Powering the Google engine: innovation is key

It’s a $20 billion company with a formidable staff strength of 20,000, but the spirit of innovation (and enterprise) is alive and well at Google Inc, 11 years after the company was founded by then-students Larry Page and Sergey Brin.

“One of the things I think is special to innovation at Google ... is that, as much as you can do a lot with Google today, it is just as appealing to the novice, as it is was on day one, and that is something that is difficult for most technology businesses to accomplish,” says Dave Girouard, President, Enterprise of Google, who took part in Global Entrepolis@Singapore, in conjunction with the APEC SME Summit 2009.

Fostering the innovative streak at Google that has led to its phenomenal success today was, however, done rather unconventionally -- with employees given an usually high level of autonomy. That, says Girouard, is because while Google is no start-up, it still wants to maintain an environment that feels like a start-up.

Dave Girouard

“(So) we are about saying yes. This is not a top-down culture; it’s not a place where you have to go seek approval to do something. There is an incredible amount of freedom to doing what you think is right and to spend your time how you think your time ought to be spent. It’s a challenging model for most companies to think about that, and it has to start with the type of people you hire and the type of culture you build. But it is fundamental to Google’s success that people feel the freedom to act and take action, and do things on their own.”

“Larry and Sergey fundamentally believe that people working on what they choose to work on, what they’re passionate about, have an order of magnitude more in terms of productivity than someone’s who’s just directed and told what to do. It is a very central tenet of innovation at Google,” he adds.

With that in mind, Girouard explains that Google has devised what he calls “a notion of 20 per cent time.” This means anybody at Google can use 20 per cent of their time -- one day a week, a week every five weeks -- however they choose to define it, for them to work on what they want to work on. It also means their manager doesn’t tell them what to do. “It’s a very unique thing and it’s given birth to a few things you might have heard of, Google News and Gmail.”

For example, Google News, he told INSEAD Knowledge, was invented by a single engineer who wanted to be able to scan headlines from multiple websites quickly and compare stories which had been created by different sources. “It was a simple idea and frankly, today, it’s still a very simple idea, but that’s what makes it special.”

Girouard concedes that not every idea may bear fruit, but says there is internally a “formula” to assess new ideas. “We have a 70/20/10 model which Sergey Brin came up with several years ago, which is 70 per cent of our efforts are to be focused on our core business, 20 per cent should be focused on related but new areas that we're developing off of that, and 10 per cent we should reserve for ‘crazy’ ideas, some of which may turn into great advancements and many of which may not pan out at all,” he adds.

To keep powering the (search) engine that is Google, Girouard says its research and development takes place in “a couple of dozen cities around the world”, including Tokyo, Sydney and Beijing.

Cloud computing: innovation during hard times According to Google’s Dave Girouard, cloud computing has come to the fore during this financial crisis, and it has proven to be particularly beneficial for small businesses because it can trim the costs of a company’s total expenditure. “The idea that you don’t have to buy and install servers and software, and you can just rent it, if you will, over the internet -- only what you need, when you need it --is inherently interesting and small businesses just jumped on to it.” So thanks to cloud computing, a 20-person company can now have access to the technology that a few years ago only a 20,000-person company would have access to -- and they can have it “almost (for) free”. While there had previously been interest in cloud computing from large businesses, the recession had the effect of accelerating what was already there, into action. Girouard reveals that more than two million businesses have already signed up with Google Apps. “It’s something that has taken off incredibly quickly and naturally, starting with small businesses; but today, giant, global companies are doing this and appreciating that they can actually get more for less.” So, in addition to helping small businesses enhance their capabilities, Girouard says Google Apps is also working with large businesses to help them act and behave with the agility of a very small business. “That’s the interesting thing about the cloud; it’s very levelling.”

“We want to hire the best and brightest computer science talent in the world and we certainly know we can’t do all that in Silicon Valley. So we’ve put a lot of energy toward building a competence in doing distributed development of products.”

“Our goal is great ideas are going to come from everywhere and great computer scientists are in all parts of the world.”

Girouard, however, is less certain when it comes to predicting the company’s future. “I think Google is designed to not know where we'll be in 10 years. The way we think about technology in our businesses, we have some very bold initiatives and some ideas that we think are very important.”

Universal access to information, he adds, is at the centre of it. “We have a lot of seeds we've planted: machine translation of content between any language in the world, everybody having broadband access all the time, mobile devices as good or better than a PC desktop. So we have some fundamental ideas but beyond that, frankly we don't know more than anybody else does. We just have a vision for the way it ought to be and we provide energy towards building that world.”

Innovating in the Arab world

Innovation, it seems, is everything that it’s cut out to be. Done right, it can take a company, government or country from mediocrity to greatness. But innovation doesn’t come easy, and in some industries, the road to innovation is a long and arduous one.

Take the pharmaceutical industry for instance, which according to Franz Humer, Chairman of Roche Holding, needs about 20 to 25 years from the germination of an idea to the “possibility” of a medicine. Suffice to say, “enormous amounts of money” are also required, as it takes “north of a billion dollars” to develop a new drug today.

“We do not understand the human body; we’ve got to do experiments on 15,000 people before we know if a drug works,” says Humer, who was a panellist on ‘Leading Innovation’ at the INSEAD Leadership Summit Middle East held recently in Abu Dhabi.

“Part of innovation is failure; there is more failure in innovation than there is in success. If I look at our 10,000 scientists who work for us, their chance of ever participating in creating a successful product is zero -- but it is more important for them to determine what doesn’t work than to find what works.”

