Business Times - 04 Aug 2009
Some companies in Singapore are more than a century old. What are the odds of surviving that long? VEN SREENIVASAN reports
SINGAPORE has a dozen companies more than 100 years old. Set up in colonial times by British traders and entrepreneurs, most, such as Guthrie and Boustead, started life in the trading and transport sector.
Others, like law firm Rodyk & Davidson, were set up to service these new players sprouting up in the British colonies. Some, for example, Eu Yan Sang, have stuck to their original business, but modernised along the way. Others, like Singapore Press Holdings have constantly reinvented themselves to not just survive, but thrive.
Despite their age and significantly different businesses, most of these century-old corporations are Asian multi-nationals that now enjoy double-digit growth.
This is particularly remarkable given the odds against companies in small economies surviving. According to Arie de Geus, an organisational science expert and a 38-year veteran of Royal Dutch Shell - and the author of the award winning book 'The Living Company' - the average life expectancy of a Fortune 500 or equivalent multi-national is between 40 and 50 years.
In fact, a third of the companies on the 1970 Fortune 500 list had vanished by 1983 - acquired, merged, broken up or bankrupt.
Average life span
A study 12 years ago by Ellen de Rooij of Stratix Group in Amsterdam showed the average life span of all companies, regardless of size, in Japan and much of Europe was a mere 12.5 years.
So why do some companies thrive for so long, while others barely survive a decade? Mr de Geus attributes endemic failure to excessive focus on profits and the bottom line rather than the human community that makes up the organisation.
'The dichotomy between profits and longevity is false,' he says. His logic is straightforward: 'Capital is no longer king. Rather, the survival of companies is becoming increasingly dependent on the skills, capabilities and knowledge of their people.'
The corollary of this is that knowledge is tomorrow's capital. And learning means being prepared to accept continuous change.
The debate about what the key elements for survival and longevity are will continue. But what seems increasingly clear - especially over the past year, when long-established names such as Lehman Brothers and others disappeared - is that corporate longevity is not a natural state of being.
The technology and techniques that enable a company to stay ahead of the competition can quickly become outdated or irrelevant in fast-changing circumstance. And business cycles are getting shorter, tighter and more brutal.
Most older firms have had to evolve to keep pace with the times.
Singapore Press Holdings is a classic study of a company which has reinvented itself constantly over the last 25 years. The media group continues to grow from strength to strength even as others - from New York to London to Sydney and Hong Kong - struggle. SPH's chairman Dr Tony Tan attributes this to its ability to move beyond its traditional print products, while at the same time constantly revamp, rejuvenate and adapt them to reflect the latest trends and remain relevant.
'SPH has grown and developed from a newspaper company to a multi-media organisation with different media platforms ranging from print, online, outdoor to broadcast,' he said. 'We also have diversified into non-media businesses like properties, search engines and directories, and events management. Today, we are indeed South-east Asia's leading media organisation, engaging minds and enriching lives across multiple languages and platforms.'
According to Leslie Hannah, a business historian at the University of Tokyo, the average 'half-life' of big companies - that is, the time taken to die by half of the world's firms top 100 by market capitalisation in any given year - was 75 years during the 20th century. For small companies, studies suggest a half-life in single figures. Corporate infant mortality is especially high, with the first year being the hardest.
To sum up, few companies can expect to survive beyond half a century. How then, have a few 'elderly' firms defied this trend? For many, luck has played a huge part. But for most, it is adaptability to changing business conditions and cycles.
'There are times when you have to let go of your past glory,' says Boustead's chairman and group CEO Wong Fong Fui, who transformed the 181-year-old company into a specialist infrastructure and engineering player.
'It is the same with companies,' he says. 'A highly successful product or service today may not be successful tomorrow. A stubborn company will try its best to hold on to products and services, even when they are irrelevant. Companies that enjoy longevity do things differently. They evolve. They create a different business and adapt to prevailing times.'
This point is echoed by Jim Collins, co-author of 'Built to Last: Successful Habits of Visionary Companies'. Survivors, he says, are very good at following a set of unchanging principles on one hand, while on the other, separating what they do and how they do it from 'who they are'. Over the years, a firm must hold its fundamentals dear - yet constantly change.
So the common thread among long-term corporate survivors is their adaptability and evolution, not their products or services. And the ability to adapt depends on the ability of a company's 'community' to identify and seek new strengths and niches for its survival and growth.
This issue of renewal is critical for family-run companies. John Davis, of Harvard Business School, says that by the end of every generation, family firms need to have built a reservoir of trust, pride and money 'so the next generation has enough of them to maintain the momentum of the business and the spirit of the family'.
Succession planning is a huge test, says Boustead's Mr Wong. 'No matter how capable the current leadership is or what they have accomplished, if they do not plan for succession to a future generation of capable leaders, decades of hard work and prosperity can unravel in a matter of years in the hands of the next generation.'
The bottom line is: to survive, corporation must have the will power to change. For this, it has to have a 'community' of employees able and willing to embrace change - and a culture, at the top level, that is conducive to change.
Companies as old as Boustead, 130-year Eu Yan Sang and 25-year-old SPH seem to have found the formula.
As Mr Wong puts it: 'To enjoy longevity, a company requires leaders and people who possess a high level of AQ - adversity quotient - apart from IQ, EQ and FQ. Essentially, this refers to people's ability to manage adversity and if possible, to turn it into opportunity.'
