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Network ties and business relationships – their effect on the profile of born global companies.
Two case studies, Anoto AB and Artingence Ltd.
Management of Innovation & Business Development (MIB) Copenhagen Business School
Nadia DolmarkMay 2010
Supervisor: Sigvald Harryson.
Institute for Leadership, Politics and Philosophy.
Total STU’s: 180.988
Total pages: 80
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Executive Summary
The development of Information Technology has boomed since the early days of com-
puting. It is now a global phenomenon that connects people both professionally and
socially. This colours the demands on businesses in the modern world and orientates
many start up companies to have a global mindset. This thesis looks to explore how
network ties and business relationships effect the profile of born global (BG) compa-
nies, and has been investigated through theoretical study and on-site interviews.
Two case companies are investigated. The first is Anoto, an official born global compa-
ny started in 1999, and the second is Artingence, a start-up company founded in 2008.
Anoto is a Swedish company that has developed the digital pen and paper. These
gadgets were designed to facilitate the transformation from handwritten text to digital
format. The thesis will explore to what extent the case companies possess a born global
profile. Among other things, they employed the use of creating partnerships to further
their success on the international Market.
Artingence is a British based start-up company that has developed potentially radical
solutions for the call centre industry. They have invented software operators known
as artificially intelligent directed agents (AIDA™), which are more cost efficient than
humans.
The literature revealed six dimensions of BGs and an overlap with the network and re-
lationship management theories. In particular, three of the BGs dimensions had a strong
overlap and two had a weak. The two profiles were scored on the different dimensions
of the network and relationship management and BG theory. The scoring was used to
test the three hypotheses proposed in this thesis: H1. Artingence is a born global com-
pany and will have similar total relative strength compared to Anoto, measured on the
born global parameters. The scoring revealed that Artingence scored higher than Anoto
in the BG parameters, thereby supporting H1. H2., areas of high literature overlap will
show similar relative strengths and H3, areas of weak literature overlap will show dis-
similar relative strengths, were both confirmed. This means that high and weak over-
laps of literature will direct if the BG profiles are similar or dissimilar.
For the management team, a stronger focus on building and strengthening network ties
will drive born global companies to successful performance. The findings must, howev-
er be put into perspective, seeing that only two in-depth case studies were document-
ed. The statistical significance of the findings must be further investigated. Finally, the
importance of structural holes as an element of the BG profile and development could
add further to the research topic.
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Table of contents
1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 5
1.1. Setting the scene . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 5
1.2. Research Question . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 5
2. Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 6
2.1. Sample and data collection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 7
2.2. Structure of analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 8
3.The Born Global Theory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 9
3.1. Early Internationalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 9
3.2. The Born Global definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 9
3.3. Organizational structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 10
3.4. Leapfrogging . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 10
3.5. The Uppsala Internationalization Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 11
4. The Six Parameters of Born Globals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 12
4.1. The Founder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 12
4.2. The Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 15
4.3. The Environment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 16
4.4. The Product . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 18
4.5. The Global Strategy and Vision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 20
4.6. The Market Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 25
5. The Network Theory and Relationship Management Theory . . . . . . . . . . . . . . . . . . . . . . . . . page 31
6. The Three Parameters of Network Theory
and Relationship Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 31
6.1. The network ties and types of relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 32
6.2. Mutuality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 36
6.3. Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 37
7. Aligning born global theory with network theory and
relationship management theory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 39
7.1. The relevance of networks in born globals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 39
7.2. Leveraging networks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 39
7.3. Strong ties – a valuable asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 39
7.4. Engaging in networks from initial stages to break-out . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 40
7.5. The know-who perspective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 40
7.6. The Overlap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 40
4
8. Case 1: The Anoto Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 41
8.1. History – A genius comes to play . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 41
8.2. Introducing the Anoto Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 42
8.3. Business units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 42
8.4. The founder - Christer Fåhraeus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 43
8.5. The organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 43
8.6. The environment of operation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 44
8.7. The digital pen and paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 45
8.8. The original global strategy and vision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 46
8.9. The present business strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 48
8.10. The original market approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 49
8.11. The present market approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 50
8.12. Leveraging trused network ties based on personal relationships . . . . . . . page 50
9. Case 2: Artingence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 52
9.1. History – the birth of a new idea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 52
9.2. Introducing Artingence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 53
9.3. The founders – Karl Dorner and Mark Gilbert . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 53
9.4. The organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 54
9.5. The environment of operation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 55
9.6. The artificial intelligent direct agent – AIDA™ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 55
9.7. The global strategy and vision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 58
9.8. The market approach – addressing the “gap”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 61
9.9. Leveraging trusted network ties based on personal relationships. . . . . . . . page 62
10. Cross-case analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 65
10.1. Scoring the born global parameters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 65
10.2. Scoring the network and relationship management parameters . . . . . . . . page 72
10.3. Scoring the theoretical overlap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 75
11. Discussions and Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 76
11.1. Managerial implications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 76
11.2. Limitations and further research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 76
12. References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 78
13.Appendices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 83
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1. Introduction
1.1 Setting the scene The world has seen a remarkable change over the last 100 years, and the rate of change
has dramatically increased over the last 15 years. Information technology has con-
nected the entire world and with the spread of fiber optics and the Internet, the world
has become networked both professionally and socially. Examples are Facebook™,
Twitter™, LinkedIn™, various blogging sites and search engines such as Google™. The
cost of communication is now almost limited to the cost of time, and the distance to
your next customer is only one click away. The Skype software that is one example of
Internet telephony, now commands 12% of all international calls (www.skype.com,
18.05.10). With a global increase in social living standards, we have seen an explosion
in the population of the world. The global markets are emerging and demand is no lon-
ger just local. In the flat world, cultures are becoming homogeneous (Friedman, 2006)
and we all need to be glocal. Think local, learn global, act global. We are at the tipping
point where we all are becoming neighbours. Innovation and business takes place
between people. In a connected and open society of free information, the rate of inno-
vation has never been higher, and the environment for business more readily available.
The connective world is going from a know-how perspective to a know-who perspec-
tive, from (internal) research and development, to connect and develop.
1.2. Research questionI am pursing the topic of this thesis for two reasons.
1. The world has become flat. Information is available to everyone and everyone has
the opportunity to network and connect. Information and data particularly turned into
knowledge has value. The opportunities are for everyone to pursue. Doing business inter-
nationally and becoming a global company however is still a challenge and of particular
importance to business from countries with small home markets. In specific, the case
of born global (BG) companies and their making and shaping is of great interest. In this
research I have chosen to focus on network ties and business relationships in relation to
BG companies.
2. The world and its markets is a sum-positive game. Productivity and demand is ever
increasing (Buffett, 2008). Again, opportunity is for everyone to pursue. Entrepreneur-
ship has fascinated me, since the day I read Milton Friedman’s words, “ the social re-
sponsibility of business it to increase its profits”(Friedman, 1970, pg. 31). Furthermore, I
came from an international family with entrepreneurial ambitions and traditions. I have
a personal desire to join a start-up company in the future and believe that my insight into
BG companies and how to shape them would be very valuable on their path to success.
6
The BG phenomenon has sparked my curiosity and to further explore what lies be-
neath, I set forth the following research question:
The goal of this paper is to explore how network ties and business
relationships effect the profile of born global companies.
The profile of the BG company is shaped by the parameters. I will review the literature
and examine areas of overlap between the BG theory, and the network theory and rela-
tionship management theory. I propose that there are similarities in the profile scores
in the areas where the literature match up. In this paper, I will apply two cases. Anoto,
which is perceived to be an official BG company by several studies (Harryson 2006,
Harryson, 2008), and Artingence, which is a start-up founded in 2008. Three hypoth-
eses are proposed:
H1. Artingence is a born global company and will have similar total relative strength
compared to Anoto, measured on the born global parameters.
H2. Areas of high literature overlap will show similar relative strengths.
H3. Areas of weak literature overlap will show dissimilar relative strengths.
2. Methodology The goal of this paper is to explore how network ties and business relationships ef-
fect the profile of BG companies. The methodological strategy selected is primarily an
abductive research approach, being a mix of deduction and induction (Dubois & Gadde,
2002). Whilst the deductive research is characterized by theory, the inductive approach
is driven by empirical fieldwork. Therefore, in this context, “systematic combining”
(Dubois & Gadde, 2002) of the theoretic framework, empiric realities and case analysis
was applied.
The research approach investigates how a BG organization’s top management team
draws upon interpersonal relationships and network ties to establish successful inter-
national business relationships. These interpersonal relationships and network ties
may influence and facilitate development of being BG within a company. The paper’s
focus of analysis is therefore based on how relationship management and network
theories supplement the profile of a BG, rather than how a BG firm initially internation-
alizes. This points to the qualitative exploration (Eisenhardt, 1989) and two appropriate
cases were identified, specifically being Anoto and Artingence. Moreover, the approach
7
has been adopted in other prior and similar studies (Harryson, 2008, Harryson, 2006).
It was important to not steer the interviewee towards preferred data, the research ques-
tion or previous theory throughout the interview. Furthermore, it was also important
not to suggest or “plant” ideas from the selected theory. It was chosen to apply the “na-
tive category” approach to data gathering (Buckley & Chapman, 1998). In this context,
“native” means self-generated and valid in a specific context. It can not be certain that
words and categories are congruent from one context to the next, so I did not assume
that interviewees shared my “objective” understanding or the topics discussed. Only
after a full investigation of the subjects under discussion, were the qualitative results
for answers to questions achieved. No prompts were used to engage in subjects not
raised by the interviewee. However, strict consistency and some structuring of the
interview process was necessary to direct discussion to relevant topics and to reach
equivalent data (Eisenhart, 1989). A semi-structured qualitative interview form was ap-
plied throughout all the interviews, which specifically targeted the varied perceptions
and descriptions from the interviewee (Kvale, 1997). To maintain equivalence, the in-
terviewees were asked core questions in the same order. Certain divergences were made
from this only to obtain clarification.
Furthermore, the interviewees were presented with a “briefing” before each interview
(Kvale, 1997). The “briefing” initially defined the focus of the interview, which hope-
fully made the interviewee more comfortable. As the interview came to an end, a
“debriefing” was given to each interviewee (Kvale, 1997). A “debriefing” was applied to
sum up core answers throughout the interview, which allowed feedback or additional
comments to questions from the interviewee.
2.1. Sample and data collectionSemi-structured interviews were the primary instruments applied in the data collec-
tion, and each interview lasted between 50-90 minutes (See appendix 1 for full tran-
script of interviews). The interviews were recorded on audio and later transcribed.
Sampling bias and validity is a concern, but has been partly addressed by having two
cases. For Anoto, two on-site interviews were conducted. In the case of Artingence, it
was four on-site interviews. The two individuals from the Anoto management team,
Torgny Hellström (Senior Vice President and General Counsel) and Lars Hermansen
(Executive Vice President in Sales & Marketing) were interviewed. They have been
chosen since they represent a broad insight to Anoto’s history, strategy and decision
making process. Anoto’s interviews took place on two separate occasions. Torgny Hell-
ström was interviewed after his Anoto lecture at CBS on 19/3/01, and Lars Hermansen
was interviewed at Anoto’s headquaters in Lund, Sweden on 7/4/10. In the case of
8
Artingence, the following individuals were interviewed: Karl Dorner (CEO and Inven-
tor), Mark Gilbert (Commercial Director), Cliff Dixon (Financial Director) and Angela
M. Gilbert (HR Director). These managers have been selected since they all represent a
different department within the Artingence organization. In the case of Artingence, the
interview took place with all four interviewees at one time, which from a validity per-
spective is not optimal. The Artingence interviews were conducted over five consecu-
tive days in Newcastle from 15/4/01 – 20/4/10. The official interview took place on one
occasion; however, it was followed up with more informal discussions over the course
of the week.
The data was further complemented by corporate publications, other literature and
sources, including the Internet. The complementary research includes a case study on
Anoto by Harryson (2008), whose 22 interviews and documentations reduces the risk of
the internal validity concern in the present research. The issue of construct validity and
viability (Voxted, 2008), do the questions address the desired phenomenon and nothing
else, has been attended to. The answers appear to have high validity since they corre-
late more within the different topics and themes, rather than in between.
Webb (1966) proposed that triangulation, the combination of different data-gathering
techniques, provides the most convincing verification and the strongest inference in a
research. Eisenhardt (1989) suggested that applying multiple data collection methods,
achieving triangulation, provides strong substantiation of constructs and hypotheses.
