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[BUSINESS] Li Ka-Shing Interview at Shantou University Economic Forum

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  • madchinaman
    Shantou University Business School Economic Forum Topic: On Corporate Strategy Date: 17 May 2001 http://www.lksf.org/eng/media/interview/20010517_01.shtml Mr.
    Message 1 of 1 , Feb 27, 2004
      Shantou University Business School Economic Forum
      Topic: On Corporate Strategy
      Date: 17 May 2001
      http://www.lksf.org/eng/media/interview/20010517_01.shtml

      Mr. Li Ka-shing shares his valuable experience in a Q&A session with
      over 100 faculty and students at Shantou University. The session was
      also broadcast live via the campus-wide Intranet.

      Q: When a business implements a strategic shift, many adjustments
      must be made within the organization. Which adjustments do you feel
      are the most important?
      A: In my personal experience, the first and most important step is
      to determine the right direction, but before you can do that you
      need to grasp the most updated and accurate information.

      You need to pay attention to the company's cash flow. Many
      profitable companies run into problems when they lose their cash
      flow.

      Staff moral is also a very important element. In a commercial
      society, people remain an organization's most prized asset.

      You must know and understand your business like the back of your
      hand. Otherwise your company could be here today, gone tomorrow.

      Q: What should a business do to meet the new challenges presented by
      the age of information technology?
      A: Information technology can help you run your business more
      efficiently, saving you time and money. So the greatest challenge in
      the IT age is to find different ways to increase productivity.

      Q: Do you consider your firms to be competitive?
      A: I would say that 99% of our businesses are competitive. In days
      bygone, communications was less advanced, and human interaction was
      more restricted. But today, people all over the world can get on the
      Internet and compare prices instantly. If you are not competitive,
      you will be eliminated. To raise you competitiveness, you must first
      establish a firm foundation. An organization is like a mechanical
      watch, if one of the gears break down, the watch stops ticking.

      We have businesses that are doing very well, and businesses that
      could be further improved. We remain competitive by continuously
      building on our strengths and improving our weaknesses. That's the
      way we operate.

      Q: How will traditional business fare in the New Economy? Are you
      optimistic about emerging industries?
      A: We are involved in a number of new industries, such as
      biotechnology, and some others that have not yet been disclosed.
      These are not capital-intensive industries. But if traditional
      businesses can incorporate new technologies, they can enhance their
      efficiency and increase their profit. All of our companies are doing
      just that. We have businesses in 27 countries besides Hong Kong and
      the mainland, and every one of these businesses is doing well. It is
      wonderful that traditional businesses can integrate with emerging
      technologies.

      Q: Many companies, such as mainland's Haier, develop a unique
      management style. Do Cheung Kong and Hutchison Whampoa have their
      own style of management, and if so, what are its characteristics?
      A: I understand Haier is in the electrical home appliances
      business. We are a multi-national corporation with many different
      types of businesses. We adopt a western style of management, but
      with Chinese characteristics. In foreign companies, there are many
      Quarter CEOs who are forced to resign if their company fails to
      perform. But we are not like that. We are a compassionate
      organization. For instance, if our peers in the same industry have
      reported a 90% profit loss, and we record a loss of 60%, then I
      would reward the CEO. Conversely, if other companies are making
      $100, and we are only making $80, then I have to ask why we are not
      performing as well as other companies.

      Foreign companies tend to focus on efficiency; Chinese companies
      lean toward compassion. We are not a small operation. One of our
      companies is ranked 90th in the world, and another is ranked 200th.
      Haier is a very successful mainland company. They started by making
      refrigerators with German technology. Their business is making very
      good progress. But we are more than a manufacturer; we have a
      manufacturing business, but in a different industry. We are involved
      in the oil industry. Our container terminal business is the largest
      in the world. We handle over 30 million TEUs every year. We are
      developing 3G mobile networks in many countries, so the
      telecommunications business is a key component. Many analysts are
      saying that the 3G launch will be delayed, that we will not be able
      to roll out 3G services by next year. I have already seen these
      handsets, and in Japan, 5,000 people will be using these handsets in
      a trial run by the end of this month. To me, that is a success.

      In short, information is most important. Haier is a picture of
      success, but we are in a different industry.

      Q: How did you formulate your strategy on Orange?
      A: Orange was a miracle. About 11 years ago, we were going in two
      directions-we were operating a one-way mobile system, and at the
      same time we registered Orange which was a PCS system. I tried it
      for myself, and the reception was very clear. The operation was very
      successful.

      However, very few people know why we finally sold the business. The
      value of the business was extremely high. Someone came to Hong Kong
      and offered us US$30 billion, but they were not the only interested
      buyers. Someone else had offered about the same amount. I felt that
      we should sell right away. If we were to build a 3G business with
      the same number of customers, we would only require about US$12
      billion. 3G offered everything 2G had and much more, including data
      transmission. So the transaction took place less than two hours
      after we met, and it became one of the largest transactions and the
      most profitable deal in history.