Innovation is not always so protracted. For the Abu Dhabi Tourism Development and Investment Company (TDIC), innovation is pegged to a specified timeline -- 2018 to be precise. Tasked with developing the Saadiyat Island project, hailed to become the cultural centre of Abu Dhabi, Chief Executive Lee Tabler says they were “challenged” to optimise the 27 square kilometres of undeveloped space and transform it into a sustainable development, which would be environmentally-friendly and commercially viable. He is confident, however, that his 500-strong staff of “creative professionals”, encompassing economists, writers, artists, architects, marketers, photographers and designers, can rise to meet this daunting exercise in innovation.

Joe Saddi (left) and Lee Tabler (centre)

Joe Saddi, Chairman of management consulting firm Booz & Company, agrees that the innovation cycle differs by industry. He adds that while technology underpins much of today’s innovation, there exists, outside those parameters, innovation relating to products like the Tata Nano; innovation centred around Starbucks where coffee is not just coffee but a lifestyle; and process innovation or outsourcing, which is in itself another way to do something completely differently.

To help foster that innovative streak in the Middle East, Saddi says that the region must make a concerted effort to boost its research and development (R&D) activities. “Where the Middle East lags behind is R&D funding. By some measures, R&D funding in the region is somewhere around 0.1 per cent compared to 1.5 per cent globally. And so companies and governments will need in the future to invest more into R&D or provide the right incentives and government frameworks for it,” he told INSEAD Knowledge on the sidelines of the Summit.

Innovation, he cautions, can also be stifled by what he calls educational and the diversity challenges, though measures are in place to address them. Schools such as KAUST, or the King Abdullah University of Science and Technology, he believes, will go a long way towards fostering an environment where innovation happens. “Unless we have education modernisation, we will not get to what we want.”

Ms Najla Al-Awadhi, Deputy CEO of Dubai Media, concurs that quality education can indeed pave the way for innovative thinking. “(If) you want people to innovate, you need to have people who can think critically, and this is extremely linked to our education system ... the innovation germ, if we want to spread it in our society, it has to start in our schools.”

Franz Humer (right) and Ms Najla Al-Awadhi

She also believes that the diversity challenge is being managed well by the innovative leadership of the United Arab Emirates. Although the UAE has a high percentage of female parliamentarians, she says this was not an accident, but a result of the leadership’s innovation.

For Ms Al-Awadhi, innovation in the media sector “has really been in increasing the numbers of Emirati women in our business, and really increasing their numbers in key roles.”

Yet for all its virtues, the innovation process needs checks and balances in place. This is especially evident in developing countries who desperately want to get a head start.

Humer explains: “One of the biggest dangers is when new emerging nations embark on the process of trying to become players in research and development, that they do not conform to the same rules of the game. And the only way to do that is through international peer reviews.”

“I think the science community has to regulate that (itself). It is working to some extent, perhaps sometimes belatedly. Look at the cloning issue in South Korea, which was hailed initially and then, piece by piece, peer reviews in leading journals internationally led to the discovery that that was falsified. And I think those were red flags also to the Chinese. I think that is one of the tasks of the scientific community worldwide to self-regulate in that area.”

Regardless of the motivation, all forms of innovation have one thing in common --the cycle never stops. “If you look at the way medicine is practised, in 50 years from now, people will look at the year 2010 and classify it as the Middle Ages,” says Humer.

He adds that innovation should always be top of mind for any country seeking to improve itself. “A country like a company, if it doesn’t innovate, will go backwards in the end, so innovation for society is the only way forward -- and that is probably for a young society like the Emirati, even more important.”

Related video: Hal Gregersen on Innovation

The innovator's DNA

A major new study involving some 3,500 executives has highlighted the key skills that innovative and creative entrepreneurs need to develop. The six-year-long research into disruptive innovation by INSEAD professor Hal Gregersen, Jeffrey Dyer of Brigham Young University and Clayton Christensen of Harvard, outlines five 'discovery' skills you need. But, says Gregersen, you don’t have to be ‘great in everything.’

Some well-known business leaders such as Apple’s Steve Jobs and Amazon’s Jeff Bezos rely on their own particular strengths since innovative entrepreneurs rarely excel at all five discovery skills. For example, Scott Cook of Intuit is strong in observational skills. Marc Benioff, founder of Salesforce.com, does a lot of networking, he says. As for Bezos, “experimentation was his forte,” while Jobs is “incredibly strong at associating.”

The five skills, Gregersen says, are ‘a habit, a practice, a way of life’ for innovators. Although Gregersen and his co-authors use the DNA metaphor, innovative entrepreneurs are actually made or developed, rather than born. “We each have unique, fixed physical DNA,” says Gregersen, “but in terms of creativity, we each have a unique set of learnable skills that we rely on in order to get to the ideas that will give us some insight.”

Research involving identical twins suggests that only about 20-25 per cent of our creativity ability is geneticically driven. “This means the other 75-80 per cent comes from the world we live in,” Gregersen says. “So even if I took those identical twins and you have one twin who sits at home, watches the television, doesn't do a whole lot trying to generate a new business idea, and you've got a second twin who talks to 10 different people from 10 different diverse perspectives, who goes out and maybe observes the world systematically, takes notes and pictures, writes down in a journal things that he or she sees, constantly asking questions -- ‘What if ? Why not? How could? What might? How might? Those sorts of things. Which of those identical twins is likely to get the creative ideas?”

“It's the one out there doing the creative actions,” Gregersen says. “They might get a bit of a boost from genetics but that's not the core of what delivers the results.”

