Monday, September 10, 2012

Giant leap of faith from fast food to health care

Business Feature
Philippine Daily Inquirer
Sept. 9, 2012

By Winston A. Marbella

Robert Kuan, 65, is having the time of his life navigating a second career after a highly successful foray into fast food, Chinese-style. After cashing in his 50 percent equity in ChowKing for a reported half a billion pesos, Robert is now chair of St. Luke’s Medical Center.

He works for free, but the psychic rewards are plentiful, because he’s doing it for his church.



Tea for two

I was fascinated by this veritable leap of faith, so I called him up for coffee. He invited me for tea instead.

Robert welcomed me to his high-rise residence overlooking the great enclaves of the rich and their meticulously manicured golf courses and polo grounds. The view would have been breathtaking had it been a sunny day. But the rainy season had come early—it wasn’t even the middle of May—and a grey pallor hung over the city like lead weights. Still, through the mist, you could see where development was heading—and a rosy future beckoned Robert Kuan.

To the north you could barely discern the old suburb of Quezon City, where St. Luke’s Medical Center stood, of which Robert Kuan, founder of ChowKing, was now chair of the board of trustees.
To the east stood a new St. Luke’s at the Fort in Taguig, all 150,000 square meters of it, ready to minister to the health needs of an expanding metropolis.

To the south lay the communities of the future, and this early St. Luke’s has staked out a property for a third medical center: “landbanking,” Robert Kuan calls it.

But first, St. Luke’s in Taguig.

As planned, the building would have cost P6.5 billion to construct. It will eventually house P2.7 billion worth of state-of-the-art medical equipment powered by technology that will boggle the minds of most everyone except the medical technologists and cyber physicians that will operate them.


Robert’s vision

Robert began to verbalize his vision for St. Luke’s:



“You know a vision can be achieved in 10, 20, or 30 years. But to reach it, you have to do a lot of preparatory things.  To accurately predict where the health care market will be, you have to look at the trend of development—where the movement of commercial, industrial, and residential development is headed.”

The way Robert looked out into the future you’d think things were just beginning for him. After earning his Master of Business Management degree at the Asian Institute of Management in 1975 (his bachelor’s degree in business administration came from the University of the Philippines), Robert put up Ling Nam with his siblings in 1976:

“After eight and a half years running it I left Ling Nam, on October 16, 1984. I talked to Tony (Tan Caktiong) of Jollibee, who by this time was on his sixth year after founding Jollibee, and I invited him to partner with me in my concept of a Chinese fast-food restaurant.

“We agreed exactly one month later, on November 16th.  On March 18, 1985, we opened the first ChowKing store.”

And then came the moment that would truly change his life:

“After five years, in 1989, we had ten stores.  (The dates punctuate his story like the day he was baptized, or the day he was married. Similarly defining moments.)  My little success came to the notice of the members of the St. Luke’s board. One of them was the president of Cosmos, William Padua, who was a very active member of the Episcopal Church, which owned St. Luke’s.

“William had served in the St. Luke’s board since 1975, but in 1989 he decided to migrate to the US to be with his children. We knew each other well since we were both active in the Church.  He recommended me to Bill Quasha, the lawyer, chair of the St. Luke’s board of trustees, who welcomed me to help them run the non stock, nonprofit hospital.


Call to serve

“From 1989-1996 (he remembers the dates without hesitation), I was just an unassuming member of the board, supporting the vision of Bill Quasha to transform St. Luke’s from a church-run charity hospital to a world-class medical center.

“But this would require a complete change of structure, a lot of new people, and a reorientation of attitudes to care for the medical needs of people in a nonstock, nonprofit organization.

“The board had set the example for servant-leadership starting with Bill Quasha, who had dedicated his life to transforming a hospital dependent on annual subsidies and a budget set aside by the Church, to a self-supporting, revenue-generating institution that could set aside an annual surplus for building centers of excellence within the hospital and making it a world-class medical center.

“Involvement in a hospital is a calling. This calling became more evident with the passing of Bill Quasha in 1996.  The board invited me to fill his shoes. I said that I did not make a good figurehead and that there were many others better qualified than me.

“But if the board wanted me to provide a visionary leadership towards lifting St. Luke’s to a higher level, it would have to be a vision shared by all members of the board. The board agreed, and I accepted the challenge of becoming their chairman.”


Tough job

“In 1996, it seemed like a very difficult vision to achieve.  We needed a lot of capital.  At that time it cost only between five to seven million pesos to put up a ChowKing store.  We needed more than one BILLION pesos to modernize St. Luke’s to world-class standards.

“Now as we look back, we are happy to provide for the needs of the Church that started St. Luke’s some 100 years ago.  We have an outreach ministry that identifies the needs of the Church.  Some of the old churches the American missionaries built are now in need of repair, and we are happy to provide funds for them.

“We have a mission in Sagada that also operates a hospital to serve the communities there.  It is now called the Church of the Igorots, for many of our priests come from there.

