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IMD922 03.10.2017

JEBSEN & JESSEN FAMILY ENTERPRISE: A HONG FROM THE COLD

Researcher Marta Widz prepared this case under the supervision of Dr Benoit Leleux, Stephan Schmidheiny Professor of Entrepreneurship and Finance, as a basis for class discussion rather than to illustrate either effective or ineffective handling of a business situation.

Jebsen & Jessen Family Enterprise was the winner of the 2016 IMD-Lombard Odier Global Family Business Award presented at the Family Business Network Summit in Suzhou, China in November 2016.

SINGAPORE, SEPTEMBER 2016. Heinrich Jessen was enjoying every minute of his dinner in Singapore. He and his fellow family shareholder, Hans Michael Jebsen, were relishing the best homemade rendang. Asia had been their adopted land for over 120 years now, not counting the years their ancestors, as Danish seafarers, had plied the treacherous Asian waters. In 1895, two of them had set roots in Hong Kong and established a first trading house, one of the original foreign Hongs in the colony. From those modest beginnings emerged a powerful group with over US$4.5 billion in sales and over 7,700 employees, with four principal entities: Jebsen & Co., based in Hong Kong; Jebsen & Jessen (SEA), based in Singapore; Jebsen & Jessen Hamburg, their global trading house; and GMA Garnet, the world leader in mining, processing, distributing and recycling of industrial garnet. The “three mackerels,” the symbol of the family enterprise, had come a long way from Aabenraa, the original family base in modern-day Denmark, close to Hamburg. Jebsen & Jessen was an Asian powerhouse, with bases throughout the continent; family members carried Singaporean passports and had become true Asians, even sponsoring the Jebsen Cup at the prestigious Hong Kong Jockey Club, the ultimate social event there.

The family enterprise survived many near-death experiences as a result of wars and revolutions, but the family partners showed a resilient entrepreneurial spirit, clawing new ideas and better opportunities from the jaws of disasters. They progressively evolved from a pure trading house, first establishing themselves as partners of choice for leading global companies such as Porsche and Demag, then becoming more involved along the value chain through vertical integration and by diversifying their geographic footprint into frontier markets such as Indonesia and Myanmar. For the third generation, the future looked promising, but history had taught the family never to rest on its laurels. The governance structure meant that ownership and control were concentrated in a limited number of hands. Would the current leaders be able to identify, groom and incentivize those from the next generation? How could they keep the family at large involved? From the business side, how far should vertical integration and geographical diversification be pushed? How should they react to the recent slowdown in China? Was there a natural limit to CSR activities? They had many issues to discuss indeed.

Copyright © 2016 by IMD - International Institute for Management Development, Lausanne, Switzerland (www.imd.org). No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means without the prior written permission of IMD.

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Jebsen & Jessen Family Enterprise: Entrepreneurial Legacy

On New Year’s Eve in 1894, two spirited and adventurous entrepreneurs met in the bar of a private club in Shanghai to map out ambitious plans for the future.1 Cousins Jacob Jebsen and Heinrich Jessen (who later became brothers-in-law), driven by opportunities they saw in the Far East, registered their new partnership as Jebsen & Co. in Hong Kong on March 1, 1895. It was one of the few non-British foreign Hongs there, following in the footsteps of firms such as Jardine Matheson or Swire.

Heinrich Jessen Jacob Jebsen

Establishment notice: China Mail, March 1, 1895.

Both partners shared the seafaring tradition of their hometown, Apenrade, then part of the Duchy of Schleswig-Holstein, part of the German Empire until 1920, later renamed Aabenraa when re-incorporated into Denmark.2 With its deep-water harbor, the town was famed for its shipyards and port. Since the early 18th century, their ancestors had all been ship-captains and ship-owners. Driven by the motto “the world is a global undertaking,” they sailed the coasts of Europe, South America and Asia, first reaching Hong Kong in 1861.

When Jacob and Heinrich formed the original Jebsen & Co. partnership, they retained the seal of their hometown – slightly modified – as the company’s logo.3 The three mackerels were a symbol of the trinity and the community and they embodied the entrepreneurial spirit of the founders:

The mackerel is a fighting fish, which moves fast when chasing its prey […]. Unlike most fish, it is not equipped with a swim-bladder (which would make it weightless in the water) and it must

1 Miller, L. and A.C. Wasmuth. Three Mackerels. The Story of the Jebsen and Jessen Family Enterprise. Hong Kong: Hongkongnow.com, 2008: p. 140. 2 Also known as Åbenrå, the city came back under Danish rule following a plebiscite required by Article 5 of the Austro-Prussian Peace of Prague (1866). 3 Jebsen & Jessen (SEA) web page: www.jjsea.com.

