SINGAPORE: Lim Soon Hock is an expert in turning around companies in crisis. He is best-known for taking computer firm Compaq Asia Pacific from a US$30 million dollar company to US$1 billion. He did this as Vice President and Managing Director in seven years, between 1989 and 1996, three years ahead of schedule.
Over the years, besides being a CEO, technopreneur and private investor across industries like IT, air transport and education, he has been active in public and community service in organisations like the National Family Council, and the Halogen Foundation, which mentors young leaders and entrepreneurs.
Lim is currently the Founder and Managing Director of PLAN-B ICAG Pte Ltd, a boutique corporate advisory firm, and has made it his mission to turn other businesses around through restructuring, acceleration, mentorship, and technology incubation.
He went On the Record with Bharati Jagdish about what he thinks is wrong with the macro-economy, what is needed to help SMEs in Singapore and how he pulled off his first big success.
Lim Soon Hock: Ekhard Pfieffer, the then-President and CEO of Compaq was a great influence. He taught me a very valuable principle – that if you believe something is impossible, you will never get it done; but if you believe something is possible, the impossible becomes possible.
After I signed on to the Compaq job, I have to confess, I had a lot of trepidation because Compaq at that time was one of the most expensive PCs and I had to sell it in one of the world’s most difficult markets – Asia.
Asia was price-sensitive and had low purchasing power then. He gave me this challenge saying: “Lim Soon Hock, I have only one goal for you. In 10 years’ time, that is, in 1999, this has to be a billion USD company.”
I said I would try. I signed the employment contract in spite of the fear I had. But he was proven right, that even if you have supposedly insurmountable odds in the market, if you are willing to be creative, innovative, establish new rules in the playing field, you can succeed. That is exactly what I did.
Bharati: What do you think was the key to making that happen?
Lim: I cannot claim all the credit. I had a fantastic team. It was an A-team. I didn’t expect to transplant everything that worked in the US or in Europe into Asia. You’ve got to find your own strategies and you’ve got to find your own tactics to develop and grow the business. At the time I was recruited, China was already starting to open up. Every company in the US was looking at China because it had huge potential. I struggled developing the business. Struggled. Out of the whole Asia Pacific region, this was the market I had most difficulty in developing the numbers.
China was only just opening up. They were poor. Compaq machines were the most expensive. Where to find the money? No clients wanted to buy. I was struggling, but I was able to seize what I called the opportunity of the moment. The day before my trip to Beijing, there was a big article in the local newspaper about the political leadership. I realised that something like 80 per cent of the political leadership was actually from Tsinghua University.
The day after that I was driving past Tsinghua University, and I got an idea. I asked my colleague in China to arrange a meeting for me to meet the president of the university because I wanted to understand what they were doing in terms of promoting PC technology, and encouraging PC adoption. He managed to arrange a meeting and I saw him the following day. I had lunch with him and took a tour around the campus.
We passed by a few empty rooms in the building. The lights were switched off and they were run-down. So I spoke to him in the office, seizing the opportunity. I proposed a training centre be set up, a joint venture between Compaq and Tsinghua University. I would provide all the equipment. I would provide all the training to three professors. I would bring in Microsoft. I would bring in Intel. I didn’t even clear with my boss that I was going to set up a joint venture, but it was the moment and I didn’t want to miss it. I wanted to seize it.
The university president was so delighted. For him, it was great political credit to be able to go into something jointly with a very successful US company. The rest was history. We started the training centre and the whole of China covered the event. It was front-page news. My sales in the next six months went through the roof.
Bharati: How did people who couldn’t afford a PC before manage to buy one after this development?
Lim: They bought our machine. They bought our PC, but not so much because they wanted our machine. They wanted a PC, but because of the university partnership, they now had a larger purpose in buying our machines. By using and buying our machine, they would have the opportunity to be trained by the very prestigious Tsinghua University, to get a certificate, a joint certificate: Tsinghua-Compaq. The certificate was the incentive. That was the incentive, the value, the asset they were trying to purchase. At the same time, they got a good machine and possibly a good job after that. So they worked harder to afford it.
RELYING ON FOREIGN INVESTORS
Bharati: You’ve worked for several MNCs. What has your experience taught you about what’s wrong with the Singapore economy and local businesses and how these problems can be addressed better?
Lim: I think if you look at the success of our model today, the success is very much driven by foreign MNC investment. It is also driven by the fact that we have succeeded in promoting wealth management, financial management in Singapore, the services industry, telecoms, airports, ports, and of course the government-linked companies have a role to play. I think those we should continue to promote, those we should continue to keep, and grow.
