A TASK 1 – EVALUATING ENTREPRENEURIAL JOURNEY
1 The Entrepreneur: Sandiaga Salahuddin Uno
Sandiaga Uno was born in Pekanbaru, Riau, Indonesia on June 28, 1969. Since he was born from a family of teachers, he was prepared to be professional employee in a company. Sandiaga got his Bachelor of Business Administration with Summa Cum Laude from Wichita State University in 1990. Two years later, he finished his MBA from George Washington University through a scholarship.
Sandiaga got great opportunities in working overseas and achieved great corporate positions in Singapore and Canada. However, his career suddenly stopped because the company was collapsed, and thereby he was forced return home. Nonetheless, the timing could not have been worse with the financial crisis in Asia in 1997. Struggling to provide his family, Sandi decided to set up his own business with only four staffs. He co-founded Saratoga Capital, a private equity firm with Edwin Soeryadjaya in 1998, and became the CEO. In order to run Saratoga, Sandiaga rented a small room, and thereby meetings always occurred in the hotel lobby. Saratoga offers investment services by investing in and transforming multiple businesses into world-class enterprises, instilling financial discipline and good corporate governance in delivering long-term values to all stakeholders. Until 2011, twelve companies have been taken over whereby some of them had been resold: PT Dipasena Citra Darmaja, PT Bank Tabungan Pensiunan Nasional (BTPN), and PT Astra Microtronics. Saratoga has been growing enormously, and in 2010, Saratoga employed over 20,000 people through its portfolio companies with over US$2 billion of assets under management.
Instead of developing Saratoga, Sandiaga concerns about Indonesian young generation, especially entrepreneurs. He developed some foundations such as Mien R Uno Foundation, offering entrepreneurship scholarship for undergraduate students of poor families (Maximus, 2010). He also built Inotek Foundation, focusing on innovation and technology development in Indonesia.
Sandiaga was awarded the Indonesian Entrepreneur of the Year by Enterprise Asia in 2008. He was also listed as the 63rd richest person in Indonesia in 2009 (Globe Asia version) with wealth reaches USD 245 million. Furthermore, Sandiaga is a member of the National Economic Committee (KEN) appointed by President Susilo Bambang Yudhoyono since June 2010. In January 2011, he was appointed as the General Treasurer of the Indonesian Association of Muslim Intellectuals (ICMI), a moderate Islamic Think Tank. All Sandiaga‟s journey is described in figure 1 and 2.
Figure 1: before the world economy downturn
Source: summarized from many resources
Figure 2: after the world economy downturn
Source: summarized from many resources
2 Start-up Influences
Entrepreneurs are in fact born and made (Burns, 2011). People are born with certain personal traits whereby shaped by history, experience of life, and the environment where people grow up in (called as antecedents). Furthermore, there are also some situational factors that influence the decision to start up a business. Figure 3 showed factors influencing Sandiaga to start up Saratoga Capital.
2.1 Personal Character Traits
There is theory linking the character traits of an individual to the success of a business; summarized by Burns (2011) -shown in figure 4. When Sandiaga studied abroad, he decided to live independently in another country; gaining new experiences and building self-confident. There he pushed himself to reach high achievements, and hence graduated with an excellent result for both bachelor and master degree. The need for achievements can also be seen from other situations: success in gaining the position of executive vice president in NTI Resources Limited, Canada; contribution in Indonesian non-profit organizations and organizations (i.e. KADIN and HIPMI) in order to achieve “Indonesia in Equality”; and different views on money as a badge of achievement (Sandiaga even did not really care whether to get paid of his job or not).
Furthermore, as an employee in an investment management sector, Sandiaga was formed to have such mentalities: forecasting future trend and price; innovative thinking by linking innovation to the market place (Burns, 2011); and long-term planning (visionary). Armed by these mentalities, Sandiaga took a risk to build Saratoga Capital during the economic recession; facing the biggest uncertainties of having no regular salary. However, he and his family have to survive. Entrepreneurs share the characteristics of owner-managers (Burns, 2011); however as an “accidental” entrepreneur, Sandiaga does not possess internal locus of control. Sandiaga believes that a strong faith of God (Alghozali, 2011) will open a way for success (destiny); a type of external locus of control whereby are less likely to take the risk. This belief might be influenced by Indonesian feminine culture (Hofstede, 1981).
2.2 Antecedents Influences
According to Sandiaga, key success factors that guide him to success are faith, gratefulness, and sincere heart. This philosophy was formed due to the family characters: integrity, honesty, tolerance and compassion to environment (Alghozali, 2011). His mother, Mien Uno, is known as an educator of personality. While his uncle, Prof. Arief Rachman has good credibility in Indonesian national education. In daily life Uno family always emphasized on noble values of Moslem. Therefore Sandiaga always adhered to his faith of God for success in living. Although he had to bring her family back to Indonesia and stayed in his parents‟ house, he still thanks God by optimizing God gifts: high education, knowledge of financial management, international network, and his characters.
Through his entrepreneurship experience, Sandiaga breaks the myth that a great entrepreneur is a talent and born. It might be true that a person growing in an entrepreneur family would learn about business earlier and faster. Nevertheless, the most important keys are work hard, focus and not to be greedy; venturing into various fields of business before having strong fundamental in the main business. “Educated entrepreneurs are more likely to establish faster-growing firms” (Storey, 1994). Sandiaga had a high quality education in America. According to Welsch (1998), in America entrepreneurship as a career option is espoused early and reinforced regularly. Unconsciously, by studying there, Sandiaga learnt the concept and habit of entrepreneurship. Moreover, Americans are said to have a „frontier culture‟, always seeking something new. Therefore, Sandiaga has innovation thinking supported from this social group and colleagues. Burns (2011) explained that middle-aged owners and owners with previous managerial experience are more likely to be associated with growth companies. Through some previous working experiences, Sandiaga gained credibility, financial resources, managerial and market experiences. Furthermore, Sandiaga maintains relationship with people, which can be seen through his involvement in organizations and foundations. Having collectivism and feminine culture, Indonesia influences Sandiaga‟s behaviour.