The five key discovery skills

Associating

Creative entrepreneurs ‘connect the dots’ to make unexpected connections. They combine pieces of what may seem disparate pieces of information until “surprise - you've got this innovative new idea.” Steve Jobs, the CEO of Apple, was interested in calligraphy and this eventually led to his company producing user-friendly, graphics-based Macs. “Several years later, when Jobs was trying to figure out the Macintosh screen, and the 'what you see is what you get' (WYSIWG) sort of image, he connected the dots back to what he had learnt in calligraphy to what might be on the screen and it was a key component of making that whole computer work.”

Observing

Some of the most innovative entrepreneurs are “intense observers,” Gregersen says. Take for example Scott Cook, the founder of Intuit: “When we interviewed him, we talked about how he got the initial idea for Quicken software. He watched really carefully in terms of how his wife was very frustrated doing their finances. Manually it was frustrating and irritating. She purchased some software that was equally frustrating and irritating.” It was at that point that Cook thought he might be able to develop a product that could help his wife “solve that problem more effectively.”

After a ‘sneak preview’ of an early Apple computer, Cook got a “rich sense of what it might look like to have a user interface and a mouse and so on, and be able to have things like checks on the screen that looked like what they should be.” And from this observation, Gregersen says, sprang Quicken.

Experimenting

When Jeff Bezos, the founder of internet retailer Amazon, was growing up, he used to spend time on his grandfather's farm in the summer. When machinery broke down on the farm, his grandfather would try to fix it himself, with some help from Jeff. They would “experiment, trying this and that, until it would finally work again.” If the animals on the farm got sick, his grandparents wouldn’t call the vet, but rather experiment and try to fix the problem themselves.

“So Jeff grew up with that kind of attitude and mindset, that if I am confronted with a challenge, I can figure out a solution,” Gregersen says. “That kind of experimentation spilled over into Amazon.” At first, the idea had been to sell books via the internet without inventory. “That was the initial idea. We sometimes forget that it took him seven, eight, nine years of experimentation to build the capacity to have warehouses full of books.” As a consequence of his experimentation, Bezos “built this business model that we now call Amazon today.”

Questioning

Questions are at the core of what we do. We can be observing the world or experimenting, “but if I have no questions in my mind, I'm pretty unlikely to get any observations or insights or ‘ahas’ that I never saw or thought about,” Gregersen says.

“And this kind of questioning attitude and mentality is just rampant in these folks.” Some may be better than others in observing, but when it comes to questioning, “all were powerful.”

“I'll never forget when I sat down with A.G. Lafley (the former CEO of Procter & Gamble) to talk with him about his world of leadership. I had a series of questions related to research about global leadership and I swear he asked me far more questions in that interview than I asked him because he was just simply curious about what was going on in the research.”

Another was Michael Dell. “I had the naivete to ask Michael if he had any favourite questions he likes to ask when he wanders around the world. And he instantly responded with a quizzical look, like ‘That's a dumb question.’ Then he said : “Hal if I had some favourite questions, everybody would know the answers. Instead, when I'm wandering the world, I try to construct a question for every conversation that might generate information that I never had before’. And for most of these innovative entrepreneurs, that's just how they think."

Networking

Typically, when we think of networking, we think of this in terms of jobs, a career or maybe social life. But when it comes to creativity, it takes on a different meaning. “Innovators are intentional about finding diverse people who are just the opposites of who they are, that they talk to, to get ideas that seriously challenge their own,” Gregersen says. Creative and innovative entrepreneurs look for people who are “completely different in terms of perspective” and regularly discuss ideas and options with them “to get divergent viewpoints.” There could be differences in gender, industry, age, country of origin, or even politics. “If I'm on the right, they're on the left, that kind of notion. And those sorts of diverse inputs in terms of conversations enabled them to get new ideas,” he says.

“Now it doesn't come instantly. Sometimes the conversations provide their own insights.” David Neeleman, founder of JetBlue Airways and now CEO of Azul Airlines in Brazil, got the idea for paperless ticketing or e-ticketing, Gregersen says, by talking to one of his employees about the frustration of having to carry around paper tickets in order to give them to passengers flying on their planes. “So that conversation then led to a new idea and a way of doing things differently.”

Disruptive innovation

Another of the co-authors of the study, Clayton Christensen, is an expert in disruptive innovation and this led Gregersen to wonder what the origin was of “those disruptive organisations that changed whole industries.” They then drew up a list of the world’s most innovative companies based in part on BusinessWeek’s ”Most Innovative Company” ranking and began interviewing the CEOs or founders.

They got access to the likes of Dell, asking him and others: "Tell us about what was going on when you got the initial idea that led to this innovative business called Dell computer (or Amazon in the case of Bezos)." They then realised, when looking at the responses to this question, that innovative entrepreneurs are “doing a lot of the same things -- there’s a little bit of variation but a lot of the same things.”

At that stage, they developed a self assessment and 360 degree survey based on the concepts of experimenting and so on, and assessed ‘thousands of executives and entrepreneurs.’ “And what we discovered was that those engaging in these behaviours and this thinking pattern, were actually the ones who delivered breakthrough processes, new products and services, new business lines within companies, corporate entrepreneurship, and new businesses outside of companies -- all of which were financially profitable and successful.”

“At the core of this, all these folks were driven by a fundamental bias against the status quo. They were absolutely uncomfortable with things being the way they are. They wanted to make things change ... They wanted to change the world. And they're going to risk failure in order to make that a reality.”

Corporate decision-making, he says, does “not usually value or support innovative actions.” Yet, some companies do. P&G’s marketers, for example, spend more than 12 hours on average each month just observing customers. “They value the behaviour and they get the innovative results. So one of the surprises for me is that even though these are relatively straightforward things that we could do, most of us have lost the capability to do them.”

