Sun Tzu – War On Business Part 1 (Prince of Wales)

During the Chinese New Year festive holidays, I managed to catch an episode of a new TV series called “Sun Tzu – War On Business”. It is hosted by a very prominent and prolific entrepreneur called Mr. James Sun (“James”), who made a name for himself as the only Asian to have appeared in the finals of the reality TV Series “The Apprentice”. In 1995, at just the tender age of 18, he set up his own investment firm Sun & Associates and invested US$5,000 of his savings into popular auction portal eBay. Six months later, he was staring at a huge profit of US$150,000. This and other instances of savviness has made him a successful entrepreneur and investor, and next on the cards is a hedge fund he plans to set up, targeting an annual return of 35% per annum. The Sunday Times also did an interview with James which was published on February 14, 2010, and it features some of his money habits and also details how he built his wealth.

What was intruiging, though, was his new TV show which was a sort of reality TV show in which James looks at businesses from top down and advises on how to improve the business, by focusing on aspects such as Management capabilities, division of labour, human resource, technical skills, operational details and financial management. James will then meet with the CEO/owner to discuss aspects of the business, what’s wrong, what’s good and what’s bad; as well as what is needed to improve or enhance the business. Throughout the half-hour show, James uses a lot of quotes from Sun Tzu’s actual “Art of War” Manuscript; and though I cannot remember the word for word references as I only watched the program once, I think it’s the lessons learnt and issues dealt with which resound in me the most.

This episode focused on an F&B business located in Singapore called Prince of Wales pub. Essentially, the owner is an Australian Mr. Malcolm Davies (“Mr. Davies”) who owns a pub cum hostel – the top floor had beds and acted as a backpacker’s hostel, while the bottom floor (of the shophouse) was a pub cum dining area. The concept was one where foreigners could get good drinks, entertainment, relaxation as well as cheap accommodation. James was then called in to assess how to improve the state of affairs at the pub, as there were lingering issues with operations and also some customer complaints.

To cut a long story short, I will summarize the main learning points I picked up from the program (not in order of merit) from memory:-

1) Proper Segregation of Duties/Roles and Operating Procedures – In any organization (even small ones such as a pub cum hostel), it pays to have a clearly defined set of rules and regulations, as well as roles and responsibilities for each and every staff. Granted, most of the staff in small businesses tend to multi-task and may gave numerous roles to fill, but the important point is that someone who specializes in say sales, cannot be tasked to do something like mixing drinks for example! So each person has to be briefed on what to do, and how to react in case of any emergencies. One such emergency occurred on one of the nights when James visited – the sink got inexplicably stuck and caused a lot of problems as orders could not be processed; and resulted in tremendous amount of frustration for patrons and Management.

2) Control over Operational Aspects – During the program, it was revealed that the Mr. Davies had an issue with serving food (as opposed to just drinks and beverages) as the food was provided for by an adjacent restaurant and not cooked in the Prince of Wales premises at all (as they had no kitchen). When some mystery shoppers (planted by James himself) complained that the food (fish and chips) was cold and slow, Mr. Davies himself invited the restaurant manager to talk to the customers instead of taking the blame himself, which James felt was not the right thing to do. He advised that Mr. Davies should try to take back operational control of the food, which was an important aspect of the business, so that he could ensure its quality and timeliness. Look also at point 5 for more on this.

3) Proper Positioning – James also advised Mr. Davies to do proper positioning of the tavern/budget hotel to ensure that it was “neither here nor there”. This was important because travellers and tourists would be able to target their search and thus pinpoint his pub cum hostel as a place to visit if he positions himself correctly.

4) Planned, Phased Expansion – There was also mention of expansion into Padang, Indonesia but then the earthquake occurred and destroyed almost everything, and so the deposit placed on a building there was also lost. In the end, Mr. Davies took a trip to Kuala Lumpur in Malaysia to assess the market there and see if there was potential to expand his operations there as well.

5) What-If Cost-Benefit Analyses – From point 2 on having a kitchen against catering food from outside to satisfy consumers’ requests for good food to be served, Mr. Davies did an analysis and got some numbers and he found out that there were space constraints with regards to building a proper kitchen. It would also cost about S$55,000 and in the meantime, the hostel area would not be accessible during the renovation works, which means opportunity costs as well. Eventually, he decided against it and used the money to cater for buffet spreads in his pub; and also to use the money to spruce up the pub (e.g. repainting the walls) and to come up with a system of table numbering (to ensure food orders could easily be traced to customers). This shows that doing detailed, in-depth cost-benefit analyses really does help the business to make better decisions, and of course James was also instrumental in providing the catalyst for this to take place, and spurring Mr. Davies on.

Overall, James did comment that he was surprised that even though there were flaws recognized by him in the running of the pub; nevertheless it still managed to “make money” (i.e. be profitable). Therefore, he was confident that if the problems inherent in the business and pointed out by him were solved, the business would prosper and grow even further. Mr. Davies was open to suggestions although he did point out that the insertion of “mystery shoppers” gave rise to an unrealistic situation whereby the “customers” were deliberately being picky for the sake of being so (though he did eventually and grudgingly acknowledge flaws in his own system).
A special guest on the show was Mr. Kenny Yap, CEO of Qian Hu Corporation Limited listed on the SGX. He was invited to also have a look at the business and comment on it, and he mentioned that all pubs should have a “Signature Dish”, which is something all customers will order instantly when they visit a food outlet. He mentions that this is also part of branding and creating an identity.

So from this simple half-hour program, I was able to take away many lessons on how to run and manage a business; and for this episode it showed an F&B outlet. Truthfully, I felt that half an hour was too short a duration and did not give sufficient time to analyze the business (especially the numbers) and all aspects in which it operates. In fact, one hour should be adequate, but I guess there are time constraints posed on such programs. I had initially wanted to stretch this out into a “War On Business” series where I would review and catalogue each episode and the business lessons which came along with it. Problem is at this point in time, I do not know if I can catch every single episode as I am not always home on Sundays when the episode airs. Thus, I will report on this reality TV series on an ad-hoc basis under the category “Business Lessons”.

Readers are welcome to comment on the lessons learnt if they have watched the program, and also on what I posted to encourage a healthy discussion.

Check out the Prince of Wales Pub's website at http://pow.com.sg/about.php