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be on the move at all times to avoid sinking to the bottom! When hooked, the mackerel puts up a fierce struggle.”4

Jebsen & Jessen Family Enterprise present and early logo.

Initially, Jebsen & Co. acted as an agent for the M. Jebsen shipping line, a company that owned 14 steamships and belonged to Michael Jebsen, Jacob’s father, but Jebsen & Co. quickly evolved into a trading house, one of the late 19th century Hongs.5 Its business was based on a traditional agency model, with the company buying goods from manufacturers and selling them at (hopefully) a good profit. Jebsen & Co. traded a number of goods: tobacco, ginger and oils from Asia to Europe; cotton, satin and chemicals from Europe to Asia. As early as 1897, it took over the agency for China of BASF,6 the German chemicals powerhouse. The business grew and more offices were opened in Shanghai and Guangzhou.

Heinrich Jessen (second row, center) with executives of Jebsen & Co., Hong Kong, 1913. Left corner: A BASF indigo barrel.

4 Ibid. 5 The Hongs (Chinese: ) were major business houses in Canton (now known as Guangzhou), China and later Hong Kong with significant influence on patterns of consumerism, trade, manufacturing and other key areas of the economy (Source: Wikipedia). 6 Miller, L. and A.C. Wasmuth. Three Mackerels. The Story of the Jebsen and Jessen Family Enterprise. Hong Kong: Hongkongnow.com, 2008: p. 140.

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In 1898, together with family friend Heinrich Diederichsen, Jacob Jebsen and Heinrich Jessen set up their first joint venture named Diederichsen, Jebsen & Co. in Qingdao, a rapidly developing port on the east coast of China. The company started to sell large quantities of cement, nails, ironware and glass to China.

A view of Qingdao with the Diederichsen, Jebsen & Co. building on the far left, 1898.

In order to facilitate the procurement of goods and to tighten the company’s control over the entire value chain, it set up a purchasing house in Hamburg in 1901.7 After 10 successful years, the business partners nevertheless decided to part ways, and in 1909 Jacob Jebsen and Heinrich Jessen opened their own European purchasing office, named Jebsen & Jessen Hamburg (JJH)

The outbreak of WWI wreaked havoc on the company. As Aabenraa was part of Germany at the time, Jacob Jebsen – who held a German passport – found himself labeled an “enemy” in the British colony of Hong Kong and was interned in a prison camp, first in Hong Kong and later in Australia, for more than four years. When China joined the war, all treaties, agreements and conventions concluded with the German Empire were declared null and void,8 and Jebsen & Co. was seized and wound down. All Jebsen ships were confiscated, never to be returned to their owners. In Europe, all senior employees of Jebsen & Jessen Hamburg were drafted into the German armed forces, leaving Heinrich Jessen in charge of the German company.9 When the two partners were reunited after the war, they discovered that all that was left of their pre- war business was a pile of rubble. Undeterred, they rebuilt a better company out of the great post-war opportunities. The family firm again endured complete destruction and reinvention after WWII and the Pacific War. According to Heinrich Jessen:

Near-death experiences put each generation back to the pioneering stage. We have never gone into the holding comfort-zone pattern that can be sometimes observed in subsequent generations of family firms.

With the passing of the founders, three second-generation leaders – Michael Jebsen, Hans Jacob Jebsen and Arwed Peter Jessen – continued to grow the business in Europe and China. Seeing an opportunity in the newly independent nations of South East Asia, Arwed Peter Jessen established an enterprise in Malaysia and Singapore in December 1963, naming it Jebsen & Jessen South East Asia (JJSEA). In the early 1990s, drawing on the entrepreneurial spirit rooted

7 Miller, L. and A.C. Wasmuth. Three Mackerels. The Story of the Jebsen and Jessen Family Enterprise. Hong Kong: Hongkongnow.com, 2008: p. 140. 8 Ibid: p. 41. 9 Ibid: p. 38.

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in the values of the Hanseatic League – a confederation of merchant guilds that dominated Baltic maritime trade for over 400 years along the coasts of Northern Europe – Jebsen & Jessen Hamburg set up a distribution company for industrial garnet.10 This paved the way for what later became GMA Garnet, an important business unit of the group.

Transition to the Third Generation

By 2016, two principal shareholders from the third generation – Hans Michael Jebsen and Heinrich Jessen – were navigating and setting the direction for the Jebsen & Jessen Family Enterprise.

Third generation family principal shareholders: Hans Michael Jebsen (left) and Heinrich Jessen (right).

