Many of Taiwan's small- and medium-sized enterprises (SMEs) in old economy industries rely heavily on orders from big customers abroad to sustain their businesses. Their main priority is satisfying the needs of these sometimes capricious and fickle clients, and they must always be prepared for change to survive in unpredictable world markets.

These are lessons that Paper Fabric Ent. Co., Ltd. chairman Ju-huai Chen has taken to heart.

In business for 40 years, Chen's investment in quality and R&D has enabled his company to thrive in volatile global markets and supported the transformation of Paper Fabric from a small family workshop making handmade bamboo chopsticks into Taiwan's biggest manufacturer of paper shades and blinds, with annual revenues of up to NT$700 million.

That commitment to quality and R&D gave Paper Fabric's boss the determination to develop his company's own brand and distribution network and no longer be beholden to the whims of big buyers.

Chen, who founded his business in 1972, personifies Taiwan's SME entrepreneurs. His factory, surrounded by fields of green farmland, is located in his hometown of Ershui, Jhanghua County, with a population of fewer than 20,000.

His family's three generations live in the company's office/factory complex in this rural setting, a remnant of an era when households and small factories were intimately tied together.

Chen's business started out humbly as a producer of handmade chopsticks and bamboo calendars, and later moved into the production of shades and blinds, with markets in Taiwan, Japan, the United States and Europe. But like many Taiwanese SMEs, Paper Fabric essentially found itself marching to the orders of trading companies.

"SMEs are in a precarious position. They have no autonomy and are at the mercy of their customers," bristles the normally openhearted and jovial Chen in his Hokkien-accented Mandarin.

But Paper Fabric has been able to differentiate itself from the pack by not only surviving but also moving up the supply-chain ladder with every major economic jolt. The business has grown from annual revenues of between NT$80 million and NT$90 million in the 1990s to NT$700 million today, and it is now IKEA's fourth biggest supplier in Taiwan.

Paper Fabric: Its Own Biggest Critic

Though the company grew steadily in the past, Chen became determined three to four years ago to be more independent and not allow his company's fate to be controlled by a handful of customers. To any SME with typically limited resources, this challenge was unquestionably a "hard goal."

The catalyst for Chen's change of course came after he rejected a request by IKEA that all its suppliers provide detailed information on their product designs and production processes. Chen did not want to hand over core expertise painstakingly developed over a lifetime, making it available to his competitors, simply for the sake of an order. 

Fortunately for Paper Fabric, IKEA did not pull its orders.

"These are my core values," says Chen proudly.

The values he was referring to are his passionate attention to quality and developing strong R&D and innovation capabilities, values that have turned Paper Fabric into an indispensable supplier and enabled it to survive major shifts in the economic environment.

"Paper Fabric's R&D capability is probably the best in the industry. It's a capability that SMEs absolutely must have to survive," says an executive from a Paper Fabric competitor.

Aside from the product development done by its dedicated R&D team, the company also improves its line by looking at it through the critical eye of a consumer. Paper Fabric blinds are installed on the windows found on all four sides of the company's office.

"Every day, we draw and test the blinds. That way, we can figure out the most appropriate way to use them more quickly than our customers," Chen says.

He also gives employees free shades and blinds to use at home, ensuring that problems be discovered and resolved in house before products even reach customers' hands. 

Constantly rolling out new products has enabled Paper Fabric to deal with volatile markets.

Two years ago, the U.S. government responded to the problem of children strangling on window-blind cords by warning that manufacturers must develop ways to eliminate the risks posed by window cords or face the possibility of mandatory regulations. Suppliers were caught by surprise, and blinds with cords were removed from store shelves.

Cordless Blinds Conquer America

The shock had little impact on Paper Fabric, however, because it had long before developed its own cordless blinds and was the only supplier immediately ready to fill the gap in the market.

Another one of Chen's hard goals came five years ago when he took the advice of his son who had studied in the U.S. and decided to build his own brand. Paper Fabric has since installed counters at 1,700 Lowe's stores across the country selling its Chicology brand shades and blinds.

Chen's eldest son Ian Chen has emulated Dell's direct sales model, allowing consumers to choose their favorite products, which are then shipped directly from the factory in Taiwan. The model has enabled Paper Fabric to build its own distribution network.

"Being able to sell your own brand at retail outlets across America, I'm sure it's a first," Ian Chen says with pride.

The seemingly simple yet hard-to-achieve goal of not submitting to domination by overseas buyers has helped Paper Fabric break through the traditional constraints faced by SMEs. The company has managed to defuse crises and to use them as an impetus for growth, transforming itself into Taiwan's biggest paper blind vendor in the process.

Translated from the Chinese by Luke Sabatier