But where I think we could have done better, is developing entrepreneurship in Singapore and also developing and growing our SMEs. We should have spent more time to grow more of the promising SMEs to be more successful. If you look at many economies, whether Taiwan, Korea, or the US, the entire economy is driven by a critical mass of large companies. We could have done this earlier. But it’s not too late. We do more now.
Bharati: The government has been doing it though. There are entrepreneurship schemes, schemes designed for SMEs in particular. What more would you like to see?
Lim: Yes, I acknowledge that there have been many initiatives. But at the core of it, we need to develop and build a more vibrant and sustainable culture of entrepreneurship, not just schemes; and people shouldn’t be too dependent on these schemes or handouts. We need to start with the schools. We need to get more of our young people exposed to entrepreneurship, and beyond entrepreneurship, a larger objective of developing an entrepreneurial mindset. And I think that’s important.
We can intensify our efforts, we can strengthen it, we can solidify it, we can deepen it. Help people develop the ability and willingness to take risks, the ability to see the opportunities out there, the ability to set new rules, to play in blue oceans, create blue oceans where you can succeed and the aggressiveness to not want to succeed just in Singapore, but also globally.
Bharati: How exactly do you think this mindset and attitude can be cultivated?
Lim: Some schools are offering entrepreneurship education. Based on what I understand from the ministry, they basically left it to the schools to decide whether they want to embark on it. My view is that if we truly believe that entrepreneurship is going to be a very important pillar of our future economy, then I think we should introduce entrepreneur education nationwide. We should also make sure that entrepreneur education is not just an enrichment program, a 2-3 day kind of thing. It has to be a structured programme where students are put through the entire process, the entire journey, the entire cycle of developing a business. My view is that at the end of the day, Singapore has to depend on its own entrepreneurs and businessmen.
Bharati: Not foreign investors.
Lim: My biggest worry is that our fear of foreign investment hollowing out of Singapore is going to happen. I am hoping it won’t. I hope I am wrong. Not that Singapore is politically unstable, not that Singapore is not economically attractive in terms of the right environment, incentives, economic support, talent pool etc., but I think China will be so big, so developed, so mature that foreign companies would have to be in China to compete with the Chinese to succeed worldwide.
I know the thinking of MNCs. They have to be in markets where there are going to make a big difference. I think soon there are going to be so many big Chinese companies that are global in orientation, global in terms of reach, doing their own business; but I think you are going to see a lot of foreign companies here moving to China. I think we’ve got to be aware of that, because if that happens who are we going to depend on?
We are going to depend on our own local companies to provide the jobs, to generate GDP. We have no choice.
I hope I am wrong, I just worry about it. Hopefully we can have more SMEs become bigger local companies to create more jobs. What we need as a country Is a critical mass of large local companies, not just large local banks, not just the large GLCs, but we want more clones of companies like Hyflux, OSIM, and previously Creative. You can count the number of companies. They are not enough.
Don’t get me wrong. I am not saying the government is not doing enough. The government is doing a lot, but what I am trying to say is that we need to do something revolutionary, not evolutionary. I feel the revolutionary way is to introduce entrepreneur education in schools for everyone. Not from Primary 1, but the moment they get into secondary school. Maybe Secondary 3 onwards and again, not just entrepreneurial skills, but the entrepreneurial mindset.
CULTIVATING THE ENTREPRENEURIAL MINDSET
Bharati: This mindset, you mentioned earlier, comprises the ability and willingness to take risks, the ability to see opportunities, the ability to set new rules. How do you really teach such things? People need to be exposed to such things from a young age and not just in school but in every aspect of their lives, don’t they?
Lim: Yes, to also know that it’s not about all success, you must also have strength and resilience to take failure. When I try to market this idea to government, I tell them that it should be a non-examinable subject. No exam. Why would you want to have exams?
In real life, when you set up a business, you can either fail or you can succeed, but it doesn’t say anything about you.
It just means wrong business, wrong choice, execution, but valuable lessons to learn. In Silicon Valley right now, the badge of honor is failure. So between two companies, all things being equal, investors are going to invest in a guy who has failed before and picked himself up or wants to learn and pick himself up. If the political leadership here truly believes in entrepreneurship, then they must put their money where their mouth is and invest in our youth nationwide.
I have been invited to be a judge in many business plan competitions. Invariably, the presentations are very well done – beautiful slides, plenty of text, plenty of pictures. But when I ask them the basic question: “Can you tell me in no more than 2-3 sentences, what business you are in,” many stumble.
