Dr. Dodd-Walker Strategic Management Entrepreneur of the Millennium: Bill Gates Class Participation Activity 1. What does he say about the importance of customers? 2. What type of management style does he use? What does he look for in employees? 3. What has he learned from playing bridge? 4. If he leaves Microsoft, what type of growth strategy (diversification) does he plan to pursue? 5. Discuss “The Force of Facts” at the individual level (i.e., career planning). 6. Do you think his projections are accurate? Why or why not? Entrepreneur Of The Millennium: Bill Gates He's redefined wealth, technology, information and society. So what comes next? Watch out, 2999! This one may just repeat. Scott S. Smith Current Issue December 1, 1999 This story appears in the December 1999 issue of Entrepreneur. Few entrepreneurs survive the transition from start-up to conglomerate. Of those, only a fraction go on to lead their company past the billion-dollar mark. And of those, only one man has directed a company to publicly traded worth of about half a trillion dollars-when compared to nations, his company boasts the ninth largest economy in the world. At 44, he may be the richest man in history, worth approximately 1 $77 billion. He's also created more millionaires than anyone in the history of business, both directly through stock options ($10,000 invested in his company's IPO is worth $4.8 million today, the most successful stock of the century) and indirectly by making computers part of daily life. When it came time for us to pick the "Entrepreneur of the Millennium," no one else even came close to William Henry Gates III, founder, chairman and CEO of Redmond, Washington-based Microsoft Corp. Although he arouses as much animosity as admiration for his hardball tactics (there's even a book about his mortal enemies: Gary Rivlin's The Plot to Get Bill Gates, Times Books), everyone, friend or foe recognizes Gates as the rightful Usher-in-Chief of the Information Age. It all started when, at age 25, Gates persuaded IBM to let him keep the rights to the DOS operating system they had him develop for something called the personal computer (he actually bought the program from another company and adapted it, with considerable retailoring for the PC). Thinking the program would be quickly replaced anyway, IBM agreed to pay for a license to use it rather than purchase it outright. Now Microsoft software operates 90 percent of the world's desktop computers. Since then, Microsoft has increased its net profits at a rate of 40 percent per year, all while sticking its fingers in an astonishing array of pies, from an online entertainment magazine to cars (1 percent of all U.S. auto sales are now made through its CarPoint Web site). "Gates and his partner, Paul Allen, were the first to realize that software was not just an adjunct of hardware, and that it would, indeed, ultimately prove more valuable," says Paul Andrews, author of a Gates biography and the book How the Web Was Won (Broadway Books). "This simple principle ushered in the Information Age faster than all 2 the hardware advances put together. Gates was also a major force in standardizing the technology, with DOS spurring the PC boom." Despite its vast tentacles, Microsoft is perhaps the only major corporation still run like a start-up, with simple lines of authority and its 31,396 employees organized into small teams with frugal budgets. Everyone pretty much has offices of the same size, no one has secretaries and the work schedule is whatever employees decide it needs to be to get their projects done. This entrepreneurial approach to leadership is Gates' hallmark. "We cannot think like a big company or we are dead," he has said. Where will Gates go from here? In the next millennium, he may again redefine himself as a renaissance entrepreneur. "People have only begun to see the impact of his wealth on education medicine, poverty and social causes, a legacy that may overshadow his technological contributions," says Andrews. Interview with Bill Gates In this interview with Entrepreneur feature writer Scott S. Smith, Gates discusses his management philosophy, career lessons and future as an entrepreneur of the next millennium: Scott S. Smith:What hiring and managing practices most differentiate Microsoft from other companies? Bill Gates: Hiring smart people has been the single most important thing we've done as a company from the very beginning. Paul Allen and I started out hiring our friends, but always with an eye to people who had a lot of passion for what they were doing and who were very, very bright. Our recruiting department works very hard to find the right people for our culture here. We also offer our employees a way to share in the company's longterm success and we encourage people to look around the company for new challenges. 