Sales

Transcript of Dr Ron Sim's interview at the BlueSky Conference on 10 Jul 04 at Suntec Singapore

To borrow a phrase from Mr Kwek Leng Beng, Chairman of Hong Leong Group, Ron’s big sword is the immense enthusiasm and the gungho spirit he has. Ron is always up for a challenge or always game for a laugh and I think that has been one of the cornerstone to your success.

In contrast to Mr Kwek, I understand you came from a relatively humble background, so you probably started with a Swiss army knife, rather than a big sword. Tell us something about your youth and the circumstances that have shaped you and made you into what you are today.

RS: I’ve always said that I’m lucky to be born poor, because it fuels the hunger, the despair and the desire to make things good and right. Don’t get me wrong, if you are born rich you are luckier, that’s all. I could recall those early days when my brother and I approached a noodle stall in Owen Road for a job. The guy at the stall said, “No problem, we can take you in, just go around and take some orders. We will pay you 3 cents for a 20 cents bowl of noodles and 5 cents for a 30 cents bowl of noodles.” I took on the job. That was in 1967 and I was 9 years old then. It was one of my best experiences and till today, my brother and I still talk about it. Now, when I look at my three kids, aged 8, 10 and 15, they cannot even carry two bowls much less the six bowls we were balancing on our arms then. So I think I was pretty lucky to have had to go through that kind of experience in the early days.

And what did you learn from selling these bowls of noodles?

RS: I learnt to sell. I totally agree with Mr Kwek Leng Beng that entrepreneurship is all about salesmanship. We always tell our people that salesmanship is more than what the MBAs teach you in schools. It is not just about selling a product, but selling a dream, your management, your style, your ideas, your concept and so on. In this respect, perhaps, we have to shift from educating people to inspiring people, instilling in them a desire to create an interest in people, so that there is a natural pull towards wanting to sell something.

What motivated you to start your own business, rather than be gainfully employed?

RS: During our school days we did not have a lot of pocket money. All I had was 50 cents when I was in Secondary school, which was barely enough for a proper snack at recess. I remembered once when I was in Primary 4, I had to go hungry during recess because I had lost 5 cents pocket money. But then, one of the teachers gave me 20 cents. That has been one of the driving forces that propel me ahead. Today, I am still in touch with my secondary teacher, to whom I said that some day, I want to make enough so that there is no need for anymore budgeting. When I left national service at the age of 20, I worked for a company selling pots, pans, and kitchen knives. I thought it was easy – find a place, add a table, carry out a promotion, demonstrate and sell. Hence, after three months, I decided that it would be better if I start on my own. That was in April 1979 and I have not looked back since. Even though the first company I started with a couple of my friends in 1979 did not work out well, it was still a valuable experience because it provided me with a good starting point. From 1980 onwards, I struck out on my own and it has been a most tremendous experience for the last 25 years.

How did you come about the OSIM concept, developed the OSIM concept? You said you started selling pots and pans, how did you come about selling healthcare products?

RS: When I first started I did not bother about anything. It was just about survival. All I did was to find some product, get a place and a table and start selling. It worked very well because in the first month of our business we made $40,000 from an initial investment of $500. In the first five years, we did very well at People’s Park, where there were many tourists. But in 1985 when we were hit with the recession, I learnt two things.

One, you cannot simply be a trader because if you are just selling products that you don’t have control over, you get hit very quickly. The other lesson I learnt was the need to specialise, and in order to specialise, you need to find your niche. The disadvantage of Singapore is its small size. So in 1986, despite the problems we were facing in Singapore, we expanded to Hong Kong. The fundamental reason was to create an external market for the company. We chose Hong Kong because of its vibrancy and also that they are one step ahead of us. We were thinking then that if we compete in a more sophisticated market, we can better sharpen our competence and grow with the market. It has been 18 years, and Hong Kong is now one of our biggest markets, in spite of the recession and handover in 1997.

And was that the turning point in your business, the time you realised that OSIM has the potential to make it big, or did that come before your foray into HK?

RS: I think we didn’t start with big dreams. I was selling other people’s brands then and was representing many different manufacturers. But as we grew and found niches, we saw the need to create economies of scale and achieve high volumes. It was then that I realised that we have to create our own brand to better control the suppliers and market. That was in 1988. From 1989 onwards, we have been seeing consistent growth every year since.

So you would say that the turning point was the realisation in the late 80s that you had to have control of the brand, and that your products had to carry your brand?