The transition to the third generation of Jebsens (refer to Exhibit 1) happened quite rapidly. “I was catapulted to the company at the age of 25 when my father died unexpectedly in his mid-50s and my uncle asked me to join the business,” said Hans Michael Jebsen, who at the time was studying toward a business degree in St. Gallen, Switzerland. He moved permanently to Hong Kong to take charge of Jebsen & Co. and soon became a regarded member of Hong Kong society, where he held directorships in many other companies and was actively involved in community service. “Every generation should have a certain amount of modesty to say, ‘we are in charge now.’”

The Jebsen residence at Middle Gap Road, the Peak, Hong Kong, built by Hans Michael Jebsen in 1987–90 and reflecting some of the elements of the original partner residence in Hong Kong called “Lysholt” as well as the Jebsen family home

“Lensnack” in Denmark.

10 Garnet is a natural mineral abrasive, it is the hardest industrial sand.

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The third generation successor in the Jessen line (refer to Exhibit 2) – Heinrich Jessen – was a tropical ecologist by training and had always been passionate about the environment. In many ways he was not supposed to join the family business: he worked at the World Wildlife Fund in Italy, graduated in interdisciplinary environmental studies in the United States, and before long found himself working in Papua New Guinea on a rainforest project. This is where he read the book on the history of the family firm and became inspired by the entrepreneurial ventures of his grandfather and his cousin. He moved permanently to Singapore to realize his dream of combining environment and business.

Almost 120 years after the creation of the first company, an unbroken chain of three generations’ commitment was ensuring that the founders’ legacy still connected East and West11 (refer to Exhibit 3).

“The very visible roles of our principal shareholders, who both carry the firm’s name, is a very important part of the success story we have,” said Helmuth Hennig, CEO of Jebsen & Co.

Jebsen & Jessen Family Enterprise

Jebsen & Jessen Family Enterprise employed about 7,700 people in 2014 and generated US$4.5 billion in sales worldwide. Its international footprint spanned the globe, from Europe through South East Asia, Australia and the Middle East to the United States and Latin America.

The firm consisted of many legal entities organized around four major business units (refer to Exhibit 4):

• Jebsen & Co. marketed and distributed a variety of premium products. Among many feats, it imported the first VW Beetle in 1953 and the first Porsche in 1955 to the Chinese mainland.

• Jebsen & Jessen (SEA) had core activities spanning manufacturing, engineering and distribution. It was, among other things, the ASEAN market leader in the design, manufacturing and servicing of industrial cranes.

• Jebsen & Jessen Hamburg was an international trading partnership engaged primarily in chemicals and textiles.

• GMA Garnet was the world’s largest producer, processor and distributor of industrial garnet with a strong presence in Australia, the Middle East, North America and Africa.

With no overall holding company, the family enterprise was in fact a federation of businesses with flat organization and decision-making structures that aimed to respond to the region’s entrepreneurial growth momentum. Helmuth Hennig, CEO and a non-family shareholder of Jebsen & Co., explained:

At the end of the day, each business has its own specialty, own needs, own geography, and own history. As a consequence, they are all run slightly differently. Each of them is allowed to develop its own identity and way of managing. CEOs are given the freedom to develop the business and a great deal of latitude is given to the management.

11 Jebsen & Jessen (SEA) web page: www.jjsea.com.

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Hans Michael Jebsen added:

Our structure is tailor-made. The independently managed companies are local companies with local partners and local co-investors that enjoy maximum flexibility in this loose structure. One is happier if one has the opportunity to lead one’s own company rather than be a part of a big structure. As much independence as possible, as much cohesion as necessary.

The business entities were bound by a set of strong values: trust, entrepreneurship, prudence, commitment and partnership. These values could be traced back to the Hanseatic League, and Hamburg merchants had lived by them for centuries.

One Captain – One Ship: Key Governance Principles

The families evolved some rather unique governance principles, many of them clearly inspired by their shipping and seafaring history.

Fierce Independence

The two families always stayed in full control of their joint destiny. Even though they remained open to outside investors, the families ultimately retained the right to call the shots if needed. The concept of stewardship was integral to the Jebsen & Jessen Family Enterprise’s philosophy through a strong wish to also stay private and financially independent.

It’s vital for people to know that we are absolutely religious in our tradition of financial prudence. This money is not being played around with.

Heinrich Jessen

We are conservative in spirit, do not risk the business by risky decisions, have strong balance sheets and do not depend on external financing.

