Fadi Ghandour interview: Aramex
Aramex founder Fadi Ghandour will this year step down as CEO of the logistics giant he created from scratch. He talks to Arabian Business about the challenges he faced in building a $700m operation, which became the first and only ever Arab company to list on Nasdaq
By Massoud Derhally Sunday, 27 May 2012 8:30 AM
Fadi Ghandour is not much of a yoga person. A one hour swim gets him going in the morning. He lets go, focuses on his breathing and meditates. By 10:00 a.m. Ghandour, 53, hits the ground running, switching gears between firefighting, attending meetings, talking on the phone, reading emails and tweeting to his 14,000 followers.
Thirty years on since he founded Aramex in Jordan before taking it public on the Nasdaq and making it the first and only Arab company to do so, Ghandour is not only a successful entrepreneur but a charismatic, passionate and selfless business leader who wants to share the plethora of information he’s gathered over the years.
Getting to where Ghandour is and where Aramex is was no easy ride. It was a combination of an intuitive ability to gauge the direction of the $200bn global express and courier industry, luck, timing, patience, persistence, and good salesmanship, coupled with strong leadership skills, governance, and the entrepreneurship drive that made Aramex into the largest courier company in the Middle East.
When family friend Bill Kingson came up with the idea of starting a courier company and entering the industry, Ghandour was fresh out of George Washington University and working in a car rental shop in Amman. Meanwhile, FedEx was in overdrive, playing commercials on US television sets on why America needed to deliver their packages overnight and not wait for the post office to do so in three days or more.
“We were talking and Bill said there is this industry coming up,’’ Ghandour recalls. “So we said let’s go and check this out and we stumbled on something that was very important, that these courier companies in the US did not go global and were clearly focusing on their domestic market,’’ Ghandour says.
Thirty years on, and Aramex is worth $700m on the Dubai Financial Market, with latest results showing first-quarter profits for the year jumping 22 percent to $16.6m. Make no mistake, this is a giant in every sense of the word, with 12,300 staff in 353 different locations across 60 countries.
But getting here has been no cakewalk. The key challenge for any start-up and for a company that comes out of this region is competing with giants. From its inception, Aramex’ main competitor was DHL, a global multi-billion-dollar company. Aramex, a small company then, was in a market that was highly regulated. For building a brand and attracting people, talent was critical. Another issue, as with all start-ups was managing cash flow. Aramex’s success came in stages. It found a niche in the Middle East market by selling its services to global express players like FedEx and Airborne Express, where it became the outsourcing arm of these firms delivering their packages in the Arab world instead of them using competitors.
“We told them ‘look you get packages that go global but you don’t know what to do with them, you normally give them to your competitors to deliver them so why don’t you give them to us and we will establish a neutral Middle Eastern network to deliver your packages for you’. That’s how we got to build our network on the back of our wholesale clients,’’ Ghandour says. “From there on like every start-up, everything you plan does not necessarily work and then all sort of opportunities pop up and you learn by mistakes and trial and error.”
Striking a deal with Airborne Express, the third-largest courier in the US at the time, which bought nine percent of Aramex and invested $2m in the company, would prove to be pivotal to its future. Technology makes small businesses more competitive. It helps reduce the exclusivity of markets that may be beyond their reach and the alliance with Airborne Express opened doors for Aramex.
“We were lucky. That’s where we learned our business,’’ Ghandour says. “The biggest alliance we had was with Airborne Express, which gave us the ability to understand technology and have tracking and tracing systems without having to own our own technology. Not only did we learn the business from them and others but because of the strategic alliance, they provided a network of interconnected computers connected to a central mainframe in Seattle that allowed everybody in the strategic alliance around the world to actually have visibility on their shipments and real time tracking and tracing.’’
Working with FedEx and Airborne Express not only allowed Aramex to learn about the courier industry, what the requirements of global companies are, but it also provided valuable know-how related to tailoring customer service, managing operations, and delivering information on time.
“We learned at the hands of the best,’’ Ghandour says.
These were the early days, and then eventually it became about building the Aramex brand in the Arab world and creating a global company through its own physical presence on the ground or through building alliances. In the countries Aramex did not exist, the company aligned itself with similar enterprises and created global strategic alliances to essentially deliver a global service.
Alliances “taught me how to expand without having the cash,’’ Ghandour says. “This was the best way to go global without having to acquire or spend a heck of a lot of cash.’’
To evolve though, the company needed more capital. The partnership with Airborne took the company only so far and angel investing in the mid 1990s was very rare if non-existent in the Arab world especially in a company that was and remains non-asset based and does not directly own transportation infrastructure.
Failing to raise money in the Arab world forced Aramex to go to the Nasdaq in 1997 and Nasdaq, according to Ghandour, is what made Aramex today in terms of its governance, its reporting, its management, its understanding of global markets, responding to investors and their needs.
“Nasdaq was an accidental option,” Ghandour says. “It was an option that we didn’t take as seriously originally as we eventually did. We needed cash to grow the business, we were growing fast like every company even though we had been in operation by that time for fourteen years. But this was not a dotcom era, it was a hardcore bricks and mortar business.”
