One of the main reasons for Sukanto Tanoto‘s success in the palm oil industry, as well as in several other industries that the RGE is currently involved with, was the gradually increasing focus on diversification adopted throughout the years by the renowned entrepreneur.
While having started work as a Pertamina contractor in the 1960s, Mr. Tanoto soon realized that, in order for his business ventures to thrive, he had to expand through investments and new business contracts to other profitable ventures.
The Limitations of Being a Contractor
At the Wharton Global Modular Course in Singapore, Mr. Tanoto gave an insightful lecture outlining the importance of diversification and why simply being a contractor wasn’t enough to ensure future success during his beginning business ventures.
He talked about how the lack of a solid, diverse base of clients represented an important risk during the first years of his business. If, for example, a client would choose to buy assets from one of his competitors, the business would suffer greatly, and it would have been very difficult to continue on the same path.
This is what prompted the young entrepreneur to begin investing in new profitable endeavors. By learning about commodities and understanding how producing materials such as plywood and palm oil would be a far more advantageous prospect, than importing it.
The Importance of Diversification
Mr. Tanoto made his first investment in a plywood mill in 1975. This was a symbolic victory for the aspiring entrepreneur due to a demand in the local market that saw no one else trying to solve the problem of the expense and difficulty in importing plywood from places like Taiwan.
After this success, it became clear that diversification was extremely important, and the years that followed came with additional investments in palm oil and acacia plantations, pulp and paper mills, viscose fiber in China and LNG exporting efforts in China and Canada.
By juggling many new commodities and producing their own, Sukanto Tanoto and the RGE Group became widely successful, particularly due to Mr. Tanoto’s effort and engagement in making his investments as beneficial as possible for the Company, Community and Country.