Hans Michael Jebsen

Concentrated and Committed Ownership

A second founding principle was concentrated and committed ownership. Through the concept of “principal shareholders,” each family’s ownership would normally be represented by a single family member, completely aligning ownership and control. As of 2016 Jebsen & Jessen Family Enterprise was 100% privately owned and fully controlled by the Jebsen and Jessen families but with just two principal family shareholders – Hans Michael Jebsen and Heinrich Jessen – who steered the family enterprise through their positions on the boards of all the companies. Based on the “one captain – one ship” mentality, Hans Michael Jebsen was the principal shareholder in Jebsen & Co. and Heinrich Jessen the principal shareholder in Jebsen & Jessen (SEA). As such they held a majority of the shares in their respective companies. For the other entities, they applied a “hand in glove leadership,” with equal cross-shareholdings, and consensus-based decision making. “We are each other’s executors of wills and trusted partners,” said Hans Michael Jebsen.

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No Entitlement

A third pillar of governance was the total absence of entitlement in the family. The next generation never inherited shares, period. The principal shareholder of each generation selected a successor within the family, a qualified person vetted by the family as ready and able to run the business for years to come. That selected leader acquired the shares from the previous generation owner, sometimes taking decades to pay them off. As Heinrich Jessen explained:

You need to be committed to put your life and soul into the business. I was asset rich and cash poor. It took me 15 years to pay off my shares with any dividends that came. And it would have taken longer if my brother had not bought some of the shares from me.

Indeed, other family members who wanted to join the business as directors and shareholders had to buy their shares from their family’s principal shareholder – and sell them back to them if they wanted to exit the business. This was the case, for example, with a brother of Heinrich’s, Johann Peter Jessen, who joined Jebsen & Jessen (SEA) two years later.

Strong Empowerment

The fourth fundamental governance feature was the willingness to extend ownership beyond family members to key managing directors of operating entities. They inherited this from their ancestors, who as captains not only navigated the ships but also – according to time-tested rules – often had to own part of the ship or cargo they transported. This mitigated the risk of “unthoughtful” decisions and led to shared success or failure. Managing directors of business entities could become temporary shareholders and benefit from the value they helped create. However, upon retirement they had to sell the shares back to the principal family shareholders, thereby guaranteeing the sustainability of the family ownership. “Hans Michael Jebsen and Heinrich Jessen are the continuity from an historical point of view as well as from a future point of view,” said Helmuth Hennig, himself a non-family temporary shareholder of Jebsen & Co., who had already concluded the future shares sale agreement with Hans Michael Jebsen.

Minority shareholders of the group were loosely organized and enjoyed equal power when contributing to the main business decisions. As Heinrich Jessen clarified:

Just like we don’t have a structure above the four business groupings we also do not have a holding structure from the board of directors’ perspective. We meet informally all the time and formally at the board meetings.

Hans Michael Jebsen further explained:

Decision making in the Asian context is very different: voting according to the ownership stake is really seen as a last resort, and not a good one for sure.

Business First

The shareholder agreement was simple and practical. Dividend policies regulated the maximum dividend level, clearly implying a strong “business first” principle. As Heinrich Jessen explained:

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The dividend appetite of the shareholders – and this goes across three generations – has traditionally been low. We live the idea of putting the money back into the business: Business priorities supersede the emotions and ambitions of individual family members.

Hans Michael Jebsen added:

Equality and fairness are two different issues. The company should not be subject to other agendas; it is there to be continued and not to be considered a personal asset that is disposable: corporate wealth does not equal private wealth.

Succession Rules

Succession rules dictated that only one person from each family could become a principal shareholder. That person had to work in the company and be accepted by all other shareholders. Furthermore, the chosen successor would have to buy his shares from the previous generation as shares were never inherited. For Heinrich Jessen:

The step from working in the business to shareholding is a big one: This is different to many other family firms, where family members become shareholders but stay away from the business.

The company’s very lean structure, a result of its succession principles, brought some definite advantages and disadvantages, as described by Heinrich Jessen:

Because we do not have to justify decisions with a large crowd of family members, we can move fast and still base our decisions on our intuition.

However, filling the ownership and succession pipeline, despite the numerous descendants in both families, could be challenging because taking on the leadership roles brought significant business and financial challenges. According to Hans Michael Jebsen:

We need to look for candidates who have both the ability and the desire to make the financial commitment. It is fair to those who do not join the family business.

To counter the risk of a dead-end in succession, various safety mechanisms have been developed, including the possibility of appointing a temporary principal partner successor and resorting to a trust whose trustees’ sole role would be to act in the principal partner’s spirit and expressed interest until the next principal shareholder has been identified and brought on board.

Even though the family at large was not involved much in the business affairs, there was a strong desire and will to pass the firm on to the next generations and ensure the continuity of private ownership. As Heinrich Jessen proclaimed, “I am the third generation, and my KPI is to make it to the fourth.”

