BUSINESS: The Ultimate Resource

January 2005 Upgrade 28

MANAGEMENT GIANT
Stan Shih
Timeline
1944 Born. 1971 Joins Unitron Industrial Corporation. 1972 Joins Qualitron Industrial Corporation. 1976 Founds Multitech (later Acer). 1981 MicroProfessor-I is the companys first branded product. 1985 Establishes AcerLand, Taiwans first franchised computer retail chain. 1987 Creates Acer name. 1988 Acer Inc. launches IPO. 1994 Introduces worlds first dual-Pentium PC. 1999 Seventh in list of top ten PC manufacturers. Revenues $8.5 billion. 2000 Announces planned reorganization of company. 2000 Invests $200 million in China. 2000 Repositions company as Internet enabler. 2002 Launches multimedia handheld computer. 2002 Launches service business.

Summary
IT visionary and corporate philosopher, Stan Shih is the man who took the Taiwanese IT industry from parochial to global. Putting aside his desire to become an academic, he ended up teaching commercial realities to the family-run businesses of Taiwan. With a mixture of solid financial grounding, brand awareness, and quality control, he propelled a small electrical engineering company to international fame by concentrating on the microprocessor and the PC. In a world where there is a PC on every desk, there is an Acer component inside every PC. Its reliability and ubiquity have placed Acer firmly on the top ten lists of PC manufacturers and made Shih a very wealthy man.

Background and Rise

Stan Shih was born on 18 December 1944. An only child, his father died when he was just three years old, leaving his mother struggling to bring him up alone. She ran a small grocery store and Shih helped out, learning the fundamentals of commerce at an early age. The business made a lasting impression on Shih. Many years later, he recalled that the stationery sold at a profit margin of 50% but only turned over every two or three weeks. The sale of duck eggs, while producing a smaller profit margin,
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BUSINESS: The Ultimate Resource

January 2005 Upgrade 28

was better business because it turned over every day. The importance of stock turnover was not wasted on him, even at such a young age. Shih was an excellent scholar. He studied for an electrical engineering degree and then, in 1971, for a masters degree at the National Chiao-Tung University in Taiwan. His intention was to become an academic, but for some reason he changed his mind and decided to work in industry. It was not the usual career path for a masters degree holder in Taiwan, but then Shih was not the stereotypical student. He had two job offers. One was from the international electronics giant Philips and the other from the Taiwanese family-run business Unitron. Because of his poor English, he chose Unitron. More important still was the fact that Unitron was the first company in Taiwan to have an R&D department.

Defining Moments
Shih quickly made an impact at Unitron. He built a calculatornot the first to be designed at the company but the first to be commercialized. His achievement earned him a promotion to manager of the semi-conductor assembly line, in charge of 800 people. Then he was promoted to director, all in the space of a year. Although it was early in his career, Shih was beginning to formulate the management theories that would influence his management at Acer. First, it is important to maintain good relationships among peers and never to take sides with any clique. Conflicts can put you in a disadvantageous position, he wrote in his autobiography Me-too Is Not My Style. Second, we must have a sense of responsibility. Shih had been at Unitron for just over a year, when the bosss son Li asked him if he would like to help set up another company, Qualitron. Shih agreed and, together with Li, created a successful business manufacturing calculators. Four years at Qualitron with Li taught Shih the importance of marketing, a discipline neglected by most Taiwanese companies of the time. While at Qualitron, he developed the first handheld calculator in Taiwan. He also received a painful lesson in the potential drawbacks of working for a family business. Qualitron was doing well; the Lin familys textile business was not (it was the time of the global oil crisis, and the textile industry was in difficulties). The Lin family decided to subsidize their ailing business with the profits from Qualitron. Shih was alarmed, but there was nothing he could do. Qualitron closed. Shih determined that any future businesses of his would be founded on stable financial management and would look after the interests of employees. Together with colleagues from the Qualitron R&D department, in 1976 Shih founded Multitech, the company that would eventually become Acer. Shihs wife took on responsibility for the finances. The starting capital was US$25,000. Shih and his wife took a 50% share. The intention was always to focus on the microprocessor industry, although industrial design brought in some welcome initial revenue. When the two designers left, however, it crystallized Shihs approach. The remaining members convened a meeting and agreed on a number of defining principles: first, that decision making would be collective despite Shihs controlling interest; second, that the company would concentrate on R&D, brand name products, and international marketing. Shih took a 50% pay cut; his wife took a two-year pay freeze.
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BUSINESS: The Ultimate Resource

