Corporate Singapore's middle-age challenge

PHOTO: Corporate Singapore's middle-age challenge

SINAPORE - Corporate Singapore has been in a birthday mood in recent months with bosses breaking out the bubbly to celebrate notable milestones.

It was City Developments (CDL) in the spotlight last Friday, marking its 50th anniversary at W Hotel at Sentosa.

Fellow property developer Wing Tai had a birthday bash last month for its 50th milestone, as did Keppel Corp with a 45th anniversary celebration.

Other big-name blue-chip firms have marked similar milestones: DBS Group Holdings is 45 this year while Singapore Airlines has turned 40.

Looking back at their four-plus decades, it is remarkable how far these organisations have come and how proudly they fly the Singapore flag overseas.

DBS can strut the region as the largest bank in South-east Asia by assets while national carrier Singapore Airlines needs no introduction.

Keppel Corp is valued at $19 billion and bears the enviable tagline of being the largest jack-up rig builder in the world.

Temasek Holdings, which reaches 40 next year, has grown to become a forward-looking institution and an active investor with investments around the world. Its portfolio came in at a staggering $215 billion as of March 31.

As Singapore moved from Third World to First World nation in one generation, so too these top companies have transformed from minnows to world beaters.

But even as they still hold sway at the top of the pile, they can ill afford to rest on their laurels.

Keppel Corp and Sembcorp Marine are known globally for being top performers for their jack-up rigs and semi-submersibles. But in recent times, Chinese competition has been creeping up.

DBS, which operates in 15 markets, has had to take a breather from its ambitious acquisition plans in Indonesia.

Property developers in Singapore, which benefited as a growing population demanded more and better housing, are now having to seek growth elsewhere.

Insead's professor of management practice Narayan Pant notes that "Singapore companies have had a great run for the last couple of decades but newer players are rapidly catching up".

For example, he adds: "Singapore Airlines dominated the league tables with their model of newer aircraft and process improvements.

But other players have discovered what they are doing and are replicating it."

New team of leaders

For  many such companies, moving the needle, so to speak, is going to be much more of a challenge than it was.

Even as these companies face challenges, many of the charismatic and dynamic leaders who were associated with transforming these businesses are retiring or taking a back seat.

At Keppel Corp, its chief executive Choo Chiau Beng, who helped steer the company from a littleknown shipyard builder to world-class rig developer, will become senior adviser at the start of next year while chief financial officer Loh Chin Hua will take over.

Singapore Airlines CEO Goh Choon Phong, who took over in 2011, has his hands full with rising costs, tough competitors and still-high oil prices.

Another blue-chip, Capita- Land, while much younger than the other firms, saw CEO Liew Mun Leong step down last year.

New boss Lim Ming Yan, who took over on Jan 1 this year, is streamlining the company's processes and continuing to look for growth in China and Singapore.

The Temasek team has the challenge of keeping returns robust in a volatile and possibly lowerreturn environment.

There are also questions over who will succeed the current generation of leaders who are in their 60s and 70s at family-controlled CDL and Wing Tai.

As Singapore's biggest and best companies endeavour to stay at the top of their game, it is not too much of a stretch to ask if some will face a crisis of middle age.

The task of taking an established company forward is both a blessing and a burden.

Ensuring the entity's continued longevity may require more than a tinker with the existing system. But major overhauls run the risk of losing it all.

The balance between striving for growth and preserving a legacy is no easy feat. The leaders face the pressure of living up to predecessors' achievements and constraints of operating within set protocols.

At the same time, stakeholders have multiplied and are much more vocal. Not only does a CEO have to please its shareholders, but there is also the board, local and foreign regulators as well as other interest groups - local and foreign - to manage. The Internet is also another force to be reckoned with.

Growth and legacy

Leaders and CEOs now have to walk much more of a fine line and balance more difficult pressures than they did previously.

Few have as much carte blanche of strategy and leeway as their predecessors. Maintaining a corporate reputation is both time-consuming and costly.

Globalisation means these companies, having reached the global marketplace, are now competing with players around the world.

You may have wiped the floor with your domestic rivals but there is always someone waiting elsewhere to do the same to you.

Business cycles too are much shorter. No longer do these companies have the luxury of time to try out different strategies, they have to get things right and in much shorter a time.

Where does this leave Singapore companies and their leaders?

Many great firms have seen their fortunes wane. Japanese construction companies, once world leaders, have now been overtaken by their Chinese state-owned rivals.

Finland's Nokia is a shadow of its former self although the recent buyout by Microsoft may give it a new lease of life.

At the same time, China companies, even with their many problems, are fast shaping up to be worthy competitors.

Insead's Prof Pant reckons that "in the future, the players that come out of China will be truly global. Today, they are fixing their hard skills such as technological capability and will soon turn their attention to fixing the softer aspects of global skills such as leading and managing a global workforce".

But the likes of General Electric, Citibank and Hewlett-Packard have also survived the test of technology and cycles.

Professor Ravi Kumar, dean of the Nanyang Business School, also points out how companies such as IBM have moved from selling "boxes" to selling a complete solution, including technology, to a company's business problems.

Prof Kumar who has been based in South Korea, refers to Samsung chairman Lee Kun Hee who, upon taking charge at the conglomerate, crushed the products it was then producing with a bulldozer in a dramatic signal that the group had to move towards embracing quality and leading edge technology. He also famously said: "Change everything but your wife and children."

In other words, sometimes risky - but calculated - bets have to be taken to move ahead.

What is required therefore is a new generation of leaders who can bring in new ideas, possibly from other industries, and who are open to ideas from everywhere, notes Prof Kumar.

The approach Singapore firms need to take to become even more of a global force, says Prof Pant, is to raise funds, find talent, source materials and be governed from wherever they can find competitive advantage.

What gives room for optimism is that many Singapore firms survived the global financial crisis, applied its lessons and are today in much better shape than before the crisis and many of their peers.

DBS, for example, has notched up record earnings in the last three years amid a challenging operating environment, but it needs to remain nimble and disciplined.

Keppel Corp has survived several crises such as the offshore and marine industry slump in the 1980s as well as the Asian financial crisis. Its incoming CEO, Mr Loh, 52, handpicked for the job, will have to bring a fresh perspective to new challenges.

The 130-year-old Fraser & Neave started as a drinks and beverage business. It went on to become a billion-dollar conglomerate with property and publishing, but is facing a fresh start with a new owner and a new corporate structure.

Singapore's blue chips have the advantage of a track record and financial muscle. Investors will be eager to see which will be around to celebrate their centenary.


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