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(Oct 9): Derrick Yap expanded and integrated various parts of his family business, transforming it from a trader in engineering components into an industrial robotics player

On the second floor of PBA International’s building, the walls of one large room have been painted black and covered with cut steel tubes lined up at an angle. The addition of fluorescent light tubes and various robotic arms mounted on wheels make the room seem like a futuristic film set, save for the rows of lecture theatre-style chairs in the middle.

Named the Robotics Automation Centre of Excellence, the room is a designated training hub for courses on robotics. Its operator, PBA, was originally known as Precision Bearings and Automation Group and started out 30 years ago as a distributor of precision ball bearings and other precision engineering components.

However, through a series of strategic acquisitions, investments in R&D and shrewd management decisions, the business has since evolved to encompass specialist component manufacturing and the integration of automated systems, or industrial robots. It has also expanded globally and now counts about 80% of its sales from outside of Singapore. The robotics and automation segment is the largest contributor to the group’s revenue, which has been growing at 30% a year.

PBA CEO Derrick Yap has this year been named EY Entrepreneur Of The Year — Diversified Engineering. The annual EOY awards are handed out to honour Singapore’s top entrepreneurs in recognition of their contributions to the economy as well as to the broader society. This year’s winners have exhibited, in particular, an embrace of technology and innovation.

“We were a hardware store, frankly,” Yap tells The Edge Singapore of the company’s modest beginnings. Since his school days, the 38-year-old had been “helping out” at the company that his father Tony Yap founded. After graduating from university, he worked at PBA full time. Last year, he took over the running of the business.

In the early years, Yap says, PBA’s business model was not particularly lucrative. “Like all trading businesses, most of the time you have a very high inventory cost. If you make money you have to plough it back into inventory,” he explains. “So on paper you seem to be making money, but in actual fact your cash is still tied up.” At the same time, he felt that the growing reach of the internet and the improving ease of cross-border deals would make the company’s middleman role unsustainable in the long run.

Today, Yap is engaged in discussions with mass food producers about putting together a laksa-making robot. And he is talking to logistics companies about automating their warehouse operations.

The move to robotics is not far removed from PBA’s capabilities, he says. The PBA group includes about 20 smaller companies that have expertise in various parts of the automation value chain. It has specialised in manufacturing direct drive and linear motors, and was making cartesian robots — stationary industrial robots that move in a linear fashion and that are used in processes such as semiconductor manufacturing. It also represents and distributes industrial robots from manufacturers such as ABB and Kawasaki. Essentially, the company already has the components that make up an industrial robot and the expertise to operate and integrate it into customers’ in-house processes.

Yap launched the robotics training centre last year to help other businesses and factory owners understand the automation options open to them. “Robotics is basically packaging various automation components. All the components that go into a robot were already available,” he says. “What the robot makers did was to put it into a standard package and power it with intelligence, which is quite similar to the motion control that we do.”

This transformation of a staid family trading business into a global operation on the edge of technology is a prime example of how the younger generation of business leaders can build on an existing company to succeed. This year’s EOY award judges also noted how Yap has not just evolved the business but moved it up the value chain.

Entrepreneurial core It seems Yap has always been enterprising, even from a young age. In primary school, he traded novelty games and sold Merlion collar pins to augment his allowance. By the time he was in university, he was subletting the condominium he was living in for pocket money. When he wanted to spend time wakeboarding, he took up a boat licence and convinced the operators to allow him to drive the boat for them in the waterway around Punggol in exchange for an hour’s turn on the water.

Yap was also eager to get started in life. He was interested in industrial design. But to study that, he would need to do a four-year degree course at the National University of Singapore. Instead, he decided on a business degree. He crammed in his classes for the three-year programme so he could finish in 2½ years.

After that, Yap was asked to join the family company. “[My father] said, ‘Come in and see if there’s anything to improve,’” he recalls. But his father, who had come from a humble background and worked hard to reach where he was, was not going to give him an easy time. Yap was given a sales role and told to bring in new business, just as his father had done before.

After three years, Yap felt there were some things that could be improved, such as how the company’s customers were segregated. He took his ideas to his father, and the elder Yap agreed to let his son try them out, albeit in a controlled environment. When the company’s general manager in Malaysia left, Yap volunteered to run the five-man operations there, which were divided between Kuala Lumpur and Penang. “I thought it was a very good place to implement my changes. Even if I were to do something wrong, the damage would be limited,” he says.