Practising and developing the skills

Gregersen says the five discovery skills may seem ‘intuitive’ but when it comes to the actual practice, “doing them is counterintuitive.” That’s because the adult world in which we live “does not value these actions.”

Gregersen’s advice? Start acting like a child again: “Not 100 per cent of the time, that would be absurd. We're adults and we have to run businesses. But 20 per cent, 25 per cent of our time, act like a four-year-old again,” Gregersen told INSEAD Knowledge. “Because all these skills are what four-year-olds do. They ask thousands of questions: ‘Why?’ ‘Why not?’ This and that. They're always asking those questions ... They observe intensely and they'll talk to just about anybody.”

“These are the things that we all did as four-year-olds. We all did this stuff. And if we happened to attend a Montessori-type school like many innovative entrepreneurs did, then we still might be doing this stuff. But most school and corporate systems consistently say: ‘Don't do it, stop doing it’ ... and we lose our innate creative capacity.”

But this ability is not lost forever. “We can get it back and that's where, if I want to become better at questioning, I start asking more questions.”

His suggestion is to get a journal and, if you've got a problem, take a few minutes each day to write down questions about that problem. After a month or so, “your questions will change and it's by changing the question that we change our fundamental understanding about the problem that leads us to a solution that we never thought of before.”

Take notes when observing others. “Step back from (the problem or situation), talk to people: ‘What did you learn? What surprised you? What was interesting?’ If you like to talk to people, talk to somebody different: maybe on another floor, a different building, a different office, another country, but talk to somebody who's 180 degrees different from you. These are things that we can do and they don't take a lot of time to do them.”

“Innovation is a habit,” Gregersen says. “And for these innovative entrepreneurs it's a way of life. It's the fabric of who they are. And for others who aren't that way, they could be: if they choose to act different to think different.”

You can find more about the ‘Innovator’s DNA’ in the December edition of theHarvard Business Review.

Hal Gregersen is an affiliate professor of leadership at INSEAD. The co-authors of the study are Jeffrey Dyer, a strategy professor at Brigham Young University, and Clayton Christensen, a professor of business administration at Harvard.

China’s Babytree.com: how it achieved its growth spurt

Just three years after starting up, Babytree.com, a social networking site for parents in China already boasts some 12 million visitors, a mammoth feat by any standards.

Co-founded by Allen Wang who is also the chief executive officer, and backed by Matrix, a venture capital firm in Boston, Babytree.com has been hailed the Chinese equivalent of Facebook for kids and parents.

But Wang is modest about his company’s success. “We don’t actually have a secret ingredient as to why we’re growing so quickly and to such a scale.” He does however allude to two things that may have contributed to the site’s stickiness.

First, he says, is the site’s attention to product detail to make the customer experience as seamless and as pleasant as possible. For example, Babytree’s uploading feature allows parents to upload not just one, but numerous photos at a time. This has proven to be so popular that the site is the largest photo deposit site in China for young parents, with the total number of pictures stored today standing at around 100 million.

Wang reveals he’s come up with an optimum number of 50 photos because he believes that if you “turn up the volume too much” and enable parents to upload photos by the hundreds, then the idea becomes in their mind unmanageable, even though it is still relatively easy.

Word of mouth also helped to boost traffic to the site as Wang says he has not really been spending marketing dollars at all. He reveals that the average monthly spend was “less than US$10,000” and that “it’s probably a fraction of that right now.” Instead, he focuses on getting people to talk about Babytree in places where they congregate, for example in online chat rooms online as well as offline events.

But perhaps it is Wang’s Google background and his philosophy of “launch many, launch early” which he picked up from the internet search giant that has really put Babytree on this trajectory. Since its inception, Babytree has launched more than 40 products ranging from the picture uploading mentioned earlier, to blogs and online sales of baby products.

His prior experiences at Yahoo! and Procter & Gamble (P&G) may also have served as inspiration. “To some degree, I do agree that my experiences at P&G, at Yahoo! - and my last professional large scale-experience was with Google in Asia - they all have taught me many things, among which is paying attention to your users, which is P&G’s mantra of consumer advertising. They’re launching many products and launch them early and test them against (their) users.”

That approach however does not seem suited for China. “I have to say all of those combined are not adequate to win in China, and I’m still learning this part which is to act very fast, learn the local ways and compete effectively with a low budget, against ‘scrappy’ entrepreneurs who are just ready to do anything … to take over the leadership position from your side.”

This, he explains, accounts for why multinationals like Google have a hard time in China, and why competition especially in the internet domain, is fierce. He reasons that though MNCs bring with them unsurpassable talent, it is not the right kind of talent that can “fight and win in the local environment”.

A plausible solution is for MNCs to recruit local Chinese. “I think actually that what kind of people you use, you have the courage to open up the floodgates and say ‘let me actually recruit people that I may not know very well, but they have proven themselves as successful people running local businesses’, versus people who are educated in the West, who have relatively very low local knowledge - that’s a key part.’”

Though Wang has clearly mastered the art of going local with Babytree, he has attracted international attention from P&G and Kimberly-Clark, whose adverts along with other MNCs, account for 60 per cent of Babytree’s revenue.

And he is not showing any signs of slowing down, though he says he is not quite ready to pursue the IPO route. “We are profitable … Going IPO is, frankly speaking, not our top (priority). Our first and foremost agenda is to push it even bigger in terms of the reach and our coverage. There are after all 15 million babies born each year in China, (multiply by) six, we’re actually talking about 100 million families with a kid every year following into our age range, and many of them in the coming years will get online. So the total population following in this age range will quickly exceed 70, 80, 90 million, and we’re still just reaching just a small fraction of that population.”

