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Highly
Visible Filipino Managers
By Michael Alan Hamlin
October 2004
My firm frequently organizes "guru
presentations" featuring day-long talks by well-known experts
in their fields of specialization. Among the experts we've presented
over the years are Michael E. Porter, Philip Kotler, and Peter Drucker.
This is not our principal business, but we like doing it, and feel
that it's important to provide our community opportunities to interact
with the world's best thinkers. We also organize a regular series
of public seminars that are facilitated by less-well known but up-and-coming
management experts. These experts come from the Australia, Singapore,
Great Britain, Hong Kong, and the U.S., generally. Very few are
from the Philippines, and our top Filipino presenter grew up in
the U.S.
So it's not unexpected that I'm often
asked why we don't feature more Filipinos. There are a number of
reasons for this. First, Filipino experts often appear as speakers
organized by our competitors and local associations, and many local
experts arrange their own seminars and workshops. But second, and
far more important, is that for many years the most talented Filipinos
in academia and the private sector have migrated overseas. The reasons
for this migration vary.
The obvious reason is financial,
and the desire to improve standards of living. For academics, the
Philippines simply invests so little in basic research that they
must go in search of funds elsewhere. Most wind up in U.S. colleges
and universities where they work on projects funded by large private
and non-profit foundations and various government agencies. The
Philippines is not alone in this regard. Many countries produce
more scientists and engineers than the United States, but they lose
them to research programs there. It's been estimated that 50,000
Chinese engineers and scientists are pursuing advanced degrees in
the U.S., for example. China actively tries to recruit these highly
valuable individuals back to China, but many of the most talented
stay in the U.S., become permanent residents, and eventually citizens.
For capable private-sector managers,
the temptations are many. Naturally, the prospect of trading the
equivalent of a $50,000 salary here for a $200,000 salary in the
U.S. is simply hard to resist. For other managers, though, there
is the opportunity to obtain world-class business experience. An
investment banker on Wall Street, for example, is on the leading
edge of financial best practice. In the Philippines, there really
is no such thing as an investment banker because there is no real
equity market. Managers and other professionals in such a position
have no choice, therefore, but to go overseas if they want to practise
their profession, and certainly if they want to practise their profession
in the company of the world's most respected practitioners.
Occasionally, there are exceptions
to these rules. Two that come quickly to mind are Gerardo (Gerry)
Ablaza, Jr., president and CEO of Globe Telecom, and Tony Tan Caktiong,
chairman and president of Jollibee Foods Corporation. Of the two,
Tan is probably more well-known because he has played the role of
giant slayer in the private sector in a very public way. Many authors,
including me, have chronicled Tan's phenomenal rise from ice cream
parlor entrepreneur to fast food king, trouncing giant McDonald's
in the process. Generally, people attribute Tan's success to the
company's well-communicated focus on local flavor preferences and
tastes. Tan developed products that appeal to Filipinos' particular
culinary likes and dislikes. McDonald's was unwilling to play by
these rules, seeming to insist that only McDonald's could make the
industry's rules. We've known for quite some time, of course, that
this is not the case thanks to Tan.
But to suggest that Tan's success
is attributable merely to his desire to cater to Filipino tastes
is to do this one-time entrepreneur a significant injustice. While
there is no doubt that much of Jollibee's success depends on this
factor, there are many other just as important components of Tan's
success. What are those factors? Among them are: 1) a willingness
to listen to sound advice and act on it; 2) a focus on operational
efficiency and productivity; and, 3) a bottom line mindset. There
are probably other factors as well, but consider these briefly.
First, Jollibee didn't start out
as a solo entrepreneurship. When McDonald's announced its entry
to the Philippines, Tan sought the counsel of brothers William and
Ernesto, along with two American consultants, Paul Rosenburg and
Smitty Lanning. Together they began to think of the strengths and
weaknesses of Jollibee compared to its giant competitor. McDonald's
vulnerability, they correctly reasoned, was the uniform blandness,
which they expertly exploited. But in coming to this decision, Tan
sought expert advice from other individuals, and tested his own
ideas. From the start he was a collaborative manager, not a one-man
show.
Second, back in 1975 the Philippines
certainly wasn't known as a service culture. Poorly paid hourly
employees generally frowned themselves through the day, treated
their customers like potential criminals, and barely managed to
perform a simple task like cashiering without two other assistants.
Sadly, in many places not much has changed in 30 years. But Jollibee
was at the forefront of operational efficiency and productivity
leading to better customer service, reliable product and service
delivery, and low cost. Now, 30 years later everyone else involved
in supply chains - and who isn't? - is thinking about the same thing.
