Question

THE CIPUTRA GROUP: SHAPING THE CITY IN ASIA

“If you have the will, and the spirit, and you have confidence, you follow up with forecast, all will happen.” Mr. Ciputra

Mr. Ciputra, founder of the Ciputra Group, looked back on his long career as one of Indonesia’s most prominent entrepreneurs. As a developer in the real estate sector, he had provided modern and comfortable spaces for millions of Indonesians to live, recreate, shop and work. Ciputra’s courage, vision and expertise led to extraordinary successes in the 1990s. But the Ciputra Group also went through a particularly difficult period during the Asian Crisis of 1998, a crisis that exposed the vulnerabilities of the Ciputra Group’sbusiness model. Ciputra had felt relieved when the last debt restructuring agreement was signed in 2005.

Yet, right at the moment when the Ciputra Group was gearing up for a new era of growth, a globaleconomic crisis struck in late 2008. Ciputra, who was now 77 years old and planning to retire, was againforced to reassess the Ciputra Group’s strategy. He thought about the appropriate balance between his

many ideas for innovative real estate projects and the level of risk the company could manage. Theongoing transfer of leadership toward his children and children-in-law also required his attention. Howcould the business continue the tradition of entrepreneurship while also building a professionally managed

family business group? The Ciputra family needed to work out a comprehensive strategy to prepare thefamily business for the next decades.

AWAKENING THE SPIRIT OF ENTREPRENEURSHIP

His father passed away in prison in 1943,when Ciputra was only 12 years old. Ciputra, then a fatherless child, was raised in poverty, but he was ableto continue his schooling after the war. After completing high school, he subsequently went to the famousInstitute of Technology Bandung (ITB) in Java, where he studied architecture. His career would be onethat showed, as he himself explained, his “spirit of entrepreneurship.”

Because the allowance he received from his mother during his university days was not sufficient, he startedhis first venture as a student in 1957. He established an architecture consulting agency with two friends,Budi Brasali (who passed away in 2006) and Ismail Sofyan. After graduating in 1960, Ciputra decided that,rather than working as a consultant for others, he wanted to implement his own ideas as a developer.

Ciputraworked and subsequently became the chief executive officer of Pembangunan Jaya, a developer partly ownedby the Jakarta provincial government, where he stayed for 35 years and worked closely with several ofJakarta’s former governors. In this capacity, he shaped Jakarta, including building or renovating severalprominent markets, a recreation park and various housing projects.

Aside from this job, he and his friends also established the Metropolitan Group after graduation, whereCiputra became the president commissioner, a non-executive role in which he actively provided guidanceand facilitated the development of this expanding group. Other investors, such as the Salim Group, werealso involved in a subsidiary of the Metropolitan Group, which developed the first privately built satellitecity of Jakarta. The group also had investments abroad. In 2009, his long-term partner, Ismail Sofyan, wasstill playing an active role within the Metropolitan Group.

In the 1980s, the three friends, who had hitherto shared their projects, decided that they could now starttheir own groups once their children grew up. So, when Ciputra’s children graduated and returned fromtheir university studies overseas, Ciputra started his own family group, the Ciputra Group, in which his

children, children-in-law, wife and brother were active. The new Ciputra Group was created for hischildren, whom he hoped would grow as professionals and continue his entrepreneurial spirit in theproperty sector.

Ciputra was considered the pioneer of the Indonesian property sector, and was often credited and awardedfor his visionary ideas. One of his achievements was to think big. He could see opportunities where otherscould not. In the late 960s, while heading Pembangunan Jaya, he transformed a swampland, infested with

mosquitoes and monkeys, intothe now popular Jakarta seaside,Taman Impian Jaya Ancol, re-positioning Jakarta as a beach city.According to Ciputra: “Every problem is an opportunity. The more difficult the problem, the moreopportunity: that is entrepreneurship.”

When his colleagues were thinking mere buildings, he was thinking new towns. The development of entiresatellite cities, or new towns, was a business model that became one of the trademarks of Ciputra, althoughit was gradually copied by other players in the market. His first project, while still with Pembangunan Jaya,was a project called Bintaro Jaya. Since the 1960s, Jakarta, like many other Asian cities, witnessed a largeinflux of people from the rural areas

While infrastructure was often officially the task of the government, the latter frequentlylacked the skills or budget to actually construct and maintain it. Especially after 1985, a period ofderegulation in Indonesia, the government warmed up to the idea of using the private sector to develophousing and public infrastructure. It was in this vacuum that Ciputra saw commercial opportunities.

With a keen eye for promising new business models, Ciputra moved into these large-scale propertyprojects, and provided middle- and upper-class citizens with living conditions that the government couldnot provide.

TheCiputra Group targeted the upper middle class for its large-scale property projects, and offered services andfacilities beyond what other areas offered, including healthcare, security, maintained roads and greenery.