One of Hans Michael Jebsen’s sons was already being groomed as the family internal successor in the Jebsen family line by gaining valuable experience outside of the family firm. “We have a policy now of not having family members trained inside our family business. I myself did not embark on the career outside of the family business as I was called to duty very early,” said Hans Michael Jebsen. Heinrich Jessen added, “When I joined, I lacked suitable exposure and active managerial experience from elsewhere. I would do it differently now.”

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Heinrich Jessen (left) and Hans Michael Jebsen (above) with members of their families.

Family Traditions and Engagement

Building on the heritage of their ancestors, both Hans Michael Jebsen and Heinrich Jessen showed a strong interest in the family and the firm’s traditions. In their town of origin, Aabenraa, three full-time employees looked after the archives and an active family register. “The perception of where home is has changed over the generations: First and second generations saw themselves as guests in Asia; the third generation considers Asia its home but at the same time cultivates a love for the European roots,” explained Heinrich Jessen.

The history book on the Jebsen & Jessen Family Enterprise and on the two families was published to create “shared memories.” Hans Michael Jebsen stressed, “The higher you want to grow, the stronger roots you have to have.”

The Jebsen family also promoted family cohesion through a family app that various members of the family used to communicate daily, and family members of the same generation got together regularly on the occasion of so- called “cousins days.”

Additionally, both families had set up philanthropic foundations in which many non-shareholding family members were engaged. “This maximizes the involvement of other family members: my brother Christian runs one of the family foundations,” explained Hans Michael Jebsen.

Masters of Entrepreneurial Partnerships

Partnership of Two Families: A Shared Destiny

From the beginning, the group acted as a bridge – between continents and cultures, suppliers and consumers – inspired by the creed of Chinese philosopher Mencius in the 3rd century BC:

A history book on Jebsen & Jessen Family Enterprise.

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“Within the four seas, all men are brothers.”12 This started with the two families joining forces in 1895. As described by Hans Michael Jebsen, the company was started on a partnership ethos and philosophy and as a shareholding. The two families were not blood related, but they were related by a shared destiny; each enjoyed the success of the other party.

Values are Paramount to Relationships

The partnership of the two families was based on common values. For Hans Michael Jebsen, “One cannot institutionalize or legislate relationships; they evolve from the complexities of individuals.” These values were paramount, and “the best glue” to the relationship of the two families, which – having worked together for three generations – still kept differentiated identities. The Jebsens were more opportunity driven, while the Jessens were known for reliability and a structured approach to life. As Hans Michael stressed:

A good metal is made of different components, going through heat and shock treatment to become one. That is an analogy for what forged our family partnership.

The Sustainability of Partnerships

The experience of a generations-long partnership and the ability to select business partners based on their values were key competitive advantages of the family firm. “Jebsen & Jessen Family Enterprise’s sustainability is based on the sustainability of relationships,” emphasized Jebsen & Co. managing director Helmuth Hennig, whose father and grandfather had also worked for the company and who himself had worked for the company for over 30 years. “The best illustration of sustainability is the long-term relationships with partners that span not only 10–15 years but in some cases many decades beyond that, such as the 61-year relationship with Porsche.”

Jebsen & Co. introduced the first Porsche car to China, built the initial distribution network there and – 61 years down the road – was Porsche’s largest dealer globally with sales coming close to 10,000 cars a year. This success was based on strong partnerships, through thick and thin, and a common history. Indeed, Porsche later returned the support by committing fully to Jebsen & Co. as its sole distributor and marketer in the Chinese market during the initial years. Helmuth Hennig added:

We have also other relationships that have lasted 30–40 years and are just as positive and just as important to us as they were on day one. That shows the desire of the owners to build long-term relationships that would hopefully lead to long-term success.

Exceptional abilities to establish partnerships were also reflected in Jebsen & Jessen (SEA)’s many joint ventures. Out of seven business units, three were 50–50 joint ventures with other companies – with Air Liquide (JJ-Lurgi Engineering), Lapp Group (JJ-Lapp) and Terex Group, the owner of Demag Cranes AG (MHE-Demag), all three of which have been ongoing for many decades.

12 Miller, L. and A.C. Wasmuth. Three Mackerels. The Story of the Jebsen and Jessen Family Enterprise. Hong Kong: Hongkongnow.com, 2008: p. 5.

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Celebrating 60 years of partnership between Jebsen & Co. Ltd and Porsche AG in 2015. Hans Michael Jebsen, chairman, Jebsen & Co. and Franz Jung, president and CEO, Porsche China.