Ultimately, triangulation was achieved through combining the interviews and other
accessible sources of data such as annual reports and published research papers. The
research data about the two case studies was collected through primary data sources as
on-site interviews. Technological blogs, as well as articles from media resources en-
hanced the data. Finally, several interesting theories were read. The theories presented
in this thesis are highly relevant to the posed research question. Although other theo-
ries such as “entrepreneurship” and “blue ocean strategy” gave additional perspectives
within the field of research, they were deselected due to limited scope. Finally, for the
purpose of this research, I believe that the findings offer a good base, within reasonable
limits, for generalization for the theoretical framework.
2.2. Structure of AnalysisThe main structure of the analysis and findings chapter will initially be built on scorings
figures based on the theoretical framework presented earlier in the paper. The scoring
will help distinguish to what extent the two respective cases follow a BG profile. For the
specific BG parameter, “the environment”, where the export percentage is of relevance,
this scoring takes departure in the initial commercialization period of the product.
9
For both cases, based on the various interviews, the different parameters were scored
in the respective categories. The Likert scale (Bowling, 2005) was applied to make the
essential scores. The Likert scale is a five-point scoring tool and is used to demonstrate
different degrees of agreement, and in this context, they are illustrated by checkboxes.
The points or scores are given in the particular checkbox, which are divided into five
categories.
Each category was assigned points from 1 to 5, with “strongly disagree” scoring 1 and
“strongly agree” scoring 5, see appendix 2. The score for the parameter was further ap-
plied within the “cross-case analysis” chapter to assess the profile of a BG of the two
cases. A similar Likert scale was used to assess to what extent the two cases leverage
network ties. Finally, an overlap between the BG theory and the network and relation-
ship management theory was compared using the scores from the previous ratings.
3. The Born Global theory
3.1. Early InternationalizationThe emergence of a new breed of companies, called BG, has become a highly discussed
phenomenon since the early 1990s. Some small and medium sized organizations strive
for globalization from inception and embark on foreign markets by selling a substantial
share of their products and/or services internationally. Various elements of the mod-
ern world have made it possible for these companies to compete with larger and more
established players successfully. Early internationalization can be explained by shifting
market conditions (Madsen & Servais, 1997). Even though these organizations lack core
resources and are limited due to their size and experience, advances in communication
technologies, knowledge becoming more available, the decrease in governments’ pro-
tectionist polices (Oviatt & McDougall, 1994), worldwide transportation systems, the
increasing role of niche markets and global networks (Knight & Cavusgil, 1996) have
made rapid internationalization achievable. Madsen & Servais (1997) commented
further on globe spanning transportation as being more common and cheaper, hence
removing some cost barriers for early internationalization.
3.2. The Born Global definitionThe concept, “born global”, was originally created by Rennie (1993) to describe this
new type of organization, based on the study of Australian high-value added manufac-
turers. In the beginning of the 90’s, these companies were also called international new
ventures (INVs).
10
“A business organization that, from inception, seeks to derive significant competitive
advantage from the use of resources and the sale of outputs in multiple countries”
(Oviatt & McDougall 1994, McDougall, Shane & Oviatt 1994).
In the same year, Cavusgil (1994) highlighted two essential trends of the ‘90s, namely
“small is beautiful” and “gradual internationalization is dead”. According to Cavusgil
(1994) there are various reasons for these two phenomena. Small is beautiful reflects
on the development of niches, where the customer’s preferences and tastes have de-
veloped towards demanding more specialized and customized products. The further
development of information and communication technology has made it easier for the
management to control operations across country boundaries. Finally, small firms do
possess certain advantages such as being able to respond and adapt to international
markets quicker compared to larger, more established companies.
3.3. Organizational structureAnother key advantage is the organizational structure. Even though BGs typically lack
the governance structure and deeply rooted administrative heritage (Knight & Cavusgil,
2004), these elements tend to restrict strategic choices made by the more established
counterparts. Dodge (2005, web, 18.05.10) puts it best by stating, “old habits die hard.
We humans are creatures of habit. We get comfortable doing something and resist
change”. Older companies consist of established routines and organizational history,
which tend to hamper their learning opportunities in foreign markets, whilst young
firms benefit from “learning advantages of newness” (Autio et al., 2000) which help
them grow more rapidly than larger players. BG firms introduce a new concept “learn-
ing advantages of newness,” (Autio et al., 2000) which is based on organizational and
managerial flexibility of newer firms. In short, key differences between established
firms and BGs are the amount and source of the resources. Therefore, the founder(s) of
BGs need to adopt more alternative structures. Hybrid structures should be applied,
since they are less demanding during the development process. These alternative
governance structures suggest collaboration in joint ventures and strategic alliances or
drawing on close personal relationships and networks (McDougall et al., 1994; Madsen
& Servais, 1997).
3.4. LeapfroggingThe second trend of the 90s, the death of gradual internationalization, refers to the term
“leapfrogging”. Hedlund and Kverneland already discussed the expression in 1985,
where they recognized a tendency towards shortening time or “leapfrogging” over in-
cremental stages in the development chain. Leapfrogging has resulted in the traditional
internationalization theories becoming challenged due to the accelerated globalization
11
of certain firms (Hedlund & Kverneland 1985, Ganitsky, 1989, Rennie 1993, Oviatt &
McDougall 1994, McDougall, Shane & Oviatt 1994, Knight & Cavusgil, 1996, Chetty &
Campbell-Hunt 2000, Knight & Cavusgil, 2004). Several scholars have highlighted the
tendency of skipping or leapfrogging over incremental stages of the Uppsala model (Jo-
hanson & Vahlne 1997), which is in strong opposition to the suggestion of gradual glo-
balization and internationalization through “rings of water” (Madsen & Servais 1997).
3.5. The Uppsala Internationalization Model Johanson & Vahlne proposed an internationalization model in 1977, which was referred
to as the Uppsala model. This model suggested internationalization as being sequential
and stepwise in nature and was based on a series of incremental decisions. Johanson &
Vahlne argued that the internationalization process is incremental and often proceeds
slowly because there is a long learning process when entering a foreign market. The
Uppsala model assumed that learning from foreign markets is time-consuming because
it should occur mainly through personal, on-site experience. Moreover, management
will not commit more resources until the organization has received a high level of
experiential knowledge. It is stated that firms expand globally through acquisitions,
integration, and the use of knowledge in overseas environments. Furthermore, Johanson
& Vahlne discussed two vital aspects when exporting: 1) market commitment - which
refers to resource commitment in the foreign markets and 2) market knowledge. The
firm strives to keep risk-taking at a low level by accumulating large foreign market ex-
perience, which would thereby pave the way for the firm’s management to make further
resource commitments to cross-border operations. In short, internationalization takes
place by increasing commitment across boarders. The Uppsala model has failed to ad-
dress why BGs internationalize early in their lifecycle and expand in a manner, which is
not incremental (Ganitsky, 1989; Rennie, 1993; McDougall et al., 1994; Oviatt and Mc-
Dougall, 1994; Knight & Cavusgil, 1996; Knight & Cavusgil, 2000; Servais et al., 2007)
The Revised Uppsala ModelJohanson & Vahlne (2003) acknowledged that their Uppsala model did “not capture
important phenomena in the modern internationalization business world” (pg. 83) and
therefore modified their previous model by adding the role of network partners. The
new internationalization-network model was based on “experiential, learning-com-
mitment interplay” (pg. 83). Furthermore, Johanson & Vahlne (2003) emphasized that
business relationships still required many resources and time, because they were based
on learning. Since they failed to address the trend of rapid internationalization within
born-global firms, they revised and expanded their original model in 2003 (Freeman et
al., 2010). Still, Freeman et al. (2010) did not agree with Johanson & Vahlne (2003) and
stated, “their revised model does not explain rapid internationalization” (pg. 71).
12
4. The Six Parameters of Born Globals Through the analysis of the literature review, six parameters specifically describing the
BG companies were identified.
These parameters are described in table 1 and are as follows: the founder, the organiza-
tion, the environment, the product, the global strategy/vision, the market approach and
potential barriers. The six parameters will be investigated through the different schol-
ars’ perceptions and opinions.
4.1. The FounderThe role of the entrepreneur has been underlined in the rapid internationalization of
BG firms. Based on a thorough review of literature in this area, different dimensions of
the founding entrepreneur will be outlined in a summary table below. Based on these
dimensions, I will rate the founding team in the cross-analysis chapter.
Table: 1. Summary of the dimensions of the BG entrepreneur. Source: Own analysis.
Dimensions of the BG entrepreneur Researched litterateurSocial interaction Oviatt & McDougall (1994)Network formation Oviatt & McDougall (1994)Seeing opportunities/alertness McDougall et al. (1994); McDougall &
Oviatt (2000)Background/knowledge/experience McDougall et al. (1994), Knight & Cavus-
gil (1996), and Madsen & Servais (1997),
Sharma & Blomstermo (2003)
The vision Based on a study of four companies in the high-tech industry from different countries,
Jolly et al. (1992) formulated a global strategy for BGs, which consisted of seven points.
These points will be discussed throughout the individual sections. The first revealed
the importance of a global vision, which was initially built on the founder’s insight.
From the very beginning of establishment the founders were able to implement their
global vision throughout their organization. Furthermore, Jolly et al. (1992) discovered
that the founders held two types of visions, namely 1) a product or technology idea
and 2) the foresight of globalization.
The past experience of the founderMadsen and Servais (1997) agreed to this point of view by stating that human resources
is one of the key forces behind the BG concept. They emphasized the importance of the
entrepreneur’s past experience and expertise in the field of the product. Past experience
13
can originate from a high level of mobility and education in international countries,
whilst expertise in the particular field of business may stem from prior international
orientated jobs. The international background of the founder results in an extensive
diminution of “psychic distance” to specific product markets. Psychic distance is
defined in terms of “…cultural, economic and political differences and also in relation
to their geographical proximity” (Bell, 1995, pg. 60). Furthermore, international experi-
ences gained by the entrepreneurs gradually shape a new perception of the world, and
greatly influence the accelerated internationalization path taken by BG firms.
One global marketAccordingly, Knight & Cavusgil (1996) and Chetty & Campell-Hunt (2004) suggest that
“active” entrepreneurs establish BG firms and appear to view the world as one border-
less market place from the firm’s inception. Furthermore, Knight & Cavusgil (1996)
argue that the entrepreneur is a distinctive feature of BG firms, and contributes to distin-
guishing elements compared to more established firms. The scholars spoke specifically
of the significance of the entrepreneurial background and experience, whilst Autio et
al. (2000) differ in their point of departure by employing a knowledge-based theory to
explain speedy internationalization in entrepreneurial firms. Firstly, Autio et al. (2000)
presented the existence of a previously unacknowledged concept “learning advantages
of newness,” to describe the advantages of newly established firms, compared to older
firms. This contradicts the concept of “liability of newness” (Stinchcombe, 1965), even
though Autio et al. (2000) still recognize its reality. Stinchcombe (1965) argued that
young firms fail in greater propensity than older firms, since start-ups’ risk of dying is
highest at inception and decreases with growing age of the company. Accordingly, li-
ability of newness occurs because start-up firms need to learn their roles in the industry
and coordinate employees within the young internal organization, which lack funda-
mental routines and structure. However, Autio et al. (2000) argue, “early entrepreneurial
behaviour might stimulate a self-reinforcing pattern that generates what amounts to an
“entrepreneurial culture” (pg. 919). Therefore, further investigation the people behind
the maintenance of continuous entrepreneurial activity in a firm will be attended to.
The capabilities of the founderMcDougall & Oviatt (2000) discussed three co-related dimensions of international entre-
preneurship, 1) innovativeness, 2) being proactive and 3) risk-seeking behaviour, which
draw attention to the significant entrepreneurial capabilities when internationalizing
quickly. Servais et al. (2007) agreed with this definition, whilst adding that entrepre-
neur’s mindset is very important, but not effective in isolation. The importance of peo-
ple is further exemplified by Dodge (2005). He stated, “VCs invest in people not tech-
14
nologies” (Dodge, 2005, web, 18.05.10). Venture capitalist are mostly interested in the
individuals behind an innovation rather than ground-breaking visions, ideas or prod-
ucts a start-up firm offers. VC firms add value when matching entrepreneurs that hold
unique competences as business sense and technology smarts with “technology wiz-
ards” (Dodge, 2005, web, 18.05.10). In Luostrarinen & Gabrielsson’s (2006) research, they
studied the BG firms, which faced great entrepreneurial and managerial challenges and
point out potential solutions. Moreover, they made a contribution to BG theories by in-
corporating the selection mode of management teams. They firstly accepted the previous
definitions of an entrepreneur, whilst adding that they usually are young, often forward
going and fearless. These characteristics go hand in hand with McDougall & Oviatt’s
(2000) prior definition. Luostrarien & Gabrielsson (2006) take the next step, by focusing
on how the entrepreneur recruits team members. In their study, they found that these
young entrepreneurs often pick similar individuals like themselves and frequently rely
on their own capabilities. They often chose educated young individuals with limited
business experiences. This leads us to the importance of a stable advisory board, which
Luostrarien & Gabrielsson (2006) argue is essential for the success of a newly established
company. The advisory board’s greatest job is to guide these young entrepreneurs.
