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Engineering and Entrepreneurship: Is it an Oxymoron?

   

YTL Community News, November 18, 2011

PROFESSOR CHIN FUNG KEE MEMORIAL LECTURE
The Institution of Engineers, Malaysia

Tan Sri Dr Francis Yeoh
Managing Director, YTL Group of Companies

Engineering and Entrepreneurship: Is it an Oxymoron?

Introduction

The best engineering feats and inventions transform human lives.

Like electricity. Can we imagine a world without electricity? I doubt Michael Faraday could have conceived the impact of his electric motor upon all of civilisation after him. Today, because of our dependency upon electricity, the challenge of developing sustainable energy is perhaps one of the most important goals for engineers.


Main Argument – Engineering and Entrepreneurship

I want to discuss a subject that is vital to all great engineering innovations and inventions. A subject that many engineers don’t take seriously enough and at their loss. Anything involving engineering technologies, you could trace it.

I am talking about ‘Entrepreneurship’!

How many engineering ideas throughout history do we know that never came to being but could have made a difference to our world? We don’t know, because they never came to being.

If we had one drop of water for every bright idea and product that never made it, it would fill an entire ocean. Each one of these unfulfilled potentials is a missed opportunity to make a difference. If we (engineers) value our profession and calling, this should eat into all of us.

I want to affirm the engineering profession, especially as a trained civil engineer. Our passion for engineering is to be applauded. Our passion is God-given, noble and necessary. However, let me argue that engineering carries its true worth only if it could be capitalised upon to help transform and better societies and individuals.

That’s why we need entrepreneurship!

“Entrepreneurship is the act of being an entrepreneur, which can be defined as one who undertakes innovations, finance and business acumen in an effort to transform innovations into economic goods at the right time.” Whatever engineering technology, tool or even idea both past and present, the fact that we know about it, could see it, study it and use it, is because of entrepreneurs.


   

What do I mean?

Someone has a bright engineering concept. But it takes an entrepreneur to put resources together to see this concept come to being.

We need entrepreneurial instinct. The vision to bring a common good into fruition. The smartness to use what is available. And the common sense to market products and services using the best marketing platform.

That’s the story of Steve Jobs or Bill Gates.

Engineers should be entrepreneurial. Or at the very least, appreciate its importance. Of course, we can’t all become Steve Jobs. We can’t all be engineering giant, innovative entrepreneur and marketing guru - all in one. But we could learn to identify market trends, tap commercial opportunities and adapt to complex business environment.

Why? Because we want our engineering products and services shared by all. That’s being true to our calling.

In the humblest sense, this is the story of YTL.

Engineering Pedigree

I am glad my father, Tan Sri Yeoh Tiong Lay is here this morning. In his days as Managing Director, my father was always an ardent advocate of new ideas and technologies. He understood its importance. But without sufficient training in engineering, my father understood his limitations in adapting to changing skillsets and technologies.

That is why he insisted that my siblings and I pursued engineering degrees in the UK. Only then, can we come back, change the industry and make a difference. With strong foundations in engineering, combined with my father’s sharp entrepreneurial instincts, the YTL Group learnt to marry engineering with entrepreneurship.

That’s why we pursued many blue oceans and many ‘engineering firsts’ in Malaysia! That’s also why our acid test for all engineering is practical application, commercial viability and sustainability. And we always stick to our core competencies in engineering.

This morning, I will use our case studies to highlight some of the important lessons we have learned.


1. Construction – Slip Forming Building Method

In construction, speed is the essence! There is an inherent commercial logic in expediting projects. In the 1980s, YTL was competing with Japanese construction firms that had both size and clout. We felt we could take them on. So we adopted the innovative ‘slip forming building method’. It was safe, reliable and fast!

Very quickly, it became the determining factor between us and our Japanese competitors.

Slip Forming Construction:

A. 7 day a floor cycle versus 21 day a floor cycle.

Japanese engineers took 3 times longer to erect one floor compared to us. Comparing our building of the MAS Headquarters and theirs of the Shangri-la Hotel, and all happening opposite each other, we shot up, whilst they languished behind. The Japanese engineers were stunned, because they can’t believe we could beat them. And they started studying our methods.

We also took full advantage synergising our construction strengths with our cement division.

Our quality ready-mixed concrete was an engineering prowess that gave us leverage, cost efficiency and of course, more speed. YTL Cement was responsible for the major pouring of KL Tower and KLCC.

Another non-engineering factor also counted against Japanese firms. Changes in Japan’s labour laws meant they were forced to work only from 9 to 5. YTL capitalised on this and worked 24 hours to speed up projects.