GMA Garnet, the youngest business entity of Jebsen & Jessen Family Enterprise, was another prime example of entrepreneurial partnership.13 Torsten Ketelsen, a Hamburg-born merchant with Danish roots, set out in the 1980s to distribute Australian garnet, one of the hardest industrial sands. In 1991 he formed a joint venture with Jebsen & Jessen Hamburg to sell garnet in Europe. Ten years later, in 2001, Torsten Ketelsen partnered with Hans Michael Jebsen, Heinrich Jessen and Wolfhart Putzier, partner of Jebsen & Jessen Hamburg, to acquire the mining operations of GMA Garnet in Australia, ultimately building the world leader in industrial garnet. The success story of GMA Garnet was based not only on the exceptional quality of a product and an aggressive vertical integration strategy, but also on the abilities of the family shareholders to build trusted partnerships.

Staying in Motion to Remain Afloat

Thriving in a changing environment requires resilience and adaptability.

Helmut Henning

As an organization we have to be adaptable. The only way to adapt is to keep yourself open to change, be willing to see things around you, develop and move with the times. The pace of change has been remarkable in our core markets. At the same time, the family shareholders allow the management team a lot of freedom to develop the business.

Heinrich Jessen

Moving Up and Down the Value Chain

Jebsen & Jessen Family Enterprise started out as a traditional trading house, opening a variety of Asian markets for production companies. As Helmuth Hennig explained:

That role is changing quite dramatically now. It is not just about introducing the product, selling it and trying to make some commission but rather it is about ensuring the longevity of the product. We have moved from a facilitator role to a value creator role by asking ourselves: How

13 The GMA Garnet saga is documented in a separate case by the same authors, “GMA Garnet: Jebsen & Jessen Environmental Mining”, IMD-7-1860.

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do we do that? What infrastructure do we need? What sales and after-sales capabilities do we need? What manufacturing capabilities do we need?

The first move up the value chain was a turning point. In the early 1970s, a German industrial crane producer, Demag AG, approached second-generation family shareholder Arwed Peter Jessen offering Jebsen & Jessen (SEA) the opportunity to become the sole agent for Malaysia and Singapore if it agreed to invest in the simple manufacture of steel crane structures locally. Manufacturing overhead travelling cranes for the fast-growing industrial sector in Singapore was uncharted territory for Jebsen & Jessen (SEA). “No one else was doing it. Everyone else was shipping cranes from places as far away as Germany and Japan,” said Heinrich Jessen.14

In 1972 Jebsen & Jessen (SEA) and Demag AG signed agency and manufacturing license agreements to set up Mechanical Handling Engineering (MHE). The new company started manufacturing in a small factory in Singapore and another in Malaysia. Building on a relationship of more than 20 years, the 50–50 joint venture MHE-Demag was formed in 1986. Today MHE-Demag is a dominant player in crane production, service, repair and refurbishment. It has built over 20,000 industrial cranes and 10,000 loading bays for warehouses in South East Asia and beyond and it designs its own cranes and crane components, some of which it sells back to Demag AG in Europe. “That was one of the most fundamental decisions my father took for this group,” stated Heinrich Jessen. “When you come from a hundred years of trading other people’s products, products that other people have branded, designed, produced and are in control of, it is very attractive to build a business where you have that control.”

MHE-Demag, 50–50 joint venture of Jebsen & Jessen (SEA), is an Asian market leader in the design, manufacturing and servicing of industrial cranes.

In the early 2000s, after China joined the Word Trade Organization, a solid middle class emerged in the country, creating strong demand for consumer products. Jebsen & Co. adjusted its operations to reflect these structural changes, successfully moving down the value chain this time, offering brand building, marketing, customer relationship management and sales

14 The Peak Interview: Heinrich Jessen. The Peak Magazine, August 2013. http://thepeakmagazine.com.sg/2013/08/the-peak-interview-an-explorers-journey/

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services. It refocused on its own brands such as its “Blue Girl” beer, which had just entered its 10th year as the number-one beer brand in Hong Kong by volume and value, with 50% year- on-year growth in Southern and Eastern China.15 In 2015 Jebsen Industrial, part of Jebsen & Co., introduced its first self- owned food brand, Weiwanjia, which catered to health- conscious consumers in China, and launched “J-Select,” its own retail platform.

Jebsen & Co’s own brand, Blue Girl, is the number one beer in Hong Kong.

With GMA Garnet, a full vertical integration strategy was pursued, first with the control of three mines (Australia, USA and South Africa) then through its own distribution chain, all the way to taking care of recycling of garnet, resulting in the leading market share position globally.

