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Concepcion-Carrier, adapting international standards to local tastes

Interview - December 11, 2012
As Concepcion-Carrier celebrates its 50th anniversary, CEO Raul Joseph Concepcion speaks about the reasons behind the company’s success as one of the few manufacturers of air conditioning equipment in the country, and about his plans to keep up with the changing times. He also addresses the issue of the growing need to attract foreign investment in the Philippines in order to accomplish the country’s full potential for economic growth

Raul Joseph “Jojo” Concepcion is CCAC’s Chief Executive Officer since 2008. A seasoned executive, He is known by his peers and loyal employees as a bona-fide hands-on CEO, a man who is as comfortable rolling up his sleeves and making the rounds inside the factory, as he would be in drawing up the best business strategies in the boardroom.

From the time he joined Concepcion Industries, Inc. in 1987, to the time he became CEO of CCAC, Jojo approached his work always with the values and vision of his father and grandfather in mind. As the 3rd generation Concepcion in the air conditioning business, he diligently carried his family’s heritage and took CCAC to great heights, leading the way as the company became the country’s most trusted provider of innovative cooling solutions with a vision to branch out in taking the company to be one of the Philippines’ globally competitive companies in the appliance and consumer durables industry.

In February 2012, Raul Joseph Concepcion also became concurrent president of the joint venture’s founding company, Concepcion Industries, Inc. 

Apart from being the CEO of Carrier-Concepcion, Raul Joseph Concepcion also served as President of the Philippine Appliance Industry Association (PAIA) for four years, and is currently the organization’s Chairman Emeritus. He holds a Degree in Business Administration from Simon Fraser University in Vancouver, BC, Canada.

A devoted family man, Jojo spends most of his free time reading and cooking for his wife and children at home. Jojo also manages his own prawn farm, further testament to the Concepcion clan’s strong entrepreneurial spirit

With the economic and international attention shifting towards Asia, this part of the world has been designated the key driver of global economic growth. In the second quarter of 2012, the Philippine economy grew by 5.9%, a rate that was higher than Malaysia’s (5.4%), Thailand’s (4.2%), Vietnam’s (4.4%), and Singapore’s (2%), thus outpacing most of the economies in Asia. As someone who has been incredibly successful in the Philippines, what are the competitive advantages of the region compared to other global markets, and what role is the Philippines playing today in the Asia Pacific region?

If you look at the strongest competitive advantage of the Philippines in relation to the Filipinos in the world, it starts with the people. Having 100 million English speakers is the first competitive advantage. Our knowledge of English makes it very easy to communicate. In business, this is what people are looking for.  In the world we live in today, almost everything is instant—Twitter and Facebook play a big role in communication. If you cannot communicate well, you will have a problem.

The second advantage is education. You need to have a basic understanding of education, and that is an essential foundation to any comparative advantage. I think that we, in the Philippines, have realized that we cannot compete in the same place where everybody competes. The Philippines can never compete with China, where there are a billion people. Its GDP is 200 times larger than the Philippines and it has a bigger market size.

We want to compete in industries and businesses that are more useful for our people.

Tourism is one of them. Our country’s tourist slogan, ‘It’s More Fun in the Philippines,’ is descriptive of what we do. It is a more personal intention that when you come in the Philippines, you feel at home. 

We know that at the age of seven, your life was not limited to playing, like all normal kids. You were brought to the factory to learn about the family business. Looking back at the past, what did you learn from your father and what motivated you to work with your family?

When we were growing up, my father made us work on the factory floor with no air-conditioning, and he made us eat in the cafeteria where everybody eats. We had no special treatment because he wanted us to relate with the people we would be working with and understand the condition that they are working in. That, I think, left an impression on my management style. That’s how I manage the businesses that we have today.

What our parents did was basically to set up the foundation correctly. Our family has certain values and one of those was hard work—that nothing in life was free, you need to work hard. You need to have the ability to connect with people.

Being the CEO of the company is not just about doing the work, it’s also about how I motivate the people that work for me, and set them toward one goal. That’s what strengthens my basic foundation.

You have demonstrated your capability of success not because you are the son of the owner—you earned the title by working hard and getting to know the company from the bottom. Can you highlight some of the major projects that stand out when you look back, as well as the new projects that you have in mind in the short and medium terms?

There is this saying that the first generation builds the business, and the second generation grows it, while the third one destroys it. I’m in the third generation, so I’m supposed to be the destroyer. It is a very critical force that when we manage things, we steward the company that my grandfather built.

One of the most successful factors in running a company is the ability to transfer knowledge, as well as the ability to keep the company vibrant, strong and growing. Part of it is how we look at our businesses—the partners we choose, the hard work, and the commitment we have are all critical. The second thing is how to remain strong and how to build a brand name. The strength of the Concepcion family is the ability to develop strong brands, such as an international brand like Carrier with a very strong market share, as well as the ability to develop our own local brand, Condura.

As this industry grows and the buildings grow taller, our biggest strength today is our credibility. Our business has been committed for 50 years because our business is not just about air-conditioning, but also about people. Our slogan is that ‘we’re not just about air-conditioning, we’re about solutions.’  We come in and we see how we can help you create a healthy environment rather than just selling boxes and pieces of air-conditioning units. 

