms”, WSJ, 21 Dec 2012 their corporate lifecycle. Presently in Asia, the median listed company size is around S$50 to 100m, and a significant number (>80%) of companies are below the billion dollar mark in market cap. What does this mean for value investors in Asia? US is Asia is Homogenous = Heterogeneous More Scalable 40(1) Buffett + Bosch + Baiyao (2) Mental Model: Bamboo Innovator (3) Boobytraps (3) Booby Traps in the Asian Capital Jungle (4) An Asian Stock Discussion
  41. 41. The Revenge of the Geographical Value Investor; Bamboo nnovatorBusiness Models Need “Emptiness” to Overcome R.E.S.-ilience in Value CreationGeographical Limitations in Asia and Scale Up “Suppose that I am told that a certain sample of wheat comes from Lahore, and that I do not know where Lahore is. I look it out in the gazetteer and ascertain that it is the capital of the Punjab. If I know nothing of geography, I shall get up with the idea that Lahore is in India, and that will be about it. If I have been properly trained in geography, the word Punjab will probably connote to me many things. I shall see Lahore in the northern angle of India. I shall picture it in a great plain, at the foot of a snowy range, in the midst of the rivers of the Indus system. I shall think of the monsoons and the desert, of the water brought from the climate, the seed time, and the harvest. Karachi and the Suez Canal In his provocative book “The Revenge of Geography: What the Map Tells Us About will shine out from my mental map. I shall be able to Coming Conflicts and the Battle Against calculate at what time of the year the cargoes will be Fate”, Stratfor’s Chief Geopolitical Analyst delivered in England. Moreover, the Punjab will be to Robert Kaplan cited the example of the me the equal in size and population of a great great British geographer Halford European country, a Spain or an Italy, and I shall Mackinder who gave a singular example in appreciate the market it offers for English exports.” 1890 of how knowledge of “geography” enriches one’s thinking on world affairs 41(1) Buffett + Bosch + Baiyao (2) Mental Model: Bamboo Innovator (3) Boobytraps (3) Booby Traps in the Asian Capital Jungle (4) An Asian Stock Discussion
  42. 42. Why Does India Have So Few Listed Internet Companies Bamboo nnovatorCompared to China? The Wisdom of Lee Kuan Yew… R.E.S.-ilience in Value Creation "Will India have an advantage, some argue, because it’s a democracy and China is not?" asked Charlie Rose. $480M "Let me put it this way," replied Lee Kuan Yew. "If Mkt Cap India were as well-organized as China, it will go at a different speed, but it’s going at the speed it is because it is India. It’s not one nation. It’s many nations. It has 320 different languages and 32 official languages. So no prime minister in Delhi can at any one time speak in a language and be $700M understand throughout the country. You can do Mkt Cap that in Beijing." Most phones sold in India come with English-language operating system software. Despite India’s reputation as an Anglophone nation, only a tenth of its 1.2 billion people count English as their first, second or third language. A few phone-makers, notably Nokia, have tried adding Hindi, India’s most widely used language, to their operating systems and physical keypads. It didn’t catch on, in large part because with three dozen consonants, 10 vowels, assorted symbols and innumerable combinations thereof, Hindi is not very user friendly on just 12 keys. India has the world’s largest mobile phone market after China. Yet the amount of money mobile networks make per user is among the lowest in the world: around $2 per month. Chinese carriers such as China Mobile make five times as much. AT&T rakes in $65 per user per month in the US. 42(1) Buffett + Bosch + Baiyao (2) Mental Model: Bamboo Innovator (3) Boobytraps (3) Booby Traps in the Asian Capital Jungle (4) An Asian Stock Discussion
  43. 43. Bamboo nnovatorIndia: Parsi Power! Parsi Bamboo Innovators R.E.S.-ilience in Value Creation $1.4B $4.1B Mkt Cap Mkt Cap $4.7B $56.8B Mkt Cap Mkt Cap The Parsis settled in Mumbai in the 1640s when the city was under Portuguese control. By the mid 19th-century, Parsi industrialists had launched trading, printing and engineering businesses and in 1854, founded the city’s first commercial bank. The Parsis have a wholly disproportionate influence in Mumbai and India compared to their tiny population. Even the Bombay Stock Exchange building is named after a Parsi - Jeejeebhoy Towers, named after stockbroker Phiroze Jeejeebhoy, the exchanges first president. Globally there are probably no more than 120,000, with the largest group outside Mumbai in Toronto. Tata was founded by a Parsi, Jamshyd Tata, who was brought up in the small, dusty trading town of Navsari on the Gujarat coast. He started a steel business in Eastern India, and from there his successors as Chairmen – Parsis all – have built the company into the megalith it is today. 43(1) Buffett + Bosch + Baiyao (2) Mental Model: Bamboo Innovator (3) Boobytraps (3) Booby Traps in the Asian Capital Jungle (4) An Asian Stock Discussion
  44. 44. Bamboo nnovatorAsian Paints: India’s “Sherwin-Williams” R.E.S.-ilience in Value Creation SENSEX index $7.5B Mkt Cap 44(1) Buffett + Bosch + Baiyao (2) Mental Model: Bamboo Innovator (3) Boobytraps (3) Booby Traps in the Asian Capital Jungle (4) An Asian Stock Discussion
  45. 45. Pitfalls in Asia: Chinnovation ≠ Resilient Compounders Bamboo nnovator R.E.S.-ilience in Value Creation 45(1) Buffett + Bosch + Baiyao (2) Mental Model: Bamboo Innovator (3) Boobytraps (3) Booby Traps in the Asian Capital Jungle (4) An Asian Stock Discussion
