Challenges in business and career can lead to failure, but how we respond matters. It is important to view failure as opportunities to grow, learn, and become more resilient, as we pick ourselves up and move on.
Former CEO of Southern Steel, Dato’ Dr Tan Tai Wai, gave a public talk on “Are You Prepared for Failure?” at the WOU main campus on 9 September 2023. Over 100 people joined the event, which was also streamed live, organised by WOU’s School of Business & Administration (SBA).
Dr Tan stressed the need to “do due diligence” before starting a business but conceded that even the best laid plans can fail. He further advised, “Get feedback on your ideas from others first. If you have a family to support, get a partner to share the risks and capital.”
He believed companies, particularly market leaders, need to invest in R&D and have people willing to embrace change.
He shared a few real-life examples of unexpected challenges to business from internal and external factors, namely bullying by a buyer, hidden truths, tightening of government spending, and global economic and health crises.
First was a canvas shoes export plant owned by a relative that went into crisis in 1979. The plant was contracted by Dunlop, and the reject rate was below 5%, but the same Dunlop quality inspector suddenly rejected 40% of the shoes. Since the global economic slowdown caused sales to drop sharply, the buyer chose to bully the small supplier rather than re-negotiate the contract.
Another example was the government cut in spending in 1986, which caused 60% of construction projects to be cancelled, and the base lending rate to rise to 13.5%.
Meanwhile the 1998 global recession impacted Malaysia’s construction-related industries, decreasing the demand for raw materials. However, Penang’s electrical and electronics sector boomed during this time. Referencing the financial crisis of 2008/09 and the Covid-19 pandemic beginning in 2020, he predicted that recession will happen every 7-12 years, whether in Malaysia or the world.
Dr Tan also described how regional or industry-specific problems may cause businesses to fail. The Indonesia Confrontation in 1963 greatly impacted Penang, as George Town was dependent on entrepot trade with Aceh, with Penang’s unemployment rate rising to 14%.
“Even without recession, a company can fail due to inadequate due diligence or blind faith in the successful partner and their verbal promises,” he stated.
He spoke about Southern Steel’s joint venture with a Hong Kong-based factory that failed because the key technical team refused to come to Penang for training. He lamented he should have done due diligence by visiting Hong Kong to talk the key people involved.
His company’s joint venture with Itochu, an agent to GenStar, the container leasing arm of GE Capital, failed because the JV plant received no orders from GE despite the assurance from Itochu. It seemed the GenStar president had warned Itochu not to enter container manufacturing to avoid conflict of interest with its principal agent role.
Dr Tan also mentioned the very sharp decline in container market demand in 2022 and the first quarter of 2023, causing AP Moller-Maersk to halt its container line production until at least 2024. He asserted, “But what about independent producers or suppliers?”
He concluded that one must prepare for possible failures when drafting the business plan, and to not be discouraged but strategise to rise again.