The company was founded in 1962 by Jose Concepcion Sr. and you are steering the company to its 50th anniversary, with a 45% market share dominance. Tell us what has been the key to leading a successful business and how are you planning to celebrate this 50th anniversary?

The biggest reason we’re here is because we delivered the best service to our customers, who in turn appreciated our service and they have kept on coming back. In fact, we have done a search for the oldest Carrier air conditioner, and we have found 10 units that came from the first manufactured batch, which are still working today. These 50 year-old Carrier air-conditioners that people are still using today symbolize who we are and why people deal with us—this shows our commitment to working with them, not just for the short-term but for the long-term as well.

Our celebration of these 50 years is really about stability: that we are the partner that you can trust to be there. And that is who we really are. 

What are your competitive advantages and how do you plan to compete with the likes of multinational companies in the coming years?

Our biggest competitive advantage is that we visionaries. We know what the local life is like, so what we do is to build products and add innovations that are useful for the local lifestyle. For example, Philippine energy is probably the most expensive in the world. People talk about energy efficiency and the Energy Efficiency Ratio—which is good, but does not ring a bell for the ordinary customer.  Everyone can understand more easily how electricity costs affect your spending.

We also look at how our consumer uses our product. You will be surprised that the average Filipino does not use air-conditioning like his foreign counterparts. He turns it on and, after three hours, he turns it off because he is trying to save power.

So what we did was to develop a 24-hour timer with a fan plug that allows your electric fan to turn on as soon as the air conditioner turns off.

Our second advantage is scale. We are small in the world but we are large in the Philippines. We have 7,100 islands in the Philippines. And to serve 7,100 islands is a challenge. But that’s what keeps us very strong.

Our third advantage is the discipline with which we manage the business. It was very critical transitioning from the family corporation we were in the 60s to what we are today. Our American partners brought the discipline of how to manage our businesses, and how to administrate our finances.

There is big a challenge to bring American companies to some new markets, and of course, once they experience the new opportunities they will change their minds. You had the opportunity to live in the States and experience their culture. Do you feel that global investors and especially the US community are fully aware of the potential here in the Philippines?

I don’t think the global community is aware of what is happening in the Philippines. We’re not yet at our peak level of success. We are just beginning but we are starting to make waves.

One of the marks of the Aquino administration is transparency. This does not mean that corruption is not prevalent. But I think leaders should say that we want to move towards a future of transparency, which is a critical foundation. As a result, you will see the first wave of investments coming in. But there is still a long way to go. If you look at the FDI of the Philippines, it’s still very small and we need to attract more investment into the country. At the moment, economic growth is being driven by local companies such as: SM’s, Ayala’s, San Miguel Corp, DMCI–they are the ones driving this economy because they can see there’s a future here.

However, today you have to go beyond your resourced capabilities because you need to partner up with investors. This is what we are looking at and this is where the opportunity is for the second wave of growth.

If you look at the Philippines’ growth, services like BPOs, tourism, and food and beverages have developed tremendously. But services will not create the employment needed for this country to grow. No economy in this world can grow without manufacturing. This is where our contribution as a manufacturer comes in. Our skills and our services comprise the base for the industry and for the growth needed for this country to grow as well. 

What is the main challenge that you are facing today as the CEO of Concepcion Industries?

There are two main challenges; the first one is business- related perspective and the second one is personal. The challenge from the business perspective is growth. We are four to five times larger than our competitor in the Philippines but in the world, our size is very small.

Businesses that are successful are businesses that have a healthy relationship with their customers. Knowing the needs of our customers is a major factor that makes us grow.  When our customers change their needs and preferences, we need to plan ahead to be able to adapt to that change.

The other challenge for me is how do I move from the third to the fourth generation. How do I move this business forward? I always look at myself as somebody in a racetrack, where I am on the third level in the race and passing the baton to the next one. One of the key successes of the company over the past 50 years is that we have established about 150 entrepreneurs. Some of our former employees even became our partners, who helped us continue to grow our business. 

What advice would you give to all those young people who want to start a business venture, and why should US companies invest in the Philippines at the moment?

Giving advice is hard. I tell our workers all the time that they have to work hard and constantly learn. Learning is never ending. In life, unsuccessful people are those who refuse to learn and who do not want to accept feedback. Second is perseverance. Businesses are not always successful, we have had our rough times but we persevered in what we wanted to do.

With regards to investors, I would say we are in the infancy stage. This is the beginning for our country. If you look at the growth rate in the Philippines, it grew 6.4% this year, while the previous year growth was 4%. We are starting from a modest level, but we are very pleased with our growth rate thus far. And this performance is telling of what will happen in the future. President Aquino has been in power for about a year and a half now, and the previous administration of Mrs. Arroyo had been in power for 10 years. In one and a half year, you cannot change things. But you can put the country on a positive path.

And what you are seeing today is a positive path; we are seeing investments starting to come in. The biggest reason why investors come in is that they enter a diversified economy. We need help; we want people to come in. What we need from the US, first and foremost, is money. And the second is education. We need Americans with know-how to come to the Philippines and teach us what they know.

The strength here is having a very open market that is growing and is open to grow. It is a market that wants information and investments to come in. I think that it is an opportunity. The investors that will set up here over the next five years will get very good returns on their investments. Ten years from now, it will be a different story.