RS: Yes, and besides the brand, we also realised that a large number of the big Japanese manufacturers distribute via dealers, as many as 500 or even 5,000 of them. It is not possible to gain an edge over these dealers as in most instances; they do not have loyalty to the manufacturers. Today they may carry Hitachi’s products, tomorrow Sanyo’s, the next day Panasonic’s and another day something else.

So what is our niche? We cannot manipulate the dealers. So we decided that the best thing would be to build the retail concept and control the points of sales ourselves. Even though we may not have big volumes, but by slowly growing these points of sales, we are able to funnel through all the products that we create and dictate when to sell, what to sell and how to sell. This has been one of the critical strategies which have helped us to consistently grow and deliver what we have projected.

I have just returned from the USA. If you look at Sony and Apple right now, they are all quietly developing their own concept shops. They have come to realise that dealers or the chain stores cannot be shaped the way you would want them to be, and that most of the time it is just about the margins which the manufacturers give to them. Over time, I believe that the retail concept and the point of sales would be critical areas we need to build to compete.

That’s right, so in effect you have been trying to gain control of all the strategic areas in the value chain and to have full control of the point of contact with the customer?

RS: We have over 500 stores worldwide. The number is not huge compared to some other distribution networks but it is important because it provides us with a platform, which we are consistently able to reap, control and grow. And as we grow, we also realised that we may need to extend our products to some other niche players. In the States, we have extended our products to others because these are specialty shops and they will be able to help promote the brand as we move forward. Still, it is critically important to control the point of sales, the brand and the business concept.

If the brand is the promise of an experience, what is the OSIM’s brand promising?

RS: We believe that branding is about building a reputation through the promise of value and creating multiples of differentiated experiences for the customers. But how do you do it? I think in many instances, innovation has been one of the key points. Besides creating new products, you need to maintain consistency in delivery of your marketing concepts and principles, and differentiate the ways in which you depict yourself in these concepts. These include how you portray yourself in the advertising media, in the delivery of services and in executing the promotional events. I think that a consistent delivery of all the key principles will, at the end of the day, constitute a promise of the desired customer experience.

What sort of experience are you trying to create at the point of sale?

RS: We always ensure that the concept is something relevant and fresh so as to induce customers to browse around and to look at the products. The products that we have created every year are essentially a function of the tangibles like design, special features, finishing, materials, etc. The intangibles are equipping the staff with the product knowledge, the service quality needed, the salesmanship, so that they can consistently educate and providing a satisfying experience to the customers time and again.

How do you manage to sustain customer loyalty and drive new business, against other competitive low cost products?

RS: It depends on your positioning. We always position ourselves at the high end. We are neither selling Suzuki nor Toyota. We are selling BMW and Mercedes Benz. I think that is the position we have to take. If you compete on price alone, you can’t win. The proposition of the value has to come through the relevant and refreshing innovations of the products. We always believe that our business is not about selling needs, it is about creating wants. Design is a one key area that we have been able to establish as a demand lead. In simple context, the design creates desire, and the desire creates demand.

Currently, the most competitive market is China. We have been in China for 10 years. During the first few years there, we did very well and made a lot of money. However, we made some losses during the Asian financial crisis. The last three years we managed well and made good money again. However, the difference is that 10 years ago when we first entered China, there was no one selling massaging equipment, let alone massage chairs. But today there are more than 60 massaging equipment manufacturers, and more than 20 massage chair makers, all within the last 10 years! And these people are very quick. They do reverse engineering, they don’t copy your designs directly, but they hybrid two or three of your designs, and they could sell it at a third of your price. But they don’t have the OSIM reputation.

Has that altered your strategy, and thinking about the market differently?

RS: No, if we had embarked on the earlier distribution model we would now be selling to all the papa and mama stalls in the local scene and we could have been wiped out. Fortunately, we have direct control of all our 45 outlets in China. We created the concept, the brand, the products and the services. We are in full control and so it is a lot more difficult for these people to muscle in and try to take over our chain of distribution networks. We also think about how we can beat them when they are copying our designs. We churn out new designs every six months. China is a very interesting market because it is so vibrant. We are currently in 28 cities in China and I go there every month for a week and my key people fly to a city everyday. The market there is very complex but I believe strongly that we’ve got to be there to tap the vast business opportunities.

What are some of the challenges in doing business in China for Singapore companies?

RS: The market environment is totally different – socially, economically, politically – so the challenge is to adapt to local conditions. China was a closed market economy for many years and had only begun to open up in the last 10 years. That was a key reason we decided, at the outset, against partnering a local. We are lucky we started out in this manner, because when the market starts to open there will be people who will want to make a quick buck and leverage whatever they can get from the foreign partner. Although it was more difficult for us to start on our own, we managed to do pretty well over the last 10 years.

