Tuesday, 27 August 2013 00:00
By Cheranka Mendis
What does Ray Wijewardene, a great inventor and thinker of his time have in common with Mahesh Amalean, an industrialist bearing on his shoulders one of world’s best apparel manufacturing companies of our time?
It is not that they have in their own right created mechanisms to shape the world, starting from our small island home and reaching various points across the globe. It is not the newspaper headlines or the long line of people who have benefited from their efforts. Over and above all these, what they have in common is a childlike curiosity and a thirst for innovation.
Holding the designation of MAS Holdings Chairman, Mahesh Amalean has a story to tell. It is a story with twists and turns, lows and highs. It is a story of how a 30-year-old entrepreneur built a billion dollar business in a small emerging economy like Sri Lanka.
Running in his blood
Hailing from a family that has had the textile business gene running in its blood for generations, Amalean built his empire by challenging the status quo and trying out a new approach despite the success of the old.
Sharing his journey at the annual IESL Ray Wijewardene Memorial Lecture 2013 held last week, Amalean traced his family tree to 1926 when his grandfather settled down in Sri Lanka to set up an apparel and textile operation. The business was carried forward by his sons, Amalean’s father and uncles.
Having received his primary and secondary education at Royal College Colombo, he attended the University of Madras for tertiary education, specialising in engineering. However, before he could test his wings in the area he laboured in at university, Amalean was requested to join in the family business by the head of the family, his grandfather.
Starting as one of the youngest executives in the family in the late ’70s when Sri Lanka was undergoing a huge transformation from a closed economy to an open one, he saw tremendous opportunity for growth in the apparel sector. Being one of the youngest and trying to drive change in a business that had built itself on a different approach, young Amalean soon learnt that it was best for him to step back and leave his uncles alone with a model successful in its own right and embark on a journey of his own.
Flanked by his two younger brothers, Ajai and Sharad, Amalean set out to enjoy his freedom and to exercise his entrepreneurial and innovative nature, which later managed to revolutionise the entire landscape of apparel and textiles.
Baby steps for greater good
Amalean acknowledged that his initial innovative approaches were taken in order to stay competitive, relevant and meet the needs of the market. “I would like to think of those as small innovative steps,” he said.
“Most of us see innovation as a group of scientists in a lab playing around with material and instruments and coming up with innovative products or cutting edge technology. But for me, innovation has many different facets. I would like to think of these facets as product innovation, process innovation, business model innovation, technology innovation and finally cost innovation.”
Mixing the old and the new
He recalls that during his school days it was the Sony Walkman that was the game changer in making music mobile. Later, during his early years in the corporate world it was the cellular telephone with the Motorola Brick that ruled society. In modern times it is the iPod, iPhone and iPad that holds the fort in product innovation. He also saw Mr. Toyota, Founder President of Toyota Company, creating a new manufacturing process, which is now well-recognised in the Western world as ‘lean manufacturing’.
The good thing about Amalean is that he has managed to adopt the wheels of these successful processes (and more) in his business by oiling it with his own learnings and innovations.
Business model innovation
“When building MAS we looked at creating a company that had the potential of meeting international needs. We wanted to build an organisation that would meet the competitive landscape of international companies. We wanted it to be world class in terms of infrastructure and talent even though it was in the apparel export industry,” he noted.
Before MAS came in to existence in 1987, most businesses at that time were owned 100% by their proprietors and the few that were joint ventures had Sri Lankan controlling interest.
However, this budding businessman was presented with an opportunity for a new approach of joint ventures – equal partnerships where partners took equal responsibility for the success of the project. It was Martin Trust President of MAST Industries, one of world’s largest contract manufacturers, a company owned by Limited Inc that also owns Victoria Secret, that brought forth the proposition.
“We saw this as an approach to bring world class technology into the country. We also saw it as an approach to access market place around the world.”
This strategic partnership approach of equal partners was developed as a cornerstone of how MAS conducted its business. In addition to this, three other innovative business models were adopted by the company – bringing professionals in to the business, creating an integrated supply chain and reducing time from order to delivery increasing the speed of customers.
When Amalean established his company in Ratmalana, one of the key challenges was to draw in talent away from the multinational banks, multinational companies and local blue-chip companies, where the brightest minds were likely to settle. Today, MAS is known for its talented workforce, the drivers of its success stories. “I say this with humility, we actually have some of the best Sri Lankan talent working with us and I think many of them are much better than I.”
The other model introduced in business innovation was supply chain integration. “When we started business in the ’80s, we were given six months from order to delivery. We bought products from different parts of the world, put it together and exported. There was enough time to redo if we made mistakes. In the ’90s that calendar shrunk to three months and that became very challenging.”