Nursing China’s aged back to health

If third time’s really the charm, then social entrepreneur Ninie Wang’s new business model should also really take off.

Her company, Pinetree, originally founded in 2004, then a provider of integrated recreational services to promote an active lifestyle among senior citizens, changed its focus in 2008 to help senior citizens become more computer-literate and internet-savvy.

Today, Pinetree’s business model has again evolved, into one focused on nursing. But the target audience of senior citizens has remained constant throughout, because Wang’s motivation to set up Pinetree originally centered around her own ageing parents.

With 170 million people in China over the age of 60 -- the equivalent of about 13 per cent of the population -- Wang says there is an “urgent need for professional care”.

This is further exacerbated by the fact that many hospitals operate on a quick turnaround of patients, leaving the elderly who often need rehabilitation or convalescent care, back in their homes but not fully recovered. According to Wang, more than 98 per cent of seniors are ageing at home, because culturally, children don’t put their parents in nursing homes.

And this, she says, is where Pinetree comes in. Whereas her former business plan was a ‘nice to have’ for the elderly, she says healthcare is a ‘must have’.

So Ninie Wang (MBA ‘03D) started Pinetree Senior Care Services and became its CEO, with six nurses who went through “hundreds of trials in three months”. There are currently two service units from which nurses can be dispatched to different neighbourhoods, so travel time is minimised between homes.

But there are bigger plans as Wang reveals she aims to have 300 to 500 nurses serving at least a few thousand different homes by the end of this year. “The idea of this model is that it requires much less capital investment compared to institutional care; and secondly it can be replicated much more quickly to serve more people at the same time.”

Her five-year plan is even more ambitious. “In five years, we want to expand this to a national network of hundreds or even over a thousand different service units, and having tens of thousands of nurses in the network, serving at least five million senior citizens in China, ” she told INSEAD Knowledge.

Setting up a social enterprise, however, does come with challenges, and in some ways, may be more challenging than a conventional for-profit business. “When you look at not-for-profit or charity, you probably don’t care as much as businesses for customer and employee satisfaction; because for businesses, you really need to make the customer happy, make sure you can have a high retention of the customer -- you can build this in the long run. But for charities, most people just give and feel good. So in my mind, the customer experience or the quality of service may also suffer.”

The second problem, she adds, is scaling up such enterprises. “If you do it as a business, whereby you give people a way to make a living or even develop a career as well as give them purpose to the work, then you can really attract many more people, essentially in the end build an army of the talent to join you. But when you do charity or not-for-profit, (there’s) only a small pool of people who can contribute their time and effort and energy in initiatives like this -- so the impact you can accomplish is also smaller.”

Wang also thinks that entrepreneurs particularly in China have it tougher. That because with China at the epicentre of global economic growth, more opportunities abound – but so do distractions. “You have almost on a daily basis, new ideas or new opportunities for partnership. As an entrepreneur in China, you’ve got to be very clear about what you want to achieve and not to be tempted away too easily.”

That said, Wang cautions that China should not be the end game for entrepreneurs -- social or otherwise. “Of course, for now everybody is looking at China, but I think we should always remain open to this global perspective when we look at doing any business in this country, because China is also more and more open to the world.”

And she is putting this into practice at Pinetree. “This ageing challenge is not just China’s own problem; it’s global, it’s universal. And with that, we really work with international experts in this field ... We have a multidisciplinary team working from many different countries, addressing the universal challenges and problems from having a fast ageing population. On that front, Pinetree’s work is never going to be standing alone. We are hand in hand with many other countries in this.”

A leap into languages

Some entrepreneurs are born into the role. Such was the

Tom Adams

case of Tom Adams who, at the age of 30, became CEO for a family business selling language-learning software. Rosetta Stone may not have been Adams’ creation, but the company’s phenomenal growth during his tenure is testimony to the role of the entrepreneur within a mature corporate structure. Armed with his passion for languages and skillful execution, Adams took Rosetta Stone to new heights, achieving 20-fold growth during his seven-year tenure.

With a freshly-minted MBA, Adams (‘01J) was named CEO of Fairfield Language Technologies in 2003, when the company was earning about $10 million in annual revenues and had 90 full-time employees. Today, the re-christened and publicly-traded Rosetta Stone Inc boasts some 1,700 employees and had second-quarter revenues of $60.6 million, a seven per cent increase compared with the same period a year earlier. In 2009, the company recorded $252.3 million in annual revenues.

“What I was so excited about was that this was a company that was trying to change its industry or had the potential to,” says Adams of his decision to join in 2003.

Rosetta Stone’s self-study language solutions include software packages and online services with speech recognition capabilities. Its signature yellow boxes at mall kiosks and airports present an alternative approach to traditional classroom teaching techniques. Memorising grammar rules and vocabulary lists are replaced with interactive experiences of reading, recognising and speaking. Its premium

offering is TOTALe, a $ 750 product that builds on the original course by integrating coach-led practice sessions, language games and live online access to native speakers.

The company’s expansion did come with tremendous growing pains, Adams told INSEAD Knowledge, as it involved reconfiguring systems to handle the million-plus transactions a year -- an expensive but necessary initiative to manage a growing consumer-driven business. The company also had to structure its management team to build scalability as its products are currently available in 31 languages and clients include educational institutions, armed forces, government agencies and corporations.

A Rosetta Stone teaching module

Adams took the company public in April 2009, in the trough of the recession, becoming only the third company at the time to do so on the New York Stock Exchange. “There was that moment of ‘are we doing something crazy here?’”, reflects Adams. Apart from the pressures of providing liquidity for private equity investors, the company was in the throes of international expansion and in need of the extra capital. “In the end, we felt so good about the business, we felt so good about our prospects of our company that we weren’t deterred.”