3 When you have smart people working for you, you want to keep them stimulated and engaged. We've worked hard to make that possible at Microsoft. Smith:What do big companies do that small firms should emulate? Gates: I actually believe there are a lot of areas where big business and small business can learn from one another. Large companies recognize that effective use of technology is a strategic weapon. This is an area where small business can be overwhelmed and, as a result, may not take advantage of the power of technology available to them. Small businesses currently sit in a very influential spot. Look at the great tools developed specifically for this customer segment. We've worked hard to develop solutions that allow small companies to worry less about technology and focus on their business and their customers. But large organizations can also learn a lot by watching smaller, more responsive, customer-focused organizations. The Internet means that the rules of competition have changed, and this gives small companies a chance to leverage what they do best-react quickly and develop close relationships with customers-and go up against the biggest of their competitors. Successful small companies also do amazing things with limited resources. Smith:If you had it to do all over again, what would you do differently? Gates: We're pretty hardcore about examining what we do well and what we need to improve on. So it's a question I encourage everyone at Microsoft to ask all the time. Our shift to putting the Internet at the center of our products was certainly something we could have done earlier. I think we've executed against that challenge very well, but we probably could have moved it up the list of issues we were tracking earlier than we did. 4 Smith:If you left Microsoft, what fields would you be interested in starting a business in? Gates: There are all sorts of incredibly difficult challenges to be met in the software industry, so I would naturally gravitate toward software. But I'm also very interested in biotech and think the advances we're seeing today and the ones to come in the near future are going to revolutionize the world of health care. That would be a fun area to spend more time in. And while Melinda [Gates' wife] and I have been spending more time working with our foundation as it engages some interesting projects, I know I'll spend more time on that later on. For now, though, Microsoft is my career, and I think I have about the best job in the world. Smith:You have diverse outside interests. Do you think you've learned lessons from any of them that could translate into something an entrepreneur could use in his or her business? Gates: The one that offers a great example is bridge. I'm a passable player but enjoy studying how other people have played and understanding the strategy behind great players. Bridge is all about great partnerships, developing a reasonable-and achievablestrategy, anticipating what people are going to do and being ready to respond to the unexpected. Smith:If you were King of the World, what would you change? Gates: Like a lot of businesspeople, being on the road and away from my family isn't much fun. I don't know how you could change that-but that would be great. Smith:You've talked about retiring in 10 years. Give us your best guess as to how daily civilian and business life will be different from your life today. 5 Gates: I've talked about the demands of being a CEO and my thought that I might want to change my role sometime in the future, but I haven't really set up a timetable. Even after I'm CEO, I'll be involved in Microsoft. I would be very involved with customers and in the product-development and technology side of the business, so in some ways, my day-to-day life would be more or less the same. Perhaps less time on the road. Bill Gates On . . . Change Business is going to change more in the next 10 years than it has in the last 50. If the 1980s were about quality and the 1990s were about reengineering, then the 2000s will be about velocity. About how quickly the nature of business will change. About how quickly business itself will be transacted. About how information access will alter the lifestyle of consumers and their expectations of business. Quality improvements and business process improvements will occur far faster. When the increase in velocity of business is great enough, the very nature of business changes. A manufacturer or retailer that responds to changes in sales in hours instead of weeks is no longer at heart a product company but a service company that has a product offering. These changes will occur because of a disarmingly simple idea: the flow of digital information. We've been in the Information Age for about 30 years, but because most of the information moving among businesses has remained in paper form, the process of buyers finding sellers remains unchanged. Most companies are using digital tools to monitor their basic operations: to run their productions systems, to generate customer invoices, to handle their accounting, to do their tax work. But these uses just automate old processes. Very few companies are using digital technology for new processes that radically improve how they function, that give them the full benefit of all their employees' capabilities, and that give them the speed of response they will need to compete in the 6 emerging high-speed business world. Though at heart most business problems are information problems, almost no one is using information well. Too many senior managers seem to take the absence of timely information as a given. People have lived for so long without information at