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CHAPTER IV CASE DESCRIPTION AND ANALYSIS
4.1 Case Description
Adira Finance:
Renewal Strategies to Sustain Profitable Growth
Main questions of the case:
1. What kind of renewal strategies has been done by Adira Finance to sustain its
profitable growth?
2. How an sponsor of renewal takes role on the execution of the strategies?
Learning objectives:
1. Students or participants learn on how strategies dynamically changes (renew) to
sustain profitable growth.
2. Students or participants learn on the significant of entrepreneur mindset to initiate
and execute strategies.
23
Body of the Case:
Among the management team and all employees of PT. Adira Dinamika Multi
Finance, Tbk (Adira Finance or the Company) at Company’s birthday celebration &
launching ceremony of “Customer Intimacy” as the big theme for the next five years plan
(2009 – 2013) in the lobby of Graha Adira, November 13th, 2008, Mr. Atmadja Setia
Atmadja, President Director of Adira Finance, was pleased to announce that Adira
Finance had achieved its goals and received 14 awards during 2008. Mr. Atmadja
thanked everybody in the company, because he was fully aware that such achievement
could happen only because of synergy of hard-work of all the Adira’s employees.
This ceremony still conducted although the financial crisis outbreak in United
States since mid 2008. Financial companies especially in banking and insurance sector
got the biggest impact of the crisis. Although multi finance industry was included in
finance companies, fortunately impact of the crisis did not hit multi finance in Indonesia.
It was very fortunate for Adira that its performance and condition were strong enough to
be perceived as “safe” from the crisis. It meant that Adira was still able to continue the
renewal strategies to achieve higher growth and got more profit.
For Mr. Atmadja, this success was just one milestone. The vision of world class
finance company was still miles away (see Table A.1.). He wondered, would the
“Customer Intimacy” strategy be successful to maintain profitable growth? Could this be
the next right step to build new distinctive competencies that delivered the company to
the next leap?
24
Indonesia Multi Finance Market
Multi finance industry in Indonesia was consisted of four categories: Consumer
Financing, Leasing Financing, Factoring Financing, and Credit card Financing.
Consumer vehicle financing, which was included in consumer financing, grew
significantly in last five years. Eventually, its growth related to the growth of car and
motorcycle industries.
According to Indonesian Motorcycle Industry Association (AISI) and
GAIKINDO, the sales of new motorcycle and car since 1997 showed increasing trend
despite monetary crisis on 1998 and fuel price hike on 2006. Figure A.1 and Figure A.2.
showed the details of new motorcycles and car sales trends and projection. The consumer
vehicle financing also grew to totally 205 companies, consisted of 116 consumers
financing, 64 leasing, 23 factoring and 2 credit cards companies in 2008.
Further market condition and factors of growth in the multi finance industry was
explained below as quoted from report produced by Data Consult in March 20081:
“The past three years saw a significant growth of multi finance industry.
The Association of Financing Companies (APPI) said the multi finance industry
has expanded by 15% annually on the average. The expansion followed improved
condition of the country's economy. The gradual cut in SBI (Bank Indonesia
promissory note) interest rate to 8% by the end of 2007 contributed to the growth
of the multi finance industry. The industry was dominated by leasing and consumer
1 source: http://www.datacon.co.id/multifinance%20industry.html, 20 September, 2009
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finance especially car and motorcycle purchase financing. The two financing
systems contribute 95% to the total value of financing business in the country.
Consumer finance and leasing still dominated the industry until 2007. Non
performing credits in the two types of financing business was still tolerable below
3% and the business players were more careful and selective in extending credits
to their clients. Factoring and credit card financing have not gained significant
market in the country. They are not yet sufficiently socialized. Few businesses use
the two types of financing services.
Based on data the Bank Indonesia (BI), financing services were valued at
Rp 107.7 trillion in 2007 up 15.7% from Rp 93.1 trillion in the previous year.
Consumer finance with a value of Rp 67.6 trillion accounted for the largest portion
of 62.8%, followed with leasing accounting for 33.9% or Rp 36.5 trillion of the
total value. Development of multi finance follows the fast growth of the
consumption sector of the country's economy. The expansion of the multi finance
industry was reflected by its assets. Total assets of multi finance industry was
recorded at Rp 127.26 trillion by the end of 2007, up 17.5% from Rp 108.34 trillion
in the previous year. The total asset value, however, still fell short of the target of
Rp 130 trillion set by APPI.
The strong growth of multi finance industry has made it an interesting
target of acquisition by investors especially banks. Bank Danamon has acquired
Adira Finance and Bank Internasional Indonesia took control of WOM Finance.
The move was followed by other banks which were interested in expanding
26
business in consumer finance. State owned Bank Mandiri also has plans to acquire
a number of multi finance companies and five Regional Development Bank owned
by regional administrations said they would soon acquire a number of multi finance
companies.
However, it was not all shining for multi finance industry. In the period of
2003-2007, the number of multi finance companies in Indonesia declined by 3.4%
annually. Based on official data of Bank Indonesia (BI), there were 239 companies
in 2004, but the number declined to 2005 in 2007. In 2007, the government
suspended the operation of a number of multi finance companies for a number of
reasons - poor performance and violation of regulations. Among the companies
were PT Artamas Multi Finance, PT Air Multi Finance Corporation, PT
Infiniti Finance, PT JRD Finance Utama, PT Primarindo Finance Corporation, and
PT Primadana Putra Finance. On the other hand a number of new companies have
secured operating license including PT Al-Ijarah Indonesia Finance, PT Mega
Central Finance and PT Mega Auto Finance.