However, the stock that was dubbed among the hottest IPOs in 2009 has hit snags this year following disappointing US sales and the recent departures of two high-level executives. In the second quarter, US sales that made up 86 percent of revenues declined two per cent from the previous year. Since July 22, its stock price has dropped 25 per cent and trades below its opening day price. The company also lowered its 2010 sales bookings and revenue forecasts. Analysts are pinning the company’s long-term recovery on the performance of a new product launch in September and continued international growth that saw a 155 per cent annual increase from the second quarter of last year.

With a noticeable air of uncertainty among analysts concerning the company’s management woes and US sales performance, Adams’ challenges are among his latest growing pains that come with being a publicly-owned company.

Visiting INSEAD earlier this year to address participants at an Entrepreneurship Bootcamp, Adams had this to say: “[MBA students have] got to be very sensitive to the window of opportunity when they come out of business school. Many of us put off starting a business or going entrepreneurial for a long time and we come to regret it. The opportunity to pursue your passion is the way to find true happiness.”

Energy’s final frontier?

For Peter Sage, the sky isn’t really the limit. It’s even higher, somewhere around 36,000 kilometres above the Earth’s atmosphere.

Peter Sage

An entrepreneur with twenty years’ experience, Sage’s latest start-up venture, Space Energy, aims to deliver space-based solar power (SBSP) by collecting and transmitting energy using satellites positioned in space. The catchall: energy on demand, 24 hours a day.

Why now? “The challenge has always been economics, closing the business plan and the business case and making that work and having the underpinnings of profitability,” says Sage, one of Space Energy’s co-founders. “It’s only going to happen if you get serious cash on the table. Scientists that have tried to get this funded in the past with a passion for knowing that it can be done have always fallen short.”

The concept has been around for decades – in fact, the idea of solar cells in space was pioneered in the late ‘60s by American scientist Peter Glaser. Essentially, a

Space based solar power satellite depiction Source: Space Energy

large solar satellite fitted with collectors -- photovoltaic panels in Space Energy’s endeavour -- would use radiowave beams to transmit energy to receiving grids (or antennas) on Earth that would eventually feed into a power grid to provide electricity. The basic principle is already in use with communication satellites routinely transmitting radiowave signals to connect cell phones, wireless internet or cordless phone signals, for instance.

Space Energy’s mission -- and that of Sage -- is to connect the dots between the scientists, the manufacturers, the investors, essentially coordinate the efforts between all parties involved. Advances in technology -- with photovoltaic cells becoming lighter, cheaper and more efficient, as well as improved satellite technology and safer, reliable space transportation -- have all made this renewable energy source increasingly viable. “We are dealing with an inevitable technology,” says Sage. “The time in history is converging at this point to support clean tech and clean energy on every political table.”

In its ongoing first phase, Sage’s team is working towards creating and launching a prototype satellite into orbit to demonstrate viability. A successful operation on all fronts will qualify Space Energy’s full-fledged jump to larger-scale, commercial satellite. The company is simultaneously developing a ground-based solar business to support its space development efforts. “That gives investors comfort because it’s a traditional technology,” explains Sage. “They get a good return on investment and at the same time they helps fund a space project that has a huge equity kicker.”

Challenges abound as the proposal involves obtaining regulatory permits and approvals from numerous governments and international agencies, improving launch capabilities, assembling a massive satellite in space, alongside the concerns of managing costs and deadlines. However, there have been some encouraging developments: a long-range wireless power transmission was successfully conducted in mid-2008 between two Hawaiian islands some 148 kilometers miles apart, more than the distance from the surface of the Earth to the boundary of space. Not quite the distance to geosynchronous orbit but still a notable advance.

With interest in renewable energy at an all-time high, venture capital investments in clean-tech firms in North America, Europe, China and India hit four billion dollars in the first half of 2010, according to a preliminary research report by Cleantech Group and Deloitte. The solar sector made up around 40 per cent of second quarter investments, scoring $811 million in venture investment. In an annual report by policy group REN21, renewables delivered 18 percent of global electric supply in 2009. Total investment in renewable energy capacity (excluding large hydro) was $150 billion in 2009, a more than six-fold jump from the $20 billion invested in 2004.

When, or indeed if, Space Energy will accomplish its goals is hard to predict. But for Peter Sage, this mission captures the essence of entrepreneurship. “It’s being able to take an idea, see a gap in the market or respond to a challenge and find a creative way to be able to bring that to market in a profitable fashion that adds value and serves a purpose.”

Entrepreneurship: inspiring ambitions

Entrepreneurs need to have plenty of self-confidence and be passionate about their projects – not just when starting up their own businesses but also when innovating within large corporations.

Filipe Santos

“The biggest difference I see between managers and entrepreneurs is that managers analyse a lot and entrepreneurs act a lot,” says INSEAD Associate Professor of EntrepreneurshipFilipe Santos, who is also Director of the Rudolf and Valeria Maag International Centre for Entrepreneurship (Maag ICE). For instance, whereas management executives spend a lot of time analysing data and research before crafting a decision, “entrepreneurship is the opposite. You need to have the confidence to act and then learn from the outcomes.”

Just ask entrepreneurs such as Tom Adams and Peter Sage (see sidebars). “It’s not about the money,” says Adams, CEO of Rosetta Stone Inc., a language learning solutions provider. “Most people who succeed at being entrepreneurs are doing it for other reasons.” Peter Sage, who’s been at the helm of multiple ventures including mail order, land development and health clubs, says, “The most important environment for an entrepreneur is the internal environment. What is your passion? What is your ability to handle uncertainty? What is your drive?” His latest venture Space Energy aims to deliver solar power collected in space using satellite.