“When the Episcopal missionaries came, they made it a point to minister to the minorities because they did not want to compete head on with the Catholic Church.  That is why we have two churches in Chinatown—St. Peter’s for the Cantonese and St. Stephen’s for the Fookienese.”

The Episcopal priests knew market segmentation 100 years ago, I mused.


One lucky guy

“You know, Henry Sy once told me,  ‘Robert, you are very lucky.  Most people your age (he was 59) still continue to make money.  But here you are giving back to society.’

“I am very thankful God called me to serve.  I get a lot of fulfillment in what I am doing today—and the example I am allowed to share with an organization like this—the concept of servant-leadership.  I never asked what’s in it for me. As trustees we do not receive compensation.”

Rewards do come in many forms, I said to myself. But I did not pursue the point. I had stayed long enough for tea.

(The author is president of a management consulting think tank; comments are welcome at e-mail: mibc2006@gmail.com.)

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Story location: Robert Kuan

Tuesday, September 4, 2012

Why MVP is targeting GMA 7

COMMENTARY
BusinessWorld
Sept. 5, 2012

By Winston A. Marbella

To understand why business tycoon Manuel V. Pangilinan is targeting TV network GMA 7 for acquisition, we have to go back in time.

In a classic leap of imagination, the Canadian media visionary Marshall McLuhan took a look at our digital future and predicted that the impact of mass communication technologies would be so pervasive that the “medium (will be) the message.”

Philippine Long Distance Telephone Co (PLDT) Chairman Pangilinan (a.k.a. MVP) has got the future of his conglomerates all sorted out, including what fits where.  In fact, he already knows where to slot in GMA-7 when he completes its buyout by December.  They are now just talking how much and how many shares.  Minor details for MVP.  He's got bigger things on his mind, and he gave his shareholders a peek into their future at their annual meeting this year. 

"The fact is," he said, "telcos (telephone companies) will become obsolete."  Then he painted the future for them.

"PLDT has a choice of staying as a utility, as a delivery system, as an infrastructure system… simply being that, like a Meralco,” he told stockholders. “That's an option for us.” 


The next frontier

“The future of that is uncertain," he continued. "We have to be something more than that. The next frontier lies in the media space." 

MVP envisions a future where his companies supply not only the power people use to charge their phones, but also the network they use to go online, and the content they access into their devices.  PLDT will be – as the song goes – here, there and everywhere.

"Social media will eventually merge with us and us with them," he said.  And boldly going where no one has gone before, MVP said PLDT must “move firmly into the social media, social networking and Internet space before they move into ours and eat our lunch." 



Competitive space

Where does GMA-7 fit in this bold vision of the future?

"You need to understand why a telco needs to move into the media space,” MVP rold reporters at the sidelines.  “Traditional media, television, radio, print, but also social media--Google, Facebook, Twitter, Youtube – these two spaces are converging." 

 "It is possible that the Googles of the world--I'm not saying it's Google--the social networks could get into the telco space… for them to offer and deliver their own services." 

 "We're seeing how [PLDT] margins are getting depressed by staying purely as a distribution company,” MVP said. “Our shareholders don't like to see that."


Compelling vision

"Telcos have user-generated content but they also need the content of others,” MVP said. “ Your television content is not user-generated. Somebody else produces content: your tele-drama, your news, even your radio commentaries." 

"We need to move into that space so that there is eventually some form of a combination between telco as a utility and social media as providing the sort of content that a telco needs to deliver," he said. “The whole industry will change."  


Radical change 

Three powerful communication technologies are radically reshaping the news, changing both its format and content, and morphing it unto a form and shape that  the Canadian media visionary Marshall McLuhan foresaw decades ago but few of us thought we would see in our lifetime.
 
Very recently, a worldwide study showed that the digital medium has overtaken radio and print.  Another  international study last year found that more people got their news from the Internet than from television. 

The driving forces of this communication revolution are the Internet and the social phenomenon it spawned, the social media, which  transformed the way people transmit and consume the news.


McLuhan's world

In turn, the news itself has evolved in form and substance, making true the prediction of futurist visionary McLuhan that, in simple terms, “the medium is the message.”

The way the social media and the Internet have transformed the news, in fact, has turned the new  technological processes of transmitting the news into powerful tools of radical social and political change.

The new arsenal of revolutionary change now includes social networking as its most potent weapon, evident in the radical changes that transformed the Islamic world since the Arab Spring of 2011.  

The social media replaced television news as the dominant tool of political change.  Only decades ago, television news was unchallenged in mobilizing American public opinion against the war in Vietnam.  

But  it took years for public opinion to jell political action.  Today it happens in months, weeks, or even days.   
 
Boundaries blurring 

Today the confluence of technology and socio-political change is transforming even the news itself as commonly understood.

In the interactive world of the Internet and social media networks, the traditional boundaries between news and opinion have been obliterated, with netizens  conveying news and opinion in an odd mixture of digital chatter.

In many cases, news is now only used as a medium for conveying the more important opinions that crisscross the digital universe  hundreds of millions of times per second.  

News has become the carrying medium of opinion in a sudden reversal of roles, with content in turn transforming the media that carry them.  

