The Chamber of Young Lankan Entrepreneurs (COYLE), together with Sampath Bank, hosted its Entrepreneurial Forum 2014 under the theme ‘Dare to be Different’ last week.

Panel from left: George Steuart & Company Chairman Dilith Jayaweera, MNK Holdings Chairman Manjula Narayana, hSenid Software International Dinesh Saparamadu, RN Group of Companies Chairman/Managing Director Ruwan Edirisinghe and Orange Electric Company Managing Director Kushan Kodituwakku

The event, which was held at The Kingsbury Hotel, featured a panel of renowned local entrepreneurs who shared their success stories as well as insights into being a successful entrepreneur in Sri Lanka.

Kicking off the forum, LAUGFS Holdings CEO/Chairman W.K.H. Wegapitiya touched on some key issues surrounding the current socioeconomic atmosphere in Sri Lanka.

“In the present economic world, we come across many economic and management theories. These theories are systematically structured to arrive at certain conclusions, which may be used as support in making micro and macroeconomic management decisions in nations and countries,” he said.

MJF Group of Companies Chairman Merrill J. Fernando

Citing famous economists including Adam Smith, Ricardo and Michael Porter, Wegapitiya said that it had been theorised that certain factors contribute directly towards the wealth of a nation. These include factor endowment and location specific advantages.

“If these arguments are correct, how has Sri Lanka become a poor nation? Countries like Singapore, Malaysia and Taiwan who were behind us in the 1950s have become very rich, economically developed nations. Singapore, which has no major natural resources, has emerged as a very strong economy,” he said.

He went on to highlight a third essential component – entrepreneurship, which can utilise the other two factors to make a nation wealthy. Adding that at present the socio-economic environment in Sri Lanka had aligned perfectly with these factors, Wegapitiya emphasised the importance of COYLE and its work to showcase some of the Sri Lankan success stories in order to display the opportunities available to the country.

Merrill J. Fernando traces

his journey

Delivering the keynote address, MJF Group Chairman Merrill J. Fernando spoke extensively on his inspiring journey from humble beginnings to becoming an iconic Sri Lankan entrepreneurial figure, while stressing the importance of maintaining integrity within a business environment.

Recalling his school years, he spoke of how he developed a love for the tea trade during the long holidays he spent at his friends’ tea plantations and why, despite his humble background, he was determined to become a tea taster.

Fernando also spoke of his time in London, where he studied the marketing of tea. He recounted how his romantic image of the Englishman was corrupted when he witnessed firsthand, how several origin teas were being mixed with Ceylon Tea and marketed under the same brand name. This was what inspired him to dedicate himself to the ideal of “tea with integrity” and to create his own brand.

He began his journey by supplying tea in bulk to foreign traders. He claimed that this only enriched thousands of foreign companies while Sri Lankan farmers languished in poverty. Although, this was against his conscience, Fernando managed to build strong relationships with his buyers in Australia, New Zealand and the UK.

“At that time, tea and coffee trades were entirely in the hands of small, medium and large family companies, and family companies have integrity. They competed only with the quality of their tea,” he said.

Battles against Multi-National Corporations

Recollecting his battles against Multi-National Corporations, which were acquiring family-owned tea businesses at the time, he pointed to the commoditising of tea being the key factor that resulted in integrity disappearing from the sector.

Fernando stated that before this phenomenon, the tea being sold in foreign markets was top quality Ceylon tea. However, once traders took over the trade, the premium prices were maintained under the prestige of the brand name while the quality of the product plummeted.

Meanwhile, MNCs put pressure on governments to abandon the need to declare the country of origin on food and beverage items and soon the term “Ceylon” disappeared from many brands of tea.

After purchasing two tea bagging machines, Fernando approached several firms in Australia and New Zealand, before Australian supermarket retailer Coles came to him for private labelling. Within three months he had all the Australian and New Zealand private labels, supplying around 20 containers a month, and as he recalls, it was a profitable time for the private label business.

After gaining sufficient confidence in his retailers, Fernando looked to launch his own brand but for a whole year he was unable to convince them to endorse the idea. It was then that he spoke to a few journalists about bringing integrity back into the tea trade. Promising to share his profits with those less fortunate than him, Fernando got the publicity he needed.

After 18 months, a buyer at Coles bought two of his products. The brand leader at the time, Lipton, was selling 100 bags at $1.99 and he initially intended on selling his product at $2.19. However, after being persuaded to respect the market leader, Fernando had to market his tea at $1.89.

“Three months later, the market leader brought its price down to $1.47 and I thought that was the end of my dream. When I went to meet my buyer though, he told me that he had never received so many calls and letters thanking Coles for bringing back Ceylon Tea,” he said.

Dilmah, his third child

Fernando also shared an anecdote of how the names of his children inspired him to coin the brand name Dilmah, which he then referred to as his third child.

Speaking about the use of advertising to promote his new brand, he spoke about how a simple and honest advertising strategy, in which he personally introduced his brand with the catchphrase “do try it”, resulted in Dilmah’s market share shooting from 3.9% to 9% in just two months.