If you don’t have a clear understanding of what business you are in, how are you going to move forward? What problem are you trying to solve for your customers? You need to know these basics.
Bharati: You mentioned entrepreneurship education. My concern is that the approach to the other aspects of education within our system or the way parents condition their kids could negate the building of an entrepreneurial mindset.
Lim: I hope not. I think the recent move by the government to focus on skills and experience and expertise, rather than just academic education, to de-emphasise academic achievement or academic excellence is the way to go. Ideally, if we can have both, great.
But not everybody is academically brilliant. I think what we need is someone who is academically well-informed, academically well-developed. That’s all.
The rest is what I call the non-academic challenges that would take advantage of any special skill set you have, any special talent that you have, any special passion you have, any special interest that you have.
In my view, there is value in all these non-academic capabilities. So the SkillsFuture move, the direction to de-emphasise academic qualifications, and also to look at passions, interests, excellence in non-academic areas, in lieu of academic qualifications, to secure a job, to secure a government position, to start a business, I think, is the right way to go.
Tongue-in-cheek, I told a minister once, that actually Singapore would have arrived, if our next PM is not somebody from the elite admin service, but completely an ordinary person with special skills. Perhaps he could have been a great painter. He could have been a successful businessman. He could have been a successful sportsman.
Bharati: Why do you believe in that?
Lim: It’s not about me believing in that. It’s about delivering the ultimate promise of this new focus on skills, experience alongside academic qualifications.
Bharati: What did this minister say to you in response?
Lim: He just smiled at me. Elsewhere in the world, President Reagan was an actor. I think he made a great president.
Bharati: Now, there’s Donald Trump, who is a businessman.
Lim: Well that’s a separate story, but we should have done it much earlier, this focus on skills. It took us some time to realise that in the new digital economy, in the new shared economy, it’s not all about academic qualifications. It’s about the ability to get things done, the ability to innovate, the ability to create and you don’t have to be academically brilliant to be creative and innovative. I think it’s good that the government is seeing that and the government is promoting that.
Bharati: How do you think this can change on the ground though?
Lim: That is the parents’ problem and the employers’ problem.
Bharati: How do you think that mindset can be nudged into positive change?
Lim: I think government, businesses, both the private and people sector would have to embrace the new philosophy. The government is taking the lead. Some government agencies already have an alternative path created for people without relevant academic qualifications, with relevant skills and expertise they would be considered. I think that’s good.
I think in Singapore, unfortunately, people are always looking towards the government as a role model. I think that must change too. I think it’s also timely that the private sector take the lead. I wish more private companies were willing to take the lead, do what is right, and pull the rest of the community along.
ZERO GOVT GRANTS
Bharati: While you’ve worked for MNCs, you have been helping turnaround SMEs as well. What would you say are the biggest obstacles for SMEs today even with the numerous government schemes that we’ve been seeing recently?
Lim: I think SMEs have to learn to be resilient and not too dependent on handouts from the government. I think if anything at all, the government has been too generous and too kind in providing the subsidies and grants.
Bharati: But businesses’ concerns are legitimate. Among other things, they have to contend with high rentals, labour costs and now, rising water and energy prices. Why shouldn’t businesses expect some assistance?
Lim: There is some merit in the complaints from businesses about high costs. There is no long-term viability or growth to talk about if companies cannot get through the short-term. That said, there are at least 10 initiatives from the budget, which companies can tap, to offset indirectly or to neutralise the increased costs.
But also, the issue of high business costs in Singapore has been around for many years now. Companies should have taken steps early to manage and overcome this. For example, if I have one dollar left, where should I deploy it to generate more than one dollar of revenue. In other words, companies should not continue to do more of the same, as the outcome would be predictable. If companies cannot contain or lower costs, then they should relocate to the region to enjoy the comparative advantage.
In the companies that I am involved in, we planned on the basis that there are no government subsidies or grants. It compels you to rethink how you would want to manage, develop and grow your business.
If I can, I do not want to be dependent on government handouts.
You’ve got to work on the basis that you get zero grants. You’ve got to work on the basis that you don’t get funding from government. You need to find your own sources of funding. Where are the sources of funding?
First, you can do equity financing, so shareholders, investors, but that has to start with a good business proposition. Do a good job in generating revenue. If you can’t really get the revenue that you want, you’ve got to make sure the quality of your business is good. The growth margin should be very good. How do you make sure growth margin is very good? You’ve got to manage the cost of goods. That’s where companies need to have a strong focus. Go through it with a fine-toothed comb. Spend when needed and save when needed. To me it’s not about saving the dollar. It’s about how you spend the next dollar wisely to generate more than a dollar of revenue.