The founder as a networkerIn 1994, Oviatt & McDougall chose another angle concerning the role of the entrepre-
neur. They identified the entrepreneur as being mainly responsible for network forma-
tion and social interaction, which is used to acquire crucial information and as a bar-
rier against imitators. McDougall et al. (1994) took the discussion of entrepreneurship
further by characterizing the founder(s) of international new ventures as seeing oppor-
tunities of high returns when establishing businesses that cross national borders. These
people see opportunities in the market that others do not see because of their compe-
tencies. They argue that the entrepreneur is “alert” and attentive in nature and pos-
sesses vital competencies such as networks, knowledge and background from earlier
activities that are unique to them (McDougall et al., 1994). McDougall & Oviatt’s (2000)
three dimensions of international entrepreneurship illustrated important capabili-
ties, but do not mention the need of social networks when internationalizing. In 2003,
Sharma and Blomstermo acknowledged this lapse by proposing models of knowledge
and networks. They discussed how founders apply their networks through strong and
weak ties when rapidly internationalizing. In accordance to McDougall et al. (1994),
Knight & Cavusgil (1996), and Madsen & Servais (1997), Sharma & Blomstermo (2003)
suggested that BG firms constitute several strong and weak ties, which originate from
previous backgrounds as educational or working environments. The researchers also
introduce the impact of personal relationships and friendships, which diverges from
conventional thinking internationalization theory. Sharma & Blomstermo (2003) added
15
that fast globalization is a result of knowledge supplied by their network ties.
4.2. The OrganizationThe organization of a BG firm is another unique feature that gives rise to early and suc-
cessful internationalization. A summary of the BG organization is illustrated in table 2.
Based on these dimensions, I will rate the two case studies their relative degree of BG
profile in the cross-case analysis.
Table: 2. Summary of the BG organization. Source: Own analysis
Dimensions of a BG organization Researched literatureHybrid structures McDougall et al. (1994); Oviatt & McDou-
gall (1994); Madsen & Servais (1997)Flexibility Young (1987); Rennie (1993); Cavusgil
(1994)The business plan Luostrarinen & Gabrielsson (2006)
Hybrid structuresMcDougall et al. (1994) examined 24 cases of international new ventures (INVs) and
discovered one common factor that characterized these companies. Entrepreneurs are
forced to depend on hybrid governance structures to secure control of critical assets
especially in the costly, early establishment phase. However, hybrid structures intro-
duce different threats e.g. opportunism from partners, and could in some cases lead
to the immediate death of new ventures. On the other hand, founders can steer clear
of the problem if the founders are deeply rooted in trustworthy, close relationships
imbedded in hybrid structures (McDougall et al., 1994). Trust and integrity create a
long-lasting, vibrant relationship. In the course of numerous face-to-face contacts and
interactions over a longer period of time, trust and mutuality can be developed, and
hopefully both partners see the relationship as beneficial. Additionally, “a one-time
gain from a single opportunistic action is quite low in comparison to the damage done
to one’s long-term reputation” (Larson, 1992). In short, close network ties can diminish
opportunism.
Madsen & Servais (1997) also highlighted the application of hybrid structures in their
study. A BG firm’s internal organization is characterized by lacking competences and
fixed routines. BGs need to source complementary competences from outside compa-
nies. Madsen & Servais (1997) proposed that there are two ways of doing this. Firstly, a
new venture could acquire necessary competencies through the recruitment of special-
ized personnel. Employing individuals with a high scientific knowledge could enhance
knowledge intensity and provide new ventures a competitive advantage (Sharma &
16
Blomstermo, 2003), but is a costly affair. Secondly, BGs could apply hybrid governance
structures, which are valuable especially throughout the distribution channels (Madsen
& Servais (1997).
FlexibilityAnother important factor that improves the rapid internationalization process is the
power of flexibility within an organization (Young, 1987; Rennie, 1993; Cavusgil,
1994), and this is mainly in the case of BG firms. Young (1987) made a clear distinction
between different types of firms in this study: the emerging multinational, the global
multinational and the “in between” multinational enterprises (MNEs). Through these
findings, Young (1987) concluded that the greatest advantage smaller firms have, com-
pared to market leaders, is “flexibility of response” (pg. 39) which originates from the
unique organizational structure of a BG. Cavusgil (1994) agreed with Young (1987) con-
cerning the competitive advantage small companies have. Cavusgil (1994) furthermore
highlighted key elements that drive BG’s international ventures. The forces behind
rapid and successful internationalization are imbedded in the organizational structure.
“Quicker response time, flexibility, and adaptability” (pg. 18) all smooth the process
of globalization for young and less experienced ventures. These intangible assets are
unique characteristics of smaller firms, and assist BG firms when competing with big-
ger and more established players in the market. Moreover, all three elements are born
within the internal organization at inception.
The business planLastly, Luostrarinen & Gabrielsson (2006) underlined that a clear business plan execut-
ed throughout the organization was extremely important for BGs when international-
izing. A BG firm’s organization should be marked by seamless collaboration between
the various departments and functions. Synchronicity between production processes,
customer needs and product development can be achieved through cross-functional
team building. Rather than building teams with homogenous members, teams should
be characterized by individuals with distinctive backgrounds who originate from differ-
ent departments in the organization. Close cooperation in such “trifunctional” (pg. 789)
teams (e.g. R&D, production and marketing) can be achieved by BG firms, which give
them competitive advantage.
4.3. The EnvironmentThere are many opinions regarding the environment or industry, in which BG firms
typically operate. Most BG researchers emphasize high-technological industries as the
representative environment of operation (McDougall et al., 1994; Autio et al., 2000;
Luostrarinen & Gabrielsson, 2006). Alternatively, some scholars observe BGs emerg-
17
ing in various types of industries in multiple countries (McDougall et al., 1994). Lu-
ostrarinen & Gabrielsson (2006) stated that BGs exist in at least five of the following
business areas: “high-tech, high-design, high-service, high-know-how, and high-system
businesses” (pg. 781). Finally, Gabrielsson et al. (2008) viewed BGs as not only emanat-
ing from conventional high tech industries, but also in the fashion environment. They
highlighted the case of Blackberry and Zara for this purpose. Zara started off as a low-
tech familiar Spanish clothing firm, but has expanded quickly in foreign markets in re-
cent years. Gabrielsson et al. (2008) claimed findings from Greek and Italian firms show
rapid internationalization occurs in both high-tech and low-tech industries. According
to Knight and Cavusgil (1996), these products may be the exception, since they claimed
that BGs often address industrial markets rather than consumer markets. See table 3 for
summary.
Table: 3. Summary of the BG environment. Source: Own analysis
Dimensions of the BG environment Researched literatureThe export percentage Rennie (1993); Cavusgil (1994); Lu-
ostrarinen & Gabrielsson (2006); Servais
et al. (2007)The globalization period McDougall & Oviatt (1996); Rennie 1993;
Cavusgil 1994; Knight & Cavusgil 1996;
Knight & Cavusgil 2004; McDougall et al.
1994; Oviatt & McDougall 1994; Madsen
& Servais (1997); Gabrielsson et al. (2008)
The export percentage The “time lapse” of internationalization is a component in all businesses, not just BG
firms. However, the percentage of export pared with time is a defining factor in BGs. The
percentage of export for BG varies somewhat amongst scholars. Rennie (1993) and Ca-
vusgil (1994) stated that new ventures need to achieve 76% of their total sales through
exports to be considered a BG company, whilst Luostrarinen & Gabrielsson (2006) sug-
gested that international sales over 50% in revenues characterized a mature BG. Lastly,
Servais et al. (2007) diverge from the above-mentioned researchers by proposing that the
total turnover must exceed only 25% in export for a company to be considered a BG.
The globalization periodThere is an ongoing debate and many disagreements regarding defining a globalization
period of BG firms (McDougall & Oviatt, 1996). Some consider BG firms as those firms,
which have internationalized within two years after birth (Rennie 1993; Cavusgil 1994;
18
Knight & Cavusgil 1996; Knight & Cavusgil 2004). Others view BGs as international-
izing from their inception (McDougall et al. 1994; Oviatt & McDougall 1994). However,
it has to be taken into account that some high-tech and biotech products’ development
time far exceeds the three plus years highlighted in table 3.
One study emphasized that the time frame should be extended beyond the firm’s
founding. Madsen & Servais (1997) doubted if BGs even could be categorized as a
“new” firm. They argued that BG firms have many “genes” that root back to firms and
networks in which it’s founder(s) and top management gained industry experience.
Madsen & Servais (1997) therefore strongly emphasized that the time perspective
should be extended and the concept of a BG being a newly established company should
be addressed. Finally, Gabrielsson et al. (2008) mentioned that the whole internation-
alization process might take longer than three years. Conversely, they posed an alterna-
tive definition to what a BG could not be. The authors stated that BGs have to bear the
risks and uncertainties, which highly characterize start-up firms. “It cannot be a spin-
off of a larger firm that is prepared to help it float” (Gabrielsson et al., 2008, pg. 388).
4.4. The ProductThe literature review shows that the product or service offered by BGs contributes
immensely to early globalization. One researcher stressed the need for a standardized
product that could dominate in concentrated niche markets (Young 1987). Young stated
that the world has become more homogeneous, where the tastes and preferences of the
customers have become more uniform. However, throughout the years, many scholars
have strongly opposed to the standardized product view based on the following argu-
ments seen in table 4.
Table 4. Summary of the BG product. Source: Own analysis
Dimensions of the BG product Researched literatureWays of marketing Ganisky (1989)High quality innovative product Jolly et al. 1992; Rennie 1993; Cavusgil
1994; Madsen & Servais 1997; Sharma &
Blomstermo (2003); Chetty & Campbell-
Hunt (2004)The market segment Chetty & Campbell-Hunt (2004)
19
Ways of marketingGanitsky contradicted Young’s argument already in 1989. He studied Israeli “innate
exporters”, which differed drastically from “adoptive exporters” who first served do-
mestic markets and expanded towards foreign markets. Ganisky (1989) explained that
meeting customer demands involves two types of strategies: price and competition. If
price is their only parameter for competing, then according to Porter, this is only a sus-
tainable competitive advantage if they are the price leader (Porter, 1985). Furthermore,
Ganisky (1989) stated that there are two ways of marketing products, namely through
adding value to the customer or adding variety to existing products. When adding
value to products, the target customers attach importance to performance and price.
On the other hand, attributing variety to available products attracts customers who are
conscious of customized products that meet their personal requirements, even though
they possibly are more expensive. Based on Ganisky’s research, the innate exporters
were successful in foreign countries because they introduced new products, which
added variety in the markets (Ganitsky 1989). Knight & Cavusgil (1996) opposed this
statement, and suggested that adding value to a product is one of the key characteristics
of a BG firm.
The high-quality innovative productAs early as the beginning of the 1990’s several studies revealed a key element of a firm’s
rapid internationalization, namely the high-quality innovative product they offered
(Jolly et al. 1992; Rennie 1993; Cavusgil 1994; Madsen & Servais 1997). Jolly et al.
(1992) emphasized the importance of an innovative product. They underlined the need
for creating a standardized product to achieve success in leading markets and thereafter
develop early follow-on products.
In opposition to Ganisky (1989), Rennie (1993) argued that BGs should compete on
quality and value through innovative products based on technology and product de-
sign. This argument leans more towards Porter’s suggestion for a differentiation strategy
rather than competing on price, proposed by Ganisky (1989). Another suggestion states
that products or services offered should be marked by a process or product break-
through employing cutting-edge technology (Cavusgil, 1994; Madsen & Servais, 1997).
Sharma & Blomstermo (2003) argued that BG firms sell products that are either “totally
new” or “ radically” different compared to accessible products in the particular indus-
try. This may allude to the importance of innovation, specifically radical innovation.
This is realistic because creating innovation on any level is promoted by the ability
to (re)combine existing knowledge and scientific findings to deliver a novel product
(Sharma & Blomstermo, 2003). Knight & Cavusgil (2004) also emphasised different ele-
ments concerning the particular product sold by BGs. They start by acknowledging the
need for unique product development and the creation of innovative products. How-
20
ever, Knight & Cavusgil (2004) point out the necessity of acquiring customer loyalty
through products by meeting a specific need. Due to the fact that present day custom-
ers have become more organized and demanding, BGs are urged to constantly provide
superior buyer value to compete with larger players on the market.