This resulted in YTL delivering projects on time, if not earlier. Whenever we fund a property development, it is always financially more lucrative if contractors could handover the finished product on time or earlier. Subsequently, YTL was given more high-rise building contracts, from hospitals to office buildings and of course, the KL Tower.

The speed with which we erected the KL Tower was quite phenomenal.

Using slip form, the concrete shaft of the KL Tower which stands at 360 metres, took only 4 months to build.


   

2. Independent Power Producer (IPP) – Innovation

YTL’s investment in IPP projects was a game-changer.

We did not benefit from fat and lucrative government subsidies like many assumed. I want to set the record straight because our IPP story epitomises my argument to you this morning.

Malaysia had a blackout. The blackout caused much anxiety to the government because it eroded investors’ confidence in Malaysia. Seeing the opportunity, and knowing its success elsewhere, we asked the government to allow YTL to generate power privately. We got the green light to build and operate two gas-fired power plants.

At the time, we also tapped Petronas’ Gas. They were openly flaring away the gas extracted from their oil drilling stations. We have never built power plants before. But as engineers, we know how to build. We leveraged on our expertise. Our 1,212 MW combined cycle gas-fired plants were built in world record time of 22 months (14 months ahead of schedule). And we started operations much earlier.

We used Siemens’ technology which was reliable. Siemens were also very good in sharing their technology and knowledge with us. The projects were completed on budget and 40% cheaper than any power plants previously built in Malaysia.


IPP Financing:

All our finances were put into the IPP projects. We didn’t believe in borrowing heavily. So we had to invent measures to ease our financial burdens. That was also where many of our financial innovations and blue oceans came about.

That is why we became the 1st Asian IPP to introduce indigenous Ringgit-denominated project financing, setting the project template for subsequent IPPs in Malaysia. This proved very critical because many Asian companies suffered throughout the Asian Financial Crises because they were financed in USD.

Much of the borrowings were also short term deposits.

At the time, Malaysia only had 5-year bonds. We successfully persuaded EPF (KWSP) and created the 1st ever long term 15-year bond. In the process, we created a very viable and liquid bond market. Our logic is simple. Projects like IPPs are long term. So long term infrastructure projects should be financed by long term money like savings and borrowings. Long term bond markets is common sense. Not short term money like short term loans or deposits.

We also pioneered the concept of Infrastructure Project Company (IPC) listing on the KL stock exchange. YTL Power was the 1st IPC to be listed in May 1997. From this listing, YTL Power raised RM2.1 billion, out of which it retired a RM1.6 billion floating rate note with a bank at 14% interests.

So we made RM200 million in year one by finding a solution to the problem of high gearing and also by being determined to remain a genuinely independent power producer. This is public record. But none of the world’s best technology nor the world’s fastest ever built power plant would have mattered, if we went bankrupt in the process?


   

3. YTL Power Services – Building On Experience

There are also two very satisfying outcomes from our IPP projects. As a result of our engineering expertise in building, operating and maintaining power plants, YTL Power Services now manage an Operations and Maintenance (O&M) Portfolio of 6,500 MW in Malaysia, Singapore, Indonesia and Lebanon.

YTL Power Services also goes around the world building and servicing Siemens plants.

We have worked on new Siemens power projects in almost 30 countries including Saudi Arabia, Korea, Egypt, Syria, Nigeria, UAE, New Zealand and Australia. The Malaysian IPPs gave YTL sufficient experience and confidence to invest globally and to expand in the energy sector.

To date, YTL Power Berhad with its operations globally, is an integrated energy company. This includes Jawa Power in Indonesia, PowerSeraya in Singapore and ElectraNet in South Australia.


4. Express Rail Link – Managing Costs

YTL operates the KLIA-Express and KLIA-Transit. They sit on top of a premium 57 km high speed rail link between KL Sentral and KLIA. But how could we charge RM35 for one journey on board the KLIA-Express when similar services globally charge way more than that?


FARE                                       MYR     USD     EURO   GBP

KLIA Express                            35        10        8          5
Heathrow Express                    91        27       22        14
Hong Kong Airport Express      70        21       14        11


The reason is simple. YTL built the rail link at RM35 million per KM and others did not. Many had costs escalating over RM120 million per KM. Whenever something is built too expensively, the cost is transferred over to the consumer.

Or in many cases, when companies go bankrupt, the costs end up being absorbed by governments. This means that in turn, taxpayers suffer! Using reliable Siemens trains, we became the fastest rail service in Malaysia.