ATPMs was seek to team up with financing firms to support their sales.
Some of ATPMs even have their own financing companies. The Astra Group,
ATPM for Toyota, Daihatsu and Isuzu cars and Honda motorcycles, has Astra
Sedaya Finance and Toyota Astra Finance to operate in car financing, and Federal
International Finance (FIF) in motorcycle financing service. The Indomobil Group
also has its own financing firms - Indomobil Finance Indonesia for car financing,
and Suzuki Finance Indonesia for motorcycle financing service.
27
Most multi finance companies operate in consumer finance accounting for
116 companies or 56.6% of the total number of multi finance companies in the
country, followed with 64 companies operate in leasing business, and 23 companies
in factoring and 2 in credit card business. The two multi finance companies issuing
credit cards are GE Finance and Dinner's Club. Multi finance companies operating
in credit card business have to compete against around 20 banks both state banks,
foreign banks and Indonesian private banks which issuing credit cards.”
Adira Finance Renewal Strategies Journey
Adira Finance was established since November 13th, 1990 by Mr. Atmadja Setia
Atmadja and Mr. Adi Rahmat. Built on strong willingness to be the best and highly
reputable company in consumer automotive financing sector, now Adira became one of
the largest multi-brand automotive financing companies in Indonesia in terms of market
share and total managed assets. The name Adira actually was an abbreviation of Adi
Rachmat, one of the founders.
Initially Adira Finance supported PT Adira Mobil in multi finance leasing. PT
Adira Mobil was a car dealer for BMW, Peugeot, Daihatsu, Isuzu, and Nissan that Mr.
Atmadja and Mr. Adi Rachmat owned. Later on, Adira Finance expanded to general
insurance under the name of PT Adira Insurance, and released the car dealership from the
group when going public in 2004. The car dealership became Mr. Atmadja’s fully owned
company and then changed its name to PT ASCO Automotive. The name of ASCO was
abbreviated from Atmadja Stanley Corporation.
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In March 2004, Adira Finance conducted an initial public offering, followed by
the private placement, which allowed the transfer of 75% ownership to PT Bank
Danamon Indonesia Tbk (Bank Danamon), one of the largest national private banks,
owned by Temasek Group from Singapore. With the support from Bank Danamon, the
company continued to expand its business by creating competitive advantages in order to
be able to bring superior value to both consumers and shareholders.
In line with the company’s core competence in managing risk of retail financing
business, Adira Finance was concentrated more on the financing of the high-yield assets.
With sizable funding supported from Bank Danamon, also with high professionalism and
dedication, the company was able to record new financing of Rp 14.0 trillion in 2008.
From that new financing, 75.9% came from motorcycle, and 24.1% was from car. The
company financed at least 13.6% of new motorcycles’ sales and 3% of new cars sales
during 2008.
The successful journey of Adira Finance from its establishment year in 1990 until
2008 can be divided into several stages:
1. Survival and Growth (1990 – 2000)
a. Operating Standard and Productivity (1990 – 1996)
b. Diversification and Network Expansion (1997 – 2000)
2. Journey to Excellence (2000 – 2008)
a. Management and Infrastructure (2000 – 2003)
b. Business Integration and Strategic Alliances (2004 – 2008)
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In period of 1990 – 1996, Adira Finance focused in car financing, since it gave
faster growth in term of revenue and asset. Since the beginning, the company ran with the
spirit of discipline in operation and opportunity-driven entrepreneurship which
encompassed three values; visionary, optimism and dare to fail, and also calculated risk.
At the end of this period, the company was able to develop 12 branches with total asset of
150 billion rupiah and was able to employ 500 people.
Year 1997 – 2000, As an entrepreneur, Mr. Atmadja saw that the company should
be able to grow much more than the previous period. Based on this vision, combined with
the economy crisis that happened in 1997 – 1998, he and his team thought that it was the
right time to diversify the product financed from car financing to motorcycle financing.
They assumed that people would reduce their expenses on buying a car and shift it to
motorcycle. That decision was a very strategic decision and brought Adira to the current
level of market leader. The company also restructured its marketing organization
structure from only one division to several divisions, where each division focused on
partnership building with motorcycle producers like Honda, Yamaha, Suzuki, Kawasaki,
etc. Figure A.3. was the new Adira’s organization structure.
By doing so, the company did not depend on only one brand to be financed. Other
strategic company action was the commitment to open new outlet on all over Indonesia as
many as the company could. At the end of the period, the branches grew almost tripled
from 12 branches to 35 branches, with the increasing assets from Rp 150 billion to Rp
500 billion and manpower from 500 people to 1.500 people. The company also
developed an application system which called Ad1Sys (abbreviation of Adira 1 System)
to integrate operational transaction in branches and support system in the head office.
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Year 2000, Mr. Atmadja and his team concluded that the Company was out of the
phase of survival. The company started a new phase called “The Journey to Excellence”.