“Aramex is a continuous story of failures in one place that lead to successes that are much more impressive and more important in our life than the original endeavour,” Ghandour explains. “Nasdaq disciplines you like hell and adhering to SEC standards is like no other. We are a product of Nasdaq. It changed me as a person, it changed me as a CEO, as a disciplined manager. It changed me completely. Nasdaq was the one single milestone. If it wasn’t for NASDAQ everything wouldn’t have happened.”
In March 2002, Aramex delisted from NASDAQ, and returned to private ownership after being acquired in a leveraged buyout by the Dubai-based private equity firm Abraaj Capital. “Exiting Nasdaq was important for us because we could be more entrepreneurial and could be less worried about public pressure,” Ghandour says. “Abraaj gave us leeway to be more entrepreneurial, because it was partly a leveraged buyout, it created financial discipline inside the organisation. The minute you have debt on your books you are much more financially disciplined in order to be able to deliver back on your obligations.”
In 2005 Aramex went public again, this time on the Dubai Financial Market. Its IPO was 80 times oversubscribed and Abraaj, which had acquired the company at around $65m in value out of Nasdaq, relisted it on the Dubai exchange at about $290m.
Between Nasdaq and the second IPO Aramex grew regionally on the ground and virtually. The internet and the advent of e-commerce changed the way Ghandour and Aramex did business. Out went the conventional means of communication and in came new arenas for dialogue and trade. As products and services were being ordered online rather than through traditional sales outlets Aramex adapted and its business grew in tandem. One very good example is the company’s ’shop and ship’ service, which provides subscribers with a UK or US delivery address and forwards their packages from these locations to customers.
“In today’s world you get instant feedback about everything you do,” Ghandour says. “That means you need to change the way you look at things. That means the front line of business is not only physical, it’s virtual.”
Aramex is not the only company Ghandour helped found. He helped establish and back Maktoob.com, the Jordanian Arabic-language internet venture, which became the largest portal in the Arab world before being acquired in 2009 by Yahoo for about $165m.
In a region where 65 percent of people are under the age of 30, which has the highest youth unemployment rate in the world, where the educated emigrate, where 100 million jobs need to be created over the next two decades, where the culture of family businesses and protectionism linger, Ghandour thinks entrepreneurship is key to overcoming obstacles and driving the maturity of local economies.
“People think this is only an Arab Spring story – it’s not. Empowering the youth in the Arab world is the huge story and it has been for years,” Ghandour says. “I think entrepreneurship, and having a generation that creates companies, a generation that employs rather than looks for employment is probably one of the biggest ways of solving productivity in the Arab world. That’s why I think entrepreneurship is essential.”
As he prepares to give up his role as CEO of Aramex, for Ghandour satisfaction comes at having reached a stage where he can share what he’s learned along the way, invest and put his money where his mouth is.
“I experienced entrepreneurship from the ground up and understand what it is to run a business from scratch,” he says. “The struggle of fourteen years in our early days gave me an appreciation for every single person that ventures into that process. That’s key for me. I know how much these people need support and can actually make it if they get the right support,” he emphasises.
Ghandour also serves on the advisory board of the American University of Beirut’s business school and chairs Wamda.com, an online platform for information and knowledge on entrepreneurship in the Middle East. In 2005 he founded Amman-based Ruwwad, a regional initiative that aims to empower disadvantaged communities and help them overcome marginalisation through youth activism, civic engagement and education.
“The best leaders are people who bring in fantastic talented people that work with them,” Ghandour says when asked about what makes a good leader.
“Many times they might be better than they are. If you want to see a good leader today, look at the people that work around them. If a leader talks about himself, it doesn’t work. It’s like a conductor in a symphony, but the people that make the music are not you necessarily.”
For aspiring entrepreneurs Ghandour says patience is as important as determination. “You need to remain patient and you need to be impatient at the same time. It’s a paradox,” Ghandour says.
“You make mistakes because you’re impatient and eventually you learn,” Ghandour says, adding, “Patience also comes from the ability to understand that you don’t know much and you are always seeking knowledge and information and never being satisfied in the sense that I have made it. Whoever thinks he’s made it hasn’t really, because there’s much more to be done if you want to continue in your industry and compete.”
“The way that you know you haven’t made it is by positioning yourself as a human being and as an organisation in a learning position. I have to keep my eyes and ears open all the time. That means not just looking at my industry. What worries me today is what is happening in the internet, in e-commerce, in the retail industry, in manufacturing, these are things that affect how we evolve and how we remain focused on our clients.”
As Ghandour looks to handing his position over to Hussein Hachem at the end of the year after which he’ll focus on angel investing and working with young entrepreneurs, he says he doesn’t really think much about having a legacy.
“I will leave Aramex without leaving,” he says. “It will continue exactly as is with new leaders that will continue to build it maybe in different directions but without necessarily feeling the absence of Fadi but not the CEO. So it continues flowing like a river. You work so hard to build an institution and it’s not about one individual but the collective effort.”
Whether the Aramex river continues to flow smoothly without Ghandour at the helm, only time will tell.