De Bono’s concept of “sur/petition” means “seeking above” (de Bono, 1989), or moving
beyond competition. Sur/petition proposes that “survival” is not enough for any busi-
ness. Rather, de Bono viewed competition as a firm deciding to run in the same race as
others . When “seeking above,” companies choose to run and develop their own race.
De Bono further claims that “Competition is for Survival” and “Sur/petition is for suc-
cess” (De Bono, 1989), which promotes value monopolies rather than physical mo-
nopolies. W. Chan Kim and Renée Mauborgne (2003) later evolved a similar concept in
the “Blue Ocean Strategy”, which again explores establishing your own playing field,
rather than competing in a crowded market (Red Ocean).
The market segmentBased on a study of New Zealand firms, Chetty & Campbell-Hunt (2004) agreed that
BG firms are driven by innovative products, but also highlighted the importance of
the market segment, which the products or services should focus on. Indeed, BG firms
should focus on specialized products with a narrow product range, as exemplified by
products like Stella McCarthy (fashion), Shamballa Jewells (accessories), iMotions (soft-
ware) and Skype (Internet call).
4.5. The Global strategy and visionA global strategy has been defined “ as one in which a firm seeks to gain competitive
advantage from its international presence through either concentrating configuration,
co-ordination among dispersed activities, or both” (Porter, 1986).
BG firms have been characterized as possessing a strong global vision or strategy from
establishment. Some researchers argue that the global strategy originates from the com-
bination of the entrepreneur’s insight and high-quality innovative products that could
revolutionize an industry (Jolly et al. 1992). As early as in 1987, Young’s article focused
on strategy perspectives on internationalization. He stated three distinct strategies for
“in-between MNEs” which was based on the assumption that the world has become
more homogenous regarding customer tastes and preferences. The three strategies pro-
posed by Young are “1) dominate the world market for a standard product, 2) concen-
trate on niche businesses and 3) aim for growth by market spreading with small shares
of many markets” (pg. 36). See table 5.
21
Table 5. Summary of the BG global strategy and vision. Source: Own analysis.
Dimensions of the global strategy and vision of a BG
Researched literature
The fast-follower versus the first-mover Ganisky (1989); Dodge (2005)The global strategy – a package deal Jolly et al. (1992)Grasping opportunities Oviatt & McDougall (1994)Controlling versus owning assets Oviatt & McDougall (1994)Strategic alliances based on trust Oviatt & McDougall (1994); McDougall et
al. (1994); Cavusgil (1994)“Learning advantages of newness” Autio et al. (2000)The spaghetti method Chetty & Campbell-Hunt (2004)Leveraging resources Knight & Cavusgil (2004)
The fast-follower versus the first-moverGanisky (1989) revealed quite a different approach regarding the global strategy or
vision held by BG firms or as they name them, “innate exporters”. The Israeli study
presented that successful innate exporters chose a business strategy built on being a
fast-follower or imitator, rather than the first-mover when aiming at a narrow market
segment by offering a variety of the original products. Dodge (2005) elaborated on why
market-leading companies fail when faced with disruptive products. He argued that
fast followers can eclipse market leaders. Larger companies tend to launch new fea-
tures faster than the customers can absorb them. As a result, newly delivered products
become extremely complex and costly, even though they solve any and every problem
that might exist. Dodge stated, “your existing customer base has no interest in the infe-
rior product, they want more features and performance at a reasonable price” (Dodge,
2005, web, 18.05.10).
Furthermore, management within a more established organization usually relies on pri-
or experiences when making decisions. Even though top management reach profitabil-
ity and “listen” to the customer, their specialized skills can also inhibit them by pre-
venting them from identifying the disruptive low end of the market. Whilst established
companies are the first to discover the disruptive low end of the market, they choose
to accelerate technical advancement in their own products, rather than address disrup-
tive new technologies. However, start-ups see an opportunity and grasp it (Dodge, 2005,
web, 18.05.10).
Even though companies such as Forte Software, AltaVista and Napster (Dodge, 2005)
were on the leading edge in their technology, and were the first to launch their product
in the market, they still failed in sustaining market leadership. Fast followers were able
22
to imitate their innovation. According to Dodge (2005, web, 18.05.10), “the technology
was outstanding…the management was not”.
The global strategy – a package dealJolly et al. (1992) posed another definition of what a global strategy should consist of.
Firstly they underlined the importance of obtaining a global vision from inception, and
thereafter spoke of seven polices which should be implemented in the overall business
strategy. The seven points consist of 1) acquiring a global vision from the beginning,
2) selling a high-quality innovative product, 3) creation of standardized products, 4)
penetrating many markets rapidly, 5) making investments abroad, 6) importance of
follow-on products and finally 7) the organization should be tightly networked and
global. These policy elements describe different essentials of succeeding in global envi-
ronments, but are insufficient when applied alone. The points should be regarded as a
package and all should be brought into play when embarking overseas markets.
Grasping opportunitiesOviatt & McDougall (1994) chose a different path when describing a global strategy
from inception. Global start-ups are firms that proactively act and capture opportuni-
ties in international markets by acquiring and selling products in numerous countries.
Oviatt & McDougall (1994) added, “they (global start-ups) appear to have the most sus-
tainable competitive advantages due to a combination of historically unique, causally
ambiguous, and socially complex inimitability with close network alliances in multiple
countries” (pg. 60), compared to the other types of companies investigated. Compared
to Jolly et al. (1992), Oviatt & McDougall (1994) pointed out different elements that
should ideally be fulfilled to secure the existence of international new ventures or BG
firms, “organizational formation through internalization of some transactions, strong re-
liance on alternative governance structures to access resources, establishment of foreign
location advantages and control over unique resources” (pg. 53).
Control versus owning assetsAll the above points are inadequate without the control over unique resources. Control-
ling rather than owning assets is essential due to resource scarcity, especially amongst
younger firms. These resources concern knowledge diffused in the internal organiza-
tion of a new venture. Unfortunately, knowledge might not be unique forever due to the
fact that knowledge has become a more accessible phenomenon. Easily reached knowl-
edge has granted industry access to BGs. They cannot live without it. On the other
hand, the phenomenon is a threat to start-up companies. In other words, accessible
knowledge can be viewed as a “double-edged sword” for BG firms. Therefore interna-
tional new ventures need to protect their unique assets from competitors. Furthermore,
23
Oviatt & McDougall (1994) stated that foreign investments are not a must, however,
strategic alliances can be formed to obtain necessary overseas resources as manufactur-
ing and marketing skills.
Strategic alliances based on trustMcDougall et al. (1994) agreed with Oviatt & McDougall (1994) regarding strategic al-
liances as a main element in the global strategy. According to McDougall et al. (1994),
strategic alliances can be useful for BGs since they often have limited funds and re-
sources or restricted personal capabilities and competences. Cavusgil (1994) accepted
the notion of strategic alliances, but took the concept a step further by focusing their
attention on long-term alliances with partners through mutual trust in relationships.
Cavusgil (1994) stressed that successful internationalization is equivalent to success-
ful business partnerships in cross border countries. Inexperienced management should
invest time and resources when building strong business relationships to achieve trust
and loyalty. When these important milestones of a relationship are reached, the chanc-
es for succeeding in foreign countries are greater. Bell (1995) proposed that strategic
decisions to going global are made through a network approach. “Evidence of client
followship and indications that some firms initiated exporting because of contacts with
foreign suppliers do offer a plausible explanation as to how and why software firms
with such networks internationalize” (Bell, 1995, pg. 72).
In the study of 196 small high-technology firms, Jones (1999) suggested that early
internationalization is regarded as a holistic process, as Jolly et al. (1992) supported.
According to Jones (1999) the firm must integrate and interrelate core value chain func-
tions, as production, R&D, marketing/distribution and people into one holistic process
when rapidly internationalizing.
»Learning advantages of newness«Autio et al. (2000) presented the new concept “learning advantages of newness”. They
tested and gathered data from the Finnish electronics industry, and claimed that knowl-
edge intensity results in speedy globalization. Firstly, knowledge intensity is defined
as “the extent to which a firm depends on the knowledge inherent in its activities and
outputs as a source of competitive advantage” (Autio et al., 2000, pg. 913). The authors
argued that knowledge intensity could contribute positively to rapid growth in interna-
tional markets due to a number of reasons. Older firms are more dependent on tangible
assets, which often originate from their legacy infrastructure. On the other hand, BG
firms in high-tech industries are likely to be more agile and adaptable to foreign envi-
ronments because their competitive advantage is concentrated in the field of knowledge
creation and exploitation. When focusing on the latter, young firms tend to build up
unique learning skills. According to Autio et al. (2000), possessing distinctive knowl-
24
edge resources may be quite beneficial when entering new situations and markets and
should be implemented as key strategic element. Sharma & Blomstermo (2003) agreed
with Autio et al. (2000) regarding unique knowledge assets as a main source of com-
petitive advantage. However, Sharma & Blomstermo (2003) added how knowledge can
be acquired. Based on case studies of a radiotherapy firm, Helax, and IRA systems, they
argued that an organization’s network ties supply knowledge. The researchers con-
cluded that these network ties drive internationalization. “The process is reactive, and
co-evolutionary based on a feedback process” (Sharma & Blomstermo, 2003, pg. 749).
However, only two cases form the empirical base.
The spaghetti methodChetty & Campbell-Hunt (2004) provided a much different approach concerning a
global strategy. Initially the scholars believed that globalization is a mix of strategic ele-
ments as, “strategic action, emergent developments, chance and necessity” (pg. 63) is
key to rapid internationalization. Besides that, they observed a learning strategy, which
they call “sow and reap” (pg. 73). This strategy is based on the assumption that firms
should launch several products in several markets concurrently. The reason for this is
to verify which one is most promising, and thereafter focus on that specific market. Ma-
rissa Mayer, Google’s vice-president of search products and user experience, described
what in the public is known as the “spaghetti method”: “The way you find really suc-
cessful new innovation is to release five things and hope that one or two of them really
take off” (BusinessWeek, 2006). She further elaborated on the topic by emphasizing
growth through word of mouth from customers. Moreover, putting several products on
the markets at the same time results in receiving vital indications about whether or not
the product meets customer expectations, market size, and realizing the strengths or
weaknesses of the certain product compared to similar existing products already on the
market (BusinessWeek, 2006). Finally, Chetty & Campbell-Hunt (2004) stated that this
process is based on experiential learning and is coherent with a global strategy.
Leveraging resourcesKnight & Cavusgil (2004) leaned more towards product development and leveraging
resources from foreign distributors when discussing global strategies. They suggested
successful business strategies for BG firms whilst sharing the following elements: global
technological competence, distinctive product development, quality focus and lever-
aging foreign distributor competences. BGs should hold technological competences
and concentrate on quality when developing products. Focusing on quality refers to
meeting or exceeding present customer expectations, by delivering e.g. extra features.
Knight & Cavusgil (2004) argued that today’s customers respond to superior quality
products and are willing to pay higher prices for them. In 2006, Luostrarinen & Ga-
25
brielsson stated that the business focus of BGs involves two aspects, 1) working on
highly specialized niche products and 2) determining the target customer segment from
the beginning. Furthermore, they acknowledged that BGs deviate from conventional
stages approach, thus view the “death” of traditional stages as to be highly overstated
in contrast to other scholars. Based on a study of 89 Finnish BGs from different high-
tech industries, Luostrarinen & Gabrielsson (2006) observed that a large number of BGs
actually do follow incremental steps or risk failing sales in foreign markets and “reverse
the pattern of the holistic model (inward-outward-cooperation stages)” (Luostrarinen &
Gabrielsson, 2006, pg. 797). Lastly, the two researchers made sure that readers would
not forget an important slogan. “Globalize or Die”, rather than “Globalize and Die” (Lu-
ostrarinen & Gabrielsson, 2006, pg. 796).
4.6. The Market ApproachWhich entry modes or market approach do BG companies select when crossing na-
tional borders? Many scholars employ a common perspective, namely the penetration
of niche markets, see table 6 below.