Third, since its foundation Jollibee
has been consistently profitable, in part because the company didn't
have the resources to be otherwise, but in large part because Tan
and his associates understood that they could only grow in an era
of exorbitant interest rates by funding expansion internally. In
1993, the company finally went public, and relies today on a variety
of fund sources for expansion. But it hasn't lost sight of the bottom
line.
As a result of these and other factors,
Jollibee has grown into an organization of 26,000 individuals working
in 1,000 outlets in seven countries including the United States
and China, according to its website. And it continues to control
the local market with a 65 percent share, despite several well-publicized
attempts by McDonald's to knock the company off its perch. Annual
revenues exceed $550 million. Because of his success, Tan has also
become a much sought-after speaker in conferences and other events.
Despite security concerns, he has been increasingly willing to share
his experiences with other aspiring entrepreneurs, and that may
be among the most valuable services he performs for his country
and its citizens.
Ablaza has been - uncharacteristically
- in the news lately as a result of receiving two high profile awards.
The Pacific 2004 Asia Business Leadership Awards presented Ablaza
with its highest honor, the Business Leader Award. He also received
the CEO Choice of the Year Award, whose recipient is selected by
a vote among other business leaders in the region. Why has this
relatively little known manager received all this attention lately?
To understand how significant Ablaza's
rise is, it is once again necessary to think back - as in the case
of Jollibee - to a dark period in Globe Telecom's history. In this
case, the date is 1997, and Globe has just reported a stunning loss
of $30 million. To add insult to injury, the company acknowledged
that $17.6 million of the loss was accounted for by bad debts. According
to former executives, the company had opened thousands of post-paid
accounts without the benefit of thorough credit checks. Organized
criminal groups quickly caught on, and started a major operation
involving opening accounts for a modest setup fee, using them until
they were cancelled, and then selling the GSM phone that came with
the account for a huge profit.
The company was in such dire straights
that its two major partners, Ayala Corporation and Singapore's SingTel,
considered dissolving the partnership. While all this was happening
an upstart competitor, Smart - led by two newly minted entrepreneurs
- was doing a Jollibee to Globe, growing faster and near profitably
by providing a cheaper service tailored to the needs of most Filipinos
with limited expendable income. While Ayala insiders wouldn't consider
the change a management shake-up, Ayala and SingTel agreed they
needed a leader who could bring process and focus to the company.
They turned to Ablaza, a banker with multinational experience.
In unguarded moments Ablaza admits
that he had no idea what he was getting into. "It was far worse
than I imagined," he told me once. How did Ablaza turn a dramatically
unprofitable company with an expensive and largely unattractive
technology around? As in Tan's case, the reasons are varied, but
first and foremost the turnaround had to do with instilling discipline
within the organization. That meant refining business processes,
and then making sure that they were carefully followed. Ablaza knew
that it would take time to compete on Smart's terms, and so he consolidated
his hold on the up market by delivering quality and value-added
services such as fax and data transmission capability when that
was a real rarity. Only when the company achieved profitability
and had consolidated its hold on the value-added market did Globe
begin to offer aggressively-priced pre-paid services.
As a result, today Globe continues
to dominate the GSM post-paid market. Competitor Smart, despite
some brilliant marketing and a strong development strategy of its
own, has been unable to loosen that hold. In the first half of this
year, users of Globe's wireless services grew to approximately 14
million, and income grew 15 percent over the same period last year.
For the full year last year, Globe reported income of approaching
US$900 million, and profits not far off $200 million.
Like Tan, Globe's success and the
publicity associated with Ablaza's awards has made Ablaza a much
more public figure, and certainly a much more public executive than
those normally associated with the often publicity-shy Ayala Corporation.
However, Ablaza's success is an important example for other aspiring
professional managers. While Tan demonstrates how to start with
nothing and dominate a competitive market in a space created by
a successful multinational, Ablaza shows how astute management,
attention to process, and strategic focus can enable a company suffering
substantial losses to get its footing, and dominate a market segment.
(Michael Alan Hamlin is the managing director
of consultancy TeamAsia and the author of three books on Asian economies
and companies. His latest book is Marketing Asian Places,
of which he is a co-author (Wiley, 2001), and he is currently
at work on High Visibility: The Making and Marketing of Asian
Professionals into Celebrities. Write him at mahamlin@teamasia.com.).
Copyright © 2004 Michael Alan Hamlin. All Rights
Reserved.
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