A leap into languages Some entrepreneurs are born into the role. Such was the case of Tom Adams who, at the age of 30, became CEO for a family business selling language-learning software. Rosetta Stone may not have been Adams’ creation, but the company’s phenomenal growth during his tenure is testimony to the role of the entrepreneur within a mature corporate structure. Read more... Energy's final frontier? For Peter Sage, the sky isn’t really the limit. It’s even higher, somewhere around 36,000 kilometres above the Earth’s atmosphere. An entrepreneur with twenty years’ experience, Sage’s latest start-up venture, Space Energy, aims to deliver space-based solar power (SBSP) by collecting and transmitting energy using satellites positioned in space. The catchall: energy on demand, 24 hours a day. Read more...

INSEAD’s Entrepreneurship Bootcamp tries to instill the confidence that entrepreneurs will need if they’re to be successful in pitching their business ideas to potential investors.

It’s a 48-hour immersion programme in which the participants – INSEAD alumni and MBA students – are put through the rigours of conceiving, developing and presenting an executable new business venture. They arrive at off-campus locations near the school’s Europe and Asia campuses in Fontainebleau and Singapore on a Friday night. Instructors lead students through a series of workshops designed to help them identify ideas, to recruit dynamic teams and then formulate strategies. The final test: a two-minute pitch to a panel of angel investors on Sunday afternoon.

The Bootcamp “really challenges people to think about themselves more than anything,” says Santos. “Am I an entrepreneur? Do I like entrepreneurial contexts? Do I have it in me? And can I build the capabilities to deliver?”

Getting started

Recent studies show that, apart from having the confidence to take calculated risks, aspiring entrepreneurs often find it difficult to pin down the necessary funding. That said, Santos believes you should “never start with raising funds.” He adds: “It has to be about solving a problem, assembling a passionate group of people and coming up with a venture design that you can take to market quickly.”

Paul Kewene-Hite

His sentiments are shared by Paul Kewene-Hite, recently appointed Adjunct Professor of Entrepreneurship and Director of the Entrepreneurship Accelerator at INSEAD. “I emphasise the team as being the most important, that execution is the next most important, and then the idea,” says Kewene-Hite, who developed and leads the Bootcamp workshops. With two decades of experience with start-ups and building and managing technology companies, Kewene-Hite doesn’t limit entrepreneurship to setting up new businesses. “We need more corporate entrepreneurs and more entrepreneurs in big companies,“ he explains. Consequently, the school has just launched a Corporate Entrepreneurship Initiative to build capabilities and develop new programmes that can help established companies become more effective at launching new businesses.

A former technology evangelist at Apple, Kewene-Hite adds: “You can be entrepreneurial inside a machine if you are thinking laterally, if you are thinking about how to materially improve and innovate. If you are proactive, if you are dynamic, refining the questions to get better answers, you are an entrepreneur.”

Having an entrepreneur as a role model can help, whether it’s a parent, family member or friend, says Santos, as it can encourage would-be entrepreneurs to look beyond traditional careers and jobs. Downturns can also mean resources are available at a lower cost, whether in terms of office space or talent.

But ultimately, to succeed, it will be your innate abilities to discover something you are passionate about, to be able to assess trends, find new opportunities or problems that can be solved differently, and to persevere despite setbacks.

It’s not so much a question of finding the biggest opportunity, says Santos, but rather one which fits with your personal goals and beliefs. “It’s wrong to say that the internet is great so let’s all do internet(-related projects). That is a recipe for disaster.” Effective entrepreneurs tend to be contrarians, he adds. They see emerging trends and connect the dots before other people. By the time everyone is doing something, then it is already too late for the entrepreneur.

Entrepreneurship at INSEAD

In July, the school received a five million euro endowment from alumnus Rudolf Maag (MBA ‘73) to fund the continued growth of the Maag Centre for Entrepreneurship, which was set up in 2003. The Centre runs an Entrepreneurship Accelerator, a series of events designed for MBA students seeking a more focused entrepreneurial education and experience at INSEAD.

The highlight of the Accelerator is the two-day Bootcamp. “If anything should validate why (students) need the strategy class and the marketing class and the ethics class and all the different courses that are offered, this experience should really emphasise that,” says Kewene-Hite on how the Bootcamp can complement the MBA curriculum. “(They) should really develop them as practical tools that you can use as entrepreneurs.” Kewene-Hite heads a group of 30 Entrepreneurs in Residence who mentor MBA students interested in entrepreneurial projects.

In addition to the Bootcamp, the school also offers a New Ventures elective for MBA students who are interested in becoming entrepreneurs. “The Bootcamp opens the door and the New Ventures course allows them to fill the holes and understand the different elements of entrepreneurship,” explains Santos.

The Maag Center offers access to external projects, entrepreneurial sales training, pitch mentoring and a Global Entrepreneurship Forum which brings together alumni and MBA students. The Accelerator complements the MBA entrepreneurship curriculum, which offers 20 electives, an Entrepreneurship day and a Business Venture Competition. Maag has also launched a Global Angel Investing Network (GAIN) to connect INSEAD angel investors and entrepreneurs, relying on the strength of 40,000 alumni worldwide.

This month, the Maag Centre has launched a new programme – The Social Entrepreneurship Catalyst - to promote social entrepreneurship and impact investing for the INSEAD MBAs and alumni. “An interesting trend in entrepreneurship is the formidable growth and interest in entrepreneurial efforts that are not focused on capturing value,” says Santos, “but on creating value for society by solving important problems that markets and governments have failed to tackle.”