their fingertips that they don't realize what they're missing. I want CEOs to demand a flow of information that would give them quick, tangible knowledge about what is really happening with their customers. Even companies that have made significant investments in information technology are not getting the results they could be. What's interesting is the gap isn't the result of a lack of technology spending. In fact, most companies have invested in the basic building blocks: PCs for productivity applications, networks and e-mail for communications, basic business applications. The typical company has made 80 percent of the investment in the technology that can give it a healthy flow of information, yet is typically getting only 20 percent of the possible benefits. The gap between what companies spend and what they're getting stems from not understanding what is possible and not seeing the potential in using technology to move the right information quickly to everyone in the company. The successful companies of the next decade will be the ones that use digital tools to reinvent the way they work. These companies will make decisions quickly, act efficiently and directly touch their customers in positive ways. Going digital will put you on the leading edge of a shock wave of change. A digital nervous system will let you do business at the speed of thought-the key to success in the 21st century. Excerpted from Business @ The Speed Of Thought: Using a Digital Nervous System (Warner Books). Bill Gates On . . . The Force Of Facts 7 I have a simple but strong belief. The most meaningful way to differentiate your company from your competition is to do an outstanding job with information. How you gather, manage, and use information will determine whether you win or lose. There are more competitors. There is more information available about them and about the market, which is global. The winners will be the ones who develop a world-class digital nervous system so that information can easily flow through their companies for maximum and constant learning. I can anticipate your reaction. No, it's efficient processes! It's quality! It's brand recognition and market share! It's getting close to customers! Success, of course, depends on all of these things. Nobody can help you if your processes limp along, if you aren't vigilant about quality, if you don't work hard to establish your brand, if your customer service is poor. A bad strategy will fail no matter how good your information is. And lame execution will stymie a good strategy. If you do enough things poorly, you'll go out of business. But no matter what else you have going for you-smart employees, excellent products, customer goodwill, cash in the bank-you need a fast flow of good information to streamline processes, raise quality and improve business execution. Information flow is the lifeblood of your company because it enables you to get the most out of your people and learn from your customers. See if you have the information to answer these questions: • What do customers think about your products? What problems do they want you to fix? What new features do they want you to add? • What problems are your distributors and resellers running into as they sell your products or work with you? 8 • Where do your competitors win business from you, and why? • Will changing demands force you to develop new capabilities? • What new markets are emerging that you should enter? A digital nervous system won't guarantee you the right answers. But it will free you from tons of old paper processes so you'll have the time to think about the questions. It will give you the data to jump-start your thinking [and allow you to] see trends coming at you. A digital nervous system will make it possible for facts and ideas to quickly surface from down in your organization, from the people who have information about these questionsand, likely, many of the answers. Most important, it will allow you to do all these things fast. Excerpted from Business @ The Speed Of Thought: Using a Digital Nervous System (Warner Books). 9 The Overseas Chinese Global Network1 In increasing strength, overseas Chinese businessmen from Southeast Asia are investing in China, where they possess linguistic and cultural advantages over big Western corporations. Navigating layers of government and the rituals of business etiquette is easier if you speak the language and appreciate the history.1 THE NEW YORK TIMES The Chinese who left the mother country had to struggle, and that became a culture of its own. Because we have no social security, the Overseas Chinese habit is to save a lot and make a lot of friends.1 LEE SHAU KEE 65, Real Estate Developer, Hong Kong (net worth $6 billion) Compared to the Japanese keiretsu, the emerging Chinese commonwealth is an interconnected, open system—a new market mechanism for conducting global business. It is now becoming apparent to many business leaders who have finally figured out Japan’s keiretsu that they “now need to understand a distinctively Chinese model, where tycoons cut megadeals in a flash and heads of state wheel and deal like CEOs.”1 The “Chinese commonwealth” is a form of global network that has become the envy of Western multinationals. It