“Today we have a very strong consumer base. Millions of people in Australia and New Zealand say ‘all other brands are faceless but Dilmah has a face to it and we trust you’. This cost me nothing,” he said.

He added though, that he faced his worst battles at home where he received no support from friends in the industry or the Government, while the Tea Board refused to accept that someone local had done for Ceylon tea what the British had failed to do.

“Sir Thomas Lipton was a lover of Ceylon tea. He sold his company to Unilever and they destroyed that tea. In fact, they say that if Sir Thomas Lipton was alive, he would be enjoying my Dilmah tea,” he mused.

In closing, the veteran entrepreneur touched on the importance of tasting success slowly and steadily while citing his mother’s influence on how he considers charity to be an important facet of his life. Even during the early stages of his business venture, he spent whatever he could on supplying his workers’ children with books, materials and scholarships. This continues today with the MJF Charitable Foundation.

“We donated large, generous sums of money to the charitable foundation, very quietly and without publicity, to show that some of us who are successful in this business can leave this a better world. Not everything you earn must go into your pockets,” he stated.

Panel discussion

The keynote address was followed by the panel discussion moderated by George Steuart Group Chairman Dilith Jayaweera. The panel comprised of four leading business leaders in Sri Lanka including RN Group Chairman/Director Ruwan Edirisinghe, NMK Group Chairman Manjula Narayana, hSenid Group of Companies CEO Dinesh Saparamadu and Orel Corporation Ltd. Managing Director Kushan Kodituwakku.

After each panellist briefly mapped out their own road to success, the interactive discussion began with questions been asked by the moderator and the audience.

COYLE as a Sinhala-based collective

In response to questions regarding COYLE’s Sinhala-based membership, Edirisinghe gave a brief background of COYLE and its membership policies.

He said that 17 young businessmen decided to set up COYLE in order to improve business networks and to share ideas and thoughts of developing enterprises as well as discussing domestic and international business opportunities.

Membership in COYLE is only by invitation and is only open to businessmen who are under 50 years, possess the majority shares in their business and contribute a certain amount of income to the National GDP while helping other businesses as well. COYLE currently has 116 members and its combined contribution to the National GDP is around Rs.600 billion a year.

Kodituwakku added that from the outside it may seem that COYLE is a racially-inclined chamber but that it was only committed to creating a platform for people to network and share information.

Inspiration for success

Discussing their individual motivations and the key characteristics that led to their success, Edirisinghe stated that through his difficulties growing up in tough political conditions, he always held on to his dream of starting his own business. He said that he was also driven to venture out on his own due to the extremely low salaries he had received while working for other enterprises.

He also highlighted the importance of rewarding the staff while pointing to the fact that more than 50% of his workers have been a part of his company for over 10 years even though his business is only 16 years old.

Narayana weighed in with his experience of witnessing unethical trade in the agriculture field during his younger days which in turn pushed him to try and make a change.

In terms of making tough calls, he said that he always studied the situation extensively before taking calculated risks.

“Whenever I make a decision, I study it carefully. I study the strengths and weaknesses, I see the potential and we always take decisions with the proper knowledge,” he added.

Speaking earlier on in the evening, Narayana shared an experience he had in 2006, when he set up a joint venture with a Malaysian firm for export, using the Free Trade Agreement with India. However, in 2007, the Indian export failed due to non-tariff barriers and he was left stranded. This was compounded by the global economic meltdown in 2008 and the commodity crisis which resulted in the joint venture partner exiting the business.

“I had invested heavily on this project. I was also responsible for the wellbeing of hundreds working under me but we had lost the focus market. So I decided to revisit the problem with a clear mind and study the business in order to re-strategise. My partner was not interested in my new plan but I was not demotivated. I decided then to operate as a fully-owned business for domestic and export markets,” he said.

His fighting spirit ensured that the hundreds who depended on him were not left displaced while Narayana claims that we probably wouldn’t have the edible oil industry with the level of innovation seen in Sri Lanka today.

Dinesh Saparamadu also shared some insight on hSenid’s beginnings and the motivation behind its rise as a global brand. He stated that he always dreamed big and even during his time in the US, he always wanted to come back to Sri Lanka and start something new.

Kushan Kodituwakku, who had the benefit of inheriting an already well-established brand, shared his unique experiences of taking over at Clipsal and the entrepreneurial role he played in its next chapter.

“They say the first generation builds a business, the second generation enjoys it and the third generation ruins it. I would like to see that statement amended to say the third generation reinvents the business,” he said.

Adding to this personal objective, he claims that the other factor that drives him is his vision to turn Orange Electronics into a billion dollar company. Even though, he would be satisfied even if this dream was not achieved during his lifetime, it helps the company move forward towards a clear and definable goal.

The concept of flat hierarchy

Saparamadu shared his views on the flat hierarchical structure in the context of a growing trend in IT companies to adopt a more level chain of command. Despite this trend however, he felt that Sri Lanka is not currently geared for such a structure.