This phase was the spirit to achieve their vision: To be the Best and Most Reputable
Company and Focus on Consumer Finance Services. This phase was divided into 2
stages. The first stage was during 2000 – 2003 when the company strengthened its
management system and infrastructure. The company started to apply modern
management concepts, namely Total Quality Management (TQM), Balanced Scored Card
and Corporate Governance. In 2003 – 2004, the Company was able to formulate its
corporate values called ADIRA TOP (Advance, Discipline, Integrity, Reliable,
Accountable, Teamwork, Obsessed, and Professional). These values were collected and
summarized from the inputs of all employees and leaders, to strengthen their belief in
achieving the same vision together. They also developed Retail Risk Management system
and strengthened the capability of product development. The program called? people
development acceleration, focused in the function of collector and administration. The
company also conducted seriously since they knew that those functions were extremely
important for the company and should be well managed. Again, Mr. Atmadja and his
team proved that their decision to strengthen their management system and infrastructure
was the right and strategic decision. The asset at that time grew tremendously from the
previous period, from Rp 500 billion to Rp 3.7 trillion, supported by 4.500 manpower and
119 branches.
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Start from 2004, the company became a public company through Initial Public
Offering (IPO) and made strategic alliance2 with Bank Danamon. By this, the company
entered the second stage of Journey to Excellence’s phase. The period of 2004 – 2008
was called Business Integration and Strategic Alliances with the change of vision from
“To Be The Best And Most Reputable Company And Focus On Consumer Finance
Services” to be “World Class Finance Company”. To achieve this, the company
maximized IT usage as business intelligent, sharpened its core competencies and
developed its people to be a knowledge worker. After this was done, the company would
go to the next level; fully integration transformation: sentra – unit model, shared services,
network optimization and more customer centric organization. The asset jumped almost
five times from Rp 3.7 trillion on the previous period to be Rp 17 trillion, manpower
jumped more than 3 times from 4.500 to be 14.000 people and number of branches
jumped almost 3 times from 119 to be 300 branches. The details of transformation stages
and growth of business networks from 2004 – 2008 were shown in Table A.1. and Table
A.2.
The year 2008 was full of challenges as an effect of the unfavorable macro-
economic condition. Hence, Adira Finance was able to get through the difficult year with
satisfactory result. Such achievement could be realized due to the employees’ strong
teamwork and the company’s full attention toward human resources development. In an
effort to have great people, the company implemented its corporate values through
continuous training program that touches employees’ heart, business partners and
community in general. All of these efforts brought a sense of pride and belongings to the
2 Note: from the market perspective, it was actually an acquisition done by Bank Danamon
32
company. Combined with the company strategies to continuously expand its wings and
developed an integrated business alliances with fully supported with IT intensification
(see further explanation about IT Intensification below), the company strengthened its
position as a multi-brand automotive financing company. Such advanced technology
capability was able to provide “auto-pilot” data analysis about one area or individual
customer based on historical data about customers and dealers in respective area. With
this “auto-pilot” data analysis, different decision could be made to different customer
with the same condition. For example, two customers, customer A and customer B, were
had 3 days late of installment payment. According to behavioral scoring made by the
system, customer A was grouped as high score, while customer B was low score. Based
on this historical data, the system would suggest to the collection officer to visit customer
B at once to collect the late installment, while customer A would not need to be visited at
that time. The impact was the increasing of productivity, efficiency and also gave good
impression to the customers like customer A.
The strategy was proven to be effective in line with the growth in automotive
industry particularly the growth in motorcycle. It brought Adira Finance to be one of the
largest players in automotive financing sector, without the need to be affiliated with any
particular brand. The Year 2008 performance highlight was described in Exhibit A.1.
In addition, the company believed that its position in 2008 was number one in
term of all types of object financing (motorcycle and car) compared to its two closest
competitors; FIF and ACC (Astra Credit Company). While, in term of motorcycle only,
the position order was FIF, Adira Finance and Bussan Auto Finance. Table A.4. provides
comparison of Adira Finance and some major competitors.
33
The journey of sustainable and profitable growth of Adira Finance since 1996 to
2008 could be reflected through Loan Asset Managed (LAM) and Profit After Tax (PAT)
as in Figure A.4. Only in those 12 years, LAM has been growth almost 100 times from
Rp 173 billion to Rp 16.9 trillion and PAT has been growth almost 500 times from Rp 2
billion to more than Rp 1 trillion.3 For the last 7 years (2001 – 2008), the Compound
Annual Growth Rate (CAGR) has a sustained growth of 44% in term of LAM and 61% in
term of PAT.4
Car & Motorcycle Financing and Consumer Financing Receivable Managed and
Net Income data were provided in Figure A.5., Figure A.6, and Figure A.7. The Financial
Highlight consisted of Balance Sheet, Income Statement and Financial Ratio were
provided in Figure A.8., Figure A.9., and Figure A.10.
Information Technology Intensification
As an IT-driven company, information technology was a backbone to support
operation of the Company. The function enhanced from just a transaction tools to data
mining. All company’s branches were connected to the head office through
communication media using various protocols. These protocols allowed system users to
access real time on-line data for cash transactions in branches or through collection
agents, such as ATM of various banks or PT Pos Indonesia (Persero).
3 source: Making the Giant Leap, Atmadja, p.xvi - xvii 4 source: Making the Giant Leap, Atmadja, p. 182 - 183
34
Besides that, the communication network provided back up of branches data that
was located in data center at head office, which was further used for transactions of
funding source party and also used for management analysis. Other function of the
network was used by the company to communicate internally using VoIP (Voice over
Internet Protocol) technology.
The core application namely Ad1Sys (Adira One System) was develop in 2002.
