Day 3, 1 June 2006, Thursday

.11

Habitats of Success
by Thomas Goh and Patrick Kelusa

Global competition waits for no one. In the increasingly complicated and competitive world, communities and businesses are finding ways to reinvent themselves by being innovative. To find out about what differentiates companies that compete successfully on the basis of innovation from the rest, International Survey Research (ISR) conducted a series of studies that examined the aspects of organisational culture that differentiate those companies from the rest. ISRs studies demonstrated that successful innovation companies excel at setting a tone within their cultures that is characterised by: An entrepreneurial, rather than a bureaucratic, management style. Support for risk-taking and trial and error. An easy exchange of ideas and information. Supportive work environments that use conflict constructively. Highly collaborative work teams. Also, ISR research indicates that smaller companies are perceived as especially skilled at idea-generation, or the incubation phase of innovation, whilst larger companies are better at bringing innovative ideas to fruition. These findings suggest that HR departments from companies of varying sizes face unique challenges when encouraging innovation. Smaller companies, with fewer local work units to manage, are more skilled at designing a local work environment to encourage innovation, but may lack the support needed to achieve execution. So how can companies, big and small, leverage on the existing opportunities to be more successful? To seek answers, we turn to Professor William Miller, who is widely considered an expert on building technology and innovation hubs in the Silicon Valley and around the world. Professor Miller is Stanford Universitys Herbert Hoover Professor of Public & Private Management Emeritus, and previously its Vice President and Provost. He is the Chairman of the Board at Sentius Corporation, President and CEO Emeritus, SRI International, Chairman of Board Emeritus Borland Software Corporation and has served on the board of directors of several major companies, such as Signetics, Firemans Fund America, First Interstate Bank and later the Wells Fargo Bank, Pacific Gas and Electric Company and Varian Associates. He works with governments of US, Singapore, Malaysia, Indonesia, Japan and Korea to help them establish their technology policies and practices. With a distinguished track record in both business and academia, he received multiple awards from the US, Korea and Japan. In his opinion, the way to support innovative companies is to create a favourable Habitat for Innovation and Entrepreneurship. The successful Habitat is one that builds the environment that will foster a mix of large multinational companies and local start-ups. The fuel for business is then ideas, talent and capital. He describes the features of an Entrepreneurial Habitat as one that creates favourable Rules of the Game to encourage entrepreneurship, supported by strong value-added business services, facilitated by free flow of capital, people and ideas, and establishing constantly growing global linkages to other industrial clusters. ISR: What are the challenges faced by companies in the Habitats? WM: One of the biggest challenges facing businesses is doing more with less. A study carried out by Joint Venture Silicon Valley Network found

that the value added by each employee in Santa Clara County had increased significantly from 2001 to 2002 (US$179,700 per employee in 2001 to US$184,300 in 2002). Im certain the statistics would follow this trend elsewhere. As companies try to do more with fewer people they will need effective productivity tools and technologies to help them. The trend of doing more with less is bringing risks for many developed countries as companies move jobs to countries with cheaper skilled labour like India and China. There will be continued pressure from low-cost, high-skilled countries, which will force developed nations to upgrade its skills and produce the highest value-added work. ISR: Your research indicates that these days, companies are more subjected to boom-and-bust cycles, but each new wave leads the region to higher levels than before the boom as they move to higher value-added portions of the value chain. Thus, companies move in the Boom, Bust and Build cycle instead of just Boom and Bust. So, what ingredients are needed to build or rebuild a company after a bust? And what do you think is a reasonable time frame to build after a bust? WM: Theres always a build period that follows a boom-and-bust cycle. I am confident that the technology business will emerge from the bubble era of the 1990s with several years of rebuilding, just as it did in the 1970s and 1980s. Companies, both old and new, build on technologies and service ideas that started in the boom. The use of the Internet is a good example. The use of the Internet is still doubling every six months due to uses of technologies and new business models that began in the boom part of the cycle. Physical, legal and social mechanisms that promote speed in product development and in cross-firm learning about both technical and business issues are keys to helping companies rebuild after a boom-and-bust period. Internally, a company should consider: Hiring experienced new hires so that minimal training is required. Soliciting advice from more experienced business people as well as outside technical expertise. Having specialised business functions for support, such as recruiting, marketing research, public relations and accounting. Having specialised technical functions, such as quality assurance, website hosting, disc manufacturing and documentation. Continued financing through life cycle of the company. Work in partnership with specialised firms, consultants and contractors. ISR: You mentioned a lot about using specialised knowledge and services. Is this a growing trend in innovation habitats, especially with the emergence of specialty industries such as bioinformatics, biotechnology and nanotechnology? WM: One of the most significant implications from the emergence of these trends is the need for a higher level of science and business education. I believe that biotechnology and info-technology are merging through the use of computing power to analyse new pharmaceuticals, and through the application of technology to create new medical devices. With the commercialisation of nanotechnology which is more scientifically based than info-technology we need to focus more on science in education. With the deepening of information and communications technology

such as Mobile Internet, productivity tools and social applications, more business education would be helpful. ISR: Given your experience and participation in entrepreneurship over the last few decades, in the Silicon Valley and around the world, what advice would you give to budding entrepreneurs? WM: Entrepreneurs need a positive, flexible attitude. They need to develop a dense and flexible network of tight relationships among people who know how to translate ideas and technology into new products and services fast enough to stay on the cutting edge of innovation. Entrepreneurs should develop an environment that rewards risk-taking and does not punish failure, as you need courage to be successful. Entrepreneurs will be challenged by boomand-bust cycles, therefore these companies need to manage these periods adapting to waves of innovation and adjusting to economic cycles. They need to think more in terms of boom, bust and build, not just boom and bust.

Thomas Goh is based in Hong Kong SAR and is ISRs Director of Greater China. Based in Chicago, Patrick Kelusa is ISRs Global Research Director.

Entrepreneurs need a positive, exible attitude. They need to develop a dense and exible network of tight relationships among people who know how to translate ideas and technology into new products and services fast enough to stay on the cutting edge of innovation. Professor William Miller

Talent Drives Performance

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