GMA Garnet’s success is based on an exceptional natural product and on the company`s complete control over the whole production and distribution cycle: from mining, over processing, logistics, shipping and distribution to the final user world-wide as well as reprocessing and recycling.16

Growth Strategy

Each business entity within Jebsen & Jessen Family Enterprise had its own strategic roadmap and its own growth strategy. Jebsen & Co. tripled its size from 2007 to 2015 thanks to quickly growing markets and many growth-oriented programs. For Helmuth Hennig:

It is all about growth in this part of the world. In order to overtake the market growth, the firm must innovate and constantly reinvent itself by identifying new businesses for its current portfolio. We enjoy a commitment of owners to the business to reinvest the earnings: that facilitates the ability to grow.

Jebsen & Jessen (SEA) pursued a “Growing Relevance, Delivering Value” strategy with the main priority being put on investment opportunities that strengthened the group’s position in the value chains of products and services. Its overall value proposition was to cover a multitude of markets of the very diverse – in terms of market sizes, languages, religions, cultures, institutions, infrastructure and legal aspects – South East Asia region. SGD 250 million were committed to an acquisition war chest for a major push into complementary products, value chain enhancement as well as frontier markets, such as Myanmar. As Heinrich Jessen explained:

Chance favors the prepared: Myanmar is now where Malaysia and Singapore were in the 1960s in terms of opportunities. Upon graduation as a tropical ecologist, I accepted the job offer that was the furthest away in Papua New Guinea. I feel the same excitement when I go to places like Cambodia and Myanmar as I did when I first went to Papua New Guinea.

15 Jebsen & Co. web page: www.jebsen.com. 16 GMA Garnet corporate video.

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Combining Environment and Business: Pioneering CSR

First Environment, Health and Safety (EHS) Executive

Jebsen & Jessen Family Enterprise had long championed combining business and environment, a movement initiated by Heinrich Jessen:

When I was working in the rainforest, Jebsen & Jessen (SEA) was moving into industrial manufacturing, with many activities that could have strong environmental impacts. I remember talking to my father, who had been disappointed that I was going in a completely different direction, about whether environment and business could be combined and whether we could start an environmental program in the company.

Arwed Peter Jessen supported the idea, so after earning his Master’s degree in industrial- environmental management from Yale in 1995, Heinrich Jessen became the company’s first environment, health and safety (EHS) manager, exactly 100 years after his grandfather and his cousin founded the Jebsen & Jessen Family Enterprise.

The first step was to ensure health and safety compliance across the group. The Ingredients business, for example, operated with hundreds of different dangerous chemicals. Proper storage methods, including segregation, isolation and separation, emergency prevention plans and emergency response procedures were developed and implemented. Numerous other environmental initiatives ensued:

• Jebsen & Jessen (SEA) was among the first companies in the region to ban shark fins at company dinners

• It entered a new business of molded pulp packaging made of recycled paper, a bio- degradable alternative to the standard protective plastic packaging

• It exited a tropical wood furniture business that used rainforest timber from Indonesia

• Although the use of tributyltin oxide – an ingredient in marine paints – was legal in South East Asia, the company ceased supplying it because of its severe impact on marine organisms

• In the late 1990s, Jebsen & Jessen (SEA) was one of the first industrial companies in the ASEAN region to implement rigorous environmental, health and safety protocols and to have all its member companies ISO 14001 and OHSAS 18001 certified.

The EHS program quickly demonstrated its economic impact, for instance in the form of lower insurance premiums upon instituting various risk-mitigating procedures such as fire- prevention systems.

First Carbon Neutrality (CN) Executive

Jebsen & Jessen (SEA) employed a full-time carbon neutrality executive and achieved full carbon neutrality in 2011, which made it the first industrial company in South East Asia to achieve the feat. Since then it has offset more than 250,000 tons of CO2 and continuously monitored carbon levels with the help of tools developed in-house. It also implemented further

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emission reduction initiatives: Jebsen & Jessen (SEA) was, for example, one of the first companies in Singapore to invest in solar panel solutions to generate power at one of its manufacturing facilities.

The extraordinary environmental commitment of Jebsen & Jessen (SEA) spurred similar efforts across the various entities of the family firm. Jebsen & Co. joined the carbon neutrality process and achieved carbon neutral status in 2013 by investing in green projects in Asia to equalize its operations’ emissions. One project involved collaborating with GE Jenbacher to deliver to the Hong Kong government the first high-voltage biogas-fueled combined heat and power (CHP) generator, which has led to annual energy savings of HKD 7 million.