SMEs need to look at their business model. If I continue with the business model, doing more of the same, my outcome will be predictable, but if I intend to have extraordinary growth, stretch my target, do more than what I set out to do, I must think through what else I need to do differently. What else do you need to do unconventionally?
That, to me, is important, but let me tell you what the biggest problem is right now. I have always said that businesses do not fail, people do. It doesn’t matter what business we are in. We are ultimately in the business of managing people. The biggest asset of a company is always the human capital. Build an A-team. Recruit good people, train and develop them and you will get your returns most times.
So companies in Singapore, for some unknown reason, are not that keen to invest in people development.
The company does not always have to have the most amazing and best product, but if you execute well, chances are that the company can even do better than another company with the best product, the most amazing product, but poor execution.
So it is in businesses’ interests to invest in people. Do all this and use the government schemes for the added advantage, as a bonus.
Bharati: Speaking of government schemes unveiled in this year’s Budget, some critics say it’s more of the same. Also, for instance, we’ve seen productivity enhancement schemes in the past and they don’t seem to have worked. So critics have been saying that the government can unveil one scheme after another, but whether they are going to have a real impact, a better result, is questionable. What do you think?
Lim: To be fair, I think this time round, there is more meat in the Budget. I see Budget 2017 as more broad- based, but broad-based in a T -shape, with the deliberate stem and discernible stem to develop and grow SMEs more extensively and intensively.
There are about 10-12 schemes available that SMEs can tap, so it’s really up to them to take advantage of it, but the key thing is that if you take a look at the other things that are there, they are not more of the same.
The Industry Transformation Maps (ITMs) are a big thing.
But again, it will remain as an idea if the execution is bad. The industry must play a part, government must play a part, businesses must play a part, the associations must play a big part. We are such a small country that you cannot cover things broadly.
You have to be targeted, identify what I call the low-hanging fruit, focus on them, develop it, and then pull the rest of the industries along. Then you take a look at the startups and SMEs, the Global Innovation Alliance, trying to link up companies with companies elsewhere to take advantage of capabilities elsewhere, technologies elsewhere. But like everything else, it’s not about the plan, it’s about the execution.
ENTREPRENEURIAL CIVIL SERVANTS
Bharati: And the people.
Lim: Yes, and this is where I would like to encourage and appeal to our government, meaning our civil servants who are managing some of these schemes to be more entrepreneurial in terms of their mindset too. You cannot on the one hand, try to encourage companies to be innovative, to be creative, to be more productive, but on the other hand, you are not seen to be that way yourself.
What do I mean by that? With all the funds that they have, they should be more generous in wanting to provide grants and subsidies in the right way for maximum effect. That means being less risk-averse, and not being constrained by the fact that this is taxpayers’ money.
Bharati: But you just said that the government is being too generous already?
Lim: Yes, from the businesses standpoint, they really shouldn’t demand or expect more. But if the government wants to be revolutionary, it also should be willing to invest in the right way and bet on more companies with potential even if those companies end up failing in the end.
It is a reality that out of 20 companies, usually only one succeeds. That is the investment success rate. One shouldn’t be too afraid of this because the one that really succeeds is going to cover all your losses in the other 19 companies. You have to have more multiples of 20 companies that you invest in, take the risk and bet on. That is really what I think we need to do. So it’s not about having all the initiatives, not just about trying to push and promote productivity. It’s got to be smart investments that cover more entities so that you can get more companies that truly become big.
Bharati: You said this means being less risk-averse, and not being constrained by the fact that this is taxpayers’ money. But surely government can’t spend taxpayers’ money willy-nilly. So how do you suggest this be done? You could rationalise it by saying that if you are less risk-averse, you might end up making more companies successful and that would power the Singapore economy.
Lim: I don’t think we need to rationalise it.
Bharati: Why not? It’s taxpayers’ money.
Lim: Yeah I agree. I think there is that moral obligation to ensure that it’s being spent wisely. I am not suggesting you give up money haphazardly. I would to be the last to not agree with you that we have to be prudent. We have to exercise responsibility in managing it and offering grants and subsidies, but what I am saying is that it’s an accepted fact in the investment community that the success rate is 1 out of 20.
Therefore we need to be realistic to try to support those multiples of 20 companies. You can’t tell SME startups to be risk-taking and bold but on the other hand, you continue to be…
Lim: I won’t say rigid. “Rigid” is not the word, but I think you can’t allow yourself to be overly-guided by the fact that this is taxpayer’s money. Then, you end up not helping to bring into being larger numbers of strong local companies.