      Q: It is said that when you do business in China, you need to bring
      a lawyer and an accountant. What kind of changes are taking place in
      China's investment environment? What are the differences compared
      with other countries?
      A: There are provincial and municipal officials, as well as
      reporters present. May I speak frankly? Even if you have the best
      accountants and lawyers, and ample funds; even when you are well
      prepared, sometimes things can go awry. China is the most populous
      nation in the world with enormous untapped potential. But in the
      past, foreign investors coming to China have been placed at a
      disadvantage. The Central Government has a perfect record for
      honoring its agreements with foreigners. But there is still room for
      improvement at the provincial and municipal levels. This is
      something that all of our leaders must review. In general, western
      countries take contractual agreements very seriously. It has only
      been about 20 years since China opened up to the world, so I believe
      things will improve gradually, especially now that we have entered
      the WTO. Even though we see some trouble spots, we remain confident.

      Q: What were the most difficult circumstances that you had to face?
      How did you overcome those obstacles?
      A: Times were really tough in the beginning. When I started my
      business in 1950, I only had HK$50,000, so I was in a tight spot
      financially. I already had some work experience, but I had an
      advantage in competing with other companies-I was willing to learn
      the latest industry trends. Actually I do not consider myself a good
      businessman. First, I don't like to entertain people. Second, I
      don't like to be acquiescent. Third, I always make good on my
      promises. But other people don't always keep their end of the
      bargain. Doing business may be tough, but I am willing to learn, to
      innovate, and to work hard, which are the reasons why my business
      can continue to grow. We focus on our core competencies while
      looking for new areas for expansion. New businesses sometimes fail,
      and sometimes succeed. But the ones that succeed can be very
      profitable. This has been my experience. Setbacks and difficulties
      are ways to build character.

      Q: You have so many outstanding executives working for you. How do
      you manage and inspire them and also allow them to retain their
      creativity and initiative?
      A: I feel very fortunate that I have a very good relationship with
      my colleagues. I was once an employee myself, so I know what
      employees want. The turnover rate for senior executives at my
      company is the lowest of any major company in Hong Kong, probably
      under one percent over the last ten years. To attract and retain
      good staff, you have to offer them good remuneration and good
      prospects, and to make them feel important. Of course you also need
      a good system of checks and balances, which is vital to the health
      of the company. Even the best people can turn bad if you leave them
      isolated.

      Also, you can't trust someone just because he is a relative. You
      have to spend time with that person, understand his way of thinking,
      and if it is positive like your own, then you can trust him. If you
      employ someone solely because he is your relative, then the company
      will certainly suffer. On the other hand, if you have worked with
      someone for a length of time, and you feel that he is heading in the
      right direction in life, and he takes care of every important
      assignment that you give him, then you can trust him as if he were
      your own family.

      Q: What is the most crucial factor in doing business? As a
      businessman, do you feel a person's moral character is the key?
      Which do you consider as more important for a school to impart,
      moral education or vocational education? Do you follow Laotze,
      Buddhism, or Confucianism in your way of doing business?
      A: I had very little formal education myself. But when I was young,
      I knew I had to sacrifice reading novels for books that were
      beneficial to my career. As for my philosophy, I have integrated
      some Confucianism, some Buddhism, and some Taoism. Reading
      philosophy helps you find peace of mind when you are unhappy. As for
      moral character, there is an old saying: when the world is chaotic,
      you depend on the abilities of the leaders, but when the world is
      peaceful, you look at his moral character.

      You may think I am conservative, but I consider moral character more
      important. What good is a talented person if you need three people
      to watch over him day in and day out?

      Q: No matter how big a corporation may be, a small tactical mistake
      could be very costly. How do you prevent such mistakes?
      A: This is a difficult question to answer. Every responsible
      officer should be familiar with the company's cash flow. Barings,
      which was one of the world's best-known investment banks, allowed
      one of its officers to make huge trades that eventually brought the
      bank down. In a globalized operating environment, you must proceed
      cautiously and not be too greedy. You should also listen to your
      senior executives often and not go it alone.

      Q: To be successful, one must not squander opportunities. How
      important was this factor in your career, and how can someone make
      the most of his opportunities?
      A: To be honest, when I started working at the age of 12, back in
      1950, it was all hard work and continuous learning. Even after I
      founded my own business, the first five years were built on hard
      work rather than opportunities. As the company grew, more
      opportunities came knocking. The most important thing is to improve
      yourself, and learn everything you can, about politics, economics,
      and industry trends. The more you know, the more prepared you will
      be when opportunity knocks. If you are lazy and wile your time away,
      you would not know how to take advantage of opportunities even if
      they stared you in the face. Also, it's easier for opportunities to
      find you than for you to go looking for opportunities. I am fair and
      honest. People who have worked with me in the past are always
      pleased with our relationship. Over the years, many opportunities
      were presented to me by people who had worked with me previously.