Table 6. Summary of BG market approach. Source: Own analysis
Dimensions of the market approach adopted by BGs
Researched literature
Niche markets and the “new customer” Ganisky (1989); Rennie (1993); Cavusgil
(1994); Knight & Cavusgil (1996)The customer segment Lusotrarinen & Gabrielsson (2006)Licensing and joint-ventures Young (1987); Jolly et. Al (1992)The psychic distance Bell (1995); Servais et al. (2007); Madsen
& Servais, 1997.Client and technology followship Bell (1995); Von Hippel (1994); Madsen &
Servais (1997)
Niche markets and the »new customer«In 1989, Ganisky claimed that focusing on carefully chosen small markets segments
brought on early internationalization successfully to Israeli exporters. Rennie (1993)
stated that SMEs grew so rapidly due to the changing preferences and tastes of the cus-
tomer, which gave rise to niche markets. BG firms exploited this new window of oppor-
tunity and began to compete within niche markets. Cavusgil (1994) agreed with Rennie
(1993) regarding the shifting customer demands. The new type of customer strived
for more customized products that met their personal needs, and therefore triggered
the emergence of niche markets. Knight & Cavusgil (1996) also highlighted niche mar-
kets in their research. The threat of being smothered by much larger and established
26
companies, gave smaller firms no choice but to highly specialize or differentiate their
products that could occupy narrow global niches. Established companies can choose to
respond to disruptive entrants in different ways. These include copying business mod-
els or competing on price. The established players are often restrained by their legacy
infrastructure, and thus can be difficult to change their business model. Examples
of this can be found in telecommunications and airline industries. For big players it
would be too costly to lower prices due to their large established customer base. Instead
they often choose to acquire the new entrants once they have become established and
proven themselves.
The customer segment Lusotrarinen & Gabrielsson (2006) reflected upon which customer segment the typi-
cal BG company should aim for. As established earlier, BGs are characterized by
lacking basic resources, therefore, targeting a broad customer segment is not viable.
Consequently, these new ventures sought out niche markets. During Lusotrarinen &
Gabrielsson’s (2006) study of Finnish BGs, the researchers found that these particular
firms normally targeted business-to-business (B-to-B) segments, rather than business-
to-customer (B-to-C) segments, because they could be reached with limited marketing
budgets.
Licensing and joint-venturesYoung (1987) suggested that smaller firms adopted unconventional strategies as licens-
ing and joint ventures as primary overseas market entry modes. Jolly et al. (1992)
agreed with Young (1987) when they took departure in the use of alliances when en-
tering overseas markets. The researchers suggested that BG companies are forced to
pursue international markets aggressively with the help of partners, because they lack a
worldwide business system.
The psychic distanceBell (1995) studied small computer software companies in Finland, Ireland and Nor-
way. The main purpose of the scholar’s article was to investigate a firm’s initial market
selection and entry decisions. Firstly, Bell (1995) found that BGs usually targeted nar-
row niches and their offerings were often specialized products. In Bell’s research, 50-70
per cent of firms under observation entered “close” markets or neighbouring countries
in the early stages of export. “Close” markets refer to the “psychic distance” between
countries. In later stages or as a firm matures, companies could export to foreign mar-
kets with greater psychic distance. Servais et al. (2007) contradicted this statement by
introducing two strategies for BG companies. In their view, “true BGs” operate in more
distant countries, whilst BGs or “born internationals” enter more culturally closer
27
markets, where the psychic distance is reduced, and follow strategies that are similar
to traditional internationalization stage approach. On the other hand, the term “psy-
chic distance” has been said to be irrelevant due to various aspects that have made
the world as we see it today is more global and accessible (Bell, 1995). In addition, the
emergence of more homogenous customer preferences and tastes has made psychic
distance less applicable (Madsen & Servais, 1997).
Client and technology followshipMoreover, Bell (1995) stated important factors that influenced the decision to export:
“Client followship, sectoral targeting and computer industry trends” (pg. 65). Client
followship relates to when domestic clients choose to engage in international markets,
and therefore some firms are encouraged to export. Bell (1995) provided evidence stat-
ing that firms do not only follow their clients to foreign environments, client followship
additionally deeply influences which specific market to enter. Sectoral targeting refers
to which markets experience rapid growth. Small firms were likely to target these nar-
row niches where a window of opportunity appeared.
Lastly, the concept of industry trends is quite similar to sectoral targeting, where firms
exploit markets that undergo quick growth in their specific industry. BGs tend to enter
markets where the development of technology or other product specific elements are
located. Von Hippel (1994) acknowledged this suggestion by stating that companies
literately need to move to the locus where the needed information is located. By do-
ing this, companies may be able to decrease the “stickiness” of information. Von Hip-
pel (1994) introduced the term “sticky information,” as being hard and costly to both
acquire and transfer. He defined the stickiness as ”a given unit of information in a given
instance as the incremental expenditure required to transfer that unit of information to
a specified locus in a form usable by a given information seeker” (pg. 430). Low costs
provide a low degree of stickiness, whilst higher costs refer to a high degree of sticki-
ness. Transferred technological knowledge can be high in stickiness since it needs to
be “codified” or easily learned by the receiver. Furthermore, the transportation of this
critical information may also be very costly. Therefore, BGs tap into geographical clus-
ters of knowledge, which may provide a source of knowledge for these firms.
According to Bell (1995) and Madsen & Servais (1997), the elements that absolutely
control and influence the internationalization process are domestic and foreign client
followship, the targeting of niche markets and specific industry trends rather then the
psychic distance to export markets.
Defining the profile of the born global firmThis research concurs with Harryson’s (2006, pg. 32) definition of a BG.
28
“BGs are firms that already from their birth have an international orientation and
participate in global relationships – often based on a strong technological competitive
edge”.
This research has identified the six parameters: the founder, the organization, the en-
vironment, the product, the global strategy/vision and market approach, as key dimen-
sions defining the profile of a BG firm and further supplementing the above definition.
These parameters are described in BG literature overview located below.
Table: 7. Complete BG literature overview. Source: Own analysis.
Founder Organization Environment Product Global Strategy/vision
Market approach
Converging Diverging
Oviatt & McDougall, 1994
Role of entrepre-neur is network formation and social interaction.
4 necessary elements in the development of international new ventures: Organi-zational formation through interna-tionalizatin of some transactions, 2)Strong reliance on alternative gov-ernance structures to access resources (alliances through networks), 3) Establishment of foreign location advantages, 4)Control over unique resources (knowledge)
Controlling rather than owning assests
Identifying and matching resources with most attractive markets
International new venture (INV): a business organiza-tion that, from inception, seeks to derive significant competitive advantage from the use of resources and the sale of out-puts in multiple countries. From in-ception - multiple countries
McDougall,Shane & Oviatt,1994
Education, network including personal relation-ships, knowledge and experience. Learn by doing, experience is all; founders are individuals who see opportuni-ties for earning high returns for establisheing busi-nesses that operate across national borders. They see opportunities that others do not see because of the competencies that are unique to them.
Rely on hybrid structures that are less ressource demanding during the formation process (ressource-based view)
INVs are present in at least ten countries through-out Europe, North America, South America, Asia, the Middle East and the South Pacific. (primarily high-tech businesses, but do emerge in a variety of industries.)
Use of strategic alliances
Identifying and matching resources with most attractive markets
INV: defined as a business organiza-tion that, from inception, seeks to derive significant competitive advantage from the use of resources and the sale of outputs in muliple countries (Oviatt and McDougall 1994)
Cavusgil, 1994 Management and control of operations across boarders through use of communica-tion technology, Flexibility
Inward interna-tionalization’ via outsourcing, subcontracting and partnerships.
Process or product breakthrough through use cutting-edge technology
Long-term alli-ances
Niche markets, faster adaption and shorter response time, customized products
Born global: the begin exporting within two years of establishment and export an average of 76% of their total sales. They are often small, with annual sales of $16 mil-lion (Australian) - based on exporting companies in Australia. Global-ization within two years of establish-ment - 76% of their total sales
Bell, 1995 Expand through new markets rather than increasing investments in existing markets
Client follower-ship, sectoral targetting, industry specific factors rather than psychological or geographic distance.
Expantion through new markets
Client follower-ship
Bloodgood et al,1996
Top mangement team and their internatioan expe-rience is critical for new venture; Importance of size of the company
Low cost, in-novation, product differentiation
Product differen-tiation
“High-potential” ventures: new entrepreneurial ventrues with high aspirations and po-tential for growth. (DIVERING) - high aspirations and potential for growth
29
Founder Organization Environment Product Global Strategy/vision
Market approach
Converging Diverging
Knight &Cavusgil, 1996
Mindset (the world is one market place); Active en-trpreneurs sparked by technology break-through
Management and control of operations across boarders through use of communica-tion technology, Flexibility
Inward interna-tionalization’ via outsourcing, subcontracting and partnerships.
Process or product breakthrough through use cutting-edge technology
Long-term alli-ances
Niche markets, faster adaption and shorter response time, customized products
Born global: the begin exporting within two years of establishment and export an average of 76% of their total sales. They are often small, with annual sales of $16 mil-lion (Australian) - based on exporting companies in Australia. Global-ization within two years of establish-ment - 76% of their total sales
Madsen &Servais, 1997
Experience and competencies; Ambition and background;
Hybrid structures Cross national networks (source ressources from companies with complementary competencies); Export accounts for 75% of sales, time to export is max 2 years
Leading-edge tech-nology products
Tied to value-adding process (genes) and not geographical position e.g. pursue access to lead customers or technology
Client and technol-ogy followership;
When studying a BG firm, the time per- spec-tive should be extended beyond its birth. Prob-ably, many of its “genes” have roots back to firms and net- works in which its founder(s) and top managers gained indu- stry experience. It may be doubtful wheter a BG can be considered a new company. TIME PERSPECTIVE - goes beyond its establishment
Jones, 1999 Early internatinal-ization of samll firms should be viewed as an holistic process; small firms in high technolgoies - competitive advan-tage may be vested in their ablility to devlop and exploit new innovations, carve out nar-rowly defined and defsible niches, and adapt rapidly to change.
Small firms in high technologies; creation of new in-novations; niches; high adaption rate
Early internation-lization should be viewed as a holistic process
Autio, Sapienza & Almeida, 2000
Argue that early entrpreneurial behavior might stimulate a self-reinforcing pattern that generates what amounts to an “entrepreneur-ial culture.”
Organization’s knowlegde is its capacity to appre- hend and use re-lationships among critical factors in such away as to achieve intended ends; Organiza- tional learning is the process of assimilating new knowledge into the organization’s knowledge base; knowledge inten-sity is the extent to which a firm depends on the knowledge inher-ent in its activities and outputs as a source of com-petitve advantage (contributes to international sales growth); imitability is the ease with which a firm’s technology can be learned or replicated by outsiders.
High-technology industries; BGs have the ablility to adapt to and innovate more rapidly in new and dynamic environ-ments than would oridinarily be the case for older firms.
Knowledge and learning; new concept “learning advantages of new-ness”; knowlegde intensity results in rapid growth in total and in inter-national sales.
Client and technol-ogy followership;
Employed knowlegde-based theory to shed light on interna-tional growth in entrepreneurial firms; the median age of the firms at the start of the study periode was seven years, and the median age at first international entry was four years, with 20% of the sample firms initiating international sales during their first year of operation. Globalizaiton peri-ode is 4 years.
McDougall & Oviatt, 2000
International entrepreneurship- a combination of innovative, proactive, and risk-seeking behav-ior that crosses national borders and is intended to create value in organizations.
International entrepreneurship- a combination of innovative, proactive, and risk-seeking behav-ior that crosses national borders and is intended to create value in organizations.
Sharma & Blomstermo, 2003
Founders use their network (strong and weak ties) to internationalize. Ties could be from educational backgrounds, busi-ness backgrounds, personal relations and friendships
Knowlegde inten-sive firms with a high degree of knowledge content and employ individuals who possess high sci-entific knowledge; competitive advan-tage - embedded in their knowledge intensity
BGs sell products and services that are either “totally new” or “radi-cally” different for existing products (non-standarlized products); This is made feasible as BGs (re)combine scientific prin-ciples and discov-eries to develop a new concept.
Internationaliza-tion process is driven by the knowledge supplied by their network ties; The international operations of BGs and their network ties thus co-evolve.
When selecting clients abroad, BGs improvise, adapt, and show a willingness to learn on needs of the individual buyers and the local distribution channels; They adapt foreign entry mode to the needs of the individual markets and clients.
BGs frequently sell products and services based on scientific prin-ciples that are not standard within the industry
BGs interna-tionalization is influenced by their network ties
30
Founder Organization Environment Product Global Strategy/vision
Market approach
Converging Diverging
Chetty & Campbell-Hunt,2004
Founder precieves the world as one market; has extensive prior experience
Extensive use of of information and communications technology; scope of networks and pace of develop-ment
Time to export- 2 years and 80% of sales
Specialized products; narrow product range
Learning strategy: “sow and reap”; firm trying sev-eral products and markets simultane-ously, waiting to determine which one is promising, and then focusing on that; strategy is consistent with experience-based learning; strategy of innovation
Niche markets; selecting countries with a close psychic distance; gain credibility through local sales (home-market)
Main focus of BGs is growth through international sales.