Middle-class Indonesians were willing to pay for much more pleasant and convenient living conditions.

Internally, the company sought to stimulate an entrepreneurial spirit. All employees — from directors toadministrative staff — were encouraged to develop their sales qualities, and one executive spoke highly ofCiputra’ssecretary, who had already sold several apartments. The group held competitions betweendifferent project teams, and the winning project teams would go abroad on trips together. Ciputra explainedthat all project staff would be rewarded: “Yes, until servants and security people go there. All go there.

One group went to Paris — the Citra Garden team — they chose where they wanted to go. We gave theman extra bonus of 3-8 months.” Ciputra liked to involve staff at all levels in projects, and he regularlyinteracted with younger staff members and stimulated them to express their views. All employees lookedup to Ciputra, and several insiders remarked that “he is so outstanding.”

NEW GENERATIONS

Ciputra had four children: the eldest two were daughters, and the youngest two male twins. Because heconsidered them all talented, the eldest two daughters with their spouses (respectively, Rina CiputraSastrawinata and BudiarsaSastrawinata; and Junita Ciputra and Harun Hajadi) each led one division of the

Ciputra Group, while the twins (Cakra and Candra Ciputra) led another. Budiarsa focused on theinternational projects, including the new town in Vietnam, and had built contacts with officials in thatcountry. Harun, amongst others, ran several large projects in Surabaya, another large city in Indonesia. Thetwins were mainly active in commercial buildings like offices in Jakarta. Although the official structure ofthe group and its listed companies did not reflect this, informally the projects were divided amongst thechildren, who were engaged in subtle competition.There were differences in style between the children. An executive of the Ciputra Group commented that“Candra is only involved in the strategy, not in the daily operations. Harun is involved in everything, he ismore in the details. He also has an architect background, so he is also involved in the design. Budiarsa is inthe middle. Candra is more interested in the financial aspects, such as the stock market.” The division led

by Rina and Budiarsa had become reluctant to borrow after the crisis, and tried to avoid this at all costs,instead choosing to work with partners who provided financing and land. Harun, however, thought that thismight be too conservative, and took a slightly different approach. As such, within one company, there wasa diversity of managerial styles and project preferences. One of the insiders remarked: “Are the subholdingsgoing to go on their own or is it one person that will succeed Ciputra?

Now was a good time to plan the strategy for the firm and for the family and to strengthen the business forthe coming decades. Whereas the group had been designed along the way by the founder, as it grew larger,a more systematic view of the progress of both the business and the family in different stages could supportits future development.

Question :

1. Why do you think Mr. Ciputra is so successful as a businessman and as a leader? Please elaborate your answer based on:

a. his vision and strategy

b. his leadership

c. business situation in Indonesia

d. his way of managing his followers (10 points)

2. What kind of self concept, values, attitude, behavior, and trait could be summarized as Mr. Ciputra’s character. How did he build them along his career? (5 points)

3.There are three different options of succession in case Mr. Ciputra would step back:

a. pick one of the children or children-in-law as the leader

b. split the business and give it proportionately to each children

c. hire a professional manager to manage the company

Which one do you think is the best approach. Please explain your reasons (5 points)

4. In case he chooseaption a, who do you think the best candidate to replace Mr. Ciputra in the coming years? Please elaborate based on his or her character, leadership and capabilities. What kind of improvements do you suggest to him/her to match Mr. Ciputra’s capabilities? (10 points)

Answer 1

Answer:-

Answer-1-a:-

Ciptura carries a vision of having entrepreneurial spirit in property sector.

Answer-1.b:-

Ciptura had great zeal in property development and lead his entrepreneurial spirit in prooerty sector by partnering with two of his friend. Post graduating instead of working for company, he chose to be a developer and lead it successfully. As a leader, he found opportunities in challenges and had lead as well as overcome his challenges.

Answer-1.c

Indonesia’s government in1960, lacked skilled and budget for developing housing where business visinaries like Ciptura helped the nation. In 1985, government welcomed private companies to develop housing and public infrastructure.

Answer-1.d:-

Ciptura liked to involve all his staff in his project. He regularly interacted with young people and motivated them to speak their views.

Answer-2:-

Self Concept of being visionary, being leader in one’s life. Living a career and shaping personal life with entrepreneurial spirit is the best trait of Ciptura. He build entrepreneurial spirit by becoming developer post graduation instead of working for organisation. He developed same spirit in his colleague and made his organisation most successful organisation.

Answer-3:-

Option-C is correct. Option-A or Ootion-B is not correct as Ciptura’s children or children-in-law as leader are good operation execution and not good strategist as well as have zero exposure to other corporate businesses hence cannot lead those. One require to have property business strategist as well as operation acumen to lead Ciptura business.

Answer-4:-

If to make a choice than Candra is the among Ciptura twin child could be successor. He is strategist hence have all property business touch points and could lead it. He need to have operation execution capability to be effective successor like Ciptura.