Some companies in Singapore are more than a century old. What are the odds of surviving that long? VEN SREENIVASAN reports
SINGAPORE has a dozen companies more than 100 years old. Set up in colonial times by British traders and entrepreneurs, most, such as Guthrie and Boustead, started life in the trading and transport sector.
Others, like law firm Rodyk & Davidson, were set up to service these new players sprouting up in the British colonies. Some, for example, Eu Yan Sang, have stuck to their original business, but modernised along the way. Others, like Singapore Press Holdings have constantly reinvented themselves to not just survive, but thrive.
Despite their age and significantly different businesses, most of these century-old corporations are Asian multi-nationals that now enjoy double-digit growth.
This is particularly remarkable given the odds against companies in small economies surviving. According to Arie de Geus, an organisational science expert and a 38-year veteran of Royal Dutch Shell - and the author of the award winning book 'The Living Company' - the average life expectancy of a Fortune 500 or equivalent multi-national is between 40 and 50 years.
In fact, a third of the companies on the 1970 Fortune 500 list had vanished by 1983 - acquired, merged, broken up or bankrupt.
Average life span
A study 12 years ago by Ellen de Rooij of Stratix Group in Amsterdam showed the average life span of all companies, regardless of size, in Japan and much of Europe was a mere 12.5 years.
So why do some companies thrive for so long, while others barely survive a decade? Mr de Geus attributes endemic failure to excessive focus on profits and the bottom line rather than the human community that makes up the organisation.
'The dichotomy between profits and longevity is false,' he says. His logic is straightforward: 'Capital is no longer king. Rather, the survival of companies is becoming increasingly dependent on the skills, capabilities and knowledge of their people.'
The corollary of this is that knowledge is tomorrow's capital. And learning means being prepared to accept continuous change.
The debate about what the key elements for survival and longevity are will continue. But what seems increasingly clear - especially over the past year, when long-established names such as Lehman Brothers and others disappeared - is that corporate longevity is not a natural state of being.
The technology and techniques that enable a company to stay ahead of the competition can quickly become outdated or irrelevant in fast-changing circumstance. And business cycles are getting shorter, tighter and more brutal.
Most older firms have had to evolve to keep pace with the times.
Singapore Press Holdings is a classic study of a company which has reinvented itself constantly over the last 25 years. The media group continues to grow from strength to strength even as others - from New York to London to Sydney and Hong Kong - struggle. SPH's chairman Dr Tony Tan attributes this to its ability to move beyond its traditional print products, while at the same time constantly revamp, rejuvenate and adapt them to reflect the latest trends and remain relevant.
'SPH has grown and developed from a newspaper company to a multi-media organisation with different media platforms ranging from print, online, outdoor to broadcast,' he said. 'We also have diversified into non-media businesses like properties, search engines and directories, and events management. Today, we are indeed South-east Asia's leading media organisation, engaging minds and enriching lives across multiple languages and platforms.'
According to Leslie Hannah, a business historian at the University of Tokyo, the average 'half-life' of big companies - that is, the time taken to die by half of the world's firms top 100 by market capitalisation in any given year - was 75 years during the 20th century. For small companies, studies suggest a half-life in single figures. Corporate infant mortality is especially high, with the first year being the hardest.
To sum up, few companies can expect to survive beyond half a century. How then, have a few 'elderly' firms defied this trend? For many, luck has played a huge part. But for most, it is adaptability to changing business conditions and cycles.
'There are times when you have to let go of your past glory,' says Boustead's chairman and group CEO Wong Fong Fui, who transformed the 181-year-old company into a specialist infrastructure and engineering player.
'It is the same with companies,' he says. 'A highly successful product or service today may not be successful tomorrow. A stubborn company will try its best to hold on to products and services, even when they are irrelevant. Companies that enjoy longevity do things differently. They evolve. They create a different business and adapt to prevailing times.'
This point is echoed by Jim Collins, co-author of 'Built to Last: Successful Habits of Visionary Companies'. Survivors, he says, are very good at following a set of unchanging principles on one hand, while on the other, separating what they do and how they do it from 'who they are'. Over the years, a firm must hold its fundamentals dear - yet constantly change.
So the common thread among long-term corporate survivors is their adaptability and evolution, not their products or services. And the ability to adapt depends on the ability of a company's 'community' to identify and seek new strengths and niches for its survival and growth.
This issue of renewal is critical for family-run companies. John Davis, of Harvard Business School, says that by the end of every generation, family firms need to have built a reservoir of trust, pride and money 'so the next generation has enough of them to maintain the momentum of the business and the spirit of the family'.
Succession planning is a huge test, says Boustead's Mr Wong. 'No matter how capable the current leadership is or what they have accomplished, if they do not plan for succession to a future generation of capable leaders, decades of hard work and prosperity can unravel in a matter of years in the hands of the next generation.'
The bottom line is: to survive, corporation must have the will power to change. For this, it has to have a 'community' of employees able and willing to embrace change - and a culture, at the top level, that is conducive to change.
Companies as old as Boustead, 130-year Eu Yan Sang and 25-year-old SPH seem to have found the formula.
As Mr Wong puts it: 'To enjoy longevity, a company requires leaders and people who possess a high level of AQ - adversity quotient - apart from IQ, EQ and FQ. Essentially, this refers to people's ability to manage adversity and if possible, to turn it into opportunity.'
No comments:
Post a Comment