China Business Journal: How can a business achieve continuous growth for 50 years?

Article originally published in the China Business Journal. Articles in this section were covered and written by journalist Shuo Zhang.

As we embark on the road of a “new normal” economy, the environment, competitors and consumers are changing, shortening the life cycle of enterprises. So, how can a corporate stay healthy and thrive? What is the driver for the growth of a corporate?

Established in 1894, Halma is a global group of life-saving technology companies. With a 128-year history, it lives up to its reputation as a “century-old enterprise.” As a member of the FTSE 100, Halma Plc has nearly 50 companies within the three sectors of Safety, Environmental & Analysis, and Healthcare. Noteworthy, Halma group maintains its positive growth for almost 50 years, including 19 consecutive years of profit growth and over 40 years of annual dividend growth of 5% or more. Halma’s market cap has increased 8x to more than ￡8bn over the past decade.

What is the business model that enables an enterprise to achieve sustained growth for decades?

What are the key strategic assets of this kind of corporates? Which kind of entrepreneur would write “Just be a good person” in its annual report? Is this business model replicable? Recently, a journalist from China Business Journal interviewed Aldous Wong, President of Halma Asia Pacific.

The Asia Pacific market will be the powerhouse in the next 10 to 15 years

China Business Journal: During FY 2021, Halma marked a high score regarding revenue. What do you think the role of the Asia Pacific market has played in it??

Aldous Wong: Yes, FY21/22 was a good year, with revenue exceeding ￡1.5bn, up 16% year-on-year. We delivered our 19th consecutive year of record profit, considering the slowdown in the growth rate caused by the global pandemic in FY20/21. Asia Pacific region accounted for 16% of Group revenue in FY21/22. The three sectors, consistent with the Group business layout, achieved balanced development in APAC. Safety Sector contributed ￡102m, while Environment & Analysis and Healthcare Sector respectively reached ￡78m and ￡71m in revenue. We believe that the Asia Pacific market will continue to be a long-term growth driver for Halma in the next 10-15 years.

China Business Journal: Why is the Asia Pacific market the focus of Halma’s future growth?

Aldous Wong: As for the market prospects, Halma Asia Pacific follows the same path as the Group. In Environment & Analysis Sector, with the increasing recognition of environmental protection in China, relevant industries have enjoyed rapid growth and become the leading players in the market of many subsectors. During the “14th Five-Year” Plan implementation, the revenue generated from environmental governance targets an annual increase of 10%, and it is likely to exceed 3 trillion yuan in 2025. Therefore, Environment & Analysis Sector will be the most crucial regarding the Group development in China; In Healthcare Sector, the “Healthy China” strategy aims to improve people's livelihood and access to health care by pushing forward relevant industries. In 2025, the potential market in this regard will exceed 11.5 trillion yuan. Halma will fit in and pay more attention to health care. In Safety Sector, to match the increasing emergency demands on public security, emergency and rescue services are in the fast lane of development. Halma has much experience with fire detection and rescue and will stay open for further investment and industrial development facing the updating requirements of society today.

The corporate culture of “Just be a good person”

China Business Journal: What is the sustainable growth driver for Halma group?

Aldous Wong: I have worked for many world-famous enterprises, and Halma group is different from them. We have our own organisational model and culture. In my opinion, they are what sustain the growth of the corporate. Halma group has nearly 50 companies of different sectors. Our strategy has sustainability at its core. The growth driver could be explained in a simple formula: Strong growth + sustainable returns + positive impact = long term sustainable value creation. Put in detail, several aspects sustain growth. First, a sustainable financial model. We have a fundamentally self-financed model: Strong revenue growth and high levels of cash generation mean that we can continually reinvest in organic growth and new acquisitions, while increasing our dividend. Second, a clear growth strategy. We are focused on growing and acquiring businesses for the long-term, and we target global niche markets with long-term growth drivers Finally, we stick to a simplified organisational model. Each company is a separate legal entity, with its own P&L and balance sheet, and board of directors. This drives accountability for performance and good governance.

China Business Journal: What are a sustainable financial model, a clear growth strategy, and a simplified organsational model?

Aldous Wong: Before sharing specific examples, I want to introduce our purpose, which is the premise for Halma Group to make every business decision. Our purpose is to solve the big problems of our time and there’s a high business value attached to solving these problems. Our purpose keeps us focused and defines the markets we operate in: safety, environment, and health. It delivers against the UN SDGs, including four that we are supporting directly through our tech (health, clean water, infrastructure, sustainable cities). Our purpose is to ensure that the development of our enterprise meets our expectations. Nearly two-thirds of our revenue last year contributed to four UN SDGs that are most aligned to our business: health, clean water, infrastructure, and sustainable cities. Meanwhile, our purpose is inclusive. It is designed to reach everyone on the planet with the life-saving technologies we provide every day.