The system was a complete application for supporting all branch operations from point of
sale and point of payment until decision making stage, including bar code system for
Vehicle Certificate of Ownership (BPKB), queuing system for consumer payment at
branches, Short Message System (SMS) gateway for announcement to consumers and
dealers as well as Gapura Gateway for integration to collection agents, such as banks and
others. The system later on was up-graded in 2005 using Oracle platform and called
Centralized Ad1Sys.
In supporting the needs of recording, managing and maintaining of human
resources, assets, workflow program of approval process, collaboration needs and
information distribution, the non-core applications was developed and integrated with the
core application. Such applications briefly explained below:
• Ad1Suites, was a collaboration application consists of content publishing and
workflow. As content publishing, this application had a function as a media to
distribute information and become communication media for every employee in all
branches with Management. This application also provided online workflow facility
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to automate on-line proposal and approval process. Moreover, Ad1Suites provided a
facility to monitor the status and progress of document proposal.
• FAMS (Fixed Asset Management System), was an application of e-procurement
regarding fixed assets activities, from purchasing, supplying, maintenance,
transferring as well as calculating process for depreciation assets.
• ServiceDesk, was a web base application which has a function as a connection of user
with Information Technology Division. Through this application, employees could
consult and ask for favor regarding information needed to Help Desk officer. By
monitoring in log record, Information Technology Division could monitor every
problem of user, and promptly help user and delivered a high quality service.
• SMS Care Center, was a media of information and communication between the
Company and dealers and customers through SMS (Short Message Service).
Outbound SMS was used by the Company for delivering information to dealers and
customers or potential customers related to financing application status, while
Inbound SMS was used by customers in requesting information regarding financing
transactions or to send complaint regarding services of the Company.
Further usage of SMS Care Center was used to support Recovery Asset Management
Division in tracking and following up financing asset with written-off status. Through
this system, Recovery Officer Area (ROA) does not need to print out contract of
customers of the visited financing asset and also does not need to print out the
Authorization Letter to Repossessed before carry out the duty to repossess, but just
using SMS facility through mobile phone. Respective ROA just input the Vehicle
Number Registration of the founded and suspected financing asset through SMS,
36
which were connected safely to the database Ad1sys.online. SMS Care Center system
will then send confirmation regarding the status of the financing asset requested to
respective ROA as well as action needed for ROA to perform. In case the financing
asset was written-off status, then ROA will contact the nearest branch immediately to
print Authorization Letter to Repossessed (SKP), which was completed by security
system through ROA HP number verification to contract number of the related
financing asset. SKP immediately printed after confirmation process completed and
will be used by ROA to perform repossession of the financing asset mentioned.
• Ad1Flow, was an application of workflow to fulfill the Company’s needs to increase
efficiency process regarding approval request, which formerly performed manually
using a lot of papers. The system could make easier process of requested expense,
service to branch and other approval request related to branch operational. Overall,
this workflow system has give benefit in increasing control and efficiency, due to all
processes have been performed electronically, therefore it would be transparent and
monitored. This process was very helpful for divisions and departments in Adira
Finance to complete structural approval process, which engaged many divisions and
departments. Ad1Flow has been integrated with Ad1Sys.online and Ad1Sys.HQ
system, therefore journal process has been performed automatically based on the data
resulted in workflow system. In 2008, it was reported that Ad1Flow has reduced cost
significantly, amounting Rp 12 billion a year.
37
Customer Intimacy Theme
Customer Intimacy theme was started in 2009. The theme was chosen by the
Company’s management based on the next vision to be a customer centric organization.
Under the two previous themes, “Survival and Growth” and “Journey to
Excellence”, the Company was successfully developed a sustained profitable growth and
at the level of cost leader organization. The management thought that this was the right
time to enter the next level.
The reason behind the theme of Customer Intimacy was the business model called
“Spider Web”, a model based on the combination of Marketing and Customer
Relationship Management (CRM) concepts that a community-based business would be a
trend and a key to sustain company’s growth in the future.
Traditional business model of finance company was the relationship between
customer, dealer and the company itself. Customer who interested in buying buy a
motorcycle through financing scheme would visit to dealer. Dealer then referred
customer to a financing company for credit assessment. If the credit proposal approved,
then finance company disbursed the payment to dealer. Eventually, the finance company
would establish a loan relationship with the customer. The detail of business model and
process were shown in Exhibit A.2.
As the company had over than 2 million customers by the end of 2008, the
management thought that this big customer based and other related parties (dealer,
principal, bank, affiliated companies and other partners) should be well maintained by
keep communicating with them in order to understand their needs from time to time.
38
With the new value proposition CARE - abbreviation of Cekatan (Adept), Antusias
(Enthusiastic), Ramah (Friendly) & Empati (Emphatic), the Company positioned itself
among its value chain as connector, coordinator & accelerator for mutual benefit
relationship among members. To implement this concept, the Company launched Adira
Club Member in 2008 as the based platform (See Exhibit A.3.), and supported with
Sentra-Unit Model, Shared Services & Network Optimization to provide more lean
process & service (see Table A.5. for the comparison between old branch model and
Sentra-Unit Model).
Mr. Atmadja’s Leadership
Mr. Stanley Setia Atmadja, together with Mr. Adi Rahmat, established PT. Adira in
1990. Prior to join the Company, he was the Director of PT Citicorp Leasing Indonesia
(1988 – 1990) and held various positions in Citibank, N.A., Jakarta (1985 – 1986). Mr.