It takes only 28 minutes to get from KLIA to KL Sentral, with 99.7% punctuality. Since the service was launched, 30 million passengers have sat on it. ERL is also the 1st standard gauge rail system in Malaysia

The train is highly energy efficient, environmental-friendly with no gas emission, and has very low noise levels. Every year, our trains help take the equivalent of 3.5 million cars off the roads. We believe, the lower our costs, the better they are for our finances and consumers.

However, we never compromise on quality and that is why we use the best Siemens’ trains. That is also why we can claim to give first class services at third world prices!


5. Wessex Water – ICT Management

Wessex Water has helped YTL to expand engineering expertise in water and sewerage treatment. We could deploy our skillsets and knowledge to build and operate water treatment facilities anywhere.

However, our greatest challenge is managing this £9 billion asset.

Wessex Water serves an area of the south west of England covering 10,000 square kilometres. We supply on average of 360 million litres of water each day to 1.2 million customers. This involves 105 water sources, 110 water treatment plants, 197 pumping stations, 368 service reservoirs and over 11,000 kilometres of mains.

Incredibly, with advanced treatment techniques, automation, state-of-the-art control and monitoring systems, operations are managed by only 50-60 people through Information and Communication Technologies (ICT) and the internet.

Our Wessex Staff at the CLAVERTON DOWN CONTROL CENTRE could detect changing quality of the water in household pipes only by looking at their monitors. We could shut off entire catchment areas within minutes to avoid contamination.

Through CLAVERTON DOWN CONTROL CENTRE, we could preamp water crises, prevent wastages, and accurately calculate water consumption and revenues. Our maintenance engineers communicate principally through laptops, mobile internet and satellite navigations. They are mobile and hardly have to visit their offices.

As such, our rate of efficiency in dealing with customer complaints is the highest. our customer satisfaction is also the best. Wessex Water has been the number one water company in the UK for the fourth year running. When YTL acquired Wessex Water, it was languishing at 5th place in the UK.

We also won the Queen’s Awards for Enterprise in “Sustainable Development”.

I have said in the outset, engineering is meant to transform and better human lives. In Wessex Water, ICT and water treatment engineering have a symbiotic relationship. Not only are our customers happy with Wessex Water, our Wessex Staff love to work there. Technology takes the heat for us, so that we could pursue a better quality of life.

Now, just imagine if Wessex Water has the benefit of the most advanced nationwide 4G mobile internet network that we already enjoy here in Malaysia through YES.


6. YES 4G – Digitalising Our Future

I have shared many times on the importance and power of the internet. Let me share it again here because this is a powerful message that does not seem to register fast enough for many of us.

Palaeolithic cave drawings:
In Lascaux, south-western France, there are a number of 17,000 years old Palaeolithic cave drawings demonstrating hunting methods, much like instruction manuals. Successful hunts not only ensured tribes’ survival but strengthened them one against another.

In fact, this knowledge transfer on walls spawned civilisations.

12,000 characters:
With 12,000 characters copied onto tortoise shells and bamboos and later, paper, the Chinese spread their influence and dominated much of the world for 4,000 years. It was the world's largest economy until the 1800.

26 characters:
However, with 26 characters, the Roman alphabets, the West conquered the world and gave us the Enlightenment, scientific and industrial revolution, and world imperialism – even invading China in the process.

Notably, they had books – printed on Johannes Gutenberg’s printing machines from the 1440s. Including, the world's first printed Bible – Gutenberg’s first major printed work. Knowledge and information disseminated with books that easily travelled everywhere.

Not surprising, much of the technology of engineering mushroomed in this period.

0 & 1:
But today, with just two numbers, 0 and 1, all of civilisation’s knowledge is digitalised and squeezed into computers.
And with the internet, the power of civilisation could literally be at your fingertips.

Key Point:
History reminds us when there is technology, individuals and societies progress.
But those who are more successful in harnessing and capitalising on available technologies, will progress faster.
Most things today are driven by Information and Communications Technology (ICT) and disseminated over the internet.

That is where engineering is heading!

For example:

Construction designs are more accurately drawn up using 3D engineering software than hand drawn.

And later, the designs could be sent via email and read on an iPad, instead of on rolls and rolls of scribbled large papers that construction engineers seem to enjoy holding. A smart engineer would use computers to advance his products and services, but would employ the internet fully to sell them. Because overheads are lower and he could reach a global market far beyond his own geography.

Today, the engineering that we are learning at universities are now available online. Just Google search or visit iTunesU.

Steve Jobs knew that. That is why his most successful product is the iPad – essentially a portable mobile device that brings the internet to the user.

That is what ICT really means. The Technology of Information & Communication, or put differently, the technology of COMMUNICATING

INFORMATION. And information has to be communicated fast. Because speed gives you competitiveness, speed is the essence!

