Business Times - 04 Aug 2009
Boustead Singapore celebrated its 180th year of existence last year and continues to make record profits, reports VEN SREENIVASAN
WHY do some companies struggle to survive, while others thrive, well over a century after they were established?
It is a question which has preoccupied many management gurus over the years.
And it is a question which was raised again last year as mainboard-listed Boustead Singapore celebrated its 180th year of existence.
Technically, Boustead - which was founded by Englishman Edward Boustead in 1828 - is Singapore's second oldest company, after Guthrie GTS. But Guthrie vanished for several years in the mid-1980s when Malaysian tycoon Tan Koon Swan bought it, then absorbed it into the stable of Malaysian-listed Gamuda. Mr Tan's troubles during the Pan Electric debacle of the mid-1980s forced him to divest Guthrie later, and the company was reincarnated as Guthrie GTS.
So technicalities aside, Boustead today remains the only Singapore-based company which can boast an unbroken lineage of almost two centuries.
Boustead's chairman and group CEO, Wong Fong Fui, cites adaptability. 'Business cycles have been getting shorter and tighter, and a company's survivability depends largely on its ability to adapt to the changes thrown up by these cycles,' he says.
Boustead itself went through numerous economic and business cycles, and world events like the Great Depression, World War ll, and survived numerous political changes in its markets.
When Mr Wong bought up Boustead Singapore in 1996 from Jack Chia-MPH, serious questions were raised about the business sensibilities of a man known at the time as a turnaround artist. This was because Mr Wong paid $85 million for a company whose net worth at the time was just $27 million. And Bousteadco was earning $1 million on a turnover of $60 million.
It was not exactly a characteristic investment coming from a businessman with a 40-year track record and one who had helped to successfully set up a privately owned national airline in Myanmar (which was subsequently taken over by the junta) and transformed mainboard-listed breadmaker QAF into a pan-Asian brand name.
Raw gem
But as Mr Wong put it, although Boustead was struggling, it was still a raw gem. 'This was a company with a great history and pedigree,' he said. 'It was all about how it could be restructured to adapt to the new marketplace.'
Mr Wong quickly set about transforming the company, building up its capabilities in design, engineering, resource management technology and specialist construction.
According to Mr Wong, the survival of his company has been due to its ability to adapt to the new realities after each upheaval: 'A company that succeeds does not simply accept its fate when it hits a very thick wall. Instead, it finds not one but several ways around the wall.'
Indeed, in his book, The Living Company, management guru Arie de Geus, who has studied companies and their survivability over 30 years, argues that successful surviving companies exhibited four key factors.
First is a sensitivity to their operating environment which enables them to learn and adapt quickly to changes occurring around them. The second factor is cohesion and identity. This defines a company's ability to create a strong sense of identity and persona for itself which is essential for survival amid challenges. Thirdly, longevity is also dependent on the company's ability to tolerate decentralisation of control and diversification, and yet maintain strong and cohesive relationships within and outside of itself.
Fourthly, companies which survive tend to be those which are financially conservative. They are frugal and do not risk capital gratuitously. By keeping their proverbial gunpowder dry, they are well equipped to pursue new options and opportunities, and also attract third party financiers.
But Mr Wong adds one more point: technology.
'The role of technology is also critical,' he says. 'The technology that propels you forward now can become an albatross around your neck a decade later. You have to adapt to new technology. Be a master of technology, not a slave to it. The only businesses where you don't have to worry about the impact of changing technology is in the art of fine wine-making. But we are not all wine-makers.'
In May this year, Boustead posted its seventh successive year of record revenue and profit. Besides earnings of $60.1 million on revenue of $516.6 million the company also unveiled a strong order book of almost $600 million, some $150 million in cash and matched its previous year's dividend payout.
This orderbook has continued growing since, with the latest being contracts totalling $27 million from the global oil & gas industries.
Keeping to his mantra of constant change and adaptability, Mr Wong said that his company was starting to change some parts of its business model - yet again.
'The new economic fundamentals, where commodity prices are rising and resources are increasingly scarce, throws up as many opportunities as challenges,' he said. 'We see a shift in economic wealth from the resource hungry West to the resource rich East. And these latter markets are places where we already have a good presence. We have the financial and technological resources and the management expertise to capitalise on the emerging opportunities and extract value for shareholders.'
Like Mr de Geus, Mr Wong is a believer in the theory of corporate evolution for survival. 'There are times when you have to let go of your past glories,' he explained. 'It is the same with companies. A highly successful product or service today may not be successful tomorrow. A stubborn company will try its best to hold onto those products and services even when they are irrelevant. The companies that enjoy longevity do things differently. They evolve. They create a different business and adapt to the prevailing times. Remember, change is the only constant. And in today's context, change produces not only a great deal of opportunities but helps us to survive.'
And a critical factor in all of this is its people, he added. 'It is essential to keep an open mind. If people within a company keep an open mind, they make themselves more adaptable to the diverse situations they will face. An open mind also allows them to bounce ideas off each other and to absorb the ideas that have good potential and which could make a real difference in the survival of the company.'