Atmadja obtained his Master of Business Administration from University of La Verne,
United States.
Mr. Atmadja’s achievements as an entrepreneur were recognized in 2002 when he
was awarded the Special Award for Entrepreneurial Spirit in Ernst & Young’s
Entrepreneur of The Year program. Years after that, he and the company received many
awards for their achievements such as Indonesian MAKE Winner – Dunamis 2005 &
2006, The Best in Archiving Total Customer Satisfaction – ICSA 2006, The Customer
Loyalty – ICLA 2006, Indonesian Employer of Choice Award – SWA & Hay Group
39
2007, Top Brand Award – Frontier Consulting Group & Majalah Marketing 2007. The
long list continued in 2008 and was shown in Exhibit A.4.
Internally, Mr. Atmadja was well known by his employees as a passionate leader,
who had farsighted vision, result oriented, going to detail, yet believed in his team ability
and concern about the development of human resources. Not an easy job to lead more
than 14,000 people to achieve the same vision, but he did it successfully by launching the
program called “Journey to Excellence”.
“Journey to Excellence” program was initiated in 2000 with the goal to make Adira
Finance to be a sustainable company with excellence in any aspect of actions and
operations. It encompassed Total Quality Management, Balanced Scorecard, and Good
Corporate Governance implementation. So seriously this program to Mr. Atmadja, that
the special division called Corporate President Office was established to ensure the
execution of such concepts. In supporting the program, Quality Control Circle – a
program which encouraged employees to be self-evaluated of their own work process, to
think out of the box on how to improve the process from time to time, and to introduce
and enforce among employees as an enabler of continuous improvement.
The program strengthened in 2004 at the 3 days event of Top Management Camp.
All Managers and Division Heads together pledged their intention to increase team work
among Departments and Division, and fully support the Company’s vision to be a world
class multi finance company. At this camp, Mr. Atmadja introduced a new jargon which
called “winning each others’ heart”. It sounded widely to all staff level to increase the
attitude of care to other’s job and to promote teamwork spirit among employees. Mr.
40
Atmadja believed that the power of teamwork laid on the unity of hearts of the people.
When their heart was united, then nothing could stop them. Their belief was proven when
the Company reached the “psychological level” of 1 trillion rupiah of net profit in 2008, 4
years after the camp.
Further, Mr. Atmadja was formulated a leadership philosophy as his “touch of
leadership” which consist of 3 principles: Trust, Respect, and Empowerment. He strongly
believed that these principles were the pillars to build a strong and productive
organization, as he encouraged every layer to have the same principles as he believe in.
Without those principles applied appropriately, Mr. Atmadja believed that unexpected
situation below would happen:
• No mutual Trust will drive negative behaviors like sectored interest, partial
perspective, bureaucracy, mindset perception gap, no sense of ownership, politicking,
victimism, defensiveness, no sharing of info & ethical crisis.
• No mutual Respect will create political game, hidden agendas, offensiveness, chaos,
and failure in marketplaces.
• No Empowerment will cause apathy, moonlighting, daydreaming, boredom,
escapism, fear-anger-frustration, and inferiority (Maulana, Alamsjah, Dilmy, & Loeis,
2009)
Those three principles were supplemented with five aspects of leadership,
encompassing Attention Focus, Compelling Measure, Effective Action, Individual
Accountability and Shared Responsibility. These five aspects were not just dropped from
41
any management theories but by his experiences in managing the company. They evolved
from some old paradigms to the new one, which briefly explained in Table A.6.
Mr. Atmadja also believed that in the fierce competition in consumer finance
industry, excellent and professional human resources was one factor of the company’s
success. Human capital was a valuable asset and a very important factor in the company’s
business activities. Therefore, the company paid significant attention to its human
resources development in order to establish a conducive and comfortable working
environment for the employees in performing their tasks, which eventually would create
a great contribution to the Company.
Under his leadership, human resources were well developed and maintained. The
summaries were as follow:
• Company’s core values was creatively formulated in 8 fundamental principles of
ADIRA TOP (abbreviation of Advance, Discipline, Integrity, Reliable,
Accountable, Teamwork, Obsessed, and Professional), which translated into 24
key behaviors.
• Training was widely conducted:
o Basic training, which was a mandatory for every employee, such as
orientation for new employees core values training, etc.
o Functional training with the objective to strengthen the technical ability of
any job function.
o Qualification training with the objective to improve the capability of
employees towards their higher-level position (promotion).
42
o General training with the objective for expanding the employee’s
knowledge and comprehension, which correlated with the Company’s
industrial and each employee’s working area.
o Leadership training with the objective to strengthen leadership aspect for
the level of supervisory and above.
• Key Performance Indicator (KPI) was applied to each of employee to make sure a
compiling measure of employee’s performance.
• Reward and punishment was carefully designed and implemented.
After the Celebration
It was 8 pm and the celebration was coming to end. People had fun chatting to
each other talking about daily job and routines. Mr. Atmadja had some serious
conversation among the top management. They would start the implementation on
January 2009, and there was a lot of preparation to be done.
43
4.2 Case Analysis
As the title of this thesis is about Renewal Strategies to Sustain Profitable Growth,
the writer will analyze the case of Adira Finance in four major subjects: Growth and
Survival, Renewal Strategies, Entrepreneur-Manager and Resource-Based View.