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The company survived. Over the following few years, it established a name for itself as an innovative electronics company, not just in Taiwan but across the world. Within five years, Shih and his team had designed 40 applications based on microprocessors. Selling was difficult because the product was unfamiliar. For some reason, confused customers thought that Shih was in the low-tech garden machinery business. Salespeople called on Multitech trying to sell gardening books. Shih took the misunderstanding with good humor: he styled the company the gardeners of microprocessor machines and published a monthly customer magazine entitled Gardeners World. The magazine was free. Its initial run was 2,000, but it eventually reached 20,000 copies a month, and was therefore quite costly. Nevertheless the publicity it received made it worth every dollar. In the 1980s the company completed its transformation to a PC-focused corporation, and continued to cement its growing reputation worldwide with a number of firsts that extended into the 1990s. The company beat IBM to the post in 1986, producing a 32bit based PC. Then, trading as Acer (following a 1988 IPO), the company created the worlds first 386SX-33 chip set; led the way in developing recyclable cardboard packaging technology to replace polystyrene, and introduced the dual Pentium to the world in 1994. As the 1990s drew to a close, it seemed as if Shih had achieved his aim of building a world-renowned IT brand. Microsoft and Intel conquered the PC world overtly by making their products synonymous with PCs. Stan Shih conquered the market more stealthily, but no less effectively, by supplying the components that make the guts of the PC. I am looking for Acer to be inside [every PC] just like Intel, he said. Whether its a CD-ROM, memory module or LCD panel, wed like to see all computers, no matter what the brand name, have some Acer parts inside. By 2000, Acer was ranked seventh in the world among PC manufacturers, with $8.5 billion of revenue and more than 120 separate businesses, employing 34,000 people around the world. It was the only non-Japanese Asian company in the top ten. As Acer entered the new millennium, Shih started shaking up his company once again, just as he did 20 years previously when he refocused the business on the PC market. This time, the shift is away from PCs towards Internet services and software development. Part of the process involves splitting Acer into five independent units. He also repositioned the company as an Internet enabler. To enhance the companys development and production capability, Acer invested $200 million in facilities in China. One of the first results of the companys new direction was the launch of the first multimedia handheld computer in 2002, followed closely by the introduction of a service business. Its a tough proposition, more difficult to accomplish with todays billion-dollar business than the small local Taiwanese company Shih transformed in the 1980s. But if anyone can manage it, it is Shih the eternal optimistthe man whose company culture rests on the principle that human nature is basically good. Shih has announced that he plans to retire in 2003.

Context and Conclusions

Shih has done more than merely build a globally recognized IT company from a provincial Taiwanese business. He has inculcated a special kind of culture at Acer that reflects his belief in the goodness of human nature. The cynical may scoff, but Shihs
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BUSINESS: The Ultimate Resource

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trust has been amply rewarded. He has fostered a culture where risk-taking is encouraged and costs incurred through employees inexperience are written off as paying tuition. The result is a tradition of integrity, open-mindedness, partnership, and ownership thatcombined with other elements such as a learning culture, innovation, and excellent customer servicehas created a world-beating IT company.

Close But No Cigar

Ken Olsen Olsen was once hailed by Fortune magazine as the most successful entrepreneur in the history of American business. Founding Digital Equipment Corporation in 1959, he spent the next 35 years riding the IT rollercoaster at the helm of his company. The man who pioneered the minicomputer, Olsen was heavily influenced by the writings of Alfred Sloan and organized .EC along similar lines to General Motors under Sloans control (small business units). Olsen left in 1992 to found Advanced Modular Solutions Inc. DEC was bought by Compaq in 1998.

The Best Sources of Help

Books: Chen, Robert. Made in Taiwan: The Story of Acer Computers. Taipei: McGraw-Hill, 1997. Shih, Stan. Me-too Is Not My Style: Challenge Difficulties, Break Through Bottlenecks, Create Values. Taiwan: Acer, 1997.

Bloomsbury Publishing Plc. 2005