Way Back When

OK I'm gonna do a first here. I glanced at the headlines of our paper, well, last Tuesday, and saw that a certain company I had interviewed way back in 2006 to do a "success story" for a local venture capital company, was described as "loss-making" and there was some shareholder out there, buying up shares on the open market, looking to take over the company.

OK, boardroom tussles and takeovers do not interest me. Almost painfully so. But the company did. I remember my visit to their headquarters in Kluang all those years before. And how welcoming and accommodating they had been. I went into my email and dug out the story. And, enjoyed reading it so much that I'm going to feature it here. It's been so many years, and most of this data is no longer relevant or timely, but you know, it's nice to catch a company when there is all this positive energy there and they are building the dream.

So here it is. My words then. Unedited, for your reading pleasure (or otherwise).

GPRO – Success Story

From the outside, the GPRO Technologies’ headquarters in Kluang looks singularly unprepossessing - a nondescript row of shophouses, tucked away in the backstreets of a housing estate.

But once inside, what a contrast; it looks like something out of Silicon Valley, especially upstairs, which seems to be something out of a modernist’s dream – purple, bright orange and sunshine yellow walls as well as Rothko and Paul Klee prints. Chief executive officer Quek Kar Loon explains that the interior decoration was done by another Kluang boy, James Ng, who used to work in San Francisco. He came back and set up his own business here, became frustrated with the way things were done in this market where contacts rather than talent won the day and GPRO took him on board. Now he sells textile IT systems in China.

For this is what this company specializes in; designing systems (both in terms of hardware and software) that help textile manufactures do their jobs more efficiently. Executive chairman Jordan Tang said the company decided to focus on the textile industry in 1996 after about six years of building ERP systems for a variety of industries ranging from electronics to property development to cooperatives.

“We decided that catering to so many different industries was not the way to run a software business as it involved reinventing the wheel time and time again. If we were to be successful, we would have to focus on a single industry and acquire the in-depth domain knowledge.”

But why textiles, the so-called sunset industry?

Jordan took umbrage: “What do you mean sunset? People have to keep wearing clothes, right? It is one of the basic needs. In the last 10 years this industry grew by at least 6 per cent every year and it is still growing. Besides, we don’t manufacture textiles; we provide the software and hardware for those who do. And IT is NOT a sunset industry.”

The company found that the textile industry, though prolific, especially in newly developing countries, was frequently backwards in terms of technology.

“With textiles, we were basically going into a green field in terms of IT. Garment manufacturing companies are frequently family-run, labour-intensive and very traditional in their approach to technology. At most, there will be a very basic data-tracking system on the shopfloor to keep track of the work done by the various employees.

“We found that we would not only have to design software but re-envision the way things were done on the shop floor to increase productivity.”

Firstly, it looked at the complications involved in data tracking on the shop floor. A garment manufacturer typically has 5,000 to 20,000 workers on the shop floor and pays them according to the number of pieces they have successfully completed. A simple shirt, for instance, has eight to nine parts, and each part requires a different level of work. An employee is compensated based on the number of pieces completed as well as the degree of difficulty of the work concerned.

Hitherto, companies have relied on “job tickets” where the employee, having completed a bundle, tears off a strip of paper with the material information, and attaches it to the bundle. At the end of the day, these strips are added up to compute the employee’s earnings for the day.

GPRO’s flagship product was a device which was attached to the sewing machine to collect data as the work was in progress. This information would be fed into the central computing system. With this system, employees saved up to 30 minutes a day, not having to interrupt their work to attach the tickets to completed bundles, which worked out to a productivity gain of about 6 per cent. In addition, supervisors could now manage the shop floors based on real-time, rather than historical data (the job tickets). Taking into account that the manual job ticket system was also error-prone, this worked out to a total productivity savings of 10-25 per cent.

The new system required that the company not only develop software for the industry; it would also have to develop the hardware on which to run it. The fledgling software house had a team of 20 programmers but no electrical or mechanical engineers and certainly no mould makers.

“We went to other companies that dealt in things like electronics and mould-making and told them what we needed. They helped come up with the hardware. Today, we have an in-house capability and a team of electrical and mechanical engineers who can develop embedded software,” Jordan pointed out, adding that a normal software house would not be able to do this.

But creativity does not stand still. As GPRO’s self-appointed mission is to transform the industry, it does not rest on its laurels at the success of its first product which it is working towards making the de facto standard for the industry.

“We are not in the business of developing and selling products. We are in the business of transforming the industry. Before we develop a product, we have to ask ourselves what its ultimate impact on the industry will be.”

