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From the mag: Taiwan–the next generation

Published April 22, 2013

The finale of BRAIN's series on sucession in the bike industry

By Nicole Formosa

TAICHUNG, Taiwan (BRAIN) — Taiwan 2.0 is taking shape on this industrious island with a generation of factory founders nearing retirement, clearing the way for their children to assume new leadership roles.

It’s a transition phase that is natural, given the fact that Taiwan began establishing itself as a cycling manufacturing hub about 40 years ago, and the tendency toward generational businesses in Asian culture. But, like many big changes, it is stirring up big fears: Will the new generation be as committed to long-term success as the founding generation? Can companies survive without the determined founder at the helm? And will that founder be able to let go and allow new leaders to take control?

“The second generation is well-educated. When they were born, the company already existed so they don’t need that opportunity to create everything from nothing and learn the hard way,” said Tony Lo, CEO of Giant Global, Taiwan’s and the world’s largest bike manufacturer. “Most of them are smart. They bring new ideas. They are more global, stronger in language ability. There are pros and cons. It really depends on the person themselves.”

The forward shift has already started for many companies. KS Suspension, VP Components, KMC, Kenda, Wellgo, Velo and many others have already integrated or started to integrate the second or third generation into daily operations.

Victor Lin, managing director of VP Components, a manufacturer of pedals, headsets and bottom brackets he started in 1980, recently began transitioning leadership roles to his children Eva, 34, and Isaac, 31. Although Lin is 50 percent retired, he still goes to the office every day at 7 a.m., and often walks the floor of the 220,000-square-foot factory in Taichung, inspecting the CNC machines and making sure everything is running smoothly.

Like many children of Taiwan’s industry leaders, Eva and Isaac were educated at Western universities—Isaac in California and Eva in the U.K. and the Netherlands—and spent their summers and holiday breaks working at VP. Isaac began at the Taiwan factory full time about six years ago and is now in charge of operations there, while Eva heads up sales.

But, there is still much for Lin’s children to learn before they take over the business, and it should happen slowly, said Hugo Yu, marketing manager for VP Components, translating for Lin during a recent interview in Taichung.

“This can’t be too quickly,” Yu said. “To learn Victor’s mission is step-by-step. You must use a lot of experience to learn it. He is trying to teach the kids.”

The younger generation tends to want to move quickly in today’s fast-paced world, but Victor built his business gradually over three-and-a-half decades, and if it is to survive another 30-plus years, patience is pivotal, Lin said.

“If it is growing too quickly, falling down will be quick,” he said.

To maintain continuity through the leadership transition, VP Components continues to have its weekly 7 a.m. Friday meeting where managers from every department—HR, financial, operations and manufacturing—gather to discuss direction and strategy, which fosters a culture of teamwork among the 285 employees.

While cultural and family values often guide kids back to the family business anyway, the desire to come home is even stronger now with unemployment rates high in the U.S. and Europe, and Asia’s emerging position at the forefront of the global economy.

The so-called “brain drain” that robbed Taiwan of new talent in the 1980s and ’90s is less prevalent now, said Rick Taylor, who runs KS Suspension’s U.S. business and works closely with the team in Taiwan, led by second-generation owner Martin Hsu. Hsu, who took over the business from his father 20 years ago at age 32, is now preparing his two Western-educated children, Jenny, 22, and Michael, 20, for a career at the company. “There’s definitely more opportunity here on this side of the globe,” Taylor said.

Tektro is one rare exception to the general rule in that the three partners behind the brake manufacturer—Leo Chen, Gary Chen and Aver Tsai—long ago decided the company would not be handed down to their children.

“For 30 years, our direction has been in the same way, but the next generation maybe their situation is not like ours. Their direction might be different,” Leo Chen said during an interview at Tektro’s Changua headquarters. To avoid potential conflicts between the founding families, Tektro will likely be handed down to one of its top senior managers.

Although leaders like Lin, now in his 60s, and Hsu are nearing retirement, most are still very much a part of the companies they founded. That speaks to the culture of hard work instilled in the Chinese businessman, Giant’s Lo noted.

It is difficult for the founder to let go of his business, Lo said, pointing to the case of Wang Yung-ching, the billionaire founder of Taiwan Plastics, who worked up until his death at 91 while on a business trip to the U.S.

In Taiwan, it’s also considered disrespectful to discuss plans for a founder’s retirement if they are still working. That’s the reason why, when asked about succession plans, some of the incoming second generation skirted the topic, Lo said.

“They never mention about a succession plan, but they’re actually all doing something,” Lo said. “We say: You can always do, but you can never say.”

Business in Taiwan is all based on relationships and trust, and it’s rare to bring in a top manager from outside the family’s circle of longtime employees. The custom is to develop a team of people where one could emerge as a natural successor, but the Taiwanese believe that if you make it known too early, something bad could happen, Lo said.

In the case of Giant, founder King Liu, now 79, and Lo, 65, had worked together for 39 years when Liu began transitioning out of day-to-day operations about a decade ago. Liu shifted his attention to cycling advocacy in Taiwan, and spends his energy now on projects like the development of a bike share system in Taipei.

Lo, who finished a 900-kilometer, eight-day ride around Taiwan the day before speaking to BRAIN, said he would retire the day he cannot ride a bicycle to work. At that point, a successor from Giant’s vast global management team will be named. One potential successor could be Liu’s son, who is currently the president of Giant China, but nothing has been decided. Lo’s son also works for Giant.

“I think now we have a group of very good managers and we have senior vice presidents who are 50 to 60 years old. A lot of people are 40 to 50. There’s a lot of talent there, so we’ll really see how this develops,” Lo said. “At Giant, most senior managers have been there 20, 25 years or above. They’re all very loyal to the company and they know the company well.”

As a new generation takes over more responsibility at Taiwan’s most influential factories, there is naturally some trepidation over whether they will share the same hardnosed determination innate to their predecessors who created Taiwan’s reputation for quality and technology in the global industry.

“The founder generation, we need to fight and survive from nothing,” Lo said. “We are very strong-willed and also have a very close bond together. We are friends and we all help each other. That is very, very real in the industry.”

The hallmark of Taiwan’s founding generation was the formation of the A-Team—an organization made up of managers from Taiwan’s top two-dozen or so manufacturers who worked together to sell the island’s high-quality, low-volume advantage when price competition from China threatened its future. That team dynamic among competitors may not live on once the current generation steps back.

But one way to cultivate the same values and way of thinking is to require the children who may eventually take over the business to start at the bottom of the ladder, said KS’ Hsu, speaking through a translator. His son Michael spends his summer vacation from university working in the factory, the warehouse or on the production line assembling seatposts. Working entry-level jobs will teach him the value of starting small and earning more responsibility over time.

The new generation can also bring different skills to the table that will complement the operational strengths built by previous leaders.

For one, Taiwan has long established its expertise in efficient manufacturing and supply chain management, but effectively marketing and advertising its aftermarket products has always been a challenge. This may be one Western influence the younger generation can bring back to Taiwan. Another is language. Most of the bosses now speak little or no English, an important skill in today’s increasingly global business environment. Then there are fresh ideas and a global perspective that the founders often lack.

The hope is the combination of new and eager with the wisdom of the past will result in a successful mix of traditional values with a modern twist that guides Taiwan into the future.

“The first generation is really working very hard to make product, how to save costs, how to execute technology. They are very down to earth, working hard, trying to save money. The new generations will find a different way,” Lo said.

Topics associated with this article: From the Magazine, Succession Series

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