“I worked for almost ten years in the US and at that point we wanted to adopt a flat hierarchy because the idea was that everybody has to be treated the same. But the issue is that Sri Lanka is not geared for it. You want to aspire to it but it cannot be implemented fully, based on the country’s culture,” he said.

He added that his company had nonetheless pushed the boundaries on the hierarchical system but maintained that a completely flat hierarchy was impractical. Saparamadu emphasised the need to incorporate Sri Lankan values and culture into local businesses instead of blindly following the rest as there is no one formula for everything.

Prioritising profit maximisation

“If anyone says they’re in business for charity and not for profit, I think that is a big lie, because the goal of any business is to make money. What you do with that money later on, if you want to spend it on charity, that’s entirely up to you,” Kodituwakku said while speaking about how companies should prioritise profit making in its objectives.

However, he also added that he had no intention of being the “richest person in the cemetery”. Underscoring the significance of formulating a successful recipe that would generate money and help the business grow, he stressed on the businessman’s duty to utilise his profits for the good of everybody.

“A certain percentage of your profits should be allocated for the good of your employees and the people in the country,” he stated while affirming his belief that money does not make you happy and that it was how you applied and engaged yourself in the business that would bring about ultimate satisfaction.

Organic growth, diversification and succession planning

Drawing from the Orel experience, Kodituwakku stated that the company had adopted the organic growth business expansion process up until a few years ago as it was the safest in terms of risk taking; although it comes to a stage where growth will be limited. In this scenario, he stressed the importance of diversifying into different related areas.

“What I found was that as I got older, I didn’t have the same energy as before to kick-start everything from scratch. It was getting easier to buy a business that was already there and use all the best practices to streamline the business you acquire, merge it to your existing one and then grow,” he said.

Some of the 16 businesses that are part of the Orel Corporation came through business acquisitions. The struggle of being a Sri Lankan company became apparent when attempting to go international, as Orel did not have a model to do so.

One of the goals as a company is to reduce the trade deficit of the country which is where import substitution and exports become important. Kodituwakku stated that this was where the company faced its greatest challenges.

“I came across many roadblocks because it was a Sri Lankan company and nobody knows Sri Lanka for manufacturing, especially on the engineering side. So when moving into a different country, it was strategically important for me to have a bigger basket of products; so now I had 16 businesses to make a move with,” he said.

Succession planning was also a topic discussed at the forum, as the process of identifying key individuals internally and grooming them to fill important leadership roles within the company was a practice considered to be under-utilised in the country.

Even in a family-owned business environment, succession and entrepreneurship are not mutually exclusive concepts. Echoing that belief, Kodituwakku explained how the role of an entrepreneur is not lost just because you inherit a company. The tasks of reinventing an already existing brand or successful diversification are areas in which entrepreneurial skills are put to the test.

Commenting further on the issue, NMK Group’s Narayana stated that as a chamber, COYLE was discussing issues pertaining to succession planning in Sri Lanka quite extensively.

“Successions come from two sides. One is from a business point of view – how the succession will weigh on your business leadership – while the ownership succession is another subject that we are very weak on here in Sri Lanka,” he stated.

Having studied businesses in Germany, US and India, he said that it was fascinating how some family-owned businesses had moved on from generation to generation.

Adding to this, Edirisinghe encouraged young entrepreneurs coming into family-owned businesses not to just follow how their predecessors ran the business but to understand their own capabilities in order to find solutions that suit them.

Integrity and politics in business

The panel was questioned about the importance of integrity in business and the role it plays in the current Sri Lankan business atmosphere.

Saparamadu addressed the question by stating that integrity was something he believed strongly in and recalled instances where he had to pull his company out of certain international markets when issues of ethics arose.

“Business should be all about integrity and there is no situation in which you should ever compromise the integrity of your organisation,” he said.

The panel then took up the subject of politics within businesses in the Sri Lankan context and with his unsettling past experiences with politics, Edirisinghe spoke at length about leaving political affiliations out of businesses.

“A person who needs politics to succeed is someone who cannot do anything for himself. Once you get involved in political quagmire there will be no end to it. If you spend all your profits on enriching politicians, you will have no choice but to steal,” he added.

Magic formula for success

“Very early on I learnt that making no decision is the worst thing you can do. Making some decision is better than making none. We made decisions quickly in order to move forward,” Kodituwakku said.

Making swift choices with just 30-40% information is vital for success according to Kodituwakku, who claimed that gut feelings come after years of experience. In the business environment, he stated that it was crucial to be able to make split-second decisions and that entrepreneurs need to be strong and daring enough to make judgments even if it turns out to be wrong choice.

He also highlighted the extreme importance of monitoring the business and planning for the future, adding that all his endeavours are not necessarily geared to pay immediate dividends but rather secure the company’s future for the next generation.

The panel also discussed the varied use of vision statements and setting timelines in order to keep the business on track and steadily moving towards set goals.

In closing, Kodituwakku stated that every entrepreneur should learn from the challenges they face and gain strength from every failure.

Pix by Daminda Harsha Perera