2.3 Situational Factors
Sandiaga‟s reasons for setting up his business are triggered by other factors (push factors), besides by his own will (pull factors) of having independence. Economic downturn in 1997 made Sandiaga suddenly lost his job, busted his investments and stopped his regular income. These conditions forced Sandiaga to go back to Indonesia, live in his parent‟s house and struggle to support his family. Nonetheless, his faith of God and support from his family enlightened him to be grateful and continuously search for opportunities. These factors gradually eliminate the barriers to move forward to gain success.
3 Innovation to Growth: Turning Opportunities into Business
Burns (2011) reminded that there are too many start-ups fail within the first three years; however Saratoga has proven its growth by having more than 20,000 employees nowadays. Figure 5 shows the startup model for Saratoga Capital. There are six factors in this model in which ideas and personal attributes have been discussed.
Knowledge of Customers
Changes create opportunities and entrepreneurs create values by exploiting change through new demand creation or existing market exploitation (Burns, 2011). According to Drucker (1985), sources of opportunities for Saratoga Capital in search of creative innovation are changes in perception, mood and meaning; in this context, it means the 1997 economic crisis. At that time, many good companies suddenly collapsed caused by interest rates jumping up dramatically after the value of the rupiah fell (Asia Views, 2007).
For some people the crisis in fact created opportunities: chance to hunt good assets at extremely low prices. In order to be able to fund these activities, some players build alternative investment institutions, such as private equity funds and hedge funds. These opportunities were also seized by Sandiaga S. Uno. Collaborated with Rosan Roeslani, he set up Recapital Advisors in 1997 (Abdullah, 2008; Noor, 2008). Then, together with veteran businessman Edwin Soeryadjaya, he built Saratoga Capital in 1998. Armed with investment funds, Saratoga bought bankrupt companies or those with distressed assets. These companies were then cleaned by a professional management team and ready to be sold later once they were healthy and profitable again. This type of business has already been going on for a long time in America and Europe; however, it is certainly a new type of business in Indonesia.
Knowledge of Competitors
Michael Porter (1985) claimed that five forces determine competitiveness in any industry. Purchasing and refinancing a bankrupt company required a lot of investment and professional management teams. These were costly, and thereby barrier of entry was high. Moreover, giving financial consultancy for such “death” company could not be done easily by an in-house strategic team. It is showed that threat of substitutes is low. Although the crisis hit businesses, the opportunistic companies compete to develop investment institutions. Therefore, there was a high competitive rivalry. Since there are some alternatives of investment institutions, bargaining power of buyers was quite high. Nevertheless, there was low power of suppliers since financial outsourcing companies were not so many.
Marketing Strategies
In the early 2000, Sandiaga analyzed that trading in energy was a good investment whereby less people were interested. Asia had a very high energy demand and Indonesia has abundant valuable natural resource. Therefore, Saratoga invested in this sector in a quite low price. Later on energy and mining sectors are booming in Asia and Saratoga gained big profit. By maintaining its focus in energy, Saratoga Capital explores coal, oil and gas, mining, timber and plantations; in 2000 Saratoga bought a large stake of PT Adaro Energy Tbk., the second largest coal company in Indonesia which has reserves 928 million tons of coal (Salam, 2009). Furthermore, it expanded into infrastructure, such as telecommunications, toll roads and electricity.
By 2010, Indonesia’s stock market is outperforming its neighbors and the region. Growth is expected to reach 6 percent and an emerging middle class is fueling domestic demand (Coren, CNN, 2010). Saratoga focuses on differentiation strategy by giving the best service to its client. In order to acquire the best company to be refinanced, Saratoga Capital conducts market investigation for about 3 to 6 months.
Resources
Aforementioned, starting investment institution required a big capital instead of rooms and staffs to operate the business. In 1997, meeting old friend from high school, Sandiaga embraced Rosan Roeslani opening an independent financial consultancy. A year after, Sandiaga developed Saratoga Capital supported by Edwin Soeryadjaja, son of a former billionaire William Soeryadjaja; the founder of Indonesia‟s largest automotive company PT Astra International (The Jakarta Post, 2010). This invitation would never be occurred if Sandiaga had never met William. After graduating from Wichita University, Sandiaga won trust of William through his hardworking in Summa Bank, owned by William (Salam, 2009). As the entrepreneurship guru, William often shared his business recipe to Sandiaga, and thereby let Sandiaga know the harshness of business. Armed by networks from domestic and foreign companies and financial institutions, Sandiaga runs the business. Through these networks, he gathers capital from investors to acquire the crisis companies. According to Sandiaga, networking only contributes 30 percent of his success. The key factors are hardworking and maintaining trust.
4 Major Challenges
In the beginning, Saratoga struggles to convince fund owners to invest (AsiaViews, 2007). This was understandable, bearing in mind that billions of US dollars were needed. Usually, fund owners investigate fund managers of investment funds through their schools, universities and previous places of work. It should be pointed that Saratoga was a new player. Nevertheless, after operating for more than twelve years, Saratoga has been facing more challenges (figure 6).
5 Sandiaga Uno: Ingredients of Entrepreneurial Success
Sandiaga‟s journey has shown that he has manage d to do more than just survive; he managed to grow Saratoga Capital quickly and with great success. The ingredients of his success are shown in figure 7.