The brothers realised that the business model they had would not be able to sustain itself. This is when they went out and met with their apparel and textile suppliers and invited them to establish themselves in Sri Lanka. It was a tough task to lure them in to a country that was known for its hostile environment.
However, what must be done must be done and they managed to form their first joint venture in supply chain with Charnwood Elastics UK. In 1996 when they established this company, MAS went global, hitting international news headlines with its success.
Continuing this further, with the infrastructure they put in place with respect to supply chain and the excellence in manufacturing through the joint ventures, MAS managed to establish what they call the ‘rapid plant’ two years ago. Through this it has managed to cut down three months of lead time from order to delivery to 10 days.
“I would like to think that just as much Ray tinkered with agricultural machinery based on feedback he received from farmers, I tinkered with a business model that existed in the industry in the ’80s, re-tinkered it in the ’90s and tinkered with it again in the 2000s; and constantly continue to improve it in order that it meets the needs of our customers in the market place,” Amalean expressed.
While Ray in his time observed an agricultural process that was new in the Philippines for agronomy in the mountain plains called Sloping Agricultural Land Technology (SALT) and brought it to Sri Lanka to help farmers increase productivity significantly by 30-40% while preventing the erosion of top soil, Amalean took to doing something similar in his field.
“In 2002 I was invited to be part of a delegation to Japan by the then Prime Minister. Having finished with the Conference I took the opportunity of visiting Toyota and other machine suppliers. By the end of the week I was kicking myself thinking I should have been here 10 years back, that I am now 10 years too late. There was so much of richness in the manufacturing competency in this country which would have been beneficial to us.”
It took him two years to take 25 people from MAS from different parts of the world back to Toyota to spend one week checking the Toyota plant and its suppliers – all nuts and bolts and metal sheets.
Did this help the company? Not until they were taken to a small plant that was manufacturing seat covers for the Crown and Corolla vehicles. “The moment we saw roles of fabrics and sewing machines, the penny dropped. Yes, we knew we could do it.”
And so just like Ray being a pilot for Ceylon Tobacco Company and tobacco farmers, the Amaleans did a six-month pilot in their plants in Kandy, one of their best with high productivity. The results, he said, were stunning. “It reduced our throughput time, work in progress and most importantly it eliminated waste from our system which had accumulated over the years. Having established these results, in 2006 we cascaded the learning and this process innovation to all our plants.”
Then came the crisis
So when they were hit, and hit extremely badly, during the downturn of the economy in 2008/2009, when their main markets Europe and America crashed and the business came down significantly, it was this process that helped.
“When banks were all in trouble and our existing businesses weren’t generating cash and we have already started new businesses, we were in trouble.” During that period, which he recalled as one of the most difficult phases in his professional career and the most difficult year in the business, the brothers realised that things were not in their control anymore. MAS had to close down two plants in Sri Lanka and one in India, turning back 3,000 people with no jobs for them in the company. “We felt like it was completely spinning out of control.”
What helped them overcome this downturn was the lean journey they started in 2005/2006, which revolutionised the manufacturing process, empowering their teams on the shop floor, organising their work better, making them more productive and all of this in a stress-less environment.
“What is significant here is that we taught them the tools, exposed them to the concept of this new innovative process manufacture and they embraced it. The innovation we got actually came from the shop floor. These small innovations started rising up and impacted our entire business.”
He assured that the innovating the process was what helped them gradually bring stability to the business and create a new strong platform for growth. “We did this to the extent that within 18-24 months, by end of 2010 we were recognised internationally as the thought leaders in the application of lean manufacturing in the apparel industry,” Amalean said.
In 2006 MAS was the single largest suppliers of bras to Victoria Secret from anywhere in the world. They had a plant that was a joint venture with a German company and American company in a cost competitive country like Sri Lanka. “We had a great, profitable business and we felt that this was a secure business that would continue to prosper.”
What they didn’t see was something that came from the blind side – a Chinese company that placed an innovative product on the table without using a single sewing machine, using a new technology at a higher price. “They stole our business away,” Amalean noted, “Not because the Chinese company brought a cheap product, but because they put on the table a new innovative technology.”
This took away 40% of the business and the company for the first time started losing money. “We didn’t see it coming. We thought our innovative business model, our innovative process we brought from Japan was sufficient for us to continue to be successful. But we were wrong.”
In that year, 2006, they established a research and innovation unit at MAS.
Amalean was in Paris, the lingerie capital of the world, at one of the lingerie fairs where their elastic company had its exhibits, when he met Han’s, an inventor with a patented silicon-based technology who enticed him with an underwear made of it, which did not have a single stitch on it. Even though the team at Victoria’s Secret wasn’t too keen on using such a technology in its products, there was mutual agreement that it was overall an interesting concept.