This is the future that MVP sees and it animates him.

(E-mail mibc2006@gmail.com.) 

Ramon Ang's bull run


By Winston A. Marbella


Ramon Ang's gung-ho stewardship of San Miguel Corporation deserves deeper study because it defies conventional management thinking.

The first semester surge of 31 percent in  SMC's profit proves the soundness of its bold diversification strategy which defied traditional management approaches.

 SMC chair and CEO Eduardo Cojuangco Jr. has announced that the conglomerate grew its first semester profit by 31 percent year-on-year to P14.1 billion -- on the strength of higher operating income from its beer, power and packaging businesses.

The operating income growth was posted by San Miguel Brewery, San Miguel Global Power and San Miguel Packaging.  The three units made up for the operating profit declines of San Miguel PureFoods Co. and Petron Corp., and the net loss posted by the hard liquor unit, Ginebra San Miguel.

“Our first semester financial results provide a glimpse of the importance of a diversified portfolio and the continuing value of our core businesses to the overall stability of the group,” Cojuangco said.

Transformed SMC

In an interview before Cojuangco turned over the reins to him, SMC President Ramon S. Ang described the state of the group's diversification strategy: In 2007, 45.3 percent of revenues came from the beverage sector, another 42.3 percent from the food business, while 12.4 percent came from packaging.

After diversification, excluding the recent acquisition of Philippine Air Lines, 50.1 percent of revenues cane from the fuels business, 13.1 percent from the power sector, 16.4 percent from beverage, another 16 percent from food, and 4.4 percent from the packaging businesses.

  All told, the food and beverage businesses have shrunk to only about a third of SMC’s diversified revenue steams.

Ang said, “Tell me—looking at where we were then and where we are now—do you believe our transformation was a success?”  

“I think we should be able to hit $30 billion in total sales by 2017,” he said. “We should surpass that again earlier.”



Entrepreneurial drive

Now, the food and beverage giant (mostly beer) is into everything else where money is to be made: energy, power generation and distribution (power plants), even highway construction.  It is entering even the highly competitive telco field, crossing swords with the PLDT/Smart/Sun group and the Ayala group’s Globe. SMC’s resurgent fortunes now depend more and more on new businesses.

Whence derives this entrepreneurial energy?


No surprises

As far back as current memory serves, SMC was the local equivalent of IBM, blue chip but staid, conservative, and, ergo, predictable.  You could put all your retirement money in SMC shares---and many did---and you could look forward to a modest but liveable cash flow.

The shifting political sands changed all that.  Buffeted initially by shareholder demands for more transparency, SMC management sought predictability by “sticking to the knitting,” in the picturesque phrase of Tom Peters and Robert Waterman in their best-selling management tome, In Search of Excellence.


Eight drivers

The landmark study, which analyzed 47 companies in the Fortune 500 list, found eight themes that the authors believed accounted for the companies’ excellence.   These are:


  1. A bias for action.
  2. Staying close to the customer.
  3. Autonomy and entrepreneurship, or supporting innovation and nurturing “champions,” people who will stick their necks out for a breakthrough product or process.
  4. Productivity through people, or treating rank-and-file employees as a distinct source of   competitive strength.
  5. A hands-on, values-driven management philosophy that guides everyday practice.  
  6. “Sticking to the knitting,” or staying with the business that you know.
  7. Simple organization, lean head office staff.
  8. Simultaneous loose/tight properties.  Autonomy in day-by-day operating decisions but faithful adherence to corporate values, vision, mission, and objectives.

Bold tack

Defying conventional wisdom, Ang and Cojuangco took a bold tack and sailed into the wind, and have been amply rewarded, to the delight of shareholders.   
 
Less than a decade and a half from the book’s writing, only a handful of the 47 excellent companies remained in the Fortune 500 list.  Many things could have accounted for that.  
 
Enter Hamel

In the mid 1990s, the best-selling strategist Gary Hamel was invited by San Miguel as a resource in its annual strategic planning review.   

Among Hamel's classic management precepts was: “(Innovative companies) not only reinvented their companies; they reinvented their industries, regenerated new core strategies, and defined new business models for global markets.”

The idea that shook conventional management logic was  “Strategy has to subversive!”

“If it is not challenging internal company rules or industry rules, it is NOT strategy.”

Hamel provides a revolutionary road map:  “The goal is to cause earthquakes.”


Inventing the future

To find the future, Hamel prescribes the following: Create new core competencies by creating revolutionary strategies.  Imagination, not cash, is a scarce resource.

Then Hamel asks the inevitable questions:  “Are you building a legacy or living off a legacy?  

“Who is setting the transformation agenda in your Company today?”

When Hamel lectured at San Miguel, it was under a different management, so Ramon Ang was not in the audience.  But considering how he has run San Miguel since 1998, it would seem like he did not have to be there.  He and Hamel just seem to think along parallel lines.  And that is probably the happiest coincidence to have hit San Miguel in a long, long time.

 (The author is president of a management think tank; e-mail mibc2006@gmail.com.)