Asian Cover -- Entrepreneurs
TAIWAN'S JONNEY SHIH (int'l edition)
Top execs at Taiwanese electronics companies would do just about anything to land a big-name computer company as a customer. Then there's Asustek Computer Chairman Jonney Shih. When the company recently decided to boost sales of computer mainboards to leading PC makers, one top U.S. manufacturer didn't cut it. Shih thought the PC maker's low-cost strategy didn't fit his company's quality-conscious image. "We insist on good-quality customers," says Shih, 45.
Being a stickler hasn't hurt Shih's meteoric rise in the global computer industry. Just a startup eight years ago, Asustek is now the largest motherboard maker in Taiwan--and the second-largest in the world after Intel Corp. By hiring top-caliber engineers, Shih has ensured that his company is a key link in the worldwide supply chains of top computer makers. That has buffered Asustek from the Asian crisis and provided Shih with fat margins in a cutthroat business. Last year, the company earned $212 million on sales of $650 million. And because Shih tests boards for Intel, he can release new ones as soon as Intel delivers new chips--and beat competitors to market.
Low-key, even reclusive, Shih joined Asustek in 1993 from computer maker Acer Inc., where he made his mark in research. He remains an engineer at heart, teaching his employees advanced electronics theory and getting involved with the conceptual design of new products.
When Intel Chairman Andrew S. Grove comes to town, he always makes time for Shih. On a recent visit, Grove smiled when Shih showed him an outline of the Asustek business philosophy with the heading "Only the Paranoid Survive," the title of Grove's book. Shih notes that he and Grove share some characteristics--both are engineering-oriented and have exacting natures. Says Shih: "If you want to be No.1, is there any difference between perfectionist and paranoid?"Return to top
A TALK WITH TAIWAN'S JONNEY SHIH (int'l edition)
Led by Jonney Shih, Asustek Computer has become Taiwan's largest motherboard maker and No. 2 worldwide behind Intel Corp. An engineer by training, Shih is a firm believer in the importance of quality. This insistence on quality has helped him keep Asustek humming despite the Asian economic crisis as the world's top PC makers beat a path to his door when they need motherboards. Business Week's Jonathan Moore recently spoke with Shih. Here are excerpts of their conversation:Q: How would you describe your management philosophy? A: We believe the core is very important. Like Chinese kung fu, you have to have very strong inner strength. We call this philosophy solidness, pursuing the No. 1 position. The whole company culture is trying to maintain this kind of engineering spirit. We want to give the customer this kind of image, that this company is a solid company, with inner strength, so you can trust us.
The whole company derives from engineering spirit because we are all from engineering backgrounds. We agree the market is important, but we'd rather start from inner strength, and eventually you get outer strength, such as market share, brand image.
I explained this to Andy Grove. He liked our culture very much. Our motto is a Chinese saying: "Respect the root and execute with solidness." A top engineer must understand the root, meaning he must master the principle, and he must execute very solidly. If you can say something, but you can't prove it, this is not a good engineer. We also try to extend this culture to manufacturing, sales, and marketing. Q: I understand your philosophy is to try to address manufacturing and marketing problems on the drawing board. What do you mean by that? A: We want to have a solid core of engineering talent. The key is from here, then you can develop the rest. People may think it's only the drawing. It's everything, you can't just isolate it. The drawing itself can be very deep. The underlying theory and principle must be very solid. If you only know the surface, how can you make sure your drawing is better than somebody else's drawing? That's why most engineering grads aren't good enough.
This principle is important even in marketing and sales. When sales people tell me why a certain price is the correct price, I always ask why. You have to collect a lot of data, you have to explain. Q: Your philosophy is unusual for a Taiwanese electronics company. Where did you get your ideas? A: I've been very lucky. I've almost always been No. 1. I wasn't the kind of student that only pursued good grades. Even when I was in junior high school, I always tried my best to study something -- mathematics, calculus -- to master it. Not because of the grades, but because I enjoy this kind of spirit and attitude. That extended to my university and engineering work, and it has influenced the way I've developed my engineering team.
One reason I extend this kind of spirit and why other managers don't may be because of a good experience I had. When I was project leader at Acer, Compaq beat IBM with the first 386 PC. We were only around two months later, but we had 8% better performance than Compaq. Acer got best product of the year, and established an international image. That gave me the confidence to insist on this kind of engineering spirit. I guess you could say I'm a bit of a perfectionist.Q: How do you get 30% margins on your motherboards while others earn 3% to 5%? A: It's a kind of combination. We think time-to-volume is very important. So speed and quality are very important. That way, we are [leading] almost everyone. We also use the "only the paranoid survive" concept. We have to be No. 1 in five aspects: quality, speed, innovation, service, and cost.
