Resilient Growth In Crisis? Bamboo Innovators CSL and Keppel Show How

Resilient Growth In Crisis? Bamboo Innovators CSL and Keppel Show How

By KEE Koon Boon

8 April 2013

“Sometimes to be reborn, you must first die,” Dr. Victor Fung, group chairman of the multi-billion Li & Fung group of companies, cites pensively this old Chinese proverb in order to ask an open-ended question, “In a world that’s speeding up, how will companies change enough without crisis?”

We cannot avoid, or even choose, a crisis in order to engender the change that is required to overcome stall points in growth and to stay relevant in today’s marketplace where disruptive industry trends and black-swan crises have become a permanent fixture. When the inevitable traumatic upheavals and unorthodox challenges do come, innovators craft their business models to stay resilient like the bamboo, which bend, not break, even in the most terrifying storm that would snap the might resisting oak tree.

Australia’s CSL and Singapore’s Keppel are two such companies who have experienced near-deaths in daring greatly to scale and globalize their once domestic SME operations right under the noses of powerful incumbent global giant rivals – and they were renewed and reborned to be resilient Bamboo Innovators.

In its remarkable transformation from a sleepy government outfit providing snakebite antivenin since its privatization and listing in 1994 with a market value of A$500 million to a A$29 billion global biotech champion, CSL had experienced a near-death crisis in 2002. Similarly, Keppel, the global leader in offshore oil rig design and building, had hit a crisis in 1973, 1983 and 1990. Both were able to bounce back higher to scale greater heights. Why? Both companies have dedicated leaders cultivating a culture rooted in trust, cooperation and empowerment to contend with and heal creative dissent to handle large-scale complex projects repeatedly with excellence.

Brian McNamee was plucked from relative obscurity at the age of 33 to head CSL at the recommendation of then Industry Minister John Button. Similarly, the late Hon Sui Sen, founding Chairman of Singapore’s Economic Development Board (EDB), picked Chua Chor Teck to be Keppel’s first managing director in May 1972 and to take over and “Singaporeanize” Keppel from the hands of British managers of the Swan Hunter Group, then one of the best known shipbuilding companies in the world that has now disappeared.

During the era when America was dubbed the OPEC (Organization of Plasma Exporting Companies) of the global plasma industry, CSL broke the dominance of America’s grip by buying Swiss plasma fractionation pioneer ZLB for A$1 billion in 2000 and Germany’s Aventis Behring for US$925 million in 2004. Today, domestic earnings account for 10 percent of the group earnings at CSL with the bulk provided by its global businesses. Similarly, Keppel got its design and technology in oil rig from acquiring rig builder Far East Livingstone Shipbuilding (FELS), which Keppel took majority control in 1973 during the oil crisis. Subsequently, the late Sim Kee Boon, Chairman of Keppel Corp from 1984 to 1999, continued to lead the globalization push of Keppel, subsequently continued by the capable leaders Mr. Lim Chee Oon, Mr. Choo Chiau Beng, Mr. Tong Chong Heong, Mr. Loh Wing Siew and so on. Mr. Sim outlined the basic strategy of avoiding “green-field” or start-from-scratch projects and to invest in yards that are already there. For instance, Keppel acquired Allison-McDermid in America, AHI in Middle East, PEM Setal in Brazil, and Verolme Botlek in Europe. Mr. Sim’s dream was to see Keppel become like a Nestle with a very significant global presence.

The big-picture “plan” to globalize is seen obvious but managing the unseen risks and creating adaptive advantages along the way are more important. For the first two years, ZLB lived up to its promise, resulting in solid earnings growth for CSL, and its market value more than doubled. But the wheels came off in 2002 when the industry went into oversupply and a combination of sharply falling product prices and disadvantageous currency mismatch nearly crippled CSL. Back in 1983, Keppel’s cash purchase of Straits Steamship saddled it with a debt of S$845 million. Furthermore, the shipbuilding industry during that period was pronounced a sunset industry by the pundits as the industry went into oversupply with more than 80 shipyards capable of building rigs. Keppel survived the crisis and was the only surviving rig-builder in the world in 1986 then. Subsequently, another crisis hit shortly after Keppel’s acquisition of Texas-based jackup yard Allison-McDermid in 1990 when an American firm brought a US$565 million litigation case against Keppel for alleged breach of contract and damages involving the building of jackup offshore drilling rigs. CSL turned risk into opportunity by acquiring Aventis Behring to consolidate its position as the industry recovers. Keppel eventually won the suit. Keppel saw the need for control and bought out its partner, renaming the entity AmFELS which became a wholly-owned subsidiary of Keppel. It grew to become one of the best-equipped offshore yards in the Gulf of Mexico.

Growth through acquisitions has proven to be the graveyard for many companies in general. Warren Buffett, the world’s greatest investor, likened growing via acquisitions to kissing unresponsive corporate toads who croaked and the tempting but value-destroying toy that executives must have because their peers have one too. Post-acquisition efforts in integrating the companies into the parent company to compete as a coherent whole prove crucial to successfully scale to greater heights and not blow up. Both CSL and Keppel are able to do so because of the foundation laid down in the culture carefully nurtured by Mr. McNamee and Mr. Chua.

“We respected them greatly for their skills and their capabilities, so we weren’t cultural imperialists. We greatly respect our Swiss and German colleagues and so there was no notion that they were being taken over and that they were going to work to our method,” McNamee articulated how their culture of trust and respect provided both parties a common ground to work together towards a global vision for the group. The culture of empowerment at CSL is embedded into its business model to foster open innovation and extensive collaboration with its acquired companies and a network of high-quality academics, scientists and physicians across the world. CSL minimises a silo formation by giving people personal responsibility and by running R&D using a matrix structure. This intangible culture has delivered powerful tangible results, including how CSL beat competitors to be the first to market with an effective vaccine against the global swine flu epidemic and in developing the anti-cervical cancer drug Gardasil. The dedication of McNamee is also touching. He was diagnosed to have cancer and kidney problems when he was planning to buy ZLB. Swiss giant Novartis also offered more money and fanned the patriotism flame that ZLB should remain in Swiss hands. Due to the persistence of McNamee who flew to Switzerland against medical advice to personally negotiate the deal, CSL acquired ZLB despite paying 20 percent less than its rival bidder.

In his touching eulogy for Mr. Chua, “the much-loved leader among his men” who passed away from cancer in 1986 when he was 47, Keppel’s influential long-time US representative Mr. John Bajor commented, “Yes there’s complete dedication expected but the return in caring for each employee is the spirit he so carefully nurtured and left behind. It has become the Keppel way.” Mr. Sim also paid tributes to Mr. Chua who “tried exceedingly hard to inculcate in the organisation the ‘Keppel culture’ of loyalty, thrift and hard work.” Mr. Chua’s dedication and his “genuine interest in helping junior officers overcome difficulties in order to advance their career” has laid the foundation to the “Can Do” spirit of excellence at all levels in Keppel for many years to come.

The story at Bamboo Innovators CSL and Keppel highlighted the intangible culture of kindness, caring and empowerment is akin to the invisible intricate underground root structure that makes the ground around a bamboo grove very stable – and make possible the adaptability of the bamboo to bend, not break, with storms and crisis, and to remain relevant and evergreen no matter how the world around us speeds up and changes.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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