Growth and Survival will elaborate the growth of Adira Finance in the long run
(1990 – 2008) through the survey done by Patrick Viguerie, Sven Smit & Mehrdad
Baghai.
Renewal Strategies will elaborate what kind of strategies has been done by Adira
Finance to sustain its profitable growth.
Sponsor of Renewal will elaborate the leadership of Mr. Stanley and his team
during the stages of transformation.
Resource-Based View will evaluate whether there are any temporary or sustain
competitive advantage that Adira Finance built in every stages, and to ensure whether the
Sentra-Unit Model will work based on the same pattern that shown in the previous stages
of transformation.
4.2.1. Growth and Survival
Adira Finance was established in 1990. It can be said that it has been existed in
the industry for the last 19 years. That long period of existence can be divided into 2
parts; 1990 – 1999 as the first business cycle, and 2000 – 2009 as the second business
44
cycle. Along its history of growth, Adira Finance’s growth direction was an organic
growth.
Viguerie, Smit & Baghai concluded that a company which grew more slowly than
GDP for the first economic (business) cycle was five times more likely to disappear as a
going concern before the end of the next cycle than a company that expanded more
rapidly. To apply this survey conclusion into Adira Finance’s situation in the first
business cycle, the revenue growth of the Company should be compared with the growth
of GDP of Indonesia. As shown in Figure 4.1. below (unfortunately, the data is limited
from 1997 and after), Adira Finance’s growth always much higher than Indonesia’s GDP
growth, except in 1999 as the effect of monetary crisis in 1998 and 2006 as the effect of
fuel price hike which impacted to consumer behavior in buying car or motorcycle.
Figure 4.1. Adira’s Revenue Growth and Indonesia’s GDP Growth5
In average, Adira Finance has been growth by 57.8% per year from 1977 – 2008
(12 years period), while Indonesia’s GDP average growth was 3,3% per year in the same 5 source: Adira Finance’s document and http://www.indexmundi.com/indonesia/gdp_real_growth_rate.html, 23 January, 2010
Adira's Growth & Indonesia's GDP Growth (in %)
-100,0
-50,0
0,0
50,0
100,0
150,0
200,0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
GDPAdira F
monetary crisis
fuel price hike
45
period of time. By this information, the writer can conclude that Adira Finance’s growth
has been far beyond Indonesia’s GDP, therefore the chance of the Company to survive on
the next business cycle is presumably good. Due to limitation of data provided, the writer
is not be able to conclude whether Adira Finance is a growth giant company or else.
As additional information, in four Figures below6, we can compare the revenue
and net income from 2003 – 2008 (actual and growth) of Adira Finance among its two
main competitors: FIF and WOM Finance. FIF is owned by Astra International and has a
privilege to capture Honda brand. WOM Finance is owned by Bank International
Indonesia and using the same approach like Adira Finance, handled multi brand of
vehicle.
Figure 4.2. Revenue Comparison between Adira Finance and Competitors
6 source: Adira Finance’s document and www.idx.co.id, 23 January, 2010
Revenue Comparison (in billion Rp)
-500
1.0001.5002.0002.5003.0003.5004.0004.5005.000
2003 2004 2005 2006 2007 2008
FIFWOMAdira F
46
Figure 4.3. Revenue Growth Comparison between Adira Finance and Competitors
Figure 4.4. Net Income Comparison between Adira Finance and Competitors
Figure 4.5. Net Income Growth Comparison between Adira Finance and Competitors
Revenue Growth Comparison (in billion Rp)
-10,0
0,0
10,0
20,0
30,0
40,0
50,0
60,0
70,0
2004 2005 2006 2007 2008
FIFWOMAdira F
Net Income Comparison (in billion Rp)
(400)
(200)
-
200
400
600
800
1.000
1.200
2003 2004 2005 2006 2007 2008
FIFWOMAdira F
Net Income Growth Comparison (in billion Rp)
-300,0-250,0-200,0-150,0-100,0-50,0
0,050,0
100,0150,0
2004 2005 2006 2007 2008FIFWOMAdira F
47
Among its competitors, Adira Finance has more stable increment in term of
revenue and net income, and it has more capability to re-bound from fuel price hike.
4.2.2. Renewal Strategies
Cakravarthy and Lorange argue that in order to sustain profitable growth, a
company has to commit to the continuous renewal, seeking for opportunities and adding
new and distinct capabilities. Through this concept, we can see that Adira Finance has
been always renew its strategies in almost every 4 years period. The management of
Adira Finance called these periods as stages of transformation (the term “transformation”
is has a different meaning with what Chakravarthy and Lorange. It is actually more on an
operational transformation or improvement):
1. Survival and Growth (1990 – 2000)
a. Operating Standard and Productivity (1990 – 1996)
b. Diversification and Network Expansion (1997 – 2000)
3. Journey to Excellence (2000 – 2008)
a. Management and Infrastructure (2000 – 2003)
b. Business Integration and Strategic Alliances7 (2004 – 2008)
Further, Cakravarthy and Lorange said that seeking sustained profitability triggers
the re-engineering of a firm’s business processes and the trimming of its business
portfolio. Through the years of experiences, Adira Finance found that the growth of the
7 The Company was used the term “Alliances” to show the strategic action taken from the Company side. From the market side, it was actually an “Acquisition” by Bank Danamon.