In addition, we share a lean and simple organisational structure. We hire exceptional leaders, who are empowered and accountable for making decisions that are right for their business without the need for complex reporting lines. Our lean and simple structure enables them to respond quickly to their customers' needs to capture new growth opportunities. We look for people with integrity—who plays to make a personal contribution and win shared success. This is precisely why Halma Group has built “Just be a good person” into the corporate culture gene.

Talent is the motive force of enterprise development. We choose to over-invest in our business and our people, minimising process and bureaucracy and maximizing speed and agility. In addition, we support our entrepreneurial businesses with Halma’s Growth Enablers — small central teams that provide skills and expertise to help them grow. We provide access to internal and external networks and encourage collaboration and best practice sharing to enable us to go faster by learning from others.

Moreover, it is also important to note that we have a fundamentally self-financed model: Strong revenue growth and high levels of cash generation mean that we can continually reinvest in organic growth and new acquisitions, while increasing our dividend. In addition, we target global niche markets with long-term growth drivers: increasing regulation; rising demand for healthcare and life critical resources; and growing global efforts to address climate change, pollution and waste.

“Goodness” brings real “growth” of an enterprise

China Business Journal: You just mentioned that Halma Group hopes to “reach everyone on the planet with the life-saving technologies we provide every day”. Fortress Interlocks, within the Halma Safety Sector, has a keen interest in recycled aluminum, eco-friendly material, which is also one of the most competitive raw materials for industrial manufacturing. How did it see the potential in this niche market?

Aldous Wong: Halma focuses on niche markets that are long-term growth drivers. Most of the Fortress products you mentioned are made of zinc alloy, a very heavy and difficult-to-recycle material. Therefore, to seek more sustainable solutions, Fortress began to design a new shell made of recyclable aluminum for its flagship product. This is a lighter material, which can be recycled fully and permanently. Through rigorous testing, Fortress proved that this material can meet the high safety standards of enterprises, which is 90% lighter in weight.

Fortress's technology is one of many innovative technology solutions of Halma Group to protect resources. As resources become increasingly scarce, the demand for such technologies points to a long-term trend that will last for decades. Recycling of Waste Metal—Ocean Insight provides a recycling solution that can sort metals in a few milliseconds to help improve efficiency.

In addition, Halma Group delivers a net positive impact on people and our planet. Examples of our impact are as follows: We supply over 1 million diagnostic products each year, for blood pressure monitoring, eye health monitoring, and perinatal monitoring. We make water safer, by enabling 200 million water tests annually, including more than 5 million as part of international relief and development efforts. We conserve water, using monitoring technology to save billions of litres each year. We protect more than 15,000 wind turbines with our fire suppression technology.

China Business Journal: More and more enterprises have come to realize that corporate social responsibility reveals the greatness of an enterprise. Nowadays, ESG criteria have gradually become the deciding factor for enterprise management. China may have a slow start but embraces rapid growth compared with other countries. With so many success stories in this regard, how did Halma, do you think, manage to achieve?

Aldous Wong: Halma is a force for good; it delivers a net positive impact on people and our planet. Therefore, as we grow our business we do more to create a safer, cleaner, healthier future for everyone every day. By growing in line with our purpose we deliver a positive impact in the markets we serve and beyond. As well as focusing on growth, we have identified three Key Sustainability Objectives (KSOs) to enable us to deliver maximum impact within our own value chain.

They are as follows. First, climate change – addressing the opportunities and risks it presents, and minimising our own greenhouse gas emissions. Setting a commitment to net zero Scope 1 & 2 carbon emissions by 2024 and a 1.5 ℃ temperature target by 2023. Increasing renewable energy from 8% to 15% of electricity consumed. Second, diversity, equity & inclusion (DEI) — working towards a fairer future for everyone, every day and being sustainable in the long-term. including the implementation of equal parental leave policies for all employees in companies around the world. We have set targets for all our company boards to be within a 40 – 60% gender balanced range by 31 March 2024. Female representation on all company boards increased from 22% last year to 26% this year. Third, circular economy – designing out waste and pollution and incorporating reuse and recycled materials within products where feasible.

