Talpra Consulting [email protected] Leadership of Global High Tech Ventures Leslie G. Polgar CEO...

Talpra [email protected]

Leadership of Global High Tech Ventures

Leslie G. PolgarCEOTalpra Consulting

Guest LectureProf. Jim Lincoln’s

BA 105 Class on Organizational Behavior

University of California - BerkeleyHaas School of Business

April 19, 2005


OutlineMotivation and challenges for startups in the international arena

The global vs. local challenge

Myths & limits of applicability of US business paradigms

Introduction to three cases on leadership in global high tech

Presentation & interactive class discussion of the cases

Results: what actually happened?

Observations about the cases

Concluding remarks


Motivation for high-tech startups to go international

To gain access to:

1. Markets & distribution channels for your: a. Product/service Cases 1 & 2b. Intellectual Property (grant IP licenses)

2. Suppliers (e.g., manufacturing)3. Complementary technologies4. Money

Case 3


Challenges facing high-tech startups in the international arena

Never heard of you…who, exactly, are you?*Lack of understanding of business practices and

cultural norms*Miscommunication/language*Theft of your IP, brand, personnel, customersCurrency/exchange issues---------------------------* Issues arising in the three cases


The Global vs. Local Challenge

Strategies are global, but implementation is local

If a strategy is not implementable in the pertinent local context, it is useless

Paradox: “People are all the same, only different”(sometimes attributed to Yogi Berra)

The failure to implement a strategy is often due todivergent expectations and perceptions arising from cultural and linguistic differences


Five Cultural Myths to Avoid in Conducting Global Business

1. US business practices and models are universal norms

2. Nationality-based assumptions are reliable without exception

3. English is universal, hence our words mean the same for others as they do for us

4. Gestures (physical and social) are for appearance only

5. The internet makes face-to-face business obsolete


Introduction to the Three Cases(All are real B2B situations; you are the Unit’s President)

1. 1991 Bertram Labs “Chicken or the Egg”

US semiconductor startup owned German corporation,

debating whether (and if so, how) to enter Japanese market

2. 1995 Air Liquide Electronics “Franco-American Wars”

Stagnant US electronics division of French company;

division is in last place in market share and sinking

3. 2000 Kodak Display Products “Negotiating with Yourself”

Flat panel display startup division of famous US firm;

owns new technology, but has no display manufacturing

experience


Case 1. Bertram Labs: Situation & Context

• Date: 1991 NJ startup, spin-out from RCA/GE, bought by Chemetall GmbH Germany

• Chemetall: smart global industrial tech niche player, owns 20 firms in 16 countries, total $700M sales

• German Board of Directors, US President

• Product: gallium arsenide specialty semiconductors

• Bertram’s competitive advantages:

Excellent product quality, low mfg equipment cost

Patient, globally sophisticated investors


Bertram Labs: “The Chicken or the Egg”

Business ChallengesEnd-market: consumer (Japan), military (Euro & USA)

> 80% of total market is in Japan for consumer end-products (lasers for CD players & printers)

Competitors: large Japanese firms (Sumitomo, Hitachi,Mitsubishi); a few, small boutiques elsewhere

Strategic Cultural DimensionGerman Board of Directors adamant that prerequisite for successful market entry into Japan is a solid reference list of US and European customers


Bertram Labs’ Strategic Issues

1. Is entering Japanese market necessary? Why/why not?Absolutely: there is no real business otherwise

2. If it is, what is of #1 importance in that market?Reliability via proven quality: Statistical Process Control

3. Would a list of US/Euro reference customers be useful?No; Japan was leader, US/Euro refs lack credibility

4. Your Board said no. So what do you do?Enter indirectly via non-Japanese channel


Bertram Labs: Strategy Implementation

• Gain credibility: publicize internal SPC

data (usually kept secret)• Presentations at international tech

conferences• Smart, focused advertising and PR n

ext

3 sl

ides


Bertram Labs Rigorous Statistical Process Control (SPC)


Use of mundane SPC in Marketing: Presentations at Tech Conferences


Focused Advertising

Communicating Bertram Labs’ Commitment to Quality


Bertram Labs Results…so what happened?

Became the fastest growing firm in its field

Penetrated Japan via UK boutique supplier to Japan

Japanese end-customers figured out who did the actual manufacturing and came to Bertram

60% of all Bertram sales generated by exports to Japan

Investors exited via sale of the company to Dutch firm Akzo, which had a joint venture with Japan’s Showa Denko…Bertram’s largest end-customer in Japan


Case 2. Air Liquide Electronics Situation & Context

Date: 1995

Parent company is l’Air Liquide, SA of Paris

World’s oldest (1902) and largest supplier of industrial, specialty & medical gases, with operations in 61 countries

US subsidiary is Air Liquide America ($1.2B rev)

Electronics Division: 150 employees, $42M revenues


Air Liquide: “The Franco-American War”Business Challenges

Increase market share: US Electronics was in 5th (last) place

Targets: top chip-makers (e.g., AMD, IBM, Intel, Motorola, TI)

Products: gases, chemicals, equipment and on-customer site engineering & technical services

Organizational & Cultural DimensionsFrench parent had top-level staff for electronics at Paris HQ

Paris HQ staff leader: senior Japanese executive, fluent in French

US Electronics reports to Air Liquide America CEO in Houston

US Electronics had history of non-cooperation between expatriate French & US executives


Air Liquide Electronics Strategic Issues• What is the dominant culture?