In many countries, our motherboard brand name is quite well established, in Japan, we have 30% market share. In many countries, our position is almost the same as Intel motherboards, and sometimes even higher priced, because we're already established. It's not easy because Intel is a big name, but at least in the motherboard field, I think we established this, very gradually. Q: You've borrowed the title of Andy Grove's book, Only the Paranoid Survive. What did he say when you met with him and he saw this title in your presentation?A: I read his book very carefully. When I talked to him about some of the concepts in my philosophy he immediately smiled. I'm only borrowing this phrase. But if you want to be No. 1, I think, is there any difference between perfectionist and paranoid?
We have some things in common. We're both very engineering-oriented. He's not very talkative. He looks at things very directly. He is trying to be very democratic. He is very cost-consciousness. We are also trying to develop this kind of culture -- diligence, thriftiness, democratic, an open-door policy. Q: Previously, your marketing strategy was to focus on selling to leading value-added resellers and distributors in different regions. You called them "local kings". Do you still use that idea? A: Now, we try to cover everything. We are also focusing on companies in the top 10 worldwide. We have a good customer who has the potential to be No. 1 in the year 2000. I can't name the company, but I think we still have this kind of strategy -- local kings, small integrators, and also the top 10. But we always try to address the good-quality customers. That way we avoid the management risk. Even within the top 10, we want to focus only on the ones we think also emphasize good quality. We want to enlarge our market share, but we're still pretty selective. It's a kind of value chain, from upstream to downstream. Because of this kind of cooperation, if the chain is very strong, then the total competitiveness also will be very strong, so we try to choose high-quality partners. But first we make sure we are ready for the next step, to go to the top 10. Q: How can you keep good quality as you diversify? A: We still want to grow, but we still have to be very focused, so we choose only a few products, and we choose those where we can have leverage our strengths. So, from motherboards, we are starting to get into notebooks, and servers. So far, the quality is not very high because we are starting in the high end. We've had feedback from customers who said this is the most reliable, solid notebook they have ever seen. So we already have a very good position. From the end of this year and first quarter of next year, our notebook line will cover the whole range. But we get in at the high end.
In notebooks, there is no common design. They have be optimized. You have to master the electronics, hardware, software, mechanical, thermal, styling, we have to make sure we can succeed before we get in. Q: What do you find most challenging about running your company? A: Finding good-quality engineers. Most good engineering graduates can make motherboards. They can do the design, but it doesn't mean they are good engineers. Many engineers can connect the lines, the drawing, and make it work. But if you are really a true engineer, you should have the best engineering spirit. You should not be trying only to make quick money.Q: How do you hire and train good engineers? A: We believe [good engineering talent] is the core. So we try to make sure we have the best engineering team, both from Taiwan and from the States. I always try to choose the best graduates, then we give them six months training. I want them to fully understand the principles. I still teach them the most advanced subjects. Today, to design very reliable products, you have to master everything you've learned.
Today's engineer must have a good working environment. Only when they don't have enough spirit to break through, then you need to motivate them, try to help them to have the kind of feeling, to insist on a breakthrough. I try to drive the inner strength of the engineer. If I've done my best, I can sleep very well.
A good company should develop it's own people internally. The next Asustek CEO should be from inside the company. Q: What lessons can be learned from the Asian crisis? A: Compared with other countries, Taiwan is comparatively strong. One reason is the economic structure. Because there are so many small and medium enterprises in Taiwan, they are very flexible and subject to competition so they stay relatively healthy. You don't have a problem like in Korea where they are all big companies that are subsidized by the government, so once they get into debt trouble, it's a big problem.
Taiwan is quite competitive. When you are competing with each other as well as with other countries, then gradually the level is stronger than other countries. This kind of competition is healthy. To stay ahead, you have to have core strength, technology, and also financial resources. From those you can develop your competitiveness.
Taiwan is pretty good in education, and a lot of people go to the U.S. and come back, so in terms of the talent, we do have an advantage. Q: What do Taiwanese electronics companies need to do to stay competitive? A: Flexibility, speed, and low-cost production are still Taiwan's main advantages. But we need to learn to have more value-added technology. Taiwan should try to have more R&D, to improve technology and drive the quality even higher.
Some companies try to be too flexible, or too clever. They make compromises to increase their speed or lower costs. I don't respect this kind of spirit. But I still believe [Taiwan] has the ability to combine innovation with speed and flexibility. That's very important for Taiwan, because if you can have both, that's the way you can win. Our philosophy is to combine these things together. It's easy to push for one thing, but to push for total excellence is very difficult. Q: Has Asustek's success had any influence on Taiwan? A: Maybe we have some impact or influence on the [Taiwan motherboard] industry. Many people tell me that, maybe, in their terminology, we are not very business-oriented. That may reflect what I mentioned about engineering concept, spirit. Maybe some of them will be influenced by this kind of culture and spirit. We are influential in the industry. I think we give other companies a different kind of perception, that maybe a very engineering oriented company can still succeed. It's not the pure Chinese way.
We have borrowed some Japanese and U.S. management concepts. We try to focus on quality and think in the longer term. We do things solidly. We've surprised a lot of people. Maybe when they think about that they'll adjust their thinking.Return to top