      Q: How do you handle a difference of opinion?
      A: You should listen to the views of experienced professionals. When
      I receive a proposal, I will consider its merits even if I do not
      think it is suitable. Sometimes, 90% of what they say proves that
      you are right, but you may not know about the other 10%, and this
      10% could turn out to be the key to the project's success. This is
      why you must have humility and listen to others' opinions. Of
      course, as head of a company, you have to have a deep understanding
      of the businesses you are in; otherwise, you can easily make a
      mistake. If you are not diligent, even the biggest companies can run
      into problems. Today's business environment is vastly different. In
      the old days, if you made a mistake, the impact on your overall
      business was limited. However, a wrong decision today could have
      very significant consequences. So you have to make decisions based
      on expert opinions as well as your own knowledge.

      Q: What is your business philosophy?
      A: In a commercial society, the more money a businessman makes, the
      better. If somebody presents you with an attractive opportunity, and
      it is perfectly legitimate, most people will take it. But if I have
      reservations and don't feel comfortable with this business, then I
      would rather give up this opportunity to make money. For instance,
      we made a very large investment in the tourism industry of a foreign
      country, with projects that include an airport and several golf
      courses over a large tract of land. The Prime Minister of this
      country granted us a casino license. My manager knew that I didn't
      like this type of business. He suggested a solution that could
      generate a profit without putting up any capital. His idea was to
      lease the casino license to another foreign investor for US$150
      million. At the time I rejected this idea because I did not want to
      be involved in the gambling business. When the Prime Minister came
      to visit me in Hong Kong, he said, "A whole army of investors wants
      me to grant them this license. I wanted you to have it because you
      have made a large investment here. Why don't you want it? You
      colleagues asked me to convince you that this is a good business."
      We held a meeting and decided to construct another building outside
      the hotel, and we would lease the license to whomever they wish for
      three years. My managers always say that I don't like to make easy
      money, that I only like to earn money the hard way. So this is my
      business philosophy: You should make money only in a legitimate
      fashion. In the US, they teach MBA students how to squeeze the last
      penny out of a deal. But we Chinese think differently. Making money
      is good, but not if it causes harm.

      Q: How do you take time out from your busy schedule to learn the
      latest trends? How do you keep up a high energy level? How do you
      develop relationships with people?
      A: Firstly, it is important to keep in good physical and mental
      shape. With regard to learning, in order to have more time to learn
      more about the business, you will have to give up some things like
      television and novels. Always keep a clear head and don't be
      bothered by the little things. You have to treat people fairly. But
      being fair doesn't mean you have to put your money in other people's
      pockets. I am not very energetic. Nowadays when I read in bed at
      night, I fall asleep with the book in my hands nine nights out of
      ten. In the past, I could always finish the book when I wanted to.
      But now I fall asleep even when I don't want to.

      Q: Charisma is very important for managers. How is your charisma
      applied? How do you develop character?
      A: I am not particularly handsome. The important thing is to treat
      people with sincerity. If you are not honest and sincere, people
      will leave you sooner or later. A company is built on the efforts of
      many individuals, and not just on one person. A single individual
      cannot accomplish much.

      In the Han Dynasty, Xiang Yu was very brave and won many battles,
      but in the end he failed. You can't succeed on charisma alone. Treat
      people with sincerity and build a good organization. Otherwise, it
      doesn't matter how famous or how capable you are. A company needs a
      good structure, good organization, and good people. If everyone
      works in concert, then you can succeed.

      Q: What type of qualities should business school students develop?
      A: Curiosity is one of them. But the most important quality is good
      English language skills. In Hong Kong, good English skills are
      essential. Secondly, you have to listen often to what people in your
      industry are saying. You have to improve yourself. You have to read
      more books. But some foreign books contain only western thoughts. In
      a knowledge economy, the wealth gap will only grow wider. If you
      don't have a good education, your opportunities will diminish. Over
      the past few decades, the income and life quality of people with
      limited education in western countries have been capped by
      inflation. The living standard of well-educated people has continued
      to rise. That's why all of you here today are very privileged.

      Q: You have never written an autobiography or shared your secrets of
      success with others. Do you have any plans to do so?
      A: This idea has been brought to me before, but I was not
      interested. I want to write a book, but only for my two sons. I am
      afraid I might offend someone. A book will be written, not to
      promote myself, but to provide a guide for our young people. Young
      people today seem to think that the ends justify the means. But our
      traditional Chinese philosophy of life is the best. That means hard
      work, trustworthiness, frugality, and building a good reputation.
      How much you learn will be the yardstick of your success.
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