BG internation-alization: having near- simultaneous and thus rapid engagement with muliple national markets, as oc-crurring early in the life of the firm, when the firm is still small and thus, operate only in niche global markets or in emerging markets opening up to new tehcnologies. These markets are not con- sidered to be the same; operate in global markets
Knight & Cavusgil, 2004
Global technolgi-cal competence: refers to the firm’s technolgical ability - the creation of superior products and the improve-ment of existing products, as well as greater effective-ness and efficiency in production processes
Leveraging foreign distributor competences: BGs rely on foreign independent distributors and those distributors’ specific compe-tences to maximize performance out-comes associated with down-stream business activities abroad.
Unique product development: creation of distinc-tive products, and is akin to differentiation strategy, which involves creating customer loyalty by uniquely meet-ing a particular need; Quality focus: develop products that meet or exceed customer expecta-tions with respect to featrues and preformance.
Most important business straegies for BGs: global technolgicial competence, unique products development, quality focus, and leveraging of foreign distributor competences.
Entry mode: tend to favor exporting
BGs: business or-gani- zations that, from or near their founding, seek superior interna-tional business performance from the application of knowledge-based re- sources to the sale of out- puts in multiple countries: their orgins are interna- tional, as demostrated by management’s global focus and the commit- ment of specific resourc-es to international activities.
Globalization through the application of knowledge-based resources.
Luostrarinen & Gabrielsson, 2006
Servais et al., 2007
Gabrielsson et al,2008
Young founders: often forward going and fearless - they rely on their own ablilities and skills and therefore select for their management teams similar, often yound and educated prople with little business experience and technological skills. Role of the advisory boards in advising and guid-ing these entrepre-neurs is extremely important for their sucess; founders have also been seen as former emplyees of down-sized businesses - has experience as an entrepreneur in the same field; Some BGs hired highly experienced managers to act as CEOs, managing directors, or board chairmen.
One case empha-sized “learning by doing” principle rather than formal training; Need cooperation be-tween the fuctions to be seamless; Trifunctional team building, where R&D, production, and marketing per-sons work closely together; Business focus must be clear
Born globals exist in 5 business areas: 1)high-tech, 2) high-design, 3) high-services, 4) high-know-how, and 5) high-system businesses; mature born globals made over 50% of their sales outside Europe; globaliza-tion periode - 4.5 years
High-tech companies: utilize advanced innova-tive technology in their products; High-service companies provide exceptionally high-quality ser-vices; High-design companies use unique design in their products and invest heavily in creating attractive designs; High-know-how com-panies sell unique know-how as their product. High-system companies sell sophisticated systems that solve customer- specific problems or needs; product must be modular to allow for country-specific variations with separate country kits or easy installation of software.
Product strategy: focused on niche markets, tech- nology was new in the world, and practicaly no viable competition existed; Operation strategy: followed the traditional stages as to invest-ment dimension; Market strategy: followed the con-vetional stages, but the process was imple- mented faster; Marketing strategy: pricing based on cost was found to be inapplicable for the BG studied. Below-cost pric-ing was used to obtain customer deal, and normal pricing was often based on the dif-ficult idelogy of customer value added. B-to-B segments seem to be more important; Slogan - “Global-ize or Die.”; BGs jump over less demanding stages; Many will reverse the pattern of the holistic model (inward-outward-cooperationa stages) by starting from the coopera-tion stage.
Focused on global niche segment and B-to-B segment; create networks, enter partnerships, build up alliances.
Proponents of the interationalization stages approach; talk about the death of the conventional stages approach in research, teaching, and practice is largely exaggerat-ed; Accepted BGs (for classification purposes) with a lesser global de-gree of sales when they had a clear global vision and were obviously on a global growth path; BGs exist in five business areas 1) high-tech, 2) high- design, 3) high-services, 4) high-know-how, and 5) high-system busines- ses; Mature BG made over 50% of their sales outside Europe- globaliza-tion periode: 4.5 years. Argues that traditional inter-nationali- zation stage theory still can be applied to BGs. BGs exist in various industries. Globalization peri-ode: 4.5 years
Servais et al., 2007
3 dimension of entrepreneurial orientation (EO): 1)risk taking, 2) proactiveness, and 3)competitive aggressiveness; entrepreneur mindset is very important, but is not sufficient alone
3 dimensions: scale, scope, and time of interna-tionalization.
Globalization periode: within 3 years from the foundation with a high share of foreign sales out of the total turnover (more than 25 %)
2 born-global strategies: 1)true born-global: operate in more distant markets, 2)born-global (born-international): go into culturally closer markets and follow strategies which resembel more te traditional incremental in-ternationalization pathway
BGs firms: rapidly internationalized firms (within three years from the foundation) with a high share of foreign sales out of the total turnover (more than 25%) - consistent with Knight et al. (2004); EO 1)risk taking; 2) proactivness, and 3) comeptitive aggressiveness; entrepreneur mindset is very important
31
Founder Organization Environment Product Global Strategy/vision
Market approach
Converging Diverging
Gabrielsson et al,2008
Exhibit broad entrepreneurial scope in the key country markets of their industry segment, high intensity of focus and rapid growth; the founder (team) needs to be an inspirational leader(ship)
BGs emanate from industries that may be what are conventially termed high-tech, e.g. Wireless, or low-tech, e.g. Clothing (Blackberry and Zara); periode of globalization: whole process may take longer than 3 years. One should be somewhat flex-ible about the time periode.
Products must have a distinct dif-ferentiation strat-egy as compared with proudcts that are already on the market.
BGs progess through three phases - 1) the introduction and inital launch, 2) Comprises growth and ressource accumulation, and 3) Break-out phase; BGs must have global vision at inception
BGs are lead by entrepreneurs and their firms are international; BGs are firms with global market potential and entrepreneurial competence that can be transformed into accelerated internationaliza-tion capability.; Global vision and effective commit-ment are the two necessary and suf-ficient conditions for continuance as a successful BG (both need to exist)
BGs must carry the risks of a small start-up company; it cannot be a spin-off of a larger firm that is prepared to help it float.; BGs emanate from industries that may be what are conventionally termed high-tech, e.g. Wireless, or low-tech, e.g. Clothing (Black-berry & Zara); Glo-balization periode: whole process may take longer than 3 years - one should be somewhat flexible about time period.
5. The Network Theory and Relationship Management Theory
“Networks typically emerge because no organization is self-sufficient, but rather depen-
dent on extra-organizational resources for its sustained competitiveness” (Harryson,
2006, pg. 17).
All economic actions are rooted in relationships between individuals (Granovetter,
1985). Different types of network ties and various types of business relationship bonds
illustrate numerous scenarios for firms regarding growth, strategic decisions and posi-
tioning on the market.
In the following chapters, the paper will examine relationship management and net-
work theories to establish a thorough understanding of both concepts.
6. The Three Parameters of Network Theory and Relationship Management
Based on an in-depth investigation of the literature review, three parameters were iden-
tified. These three parameters describe the elements highlighted throughout the read-
ings; 1) network ties and types of relationships, 2) mutuality and 3) trust.
32
6.1. The Network Ties and Types of Relationships
Table 8. Summary of network ties and types of relationships. Source: Own analysis.
Dimensions of network ties and types of relationships
Researched literature
The strength of weak ties Granovetter, 1973Direct and indirect ties Ahuja (2000); Burt (1983); Andaleeb, 1996Informal relationship building Halinen and Salmi (2001)Personal contacts Halinen and Salmi (2001)Interpersonal relationships Mainela (2005)The know-who network perspective Harryson (2008)
The strength of weak tiesIn 1973, Mark S. Granovetter was the first recognized scholar to present the concept of
“strong and weak ties”. In his article, the main focus leaned towards how strong and
influential weak ties may be in the diffusion and exchange of knowledge. The strength
of a tie is defined as, “…(a probably linear) combination of the amount of time, the
emotional intensity, the intimacy (mutual confiding), and the reciprocal services which
characterize the tie” (Granovetter, 1973, pg. 1361). Furthermore, a “friend” relates to the
notion of strong tie, whilst an “acquaintance” refers to weak ties.
The formation and continuous maintenance of strong ties involve a long time frame
and substantial commitments, whilst weak ties are not restricted by such repeated
engagement from both relations. Granovetter (1973) used a concept of a “bridge” when
explaining the only possible path between partners, and is an important term when
discussing diffusion methods. In other words, a bridge represents the only route where
information or knowledge can pass between two individuals of networks. Nonetheless,
bridges are only applicable if each partner only has one strong tie. This scenario could
never occur when operating in any social network. Due to the unlikely situation of a
particular tie only providing one path between two points in a social network, all bridg-
es are characterized by weak ties (Granovetter, 1973). When weak ties are local bridges,
they have the ability to enhance speed and shorten space between networks. Granovet-
ter (1973) stated, “individuals with many weak ties are, by my arguments, best placed
to diffuse such a difficult innovation, since some of those ties will be local bridges”(pg.
1367). Based on this argument, weak ties possess the power to diffuse knowledge to
a larger number of people in greater distances more rapidly, than strong ties. In other
words, globalization can be accomplished through working with weak ties, as they can
be mobilized.
33
Direct and indirect tiesAhuja (2000) based his research on the study of firms in the international chemicals
industry. He analyzed three aspects of a firm’s network structure: The influence of 1) di-
rect ties, 2) indirect ties, and 3) structural holes, which can be related to Granovetter’s
(1973) strong and weak ties. Ahuja (2000) furthermore examined the interfirm collabor-
ative linkages within the industry network and defined this concept, “…as a voluntary
arrangement between independent organizations to share resources” (pg. 426), which
can be used in the exploratory phases of a new venture. The interfirm collaborative
linkage is beneficial in two ways. Firstly, firms benefit this linkage by permitting re-
source sharing. The more aligning and sharing of resources with co-investments be-
ing the ultimate, companies then share a common fate. Hence, their interests are fully
aligned (Andaleeb, 1996). Allowing access to knowledge, skills and psychical assets en-
courages cooperation between firms. Additionally, various important aspects as knowl-
edge spill-overs, technical break-throughs, new solutions to problems or unsuccessful
methods may also appear by applying the interfirm collaborative linkages, and there-
fore give some firms a competitive advantage. These valuable insights give rise to the
relevance of a firm’s networks through direct and indirect ties, and potential structural
holes. Direct ties are defined as ties that “potentially provide both resource-sharing and
knowledge-spillover benefits,” whilst indirect ties are defined as” not entailing formal
resource-sharing benefits but can provide access to knowledge spillovers” (Ahuja, 2000,
pg. 428). Conversely, the degree of a firm’s relationship commitment or connectivity
plays a vital role when accessing crucial knowledge and is recognized in direct and
indirect ties. The last dimension of the firm’s ego, namely structural holes, exhibits the
potential “gaps” in information flows between partners. In other words, structural holes
appear when different network members have access to different flows and sources of
knowledge.
Informal relationship buildingWhereas Granovetter (1973) and Ahuja (2000) concentrated on the degree of strong and
weak ties, Halinen and Salmi (2001) emphasized informal relationship building as a
key driving force when developing long lasting business relationships. The foundation
of informal relationships originates from personal contacts, because all relationships
begin with interaction between people (Halinen & Salmi, 2001). Accomplishing suc-
cessful business relationships, personal contacts need to fulfil four instrumental func-
tions: “information exchange, assessment, negotiation and adaption, or service produc-
tion and transfer” (Halinen & Salmi, 2001, pg. 13). There is a possibility of exchanging
knowledge or even confidential information in face-to-face meetings, where these loose
trades would never become implicit or official. Informal relationships are also able to
access the partner’s particular competences in these casual meetings, maybe even when
34
it is not intended. Other than that, personal contacts can be enablers when building
business relationships. Furthermore, personal contacts can also hinder the evolution of
a specific relationship, when friendship is too close. Personal contacts have the power
to increase the risk of unethical business behaviour, hence enhancing corruption be-
tween partners (Halinen & Salmi, 2001). One partner might deviate from their loyalty to
their firm when choosing to meet their “friend’s” needs first.
Personal contacts Personal contacts have the ability of playing different roles in the vital phases - the
initiation period, the crisis period, and the ending of a business relationship. Personal
contacts can be seen as door openers in the initiation period or even in a crisis period
where help is needed. This refers to the involving a third party in a social network.
When one partner introduces or recommends different partners to each other, a new
relationship could appear between other business partners, who otherwise might never
have met. In opposition, personal contacts may be gatekeepers, where one partner is a
barrier and chooses to hinder new entrants in networks. Maintaining a trustworthy im-
age is crucial and a main milestone when building relationships. However, if the indi-
vidual on the other side is not convinced, a potential vibrant relationship might be lost.
If the day comes where a business relationships needs to end, personal contacts can act
positively as a door closer or negatively, as a terminator.