French• What culture is the gate-keeper?

Japanese

• What must you accomplish first?

End the US-French wars; show discipline; win confidence of the Japanese gatekeeper & Paris HQ

• What do global chip making customers need?

Higher yield by “copying exactly”: same materials, equipment, tech services at their fabs worldwide

• What is your greatest competitive strength?

Global presence of the French parent firm


Coming to America…going overseas.

Before we were here, our reliabilitywas well-known “over there:” in Europe since 1902. In Japan, 1907.In Singapore, 1917. In 61 countries, the global leader is Air Liquide.

A Korean firm builds its first fab inthe USA. Japanese and Americangiants join to build a fab here.

An American chipmaker builds in Taiwan and Europe. What do theyhave in common? They all choseAir Liquide.

Our reliability in process gases,select chemicals, related equipmentand software provides our customer-partners with the competitiveadvantage.

Here. There. Worldwide.

Communicating Air Liquide’s Greatest Strength


Air Liquide Electronics Results…so what happened?

Sales tripled by organic growth to $120M+ in three years

Built major new accounts with IBM, Toshiba, Hyundai, Micron, MEMC

Moved from 5th to 3rd place in market share

Pre-tax profit up 19-fold in three years


Case 3. Kodak Display Products Situation & Context

Date: 2000

• Kodak is the world’s top imaging company, but transition from film to digital is tough

• Corporate Strategy: grow in digital, but preserve as much profitability as possible in aging film sector

• Kodak not in top 3 in global digital market share, but develops and owns some great digital technologies…

• Kodak invents new flat panel display technology (OLED*), owns large patent portfolio, starts business

*OLED = Organic Light Emitting Diode


Kodak “Negotiating with Yourself” Business Challenges

Enter the flat panel display market with OLED* technologyRecognize revenue growth & maintain maximum control feasibleOLED displays require complementary electronics technology,

making partnering necessaryKodak has no flat panel display manufacturing experience

Organizational & Cultural DimensionsSanyo has OLED complementary electronics & mfg experience Sanyo & Kodak already doing joint R&DSanyo is Kodak’s only unrestricted OLED licenseePresident of Sanyo USA is Japanese, in USA for 25 yrs

*OLED = Organic Light Emitting Diode


Kodak Display Products Strategic Issues

1. Which company should lead the JV? Why? Sanyo. Kodak has no experience in display mfg

2. What are the minority partner’s top concerns? Preserve as much control as possible and gain

understand the manufacturing process

3. How do you satisfy those concerns? Guaranteed minority rights on key decisions

4. Who is the pivotal figure who can get that? Sanyo’s USA President

5. What precedent would he respect? US history…see next slide


Using well-known historical precedent: A Bill of Rights for the Minority Partner

Washington at the Constitutional Congressby Junius Brutus Stearns (1810-1885), Virginia Museum of Fine Arts


Case 3. Kodak Display Products:Results…so what happened?

Formed a $350 Million manufacturing JV in Japan (capital was 66% Sanyo/34% Kodak)…next

slide

Brought world’s first color OLED display to market in one year after signing the JV

Initial OLED display product (in a digital camera) was a sellout, and won:

– Industry’s Gold Medal as “Best Display of 2002”

– Forbes’ “2003 Top 10 Nanotechnology Award”


Front page…


World’s First Full Color Commercial Active Matrix OLED Display

Image from Eastman Kodak website


Society for Information Display 2002 Gold Medal“Display of the Year” to the Kodak AM 550L OLED


Observations on the Three Cases• Trans-national behaviors permeate business, as

opposed to being “stand-alone” topics

• Understanding culture-based organizational behaviors was central to finding solutions

• The right strategy and implementation required the ability to deal with both internal and external cultures and to align these to maximize competitive strengths

• In retrospect, the solutions were “obvious” but at the time, they were risky and controversial


Concluding Remarks: What is Needed to Manage the Global Enterprise Successfully

• Know the culture, history & politics of other nations

(history and biography are crucial resources)• Be aware of international current events

(many sources, but The Economist is my #1)• Keep an open mind, eye and ear

• Face-to-face relationship building is crucial

• Genuine humility and respect are essential


Speaker Bio: Leslie G. Polgar

Leslie Polgar served as the founding President of Eastman Kodak Company's Display Products Business from 2000 to 2003. Previously, he was VP/General Manager of the Semiconductor Products Group of Etec Systems, bought by Applied Materials for $2.8 Billion in 2000.

As VP-Marketing & Sales and later as President or General Manager, he has led the building of five successful high-tech firms, two of which went public (TRC in environmental modeling software and Emcore in semiconductor equipment).

He holds a PhD in physics from Carnegie-Mellon University, an MBA from the University of Connecticut and a BS (physics/math) from the University of Michigan.

Talpra, his consulting firm, serves investors and principals of international high tech companies.

Talpra Consulting [email protected] Leadership of Global High Tech Ventures Leslie G. Polgar CEO...

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