“I borrowed it (the underwear) for 24 hours and during dinner with the team from VS that evening I took the panty from my pocket, unwrapped it and asked them to take a look at. They weren’t sure if the customers would like it. ‘It does look interesting,’ they said, ‘but we don’t know if it’s for us.’”
The next day, Amalean asked his brother Ajai and three other senior executives who were with him in Paris to forget their plans and to follow Hans to Frankfurt to see his production. Soon he received a call noting that Hans needed a down payment of Euros 20,000 to make them his manufacturers and give them the license to manufacture products using that technology worldwide. “I said to go ahead.”
He stated: “Hans was an inventor. He invented the technology. What he didn’t have was the entrepreneurial skill. He was looking for someone to take that invention and condition it, until he found these young Sri Lankans.”
The technology was further developed and refined in Sri Lanka along with the manufacturing process using our engineers and technicians and then presented to VS. “To date we have been able to generate US$ 300 million of business using that innovative technology,” he expressed.
An Olympic win
The story becomes even more interesting. “When we were manufacturing this product we took the opportunity of taking our customers to see this. One of the customers we took was Nike.” Nike has a team called the Advanced Innovation Team and there was a new person in that team who was a former NASA engineer involved in space travel. He came to Sri Lanka to work with MAS as a part of that team. We showed him the technology and he said there was opportunity to do this a little differently.”
He took it to the Nike world headquarters and while working on it realised they could apply this on the outside and by using a particular design be able to create a product that reduces drag and can be used by athletes.
Amalean commented that the team there worked on some 350 different designs and came up with a golf ball design which could improve the speed of an athlete by 2-4%, the difference between a bronze medal and gold.
For the first time ever, Nike took a product that they always made in their headquarters in USA for the Olympics and brought that product to Sri Lanka to co-create this new product in the MAS plant in Horana.
“Our engineers, technicians and technology along with their scientists worked together and created this new product altering the aerodynamics on the surface of a fabric and reducing drag,” Amalean assured. When the winners of the 4x100 women’s relay celebrated their gold win at the finals of London Olympics 2010, the team in Horana also celebrated the success of their creation of a product made by MAS in Bodyline Horana.
Invention vs. innovation
“There is a difference between invention and innovation – even though at times we tend to mix them up,” the MAS Chairman assured. “What Hans did was work in a lab and create a product and patent a technology, that is invention. It is when you bring an entrepreneur in who sees the commercial value in it and create it that the invention becomes an innovation.”
Catching the ‘innovation’ bug
“I got the innovation bug and couldn’t resist the temptation of doing another trip outside,” he said. Just as they saw Japan as the Mecca of manufacturing excellence, they saw Silicon Valley as the Mecca of innovation.
With five of his colleagues he went to Silicon Valley and spent time there with Facebook, Google, Microsoft, HP and then to Minnesota to visit 3M. He also had the opportunity to take a trip to New York for an innovation forum.
“I was curious and wanted to know, wwhat is it that makes man innovative? What are the elements that constitute that? I wanted to understand this. I was curious.”
He visited the Stanford University Alumni Innovation Presentation and met up with various parties to understand what it takes to create the right environment for innovation. “I was just curious. I think curiosity is really the cornerstone for innovation. That childlike spirit of wanting to learn is important,” Amalean professed. “I believe there is one thing Ray and I share, although we have never met – he in the agricultural field and I in lingerie, we are curious.”
During that trip he learnt that unlike the old days where you had a few scientists in a room and went about doing experiments with material and instruments, there was a different approach to make. The era of closed door research was beginning to end, there was a new approach looking at co-innovation and co-creation.
Innovative companies like Procter & Gamble (P&G) built their innovation model based on this concept, he said.
“Another learning during my visit was that innovation was a structured process like lean manufacturing and companies were actually reinventing their business models in order to make innovation a part of their DNA.”
It was also a process where the responsibility was not given to one person like the Vice President Innovation or Chief Innovation Officer but the responsibility was borne by the CEO. “He allocated a budget and had clear key performing indicators to manage the process innovation. By doing that they had more success in achieving their targets.”
Such companies started creating a culture where failure was not frowned upon. In fact when you tried and failed, you were celebrated. They embraced this concept of fail early, fail often. In addition they would also test different market places with this model by taking their innovative product to different market places, making a little, selling a little and learning a lot.
“Having observed and understood what world class companies are doing to become innovative, today I have actually started applying these learning of open innovation in a structured approach in the next phase of innovation at MAS. I have taken the responsibility as Chief Innovation Officer of the company. And this is my story,” Amalean concluded.
Pix by Upul Abayasekera