It was challenging. Two employees left soon after his arrival, and the company did not have a proper delivery van or an accountant. He also had some issues with hiring: The office was in a tiny shoplot above a dim sum stall, and people tended to not take them seriously.

Eventually, however, Yap managed to get the people he needed. He also reviewed the sales strategy and inventory system, redesigned some of the jobs and focused on selling their proprietary products, which would fetch more value. Yap also built a brand new business: contract manufacturing. “The biggest difference [made] at that time was when I wanted to get out of trading,” he says. That, in turn, led to the expansion of the Malaysian operations.

Within months, the unit doubled its earnings — a feat that caused some doubt at the headquarters in Singapore. “We had to submit our numbers, and many people, including my dad, were saying, ‘This must be a fluke. There’s no way the company could turn around so quickly.’” To be sure, Yap adds, “it was off a very low base.”

The business continued to grow. But, most importantly, Yap learnt several management lessons during his two years in Malaysia. And he is trying, in some ways, to build on those lessons in Singapore. “When the company is small and you really work the ground with the guys and you build it up, the feeling is fantastic. The problem is when most companies grow big and people don’t feel that anymore. They feel that whatever they do, it doesn’t impact the company. Hence motivation is lost,” he says. Yet, businesses do need to grow. “So, you break up the company into smaller business units, and you let the team see very closely how their efforts translate into results.”

Turning point Since returning to Singapore, Yap has spent time developing and managing other business units. Over the years, there have been other changes at PBA. But perhaps the most significant has been the focus on automation. “It was a very big step that was really transformational,” Yap says. He also expanded the company’s range of automation products. “It couldn’t just be mechanical. We also needed electrical and some motion control [elements] and so on.”

Just as how he thought that PBA should not be holding on to large amounts of inventory, Yap believed the company should not end up buying various equipment in order to produce customised components. “Because then you’d have no know-how,” he says. And, limited as they were by the size of the local market, Yap had to find a way to drive growth. “If you couldn’t sell these products to a limited market, what can you do? You’d have to increase your product range. We started developing technology, whether internally or through acquisitions, to provide the same customer more technology and more products.”

PBA’s first customers were companies that dealt with engineering components, but the company also expanded its customer base to include machine manufacturers. Subsequently, instead of selling these manufacturers disparate components, PBA began to offer modules to its customers by assembling the components it offered. “So instead of selling the screws and nuts to build a car seat, we sold the seat to be placed in the car,” he explains.

The goal, he says, was for PBA to become a leader in its field. “We became top-class by providing the most complete package.” For a customer that wants to produce laksa on an industrial scale, for instance, PBA is now able to integrate the components involved — the robotic arms that go through the motions of preparing and assembling the bowl of noodles and its ingredients; a camera that allows a computer to see what the robot is doing; and the algorithms that control these processes.

Indeed, with the wealth of its expertise, the company is ready to offer its customers the next level up in automation. “You might want to outsource building the car itself, so that you can concentrate on the design. I will build the whole car for you,” Yap says.

Preparing for the future Given his experiences over the last decade, Yap is mindful of the challenges that budding entrepreneurs face. So he has founded a start-up incubator, and the company is now putting aside $10 million in a fund for start-ups. PBA will take minority stakes in companies that show promise in the field of mechanical engineering. “I think we have a platform that a lot of them can tap. Through us, the burn rate [would be] lesser,” he says.

What types of companies is PBA on the lookout for? “It has to be something that we can add value to, it cannot be someone who just wants money,” Yap says. “The problem is not that you can’t find money; there’s a lot of stupid money out there. The problem is if you find money and you don’t know how to spend it.”

As Yap explains it, a start-up that has to build hardware is going to encounter far more obstacles than a typical mobile app developer. For example, a machinist might charge the start-up far more than necessary to produce a one-off item. “Then if you miraculously find a customer, how is [the customer] going to order in bulk? How would he know you are able to deliver a consistent product for the next three years?” Yap says. “All these are the reasons why deep-tech mechanical start-ups fail a lot more often than the apps.”

For those who succeed, however, the potential rewards are great. The opening of Changi Airport’s Terminal 4 later this month, for instance, will allow people a glimpse of what the future could hold — housekeeping robots cleaning long, carpeted walkways, smart trolleys and automated baggage handling are just the start. Indeed, as industry and society in Singapore and elsewhere embrace automation in everyday tasks, Yap’s transformation of his father’s company will pay off.

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