is a network of entrepreneurial relationships spread across continents, though primarily is Asia. What is increasingly being referred to as the “big dragon of Greater China” includes mainland China’s 1.3 billion citizens and more than 55 million overseas Chinese—most of them from Taiwan, Indonesia, Hong Kong, and Thailand. It is estimated that the overseas Chinese control $2 trillion in liquid assets and contribute about 80 percent of the capital for the People’s Republic of China (PRC). If the overseas Chinese lived in one country, their GNP would exceed that of mainland China. In addition, this “Bamboo Network,” which transcends national boundaries, is estimated to contribute about 70 percent of the private sector in Malaysia, Thailand, Indonesia, and the Philippines.” Most observers believe that this China-based informal economy is the world leader in economic growth, industrial expansion, and exports. It comprises mostly mid-sized, family-run firms linked by transnational network channels. These channels for the movement of information, finance, goods, and capital help to explain the relative flexibility and efficiency of the numerous ongoing informal agreements and transactions that bind together the various parts of the Chinese-based trading area. The network alliances bind together and draw from the substantial pool of financial capital and resources available in the region, including those of entrepreneurial services in Hong Kong; technology and manufacturing capability in Taiwan; outstanding communications in Singapore; and vast endowments of land, resources, and labor in mainland China.1 The overseas Chinese, now models for entrepreneurship, financing, and modernization for the world, and in particular for Beijing, are refugees from China’s poverty, disorder, and communism. Business became the key to survival for those Chinese emigrants faced with uncertainties, hardships, and lack of acceptance in their new lands. The uncertainties, a survivor mentality, and the cultural basis in the Confucian tradition of patriarchal authority have led to a way of doing business that is largely confined to family and trusted friends. This business mentality and approach to life has led to many selfmade billionaires among the Overseas Chinese. Among them is Y.C. Wang, the Taiwanese plastics king, who had to leave school after the sixth grade but taught himself what was necessary to develop a new industry. More recently, there has been a new wave of investors—overseas Chinese who are attracted by rapid growth in China, compared to slow growth in their home countries, such as Singapore and Indonesia. The network of alliances of the ethnic Chinese is based on guanxi—personal connections— among families, business friends, and political associations, often rooted in the traditional clans. Massive amounts of cross-investment and trade are restricted primarily to families and long-standing connections, including those from the province of the PRC from which the overseas Chinese or their ancestors migrated. As examples, Chinese ties in Hong Kong have provided about 90 percent of the investment in the adjacent province of Guangong; and telephone calls from the special economic zone of Xiamen in the PRC to Taiwan now average 60,000 a month, up from 10 a month eight years ago. The web of those connections has created an influential network that is the backbone of the East Asian economy.1 The history, culture, and careful, personal approach to business of the overseas Chinese have led to some underlying values—Kao calls them “life-raft” values—which have shaped a distinctive business culture. These values include thrift and a very high savings level, regardless of need; extremely hard work; trust in family before anyone else; adherence to patriarchal authority; investment strictly based on kinship and affiliations; a preference for investment in tangible goods; and an ever wary outlook on life. This shared web of culture and contacts has spawned an intensely commercial and entrepreneurial network of capitalists and a dominant power in Asia. Two benefits of such a business culture are speed and patience. Because of their knowledge of and trust in their contacts, the overseas Chinese can quickly smell profits and make decisions even more quickly; a deal to buy a hotel in Asia can be completed in days, compared to months in the United States. Patience to invest for the long term is an outcome of closely held ownership and management, often in a single family, so that outside shareholders are not demanding short-term profits. No doubt sharing language and cultural bonds is a vital lubricant for business, especially with people in China, where there are few firm laws on which businesspeople can rely.1 SOURCE 1 Deresky, H. (2008). International management: Managing across borders and cultures: Text and cases (6e). Upper Saddle River, New Jersey: Pearson-Prentice Hall. Dr. Dodd-Walker Strategic Management Overseas Chinese: Entrepreneurial Model Class Participation Activity 1. Where are they primarily located? 2. What is the economic impact? 3. What are the “life-raft” values? 4. What is the network based on? 5. What are the two benefits of the business culture?
Purchase answer to see full attachment