48
company will depend on 3 major factors which is Receivable (include new
booking/disbursement), OPEX and Credit Lost. Receivable will be driven by the
automotive market, while OPEX and Credit Lost will be driven by the internal
management and operation. Therefore, the company put much effort on how to minimize
the OPEX and Credit Lost by operational excellence and standard procedures that
enabled by IT intensification. One of the example is the usage of mobile system devices
to inform which customers should be visit by the collectors while they are in field. With
this operation model, the process of collection and repossess the financing asset (if
needed) is much faster and efficient. Moreover, the company has been introduced
paperless system for application process and other administrative things in branches,
which is called Ad1Flow. This system has been integrated with Ad1Sys.Online and
Ad1Sys.HQ system, therefore journal process has been performed automatically based on
the data resulted in workflow system. The achievement of the workflow processes as
explained above has succeeded in saving cost with significant amount of Rp 12 billion
per year8.
Since the Company established until now, profit is always gained and growth is
never stop. The writer can draw in the figure below to show how the profit and assets
growth is in-line with the strategies:
8 source: Annual Report 2008 PT Adira Dinamika Multi Finance, Tbk., p. 81
marg
brand
two s
finan
negat
to th
conso
390 t
1997
Figure 4.6.
In the firs
gin turn over
d, meaning t
strategies wa
ncial crisis in
tive profit.
In 1997, t
e financial
olidation. Du
thousand uni
– 1998. Mo
Aligning ren
st stage, Adi
, and kept se
that Adira F
as proven as
n 1997, the C
the Company
crisis, the m
uring the cr
it per year b
otorcycle got
newal strateg
ira Finance w
eeking oppor
Finance did n
the right str
Company ha
y actually h
management
risis, car pro
before the cr
t the same im
gies with the
was focus on
rtunity to gr
not loyal to
rategies to th
ad always in
ad planned t
t prefer to c
oduction we
isis to only
mpact, decre
e LAM & PA
n car financi
rowth by usin
finance only
he Company
the health c
to open anot
change the p
ere drastical
around 58 th
eased from 1
AT of Adira
ing since it w
ng the appro
y one brand
y. Until befor
condition and
ther 15 bran
plan and did
ly decrease
housand uni
1.8 million u
4
Finance
was given bi
oach of mult
of car. Thes
re the time o
d never had
nches, but du
d operationa
from aroun
its per year i
units to below
49
ig
ti-
se
of
a
ue
al
nd
in
w
50
500 thousand units during the crisis. But start from 1999, the production of motorcycle
eventually back to increase consistently. The management of Adira Finance saw this
phenomena and concluded that people had tried to find transportation alternative beside
car, as the increase of motorcycle much more fast compared to the increase of car
production.
Looking at this situation, Mr. Stanley moved fast and decided to focus more on
motorcycle financing and enter the second stage of the Company.
The second stage is a protect and extend strategy. Although the Company was
entered new geographies and re-segment the market, the core business was still the same
as the previous. New geographies was signed by expanding the branches from 12 to 35,
while re-segment the market was signed by focusing on the development of motorcycle
financing. The Company also strategically has developed partnership with motorcycle
producers and dealers. The outlet expansion was continued throughout the next stages as
the branches grew to 199 branches in the third stage and 300 branches in the fourth stage.
The third stage is still a protect & extend strategy. As the Company has more
stable growth in term of asset and profit, the management decided to develop new
capabilities in management system and infrastructure. The business map was created
through Balance Scored Card, the business process was strengthen by implementing
Total Quality Management, and the accountability of each employee was measured with
Key Performance Indicator. The Company was also implemented Good Corporate
Governance through developing and implementing policies related to the customer,
51
dealer and internal process. All the new competencies built are supported by the strong
corporate values.
The fourth stage is also a protect and extend strategy. Adira Finance has
growth from a small finance company to a leading public-owned multi finance company
with sophisticated technology and analytic tools that enabled the Company to have auto-
pilot indicator in approving and collecting processes. Yet, the Company has not leaving
its core business until this stage, but more on doing renovation of the business processes.
4.2.2.1. Risk of Renewal
Chakravarthy and Lorange argue that in every renewal strategy there will be risks
lie with it. Below is the table that describes the risk that Adira Finace faced throughout
the strategies:
Table 4.1. Applying Risk of Renewal in Adira Finance’s Case
Renewal
Strategy Risk
How was Adira Finance
overcome/avoid the risk?
Protect &
Extend
imitation, obsolescence (substitution
of products/services), complacence
(ignoring market entrants) and
market saturation
• Renew strategies &
operational
• Emphasize on speed and
accuracy (services) in the
whole value chain (start
52
Renewal
Strategy Risk
How was Adira Finance
overcome/avoid the risk?
from the application until
collection processes).
Leverage
not understanding the needs of the
customers in the new markets that
the firm enters
N/A
Build difficulties in the competence
development process N/A
Transform
market development, competence
development, financial, reputational
and disconnectedness
N/A
Consumer financing is a generic product. Basically it is a kind of loan provided by
non bank institution. Different with bank which under the supervision and regulated by
Bank Indonesia, financing is under the supervision and regulation of Ministry of Finance.
One of common difference between bank and finance institution is that the regulation in
finance institution is not as tight as what applied in bank. Therefore, speed and accuracy
are the key success factors. Adira Finance keep improves its business processes from
application to collection. A customer should not wait for days for an application but only
hours and collection is maintained by keep monitoring the payment behavior of the
customer.