A door closer promotes a “beautiful exit” (Halinen & Salmi, 2001, pg. 9), where all net-
work members can break-up in a comfortable manner. If used correctly, personal con-
tacts could have the ability to level out any controversies members could have such a
delicate and serious situation. If the door closer executes his/hers mission well, reputa-
tions will still be able to stand strongly, untouched and unwounded.
An intentional termination of a relationship may derive from a member’s bad inten-
tions to damage or hurt another relationship, based on various sensitive matters. Termi-
nation of a particular relationship could in some situations sustain long-term damage of
the reputation for a specific member or firm. A crisis situation can arise from the ending
of a relationship. In some cases, other network members could deviate from the original
relationship because potential insecurities could appear. Ruptures in a safe environ-
ment could involve delays in business deals; increase uncertainties between members
or even lead to the death of another stable relationship (Halinen & Salmi, 2000).
Interpersonal relationships Mainela (2005) posed four ideal types of interpersonal relationships that constitute dif-
ferent levels imbedded in creation of business networks. Based on the research, the au-
thor mainly focuses on the organizing of international joint ventures through these four
types of social relationships. The first, reporting relationships, are regarded as more
35
formalized and professional in nature. These formal relationships are characterized
by regulatory process between the contractual or legal parties, and are found in every
business network. They are often employed when transferring uncomplicated informa-
tion or knowledge between network members. Organizational contacts differ from the
latter by involving more face-to-face interactions rather than written documents. These
contacts are still very formal in nature, and relate to common business negotiations or
other regular organizational processes a firm must endow. In this specific type of rela-
tionship, Maniela (2005) observed the use of “door opening” as a third party might be
involved (Halinen & Salmi, 2001), when convincing potential investors to inject capi-
tal in a particular project. Personal relationships illustrate links between rather close
individuals, and can be related to weak ties. Mainela (2005) agreed with Granovetter’s
(1973) definition of weak ties as being equivalent to “acquaintances, ” but still hold a
degree of formality. These personal contacts are forums where both parties are equally
committed or interested in hearing what the other has to say. Friendship relationships
is the last type of social relationship, and is closest and strongest tie between individu-
als.
The Know-who network perspectiveWhen a firm navigates from creativity to commercialization, Harryson (2008) contem-
plated that a firm’s assets are deeply rooted in three specific types of networks: “…
creativity networks, transformation networks and process networks…” (pg. 290). These
network forms support the phases of exploration and exploitation as firm progresses.
The exploration stage “entails the quest for new knowledge, which can be combined in
new constellations, to subsequently develop new organizational capabilities and future
innovation” (Harryson, 2008, pg. 295). On the other hand, the exploitation phase is
characterized by accessing corporate knowledge to reach effective commercialization of
the product or service. Furthermore, Harryson (2008) suggested that firms should apply
know-who based entrepreneurship when passing from creativity through transforma-
tion and commercialization, and therefore emphasized the need for strong and weak
ties in networks. The know-who concept differs greatly from the know-how concept.
Know-who “is the ability to acquire, transform and apply that know-how through
personal relationships” (pg. 294), whereas know-how is the ability to solve problems
efficiently based primarily on internally accumulated knowledge, experience and skills
(pg. 294).
Weak ties are most useful in the early phases of exploration, as they enable speed of
development and can give access to broad knowledge rapidly. Conversely, networking
through strong ties can be applied in the exploitation stage or when the firm wishes to
commercialize their product. The power behind strong ties is that they can obtain more
36
complex knowledge, compared to weak ties. However, Harryson (2008) further men-
tioned that the combination of both ties has been observed when the final product is
characterized as a “radical” innovation. In other words, when balancing the phases of
creation or commercialization the different ties are applied concerning what degree of
innovativeness the product holds.
6.2. Mutuality
Industry-university collaborationsHarryson (2006) highlighted the aspects of industry-university (I-U) collaboration, by
stating that bridges between universities and industries can enhance successful inno-
vation. When companies leverage knowledge from academic brainpower, the chances
of creating an innovation break-through radically increase. However, Harryson (2008)
specified that a company’s internal R&D department should not solely be dependent on
universities. Knowledge accumulated through the I-U collaboration should be viewed
as supplementary activity, rather than a substituting R&D all together. The process of
I-U collaborations can contribute to the discovery of new innovations or the solving
technical problems by achieving cost-reductions and flexibility in a shorter time frame
on both sides of the relationship. When solving innovation related problems, I-U col-
laborations may assist.
On the other hand, von Hippel (1994) argued that the transfer and attainment of knowl-
edge from outside sources might be a costly affair. As previously mentioned, von Hip-
pel (1994) referred to this type of information as “sticky”. von Hippel (1994) therefore
suggested that companies should move to the locus of the needed knowledge to de-
crease the degree of “stickiness” in information. Conversely, I-U collaborations have
been viewed to provide low-cost expertise, thus expecting reciprocity through full-time
jobs or other motivational elements, as seen in the study of Porsche below.
The Porsche caseHarryson and Lorange (2005) drew attention to the alliances between companies and
academia by revealing a unique study of Porsche. Opposed to conventional I-U collabo-
ration research, Porsche recruited and collaborated with master students not only in
R&D, but were also involved in the commercialization stages of a revolutionary ceramic
brake system. Initially, the employment of master students reduces the costs of wages
significantly. “A student costs the company 15% of what a full-time employee cost, so
the savings are substantial” (Harryson & Lorange, 2005, pg. 30) Furthermore, coopera-
tion with universities opens doors to the latest research in technology and therefore
provided Porsche with a strong competitive advantage against larger competitors as
Mercedes-Benz and BMW, at lower costs. Even though a master student had to work
37
long hours at minimum wage, attracting these individuals was not an impossible task
for Porsche. At the end of a project, Porsche offered their best interns a great opportu-
nity by employing them full-time within their organization. Additionally, this strong
motivation factor enhances mutuality and builds grounds for close relationships based
on loyalty. Besides the offer of a full-time position in the organization, students that do
not meet the first cut are still invited to be member of a highly active “alumni network.”
According to Harryson & Lorange (2005), such a chance could not be lost and appealed
greatly to the young engineers. As a result, over 2000 students applied for internship
annually at Porsche (pg. 32).
A summary of the dimensions of mutuality are seen in table 9.
Table 9. Summary of the dimensions of mutuality. Source: Own analysis.
Dimensions of mutuality Researched literatureIndustry-university collaborations Granovetter, 1973Direct and indirect ties Harryson (2006); Harryson (2008);
Harryson & Lorange (2005)
6.3. Trust Research shows that “if you create your networks with trust, diversity and brokerage,
you can raise your level of information from what you know to who you know” (Har-
ryson, 2008, pg. 294).
Trust is a phenomenon that contributes directly to the strengthening of relationships.
To compete successfully in the global economy, one initially needs to be perceived as a
trustworthy and dependable cooperator in underlying networks (Morgan & Hunt, 1994).
See table 10 below.
Table 10. Summary of the dimensions of trust. Source: Own analysis.
Dimensions of trust Researched literatureKey mediating variables in relationship
marketing
Morgan & Hunt (1994); Andaleeb (1996)
Opportunistic behaviour Morgan & Hunt (1994)
Key mediating variables in relationship marketingMorgan & Hunt (1994) proposed elements as commitment and trust to be key mediating
variables in relationship marketing. Relationship commitment occurs when “an ex-
38
change partner believes that an ongoing relationship with another is so important as to
warrant maximum efforts as maintaining it...the committed party believes the relation-
ship is worth working on to ensure that is endures indefinitely” (pg. 23). Commitment
is therefore defined as a party’s wish to preserve a cherished and valued relationship
(Andaleeb, 1996). Moreover, trust exists when “one party has confidence in an ex-
change partner’s reliability and integrity” (Morgan & Hunt, 1994, pg. 23). Trust is seen
as a necessary building block that greatly influences the development of commitment
within the relationship. However, the important trust factor can be enhanced or dimin-
ished by various factors as shared values or opportunistic behaviour. When both parties
share values, trust between these partners is improved. Sharing values is characterized
by similar beliefs between the partners regarding for instance, the right behaviour in
operations, consistent goals and company polices. According to Morgan & Hunt (1994)
shared values is a direct precursor of relationship commitment and trust. Additionally,
communication also fosters trust in a high degree. “We posit that a partner’s perception
that past communications from another party have been frequent and of high quality –
that is, relevant, timely, and reliable – this will result in greater trust” (Morgan & Hunt,
1994, pg. 25). In other words, trustworthy behaviour can be acknowledged through how
a particular firm communicates with other parties.
Opportunistic behaviourLastly, opportunistic behaviour can seriously damage any type of trust between two
partners. Even a slightest hint of opportunistic behaviour from a company can decrease
or even eliminate trust between established partners. The ultimate result of the key me-
diating variables is cooperation or the establishment of alliances in businesses (Morgan
& Hunt, 1994).
An overview of the network theory and relationship management theory is illustrated
below.
Table: 11. Network theory and relationship management literature overview.
Source: Own analysis
Network ties and types of relationships
Mutuality Trust
Network litt Granovetter (1973), Sharma & Blomstermo (2003), Harryson (2008), Gabrielsson et al. (2008), Johanson & Vahlne (2003), Ahuja (2000); Halinen & Salmi (2001)
Freeman et al. (2009), Johanson & Vahlne (2003),Kreiner & Schultz (1993)
Morgan & Hunt (1994), Kreiner & Schultz (1993), Ahuja (2000)
Relationship management litt Mainela (2005) Harryson & Lorange (2005), Harryson (2008) Harryson & Lorange (2005), Svensson (2001),Morgan & Hunt (1994), Harris & Wheeler (2004)
39
7. Aligning Born Global theory with Network Theory and Relationship Management Theory
7.1. The relevance of networks in Born GlobalsIn 2003, Sharma & Blomstermo made a contribution to BG research by pointing out
the relevance of networks based on strong and weak ties in early internationalizing
firms. Sharma & Blomstermo’s (2003) article “The internationalization process of Born
Globals: a network view” establishes and documents the significance of how global
networks and relationship management co-evolve with the rapid internationalization of
BG firms. The company’s network ties provide critical knowledge that drive and deeply
influence the internationalization process.
7.2. Leveraging networks Sharma & Blomstermo (2003) stated that pre-existing knowledge is already imbed-
ded in a BG firm before their first foreign market entry, because strong network ties are
developed before the establishment of a new venture. Strong ties originate from the
founder’s or top management team’s previous background. International education or
prior work oriented experiences mould and create these strong ties, which supply large
access to sharing knowledge and exchanging ideas. Similar past experiences and the
small size of a BG firm allow employees to own highly intensive knowledge, which
are similar in nature. Being a small organization provides an advantage when commu-
nicating amongst co-workers. In the beginning, no fixed routines are established and
the organization itself is highly decentralized. This gives the employees an opportu-
nity to co-develop corporate guidelines which further encourages cooperation within
the novel organization. Due to their small size and limited experience in foreign mar-
kets, BGs need to be creative when accessing new knowledge. New ventures leverage
knowledge through weak ties, and then recombine their own resources with external
knowledge. Hence, several weak ties also facilitate BG firms. Due to the fact that weak
ties are spread out across the globe, they are characterized by fewer personal interaction
and intensity. Consequently, weak ties demand less time and maintenance compared
to strong ties. Nevertheless, weak ties provide BGs with an extensive amount of foreign
knowledge that is heterogeneous and therefore enhance internationalization. Accord-
ingly, BGs learn through their networks.
7.3. Strong ties – a valuable assetCompared to Sharma & Blomstermo (2003) Harris & Wheeler (2004) concentrated more
on the entrepreneur’s inter-personal relationships, and which role these relationships
played in the internationalization process. An entrepreneur’s strong ties derive from
different settings in home markets, and demand years of face-to-face interactions where
40
trust between partners eventually emerges. Harris & Wheeler (2004) furthermore em-
phasized that these strong ties can be regarded as a firm’s most valued asset. Not only
do they provide access to knowledge, strong ties can highly influence and shape main
business strategies. Strong ties are so influential that they have the ability to transform
a new venture to a large extent by playing a key role in strategic choices taken by the
certain firm. As a result, entrepreneurs seek guidance from strong ties when establish-
ing businesses and creating visions and plans for the particular firm.
7.4. Engaging in networks from initial stages to break-outFurthermore, Gabrielsson et al. (2008) proposed that BG firms proceed through three
stages, where engaging in networks promotes successful internationalization. The intro-
duction and initial launch phase is characterized by establishing channels to potential
customers through networks or the Internet. Besides that, BGs can seek collaboration
with venture capitalists to enhance expansion in foreign markets through funding or
distribution channels. The second phase refers to growth and resource accumulation.