Boss's secret recipe to success

1. Why is the Asia Pacific market the focus of Halma Group's future growth?

As for the market prospects, Halma Asia Pacific follows the same path as the Group. In Environment & Analysis Sector, with the increasing recognition of environmental protection in China, relevant industries have enjoyed rapid growth and become the leading players in the market of many subsectors. During the “14th Five-Year” Plan implementation, the revenue generated from environmental governance targets an annual increase of 10%, and it is likely to exceed 3 trillion yuan in 2025. Therefore, Environment & Analysis Sector will only be the most crucial regarding the Group development in China; In Healthcare Sector, the “Healthy China” strategy aims to improve people's livelihood and access to health care by pushing forward relevant industries. In 2025, the potential market in this regard will exceed 11.5 trillion yuan. Halma will fit in and pay more attention to health care. In Safety Sector, to match the increasing emergency demands on public security, emergency and rescue services are in the fast lane of development. Halma has much experience with fire detection and rescue and will stay open for further investment and industrial development facing the updating requirements of society today.

2. What is the sustainable growth driver for Halma group?

I have worked for many world-famous enterprises, and Halma Group is different from them. We have our own organisational model and culture. In my opinion, they are what make the corporate maintain continuous growth. Halma group has about 50 companies of different sectors. Our strategy has sustainability at its core. The growth driver could be explained in a simple formula: Strong growth + sustainable returns + positive impact = long term sustainable value creation. Put in detail, several aspects sustain growth. First, a sustainable financial model. We have a fundamentally self-financed model: Strong revenue growth and high levels of cash generation mean that we can continually reinvest in organic growth and new acquisitions, while increasing our dividend. Second, a clear growth strategy. We are focussed on growing and acquiring businesses for the long-term, and we target global niche markets with long-term growth drivers Finally, we stick to a simplified organisational model. Each company is a separate legal entity, with its own P&L and balance sheet, and board of directors. This drives accountability for performance and good governance.

Profile

Aldous Wong holds an MBA from the Hong Kong University of Science and Technology. In 2020, he joined Halma as Divisional Chief Executive and Chair of the Board of Directors for multiple Halma companies. In January 2022, he was appointed President and Chair of Halma Asia Pacific. Since then, he has been responsible for growing Halma’s 30-plus existing companies in China and leading an M&A team focused on the M&A opportunities within the three sectors of Safety, Environmental & Analysis, and Healthcare that Halma operates in China. Before joining Halma, Aldous Wong already had experience in senior leadership roles at GE, Honeywell, Oracle, HP and other Global 500 companies and start-ups engaged in IT, technology, industry, healthcare, etc.?

Aim at Leadership: The Way to Sustain Business Growth

The iconic piece of work -- Innovation and Entrepreneurship: Practice and Principles by Peter F. Drucker proposes five principles in innovation: (1) analyse opportunities, (2) be perceptive, (3) be simple and focused, (4) start small, and (5) aim at leadership. Among all, “aiming at leadership” plays a critical role in sustaining the originality of a company's long-term growth.

Against the backdrop of new changes in globalisation, companies need to re-examine the meaning of “aiming at leadership” and take a holistic view of the present and the future.

Halma, probably less heard by the public, is a truly “invisible champion” worldwide in building a safer, cleaner, healthier future. It has a 128-year history and nearly 50 years of growth.

What is behind its continuous growth? The journalist found that its unique corporate DNA (i.e. culture) and simplified management model explain well. Just be a good person. It has been included in Halma’s cultural genes written on its annual report with commitment to bringing positive impact every day. This practice drives every business decision that Halma makes. As Wong mentioned in the interview, Halma’s purpose determines all its actions, whether it is acquisition, staffing divisions or the exploration of new markets. As the old Chinese saying goes, “Who understands the world is learned； Who understands the self is enlightened”. Here, it is well proven.

At the same time, how does a corporate with nearly 50 outstanding companies sustain healthy growth? Less is more. Its organisational structure gives the answer. Halma is a powerful and flexible organization. Minimizing process and bureaucracy drives accountability for performance and good governance. This efficient management approach greatly helps the group seize new opportunities. For example, Halma Headquarters is like a “workplace coach”, continuously empowering each company with an open attitude and providing skills and expertise to help them grow. Halma provides access to internal and external networks and encourages collaboration and best practice sharing to enable us to go faster by learning from others, which fully demonstrates the inclusiveness and growth of Halma. In addition, its self-sustaining financing model and the strategic insight in targeting global niches in markets with long-term growth drivers are the key elements that have contributed to Halma’s almost 50 years of positive growth.

Halma’s sustainable growth, whether powered by its purpose, cultural genes, business model, talent strategy, or Aldous Wong himself, reveals a valuable consistency throughout. This is Halma’s way of aiming at leadership by believing in “goodness” and “growth”.