53
In entering new area, Adira Finance always did a field survey first, in order to
know how potential will the market they about to enter. They learned about social
characteristic of the people and they behavior toward loan and financing.
Adira Finance avoided the risk new competencies build such as TQM, BSC, Risk
Management by gaining top management commitment and involve all departments in
developing such competencies. Processes are monitored and results used as feedback to
improve the competencies. In employees level, they used to criticize their own working
process through Quality Control Circle, a bottom up respond program to Total Quality
Management which top down from the management.
4.2.2.2. Sponsor the Renewal
Chakravarthy and Lorange also mention in their book that entrepreneur-managers
will be needed to ensure a successful renewal strategy. Adira Finance, in this case, has a
very solid team of management, from Mr. Stanley Setia Atmadja as Chief Executive
Officer, Board of Directors, Division Heads until Line Managers in head office and
branches.
The role of CEO in Adira Finance is to give vision and broad directions in order
to achieve the vision. Within the time frame of this thesis describe, Mr. Stanley had
formulated the company’s vision twice: To be the Best and Most Reputable Company
and Focus on Consumer Finance Services for the vision of 1990 – 2003, and World Class
Finance Company for the vision of 2004 beyond.
54
As the CEO who sponsoring the renewal, Mr. Stanley is well known as a brilliant
entrepreneur who in several time received distinguish rewards. Internally, as
Chakravarthy and Lorange describe five critical roles of the sponsor, we can see a similar
characteristic in Mr. Stanley leadership:
1. Mr. Stanley always lead the renewal strategies. He is the one who has given the broad
vision and scope of the strategies.
2. Mr. Stanley believe on performance and competencies of his team. Either from inside
the organization or taken from outside, he usually find the right person to handle a job
or project. Succession from inside of the Company has been organized by Human
Resources Development Division with Talent Pool initiative and structured training
(e.g. BDET – Business Development Executive Training) as a mandatory requirement
for an employee to enter managerial level.
3. Organization structure will follow the need of organization and align to the vision of
the Company. One of the example is when the Corporate President Office Division
was created to support and control TQM, Balanced Score Card and QCC projects.
4. Bonus system are set up to appropriately reward performance. They who work in
branches will provide with quite big bonus if they can achieve or even exceed the
target set. This bonus scheme is intentionally set bigger than the bonus scheme set for
head office employees. Top management belief that branches should be rewarded
more because they are the one who produced income for the company and take a
bigger risk in facing the customer and the market.
5. In coaching and supporting the team, Mr. Stanley use the paradigm of managing
mindset instead of managing people. He argues that if you have 100 people in your
55
organization, you can manage them one by one, but if you have thousands of people,
than you have to manage their mindset to marching together to one direction.
Therefore he create three principals supported by five aspects of leadership to be
applied and followed by his employees.
4.2.3. Resource-Based View
To evaluate whether there is distinctive competency built in every stage of
renewal strategy of Adira Finance, the writer use the concept created by Jay Barney
called Resource-based view. According to this concept, the writer analyze whether the
resources or competencies possessed by Adira Finance will give the Company
sustainable competitive advantage and distinctive competence. The VRIO Analysis in the
Table 4.2. below will provide the information:
Table 4.2. VRIO Analysis of Adira Finance
Categories Resources Reveal
in Stage …
VRIO Analysis
Competitive Implication
Strength or
Weakness
Financial capital
Strong funding sources from Bank Danamon
4 Valuable Rare
Temporary competitive advantage
Strength & distinctive competence
Physical capital
Ubiquitous Network 2 Valuable Competitive
parity Strength
IT intensification 4
Valuable Rare Costly Exploited
Sustained competitive advantage
Strength & sustainable distinctive competence
Human capital Solid team 2 Valuable Rare Costly
Sustained competitive advantage
Strength & sustainable distinctive
56
Categories Resources Reveal
in Stage …
VRIO Analysis
Competitive Implication
Strength or
Weakness Exploited competence
Structured training & succession planning
3 Valuable Competitive parity Strength
Top Management leadership
1
Valuable Rare Costly Exploited
Sustained competitive advantage
Strength & sustainable distinctive competence
Organizational capital
Partnership within supply chain
2 Valuable Rare
Temporary competitive advantage
Strength & distinctive competence
Robust management system
3 Valuable Rare
Temporary competitive advantage
Strength & distinctive competence
Strong corporate culture
3
Valuable Rare Costly Exploited
Sustained competitive advantage
Strength & sustainable distinctive competence
Big customer based 4 Valuable
Rare
Temporary competitive advantage
Strength & distinctive competence
At the end of the case described, Mr. Stanley and the team still wondering,
whether the next five years big theme implementation, Customer Intimacy, will be
another success strategy or a failure. At the same token, the writer can use the above tool
to examine the possibility. As described in the case, that Customer Intimacy is a strategy
of the Company to know more who the customers really are and in positive term
“exploit” that knowledge to provide them better services. The ultimate aim is that in
every part of customer’s life cycle related to financing products, they will related to Adira
Finance as the center of “spider web”. Thus, this strategy is actually the effort of the
Company to add “Exploited by Organization” category to the resource of “big customer
57
based” to become a complete VRIO requirement: valuable, rare, costly to imitate and
exploited by the organization. Therefore, we can conclude that this strategy has a big
chance to be success because it is a strength and sustainable distinctive competence of the
Company, and will give sustained competitive advantage to the Company.