Which is why the company is looking to bring “precision engineering” into the hitherto unwieldy world of textile manufacturing. “The electronics industry is already precise. You can’t do much more there. But for textiles, nobody has looked at coming up with anything like a standard time for the different processes because it is so labour-intensive.”

That is, until now. GPRO is now working on an industrial engineering execution system, which establishes a standard time for all the tasks to be performed. With this, a company is able to benchmark its employees to see how far they are compared to the standard and make adjustments to improve productivity accordingly. Sound a little robotic? Well, by eliminating unnecessary motions, it can increase productivity by up to 10-15 per cent. And this is what GPRO means by “transforming the industry”.

This inventive and can-do approach has been with the company from the outset, when Jordan, armed with only a book on Systems Analysis and a couple of flowcharts, managed to secure a RM400,000 contract to computerize the office of German handkerchief-maker Winitex Sdn Bhd, more than 10 years ago. The former biology teacher, who quit teaching to run his own computer store and school, only hired his first programmer after he secured the project. It was a success and Jordan points out how that first system, designed to run on the antediluvian 386 computers, is still operational today.

A few years down the road, with a team of 20 programmers and servicing a variety of different industries, he realized that the job was getting a little too heavy for him: “I bumped into Kar Loon, another Kluang boy and asked him to take over the technical aspect.”

Kar Loon, with a computer science degree from Canada and a MBA from Miami, was game. Having always been of an inventive turn of mind, he was quite happy to experiment with different possible systems for their first product. He admitted that some of their early attempts at shop floor data tracking went pear shaped, but the company kept learning from its mistakes until it came up with something the customers were happy with.

Because Kar Loon was both CEO as well as CTO, things became pretty chaotic. “It was like building a house with the windows in the wrong place. I was both an entrepreneur as well as a software architect.

“This meant that if our sales people came and told me the customer wanted such and such, we would do everything possible to fulfill that request, without considering IT maintainability. It was challenging, entrepreneurial, but not very systematic,” Kar Loon said with a grin.

And so, enter Kar Loon’s old schoolfellow Tumin Chook (the Americanised version of Chook Tu Min) who had spent the last 26 years in the US and was now looking to come home to take care of his ageing parents. GPRO courted him for two years before he agreed to come on board.

Tumin, who had developed IT systems in, among other places, Michigan, Boston and New York, was shocked to see the lack of systems in place. “The thing that amazed me most was the lack of source code control.

“We were having an issue with one of our clients and I asked the project manager for the source code. It was like going to a Chinese sinseh. She started picking up bits and pieces of code from PCs left and right and when we compiled it, of course it didn’t work together.

“I decided that this was ground zero and anything I could do to help would be a step up. So I took over the IT side and set about putting in basic necessary things like a source code tracking system. I also made a huge effort to standardize the software. It took us about six months to a year to get everything sorted because we still had to service our clients while we standardized procedures.”

Kar Loon put in: “When you are building markets, sometimes you have no bargaining power. You do whatever the client wants you to do without looking to see how everything works together.”

Tumin’s advent spelled a new phase in the company’s development. With his more than two decades of experience in building systems, he started to introduce some order to the entrepreneurial chaos that existed before.

“Look, they did the best they could before. Everything is part of an ongoing process. As a company develops, it puts more systems in place to ensure stability. It’s not easy for an entrepreneur to sit down and build systems,” he put in kindly.

Tumin found that his team consisted mostly of fresh graduates between the ages of 24 to 26, who were as yet, pretty green. “I did a lot of mentoring, teaching them to focus on critical tasks and how to tackle problems. They’re a pretty good bunch.”

The three fiercely loyal Kluang boys feel that their location is in a good measure, responsible for their success. “In KL, there is a lot of disturbance and peer pressure on your staff. Other companies keep trying to pinch them. Here they can sit tight, learn and develop.

“But other than HR stability, Kluang also provides us with extremely reasonable rentals. How much do you think we pay for all this a month?” he asked, gesticulating at the two-storey premise which covers over 30,000 sq ft. “RM7,500 a month! Tell me, where else I could get such a large office for so little,” Jordan said with a gleeful chuckle.

A third factor would be that as the Malaysian textile industry tends to be concentrated in the Kluang-Batu Pahat stretch, the company’s location allows it to be near its customers.

The three strive to create a culture that is fun, exciting and personally fulfilling. The office boasts a large recreation area with a television set, coffee machine, foozball machine, snooker table and gym equipment for employees when they want to take a break. Those who have other creative interests are given a chance to explore them. For instance, most walls have a framed Chinese character such as wisdom, excellence, value or creativity, painted by an accounts executive who is a champion calligrapher both at town and state level.