Jebsen & Jessen Family Enterprise as a Nexus in a Multiple Stakeholder Value Chain

Jebsen & Co. published a comprehensive annual corporate social responsibility (CSR) report in which it elaborated on its four “bottom lines:” business partnership, staff well-being, philanthropy and environmental conservation (refer to Exhibit 5). In its 2015 CSR report, Jebsen & Co. stated:

Having come a long way to evolve from a shipping agent to a specialized marketing and distribution organization, Jebsen relates itself with extensive stakeholders ranging from governments and customers to partners, shareholders, employees, non-profit organizations, environment and universities. We are part of a value chain in which every component is integrated and developed together. In view of this, Jebsen has committed itself to proactively address our stakeholders’ diversified CSR needs, to achieve comprehensive and sustainable development together.17

Jebsen & Jessen Family Enterprise launched comprehensive sustainability programs aimed at responding to defined needs in local communities. Since 2007, within Jebsen & Jessen (SEA)’s “Meet a Need” program, 18 social and environmental projects have been supported with over US$4 million and the participation of over 200 employee volunteers. These projects spanned from building a local school for a rural community in Vietnam to providing fresh water supplies for a remote island community in Malaysia. Since 2011, a total of US$ 800,000 have been committed to Jebsen & Co.’s “Morning Star” project, which was conducted together with an international non-profit organization, Orbis, and considerable employee involvement to save sight and fight preventable blindness in China. “We have the privilege to be productive. Wealth is goodwill, not the money in a bank,” commented Hans Michael Jebsen.

Future Outlook

For the third generation, the future looked promising, but history had taught the family never to rest for too long. A number of issues were on their priority list.

First, on the family side, their governance concentrated ownership and control in a limited number of hands. Would they be able to identify, groom and incentivize the next generation leaders? How could they keep the family at large involved, especially considering none of them were working inside the family business? Was the burden that was being put on the next

17 Jebsen Group Corporate Social Responsibility Report 2015, p. 22.

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generation successor, in particular the requirement to buy the shares from the previous generation, not counterproductive?

Second, on the business front, how far could vertical integration be pushed? Was GMA Garnet the example of things to come in terms of business models? For Heinrich Jessen, diversification had been opportunistic in the past because the market was wide open. Today the growth strategy had to be much more focused: New opportunities had to complement the existing business in terms of either geography, capabilities or customer segment.

Third, the recent slowdown in China had forced the organization to reconsider its Asian exposure as a whole. Yes, the family had many of its proverbial eggs in the Asian markets. But GMA Garnet and Jebsen & Jessen Hamburg were acting as hedges. According to Heinrich Jessen, the wide geographical diversification was the company’s insurance against a “black swan.” The Asian crisis of 1997/98 did hit the group in Asia, but the Hamburg unit remained strong. Having a leg in Australia was also important in this regard: it gave the company a strong third geographical column next to Asia and Europe.

Fourth, was there a natural limit to CSR activities? How many threats would they be able to turn into business opportunities? Was it time to change their attitude to CSR and build it into the core foundations of the company? For Triton Textile – a business unit established in the 1960s to provide textile and apparel merchandising services, now integrated into Jebsen & Jessen Hamburg – one of the biggest areas of focus was social auditing, as textile production and merchandising of garments were too often associated with child labor and many poor practices. “We have turned what was a challenge into an opportunity and now we qualify, among hundreds of potential suppliers, as those that meet the strict standards of our end customers,” said Heinrich Jessen. Was there an efficient way to turn CSR into a core value proposition?

Finally, was there a way to formalize and strengthen their ability to attract and retain external resources, not only employees but also partners? Did they need to adjust their historical model of partnering to ensure they continued to be the “partner of choice” for the future?

Time to return to the office and share some thoughts…

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Exhibit 1 Line of Succession of Jacob Jebsen,

the Co-founder of Jebsen & Jessen Family Enterprise

Source: Miller, L. and A.C. Wasmuth. Three Mackerels. The Story of the Jebsen and Jessen Family Enterprise. Hong Kong: Hongkongnow.com, 2008: p. 202

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Exhibit 2 Line of Succession of Heinrich Jessen,

the Co-founder of Jebsen & Jessen Family Enterprise

Source: Miller, L. and A.C. Wasmuth. Three Mackerels. The Story of the Jebsen and Jessen Family Enterprise. Hong Kong: Hongkongnow.com, 2008: p. 203. Updated 2012.

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This document is authorized for use only by Polun Chang in BA 512 Spring 2021 taught by John Morris, Oregon State University from Mar 2021 to Jun 2021.

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Exhibit 3 Jebsen & Jessen Family Enterprise Historic Evolution

Source: Company information

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Exhibit 4 Jebsen & Jessen Four Business Units

Source: Company information

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For the exclusive use of P. Chang, 2021.

This document is authorized for use only by Polun Chang in BA 512 Spring 2021 taught by John Morris, Oregon State University from Mar 2021 to Jun 2021.