Boustead Singapore celebrated its 180th year of existence last year and continues to make record profits, reports VEN SREENIVASAN
WHY do some companies struggle to survive, while others thrive, well over a century after they were established?
It is a question which has preoccupied many management gurus over the years.
And it is a question which was raised again last year as mainboard-listed Boustead Singapore celebrated its 180th year of existence.
Technically, Boustead - which was founded by Englishman Edward Boustead in 1828 - is Singapore's second oldest company, after Guthrie GTS. But Guthrie vanished for several years in the mid-1980s when Malaysian tycoon Tan Koon Swan bought it, then absorbed it into the stable of Malaysian-listed Gamuda. Mr Tan's troubles during the Pan Electric debacle of the mid-1980s forced him to divest Guthrie later, and the company was reincarnated as Guthrie GTS.
So technicalities aside, Boustead today remains the only Singapore-based company which can boast an unbroken lineage of almost two centuries.
Boustead's chairman and group CEO, Wong Fong Fui, cites adaptability. 'Business cycles have been getting shorter and tighter, and a company's survivability depends largely on its ability to adapt to the changes thrown up by these cycles,' he says.
Boustead itself went through numerous economic and business cycles, and world events like the Great Depression, World War ll, and survived numerous political changes in its markets.
When Mr Wong bought up Boustead Singapore in 1996 from Jack Chia-MPH, serious questions were raised about the business sensibilities of a man known at the time as a turnaround artist. This was because Mr Wong paid $85 million for a company whose net worth at the time was just $27 million. And Bousteadco was earning $1 million on a turnover of $60 million.
It was not exactly a characteristic investment coming from a businessman with a 40-year track record and one who had helped to successfully set up a privately owned national airline in Myanmar (which was subsequently taken over by the junta) and transformed mainboard-listed breadmaker QAF into a pan-Asian brand name.
Raw gem
But as Mr Wong put it, although Boustead was struggling, it was still a raw gem. 'This was a company with a great history and pedigree,' he said. 'It was all about how it could be restructured to adapt to the new marketplace.'
Mr Wong quickly set about transforming the company, building up its capabilities in design, engineering, resource management technology and specialist construction.
According to Mr Wong, the survival of his company has been due to its ability to adapt to the new realities after each upheaval: 'A company that succeeds does not simply accept its fate when it hits a very thick wall. Instead, it finds not one but several ways around the wall.'
Indeed, in his book, The Living Company, management guru Arie de Geus, who has studied companies and their survivability over 30 years, argues that successful surviving companies exhibited four key factors.
First is a sensitivity to their operating environment which enables them to learn and adapt quickly to changes occurring around them. The second factor is cohesion and identity. This defines a company's ability to create a strong sense of identity and persona for itself which is essential for survival amid challenges. Thirdly, longevity is also dependent on the company's ability to tolerate decentralisation of control and diversification, and yet maintain strong and cohesive relationships within and outside of itself.
Fourthly, companies which survive tend to be those which are financially conservative. They are frugal and do not risk capital gratuitously. By keeping their proverbial gunpowder dry, they are well equipped to pursue new options and opportunities, and also attract third party financiers.
But Mr Wong adds one more point: technology.
'The role of technology is also critical,' he says. 'The technology that propels you forward now can become an albatross around your neck a decade later. You have to adapt to new technology. Be a master of technology, not a slave to it. The only businesses where you don't have to worry about the impact of changing technology is in the art of fine wine-making. But we are not all wine-makers.'
In May this year, Boustead posted its seventh successive year of record revenue and profit. Besides earnings of $60.1 million on revenue of $516.6 million the company also unveiled a strong order book of almost $600 million, some $150 million in cash and matched its previous year's dividend payout.
This orderbook has continued growing since, with the latest being contracts totalling $27 million from the global oil & gas industries.
Keeping to his mantra of constant change and adaptability, Mr Wong said that his company was starting to change some parts of its business model - yet again.
'The new economic fundamentals, where commodity prices are rising and resources are increasingly scarce, throws up as many opportunities as challenges,' he said. 'We see a shift in economic wealth from the resource hungry West to the resource rich East. And these latter markets are places where we already have a good presence. We have the financial and technological resources and the management expertise to capitalise on the emerging opportunities and extract value for shareholders.'
Like Mr de Geus, Mr Wong is a believer in the theory of corporate evolution for survival. 'There are times when you have to let go of your past glories,' he explained. 'It is the same with companies. A highly successful product or service today may not be successful tomorrow. A stubborn company will try its best to hold onto those products and services even when they are irrelevant. The companies that enjoy longevity do things differently. They evolve. They create a different business and adapt to the prevailing times. Remember, change is the only constant. And in today's context, change produces not only a great deal of opportunities but helps us to survive.'
And a critical factor in all of this is its people, he added. 'It is essential to keep an open mind. If people within a company keep an open mind, they make themselves more adaptable to the diverse situations they will face. An open mind also allows them to bounce ideas off each other and to absorb the ideas that have good potential and which could make a real difference in the survival of the company.'
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