SIM Giok Lak, managing director of Zicom Group and Ernst & Young's Entrepreneur Of The Year (Industrial Products), reckons a true entrepreneur is visionary, hard-working and unafraid of failure. He does not say so, but these are the characteristics he has displayed himself throughout his career.
At 17, straight after his O levels, he began work at a public accounting firm as an audit clerk. On the side, he did a self-study accounting course, which he completed when he was 21. He later switched to management consultancy, where he helped advise a marine engineering company that was in distress. His efforts helped revive the company, which resulted in a job offer.
Under his guidance, the company became successful. But a problem with his boss resulted in him leaving. And to his surprise, several staff also offered to resign and work for him - an early testament to his leadership ability.
Rejecting an offer from a foreign bank to take on a managerial role, Mr Sim decided instead to start his own engineering business, with a $50,000 loan from one of his previous suppliers in the US.
He set up Zicom Pte Ltd in 1978 and has never looked back. Over the past 30 years, Zicom has expanded from manufacturing and supplying hydraulic deck machinery to a diversified business, Zicom Group. Its clients are mainly from Singapore, Malaysia, Thailand and China, though it also has business in Australia, India, Indonesia, the Middle East and Myanmar.
'When Singapore went into recession in the early 1980s, three years after I had been in business, we were hit with a significant number of bad debts due to the failure of some of our Singapore shipyard customers. Our cumulative profits and our small equity were wiped out,' recalls Mr Sim.
Not to be beaten, he mortgaged his house so he could keep paying his workers. And for the next two years he worked without pay - moves that did not escape the attention of his staff. 'Most of them are still with me,' he says.
In the late 1990s, nine months after Zicom had expanded into Australia, the Asian crisis hit. Sixty per cent of production meant for exports was lost. The only option seemed to be to downsize the Australian operation, but the business was unionised by the very strong Australian Metal Workers Union, which resulted in a 'nightmarish' situation. It took a lot of diplomacy and some 'subtle' management to work through the situation, Mr Sim recalls. But today, the business remains in place.
Through the economic boom of the past three years, Zicom has maintained an average 30 per cent of net assets in cash, primarily to position itself to take advantage of opportunities. Net debt has been kept low at 9-12 per cent.
The company embarked on a variable wage policy four years ago to make it easier to control costs - rather than lay off workers - should there be a downturn. Under this policy, 10 per cent of the salary of every employee - from the managing director downwards - is withheld every quarter. The amount is subsequently released only if a break-even target is achieved. If there is a loss, the money withheld is not paid out. The 10 per cent has been built up from annual increments over the past four years, to act as a cushion against retrenchments.
Explaining what appeals to him most about manufacturing, Mr Sim says: 'Staying ahead, not only in terms of innovation but also competitiveness. The quantum leaps in our business have come about from innovation or new developments on existing products. These steps have enabled us to reach new frontiers, grow our products and widen our market base.'
For instance, Zicom first developed the high-precision hydraulic encapsulation press in 1990. Today it is used in the US, Europe, Malaysia, China, Korea, Taiwan, Singapore and the Philippines.
'We either continue to move ahead or we will be rendered irrelevant by change or edged out by competitors,' says Mr Sim, acknowledging that the blistering pace of change often translates to personal sacrifice and stress.
The company's plans are focused on initiatives to ensure the growth of current products, as Zicom believes these still have plenty of potential. It is also looking at investing in a couple of overseas markets but is holding back for the time being because of the current economic uncertainty.
Expansion will centre on the group's core expertise. 'The growth plan embraces the construction of a concrete mixer manufacturing hub in Thailand to achieve a better competitive edge, particularly for our Australian operations, expanding the capabilities of our precision automation business and our deck machinery manufacturing to increase our output and increase productivity,' says Mr Sim.
Product development and innovation programmes will also remain in place.
For the financial year ended June 2008, Zicom reported revenue of $127 million - a 33 per cent increase from $95 million the year before. Higher material and wage costs took a toll on H2 2008 results. But net profit for the full year still grew 12.11 per cent to $8.7 million, from $7.7 million in FY 2007.
This article was first published in The Business Times on November 28, 2008.