You don’t think that in the longer term you’ll need a partner to run the business to open up the market further?

RS: That to us is not true. If I have a business which depends on the state government, I might have no choice but to partner a well-connected local. However, given that my business deals directly with the consumer, there is no need to have a local partner. Our manufacturing plant in Suzhou has been set up for 10 years with our Japanese partners. We train the local people to be managers.

Have you taken a different approach in your other markets? Other international markets that you have gone into, have you developed local partnerships there?

RS: In Hong Kong we have no partnership. But in Taiwan and Malaysia, we do have.

And how do you decide when you should form partnerships and when you shouldn’t?

RS: You have to study the maturity of the market. If you are in a developed market, you may want to forge partnerships with selected candidates who can add value to the business. This is because they know the ground and understand the local rules and regulations better. Such collaborations are needed to move forward.

China, in our instance, is still very young and some local businessmen will not hesitate to exploit the relationship with the foreign company. In the end, the company could be taken over. Many of my Taiwanese and Hong Kong friends who ventured into China to set up factories had failed. I think the reason was that they took a short cut. They exploited the market rather than explored and invested in it. When you exploit the market, you will also exploit the people. Therefore, in a few years’ time the cycle could be reversed and you’ll be exploited in return.

So do unto others as you have them do unto you. You are now in 22 countries, if you could do things differently in your expansion endeavor, what would you have done differently, looking back and learning from your experiences.

RS: I wish I had more money.

You wish you had the big sword that Mr Kwek had?

RS: Then again, more money doesn’t mean everything. I think I would still have done it the same way in spite of having all the resources because I wanted to go through the experience. The experience itself was a great resource and asset.

Did you open multiple markets at the same time?

RS: Singapore was experiencing a crisis in 1985 and our company almost went bankrupt. To survive, we had no choice but to go into Hong Kong and Taiwan in 1987. We were managing two to three countries at the same time, having to travel every other week to each of the countries. I think there is no one clear direction that each and everyone of us should take given the different circumstances and experiences we each face. In our situation, that was the road that we had to take and it was not a choice we had. Today, we have a Head of International Franchise who looks at business opportunities all over the world.

One of the challenges of maintaining and growing your own business is that some times, if you are at the top, you feel quite isolated. Where do you go for inspiration, ideas to recharge yourself?

RS: These days, I travel almost every week. But I always come back with a lot more ideas. I hate shopping but my job is to shop every day when I am overseas. Every time when I visit any country, I would shop and look around at the shopping malls. In fact, by browsing and walking around the departmental stores, you can actually pick up a lot of ideas. America is one of the best places that I like because the people there have a lot of new and different ideas. These days in China you’ll be surprised at how enterprising the Chinese are. They can come up with great ideas to attract the customers. I get re-charged and inspired by these new ideas that I pick up along the way.

In that context, leadership within a small or medium sized enterprise is very important. You have the luxury of being able to go out and to travel and see the world and get your ideas there. What are some of the things you think a movement like ACE can do to help senior managers and leaders of startups and emerging enterprises?

RS: I always believe there are two parts to learning. There are the tangibles, which are the principles, the methodologies, and the formulations, etc., as well as, the intangibles. I always believe it is easy to learn the tangibles, but what is more important is to cultivate the intangibles. The intangibles are really the driver behind one’s characteristics and drive.

I was formally educated up to the GCE‘O’ levels. My characteristics and leadership skills have a lot to do with my outdoor activities in school, like sports and participation in the outward bound activities. I found that the challenges and thrills in sports instill in one a competitive spirit, which helps to build the person’s character. When you are young, you tend to see outdoor activities as thrilling and fun but in the process you could be taking risks without realising it then. I found that this has indirectly contributed towards my leadership skills and these are the intangible assets that are really required to drive the company.

Certainly, in order to build one’s leadership skill, you have to take all experiences, whether positive or negative, and have the willingness and open-mindedness to go forth. That’s critical to leadership.

Would you say that the biggest differences between a corporation and an enterprise, is that in an enterprise, it is the founder or the CEO that drives the business?

RS: I believe so. You look at Singapore, it is about the Senior Minister Lee Kuan Yew, you look at Microsoft, it is about Bill Gates, you look at Dell and it is about Michael Dell and you look at Virgin, it is about Richard Branson. There has to be a head, someone has to be the driving force. And that driving force always makes the difference.