But what good is a mobile device if the mobile internet network cannot carry it well? When there is no decent bandwidth?

And at YTL, we not only know that, we have the solution for it.

In the late 1990s, together with many people, we persuaded the Malaysian Government not to censor the internet – to keep it free and vibrant.

The internet must be an ecosystem that Malaysians could tap to better themselves. We invested in technology incubators and listed YTL e-Solutions. We then invested in EXTIVA, a Voice Over Internet Protocol (VOIP) services. Then, we already understood ‘DIGITALISATION’. We used the Clarent Gateway, and by converting analogue to digital, we helped bring down IDD calls by 94% and mobile phone calls down by 50%!

When the Government issued the 4G license to YTL, we were blessed with the most powerful opportunity to transform ourselves and this country. We invited engineers from silicon valleys everywhere to come to Malaysia to build the world’s first ever nationwide 4G mobile internet network and ecosystem. It is now a reality!

YES 4G gives you powerful bandwidth to access chunks of information over the internet throughout the country from north to south.

YTL has hot-spotted the country. We have now literally made it possible for civilisation to be placed at your fingertips anytime and anywhere - but in Malaysia. In every sense, we have helped iPad or any smart mobile devices to fulfil their genuine potential – true mobility riding on a powerful 4G mobile internet bandwidth. That’s our real contribution to ICT!

BROADBAND IN THE TROPICS!

Our YES was also recently awarded the global ‘Best New Service’ at the Broadband InfoVision Awards 2011 in Paris. We have made YES 4G very affordable so that Malaysians can enjoy our network to become the next innovators, the next owners of Alibabas, Facebooks, Twitters and YouTubes. There is intense competition in the internet / ICT world. You have to become competitive and market-savvy online in order to sell one’s products and services.

The internet is a realm of speed, efficiency and also 'smartness'. It requires much more thinking to convince the rest of the world that one’s products and services are worth the purchase. Even if you have the best engineering product or service.

But the alternative, a reluctance to embrace both the digital and internet challenge, either out of ignorance, laziness or for whatever reason is in my opinion – unwise! Look at Borders. They recently went bankrupt. But Amazon is going strong. The internet has given Amazon the flexibility to function, coordinate and operate, that physical bookshops cannot do.

And just a few days ago, Baidu (China’s biggest search engine) reports a profit surge of 80% in the third quarter, USD295 million in 3 months. They must be getting something right. The digital economy powered by the internet is no longer an option to ignore. Businesses must have their presence on it and capitalise on what it has to offer. It is the smartest engineering technology to date and all engineers must capitalise on the internet and mobile internet to advance.

Conclusion
Let me conclude by making two points:

Firstly, I am not suggesting that entrepreneurs are more important than engineers. I am also not asking you to quit engineering and go into business.

I was told, too many young people are not going into engineering, but into investment banking. Because there is money to be made.

But the crisis in Wall Street shows that Financial Engineering is not real engineering.
Our engineering is based on substance. We build and create using what is real – tangible. A lot of financial engineering is based on lies and deceit – selling to people what does not exist.

BUT, I also know that engineers are not paid well. Engineers are often forced to compromise on standards and quality, just so to get a better living. That is why they quit engineering dreams and get tempted to leave for investment banking or whatever.

Which is why I believe it is so important that engineers must be business savvy. Get equipped, because if you have the best engineering in the world, it will sell. You just need to learn how to do so.

Secondly, Steve Jobs mentioned that one of his inspirations for making his devices is admiring the intricate details of civil engineering, especially European bridges and the Eiffel Tower. Because of that, he asks his engineers what is ugly about the phone, they said ‘Buttons’. And he told them to find a solution. Now, we have the touchscreens – and every smart device is heading that way. Gone with ugly buttons – all because of beautiful bridges and the Eiffel Tower.

I want to encourage our engineers to take pride in what they do. Don’t compromise and do cheap, tatty and uninspiring works.

Please excel in your very profession and skillsets, and light up the world by contributing to engineering achievements that will last a few civilisations. We are greatly blessed with our engineering skills and talents. Treasure them and use technologies to better yourselves and use entrepreneurialism to help you get there.

Let me leave you with this thought:
The engineer-entrepreneur is not an oxymoron! Entrepreneurship has and will always be the facilitator of grand engineering becoming real before our eyes.

We don’t all have to be Steve Jobs. We can’t all be like Steve Jobs. But at least, we could be using the iPad; selling engineering products and services online via Alibaba.com; twittering to everyone that we have the next best engineering sensation; and all the while riding on YTL’s YES 4G – the fastest nationwide mobile internet in the world.

That’s being a smart engineer!

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