  46. 46. Pitfalls in Asia: Chinnovation ≠ Resilient Compounders Bamboo nnovator R.E.S.-ilience in Value Creation 46(1) Buffett + Bosch + Baiyao (2) Mental Model: Bamboo Innovator (3) Boobytraps (3) Booby Traps in the Asian Capital Jungle (4) An Asian Stock Discussion
  47. 47. China’s Tencent: 65X from US$900m (Jun 2004) to US$65bn Bamboo nnovator R.E.S.-ilience in Value Creation Hang Seng index $65B Mkt Cap 47(1) Buffett + Bosch + Baiyao (2) Mental Model: Bamboo Innovator (3) Boobytraps (3) Booby Traps in the Asian Capital Jungle (4) An Asian Stock Discussion
  48. 48. Just Another Copycat? Tencent Monetized IM When Bamboo nnovatorWestern Giants Failed; “Emptiness” in Know-How and R.E.S.-ilience in Value CreationTrust from Community Tencent’s Pony Ma ripped off Instant Messaging (IM) service, QQ, off Israel’s ICQ in 2000 as a free online download. After burning US$1.1m, the two investors that Ma found were anxious to sell their shares. The company was shopped around for nearly any price to China’s largest portals, but no one wanted to waste money on a company doing IM. If the mighty AOL couldn’t make money off IM, who could? Lucky break? China Mobile decided to share a portion of revenue to third-party companies who could boost the number of people buying data plans. Pony Ma offered IM chat messaging at RMB 6c per month per user. Viola! Tencent started to push anything that a mobile user would pay: ringtones, wall paper, horoscopes. Pennies over mobile phones earned Tencent US$6m sales and US$1.2m profits in 2001. Tipping point came when Tencent offered virtual goods – avatars, outfits, pets, and emperor-kids spend pennies and hours collecting. Naspers paid US$30m to buyout 50% of Tencent in 2005 before its listing and now its 35% stake in Tencent is worth >US$13B. Tencent monetized IM when western giants failed and built chat not as a productivity tool but to be a community for bored kids to hang out. 48(1) Buffett + Bosch + Baiyao (2) Mental Model: Bamboo Innovator (3) Boobytraps (3) Booby Traps in the Asian Capital Jungle (4) An Asian Stock Discussion
  49. 49. Kingdee: ERP Software King in China for SMEs; Disrupted Bamboo nnovatorby SAP BusinessOne in 2011… R.E.S.-ilience in Value Creation “Who cares about Lehman crisis?” ? US$12M US$1.6B US$430M 49(1) Buffett + Bosch + Baiyao (2) Mental Model: Bamboo Innovator (3) Boobytraps (3) Booby Traps in the Asian Capital Jungle (4) An Asian Stock Discussion
  50. 50. Bamboo nnovator R.E.S.-ilience in Value Creation SAP struck right at the heart of the customer base of the domestic companies with its locally-developed Business One software targeted at SMEs, backed by the commitment of US$2bn investment and plans to double the workforce by 2015. SAP moved in November last year from Germany its global support organization now headquartered in Beijing. Shares of the domestic ERP software companies were down by 40 to 70% from their 2011 peak as SAP signs up 14 new Business One customers in China everyday on average and SAP shares are trading at their highest in over a decade since the dotcom years. 50(1) Buffett + Bosch + Baiyao (2) Mental Model: Bamboo Innovator (3) Boobytraps in the Asian Capital Jungle (4) An Asian Stock Discussion
  51. 51. Li Ning: Nike of China; Disrupted by Nike in 2011… Bamboo nnovator R.E.S.-ilience in Value Creation HKD 23.70 Nike: Inspiring 2011 campaign in China “Use Sports” (用运动) which aims to show how sports can help people achieve something greater: www.youtube.com/watch?v=2DPNJTcHcmk $650M Mkt Cap Inventory pile-up and rampant discount characterized the state of affairs at Chinese sports retailers as Nike, which has been active in the Chinese market for 30 years, ventures beyond the Tier-1 and 2 coastal cities into the domestic brands’ strongholds in inner China. Sales in China at Nike surpassed US$2bn as at May 2011, doubled from 2007. Nike aims to “just double it” in the next four years as Chinese consumers increasingly lose the taste for domestic brands and quality counterfeits while Nike continues its well-crafted marketing campaigns in introducing more lower-priced products and cultivating its brand cachet at the top-end. Shares of the once- multibagger domestic brands were down by 50 to 80% from their 2010 peak; Nike’s shares hit an all-time high. 51(1) Buffett + Bosch + Baiyao (2) Mental Model: Bamboo Innovator (3) Boobytraps (3) Booby Traps in the Asian Capital Jungle (4) An Asian Stock Discussion
  52. 52. Invest in Asian Fallen Angels whose valuations are Bamboo nnovatortempting? Are they cigar-butt value traps? Asia is now at a R.E.S.-ilience in Value Creationcritical transition point! Kingdee and Li Ning are typical Asian companies with once- successful halo. Share prices have fallen = Valuation becomes more attractive? Catch a falling knife? Cigar-butt value trap? Many once-successful Asian businesses have lost “focus” during the property boom. Many successful and wealthy Asian business owners like to point out in a well-meaning way that those who have used the company’s reserves and profits to invest in property during the recent financial crisis have come out on top of those who stick close to their knitting in their core Easy money, property businesses. and stocks Bleeding quietly in their initial years operating in China, the intense focus at several of these MNCs has hit the tipping point Neglect of knowledge in scaling up the operations, helped in no small part by the accumulation in core business distraction of local entrepreneurs into property and speculative activities, neglecting their core businesses. 52(1) Buffett + Bosch + Baiyao (2) Mental Model: Bamboo Innovator (3) Boobytraps (3) Booby Traps in the Asian Capital Jungle (4) An Asian Stock Discussion

×