“In essence entrepreneurship is an approach to create value by solving neglected problems through new business initiatives. These initiatives could happen as new commercial ventures, social ventures, corporate ventures, even government-led ventures. The essence of entrepreneurship is solving problems in innovative, practical and sustainable ways. Our society needs more entrepreneurship.”

Debunking 'myths' about China's imminent collapse

China’s red-hot economy is in no danger of an impending collapse despite warnings that the debt-fuelled bubble in the nation’s property market is close to bursting, says Jing Ulrich, JPMorgan’s managing director and chairman of China Equities and Commodities and a speaker at the Reporting New Realities media conference held recently in Hong Kong.

Responding to a question at the conference about what keeps her awake at night about China’s economy, Jing says she feels a need to “debunk the myths” about an impending collapse of China’s economy. These “myths” include suggestions that China’s fiscal position may be exponentially worse than Dubai’s and that local government debt levels are too high.

“I do think there are some areas of potential concern, such as in the high-end real estate market. There are some areas where we are experiencing over-capacity such as the steel industry and the aluminum industry,” says Ulrich.

“All these areas are worth monitoring very closely. But those people who are suggesting China is up for its economic reckoning are way off the mark.”

Two weeks ago, the Shanghai Composite Index entered a bear market, falling more than 20 per cent from a November peak amid concerns that Beijing’s efforts to curb inflation by tightening monetary policy will hurt earnings.

In early May, investor Marc Faber, the publisher of the Gloom, Boom & Doom report, warned that China’s economy will slow and possibly crash in the next nine to 12 months, noting that declining stock and commodity prices signal that the bubble in the property market is set to burst.

Other naysayers about China’s economy include billionaire investor Jim Chanos and Harvard University professor Kenneth Rogoff, a former chief economist at the International Monetary Fund. Both have also been warning of an economic crash in China. They point to the government’s rollout of a massive RMB4 trillion (US$586 billion) economic stimulus package in late 2008 amid the global financial crisis, which helped fuel the speculatory bubble in China’s property market. Chanos noted that as much as 60 per cent of China’s gross domestic product is dependent on construction.

Other fears include rampant overcapacity in China’s various economic sectors, which could leave the Chinese with vast quantities of goods and products that they will be unable to sell.

Last year, Chinese banks issued loans of an unprecedented RMB9.59 trillion (US$1.4 trillion), helping the world’s third-largest economy recover from the aftermath of the crisis.

In her analysis of China’s economy, JPMorgan’s Ulrich says there are three key economic shifts. First, Beijing has moved to a more neutral monetary policy after adopting an ultra expansionary one in 2009 due to the crisis. For instance, the government has moved to reduce lending by banks and adopt other tightening measures such as a possible interest rate hike in the second or third quarter of this year, as well as allowing the renminbi to appreciate against the US dollar in the coming months, says Ulrich.

To be sure, Beijing’s monetary tightening is aimed at controlling inflation, prevent the deterioration of the asset quality of the banking system and avoid the build-up of overcapacity in the industry, says Ulrich.

Second, Beijing is shifting away from its highly supportive policy towards the real estate sector in a bid to rein in asset price inflation and asset bubbles. Towards that end, the government this year introduced more restrictive down payment requirements, higher mortgage rates, a ban on lending for third-home purchases, and increased scrutiny of developers’ financing. Ulrich notes that after these measures were implemented, property transaction volumes fell by between 20 and 30 per cent.

“I think that it’s important that the government actually acts aggressively in this instance because if they didn’t do anything, if they let property prices running away, I think the ramifications could be very negative,” says Ulrich.

Lastly, Beijing is intent on shifting away from state-driven investments towards more private sector consumption. Ulrich says that with China’s economy having stabilised in the wake of the global financial crisis, the government recognises the need to focus on private consumption to prevent private sector investments from being crowded out by public sector investments.

Beijing has thus disbursed about RMB45 billion to rural residents for them to trade in their old appliances and vehicles, and reduced taxes on smaller-sized vehicles five per cent from 10. And to relieve the pressure on the middle class, Beijing will spend US$123 billion in the next two years to provide basic healthcare services to 90 per cent of the Chinese people, and aims to achieve universal healthcare by 2020, says Ulrich.

“If people have pension services, healthcare and education services provided for, they can then feel a lot more confident to spend their savings rather than keeping all that money in the bank for a rainy day,” says Ulrich. “So I think this is one of the most encouraging trends we will see in the coming few months and the coming years.”

Another possible trend is that China will become more inward-looking over the next decade, says Jin Canrong, professor and associate dean of the School of International Studies at Renmin University of China.

Speaking to INSEAD Knowledge on the sidelines of the conference, Jin explains that he thinks China will be inward-looking because its leaders will always view the country’s domestic challenges as their top priority. But he acknowledges that China also has a dual-identity in that it has a major role to play in the international community.

Jin adds that from a strategic standpoint, China is very satisfied with the status quo in the world and that Beijing is unwilling for change to occur, even if the US wants to pursue change. But from a tactical standpoint, Jin believes that China will become more active in protecting its interests overseas, particularly in strengthening its navy to protect shipping lanes.

Asked about his view that the world will be disappointed if it expects China to shoulder more responsibility internationally, Jin says there is a gap between the perceptions of foreigners about China’s capability and the reality.

“I think that the real case is that China will take more responsibility because China is fully aware that power means responsibility,” says Jin. “With more power China gets, China should have more responsibility. But China tries to keep the balance between the capability and the responsibility. China will resist the part beyond its capability.”