It also provides housing, recreational activities and compulsory in-house training. Coupled with the fact that Kluang is a small town, and as Jordan puts it: “When you look out of the window here, you don’t see another job waiting”, the company has managed to achieve a high degree of HR stability. Our turnover rate is only 15 per cent which is amazing for any IT company.

“And sometimes, our staff who have left come back to us because they find things are so different outside,” he added.

All three directors emphasise the importance of good old-fashioned relationships when it comes to growing a company. Kar Loon said when the company first decided to focus on the textile industry, it was its relationship with customer, Bin Bin Knitware, that helped it win through.

“We were doing ERP systems for garment companies, slogging, losing money, but finishing our projects, which gained us a certain trust with our client. Because of this, the customer in question, Bin Bin Knitware, allowed us to use its company as a testing ground for our new system. I have to say, in the beginning there were a lot of screw ups and patchwork but we learned from our mistakes.

“Our relationship was so good that this client was our angel investor. At that time, things were very difficult and we were frequently short of cash. We could just walk into his office and ask for an advance and the money would be credited into our account.”

A good relationship was also responsible for the company’s first serious round of funding. “As I said before, my first client ever was handkerchief maker Winitex Sdn Bhd. Anyway the chief executive officer at the time, Bernt Winkler, left Malaysia and I bumped into him in KL, some 10 years later. We caught up and later, he wrote me an email asking if I had any need for funding.

“Apparently, he was now managing a US$600 million venture capital fund for Swiss-based Prosperco New Century AG. I wrote back to him with our story, flew to Switzerland to make a presentation and the VC invested US$1 million in our company. All because of the trust built up before.

“At that time, we only had a prototype, but the money helped us go into production, initiate our overseas expansion programme,” Jordan pointed out.

Then in March 2003, it approached the local VC, Malaysia Venture Capital Management (Mavcap) because it realized it needed a lot more funding to develop the overseas market. “We were already profitable at that time, but found we needed more money if we were going to open offices abroad. I felt we were not ready to raise money from the capital market so we looked for alternatives.

“That was where Mavcap came in. They invested RM5.2 million and a few months later we started looking at a possible listing on Mesdaq. We were listed in June 2004, one year and three months after we received our funding from Mavcap,” he said,

To build its overseas market, GPRO frequently participates in international trade shows. This was how it secured its first big name, the Crystal Group in Hong Kong, as a customer: “Their boss took a brochure and asked their IT guy in Penang to look us up. They conducted a trial of our product at their Penang plant for six months and the results were positive. They then tried us out at their plant in Sri Lanka, also successfully. After this, the Crystal Group implemented our system at all its plants around the world.

“Once we got this big guy on board, it was easier to sell our systems to the others,” he pointed out. Jordan added that in the textile industry it was important to be either number one or two in the market, as the top two players usually held about 80 per cent of the market between themselves.

GPRO has already secured a customer base in Malaysia, Indonesia, Thailand, Cambodia, Vietnam, China, Hong Kong, Sri Lanka, Dubai and Brunei. Then a year ago, something happened which precipitated a flood of enquiries from Africa, the Middle East, South and Central America and Eastern Europe.

Jordan explained: “For 30 years, there was a quota system that controlled how much you could export to the major markets such as the US and the EU. Because some countries were protected by this system, they had no incentive to improve their operations and increase efficiency.

“Then on January 1 2005, the World Trade Organisation abolished the quota system making it a free-for-all. This meant that you had to swiftly shape up or lose out in the game. The inquiries for our products started coming in from all over the world. Suddenly we were receiving interest from Honduras, El Salvador, the Caribbean Islands, Eastern Europe, India…”

Kar Loon said GPRO maintains its edge by continuous engagement with its clients. “Our R&D is completely market-driven. And we get continuous feedback from customers which goes into product enhancement. Since our business spread to so many different countries, we were also able to pick up the best practices in each country and build these into our system.

“You cannot develop a commercial product in isolation. It has to be in collaboration with the users. Define your product or service and be flexible enough to change when you realise that what you define is not acceptable to the market.”

At the moment, the company has virtually no competition as there are no other players in this space. As Jordan pointed out: “We do come across the occasional barcode solution, but more often than not, they are inferior to what we have and we are able to replace these with our system.”

Now with the boom, the company expects an influx of competition, but the directors, while vigilant, are not overly concerned: “I tell my sales people, don’t worry about competition; if ever others come into this space, just remember, you created an industry!”