Increased growth and the acquisition of resources can also be gained through networks
in the global industry. Based on active networking, the BG organization learns from
cooperating or collaborating with partners or customers. The final phase, the break-out
phase, occurs when the BG firm combines the previously mentioned experiences and
knowledge acquired from network partners and customers into one plan. The break-out
phase therefore refers to the position the BG embraces in the global industry.
7.5. The know-who perspectiveAdditionally, Harryson (2006) introduced the know-who perspective in networking. He
argued, that “companies that move from know-how to know-who make extraordinarily
effective and efficient use of external networking to acquire both tacit and explicit
knowledge with and from extracorporate centers of excellence” (pg. 18) Combining
the BG’s limited resources with the right resources as knowledge and skills drawn from
network partners initially begins from “knowing who” can best contribute and transfer
these assets.
7.6. The OverlapThe overlap between the BG theory, network theory and relationship management theo-
ry is outlined in table 12 below. The table introduces an overview of how BG theory,
network and relationship management theory share some characteristics, which shape
the profile of a BG company. Since the three parameters, network ties and types of rela-
tionships, mutuality and trust are present in both theories, I have chosen to merge the
two theories into a common denominator when comparing to BG theory and its profile.
This thesis has constructed its research and interviews to help shed light on the nine
41
dimensions (six for BG theory and three for network and relationship theory) with a
particular emphasis on testing the three hypotheses.
Table: 12. Overlap of literatures: Network ties and types of relationships in BG litera-
ture. BG parameters in network/relationship management literature. Source: Own
analysis.
Network ties and types of relationships
Mutuality Trust
Born Global litt Oviatt & McDougall (1994), McDougall, Shane & Oviatt (1994), Madsen & Servais (1997), Sharma & Blomstermo (2003), Gabrielsson et al. (2008)
Founder Organization Environment Product Global strategy/vision Market Approach
Network / Relationship management litt
Harryson (2008), Harris & Wheeler (2004),Mainela (2005)
Morgan & Hunt (1994), Harryson (2008), Gabrielsson et al. (2008), Swan et al. (1999), Harryson & Lorange (2005)
Ahuja (2000), Halinen & Salmi (2001), Harryson & Lorange (2005)
Sharma & Blomstermo (2003) Gabrielsson et al. (2008), Kreiner & Schultz (1993)
As seen in table 12, there are three levels of overlap: strong, weak and no overlap.
Strong overlaps are the areas with three or more research studies in common. Weak
overlaps have one to two research studies in common. No overlap means that there
are no research studies in common. The strong overlaps are 1) network ties and types
of relationships, 2) the founder, 3) the organization and 4) the environment. The weak
overlaps are 1) the global strategy and vision and 2) the market approach. No overlaps
are identified in 1) mutuality, 2) trust and 3) the product. In order to test the three hy-
potheses, I will score the two case companies on their respective fit within the relevant
strong and weak dimensions.
8. CASE 1: THE ANOTO GROUP
8.1. History – A genius comes to playIn 1996, Swedish national Christer Fåhreaus, came up with a break-through idea,
which would redefine the way of storing data by using a pen-like tool. Since Fåhreaus
was in the process of writing his doctorate in neurophysiology, he needed an easier
way to note down important insights from the never-ending piles of books he was
required to read. Fåhreaus envisioned a high-tech pen that could read the marked text
whilst uploading the data onto his computer simultaneously. Even though the idea
was simple in nature, the technology was far more complex. The technology was based
on advanced image processing, digital camera technology and a fast processor ( www.
anoto.com, 18.05.10).
Fårhreaus convinced the CTO of Ericsson Mobile of the great potential the idea held.
42
Together with Torbjörn Gärdfors, they pitched the concept to the Ericsson Mobile’s
Board of Directors (BOD). Even though the BOD was intrigued by the idea and saw
commercial value, they were not convinced to develop the technology within their
company. However, Ericsson Mobile and their founder were eager to support Fåhreaus
and decided to finance the project (Harryson, 2006). This lead to the establishment of
C-Technologies, enabled Fåhreaus to create the world’s first digital pen and thereafter
paper technology. C-Technologies paved the way to the formation of the Anoto Group
in 1999. As Anoto matured, they became the new leader of the unique technology be-
hind the digital pen and paper, which consistently facilitates the transformation from
handwritten text to digital format (www.anoto.com, 18.05.10).
8.2. Introducing the Anoto Group Anoto is a Swedish high-tech company with headquarters in Lund, Sweden and offices
in Boston and Tokyo. Anoto has around 113 employees, who are mainly based in Lund
(www.anoto.com, 18.05.10). Today, Anoto employs a partner-driven business model
and actively operates through a significant global partner network, which provides
easy-to-use solutions fundamentally based the digital pen and paper technology. Anoto
is in the licensing and royalty business, whilst serving and creating solutions for vari-
ous segments as healthcare, bank and finance, transport and logistics, and education
(www.anoto.com, 18.05.10).
Anoto’s business is characterized by being highly patent-protected, with 296 granted
patents and 263 patent applications, and is currently divided into three business units
since the radical change in their business strategy. In 2006 Anoto decided to adopt a
new strategy focusing on supporting sales and marketing. This shift within the organi-
zation led to the employment of a new Chairman of the Board, Hans Otterling, who fur-
ther recruited Anders Norling as CEO (www.anoto.com, 18.05.10). Previously, Anoto
had positioned itself as a consumer-focused company and has now moved to being an
enterprise-focused company (Interview with Lars Hermansen).
8.3 Business unitsThe change of strategy and restructuring the internal organization resulted in the for-
mation of three new business units: Anoto Products, Technology and Licensing, and
Imaging Technology (www.anoto.com, 18.05.10).
1) Anoto Products focuses on products and solutions for enterprise customers as sys-
tem integrators, software developers and IT consulting firms, around the digital pen.
These partners design their own solutions based on Anoto’s technology and sell the
product to their corporate customers.
43
2) Technology and Licensing sell basic technology to partners that develop their own
solutions and products based on Anoto’s technology and digital pen. These partners
have their own products, channels, marketing methods, and branding. Examples of
products are firstly children’s toys designed by LeapFrog, where the company applies
Anoto’s patterns and technology into their products such as textbooks. Second, Poly-
Vision produces interactive whiteboards, called Eno, where Anoto’s functionality is
featured. PolyVision incorporates Anoto’s unique dot pattern in their surface to de-
velop the Eno board, where written data or handwritten strokes can be projected onto a
whiteboard.
3) Imaging Technology develops and licenses technology for integration with customer
products or components including mobile phones, accessories and their components.
The paper will only briefly examine Anoto’s previous business model, highlighting the
main events. The main research of this paper investigates Anoto from change of strat-
egy in 2006. Furthermore, additional details of the key financial figures can be found in
appendix 3.
8.4. The Founder – Christer FåhrauesChrister Fåhraeus, the founder of Anoto and the inventor of the digital pen and paper,
possessed a unique entrepreneurial mindset and insight that provoked Anoto to inter-
nationalize from inception. Fåhraeus is characterized as a high technology entrepre-
neur and has a background involving the creation of multiple products, which later
lead to the establishment of various companies (Harryson, 2008). Hermansen stated,
»Christer Fåhraeus’ strength as a manager, to have the entrepreneurial insight and to
drive processes and details. He is a different type of person«.
Fåhraeus was the key person behind the knowledge-creating exploration phase at
Anoto, but resigned as CEO in June 2003. As the company grew, piercing the commer-
cialization phase, Fåhraeus was replaced by Örjan Johansson, former CTO at Ericsson
and chairman of the board at Anoto. Today, Fåhraues is still a shareholder, but has no
involvement within the company (Interview with Lars Hermansen).
8.5 The organizationIn the early years of Anoto’s establishment, the organization had highly embraced
hybrid structures. The company followed the BG path by leveraging global relation-
ships, which resulted in “crossing the chasm” and achieving an early majority of users
(Harryson, 2006). Since the global relationships greatly influenced Anoto, the pen had
44
no natural home market. From inception, Anoto embraced an immediate internation-
alization process. The initial Ericsson relationship facilitated the developing process
of the digital pen and resulted in a global partnership. Additionally, Ericsson awoke
awareness amongst some of the leading players in the industry as Nokia and IBM, and
therefore acted as a medium or a “door opener” when establishing relationships with
new global partnerships. Since Ericsson introduced and involved their own sustain-
able network to Anoto, the company accomplished a global partnership based on a
know-who networking model. Key management heads within the Ericsson concern as
Örgan Johansson and Torbjörn Gärdenfors, were intrigued by Anoto’s product offering,
the digital pen and paper, and therefore gave way to their own network base acquired
through the previous Bluetooth experience, to enhance rapid internationalization
(Harryson, 2006). Without these essential relationships and their assistance, Anoto’s
internationalization process would most probably have been viewed as a slower, more
expensive and time-consuming journey.
Anoto outsourced large parts of the value chain to external partners, whom further de-
veloped consumer products based on Anoto’s technology. Their partners as Nokia and
Logitech enhanced the development of the pen and ultimately assisted Anoto to reach
the mass market (Harryson, 2006). Furthermore, Anoto absorbed transferred knowl-
edge from academics within Lund University and the Lund Institute of Technology. In
collaboration with 30 joint master theses and three fully integrated PhD thesis projects
over the first three year of operation, Anoto was surrounded by massive brainpower.
Moreover, highly skilled individuals were recruited based on prior personal relation-
ships or other personal settings, which enhanced the success of fundamental research
behind the technology (Harryson, 2008). Even though Anoto had all the benefits as
transferred extensive technological knowledge and expertise, unfortunately the compa-
ny did not reach their initial goal, crossing the chasm and reaching the early majority.
During the eleven years Anoto has existed, they have experienced a series of changes in
the organization, especially within the top management team. The ability to maintain
relationships and partnerships will be further discussed.
8.6 The environment of operationAs mentioned in the above chapter, Anoto leveraged an extensive global partner net-
work through the Bluetooth experience and the Ericsson collaboration. The global
partners heavily supported Anoto and resulted in immediate internationalization from
the company’s inception. Since globalization from inception is a main driver within BG
studies, Anoto can be recognized as a true BG company. Anoto operates in more than
50 countries through 300 partners across all continents (annual report 2009, HYPER-
LINK “http://www.anoto.com” www.anoto.com, 18.05.10). Moreover, Anoto’s digital
pen and paper is a cutting-edge technology and is dispersed throughout the high tech-
45
nology industry and will be investigated further in the product chapter below.
8.7. The digital pen and paperChrister Fåhreaus had an original idea. He envisioned a digital pen that would cap-
ture marked text and store data by downloading the marked text onto one’s computer.
Fåhreaus founded the company, C-Technologies, which was the initial starting point
for the future establishment of the Anoto Group. In collaboration with recruited highly
skilled engineers and friends from Lund Univeristy, the C-Pen was created. The found-
ing team involved great amounts of specialized knowledge and also involved the CTO
and the Chief Science Officer of Ericsson Mobile, made it possible to go far beyond the
original idea of the digital pen, called the C-pen.
Cooperating with his highly specialized team of engineers and top management heads,
together they gave birth to an innovative invention, namely the digital pen. Conse-
quently, the new digital pen was further supplemented with digital paper. Appendix 4
illustrates how the digital system is built.
The Anoto technologyThe new technology consists of two components. Firstly, a miniature camera is embed-
ded in the pen. The camera allows the capturing of the pen’s movements across the
digital paper, which captures 70 images per second. As a result the pen stores the rel-
evant data in a series of map coordinates. Furthermore, each coordinate is labelled with
a time stamp. Lastly, the pen can store up to 200 pages, whilst the captured data is can
be transferred via Bluetooth or USB (Torgny Hellström).
The second component, the digital paper, features a patented pattern of small dots on
common paper. The dot pattern is nearly invisible to the human-eye whilst printed on
regular paper. The spacing between the dots amount to 0.3 mm to enable the registra-
tion of the pen’s exact stroke on the particular area of the paper, which is crucial for
proper execution of the technology. The dots, employed in the digital paper, permit the
absolute identification of where the pen is on an area of 60 million square meters. Each
form is unique, permitting immediate recognition of individual forms. Lastly, different
checkbox systems can be applied when sending notes or messages. When sending, the
person marks the checkbox and the exact image will automatically be sent and dis-
played through various on-line mechanisms as e-mail, graphical texts or fax (Harryson,
2006).
Benefits of the Digital Pen and PaperFaster processes characterize some of the benefits of the digital pen and paper. Further-
more, the technology inhibits user friendliness, since the end-user does not need to
change habits. The digital pen and paper saves time and money (quicker ROI), hence
46
less staff is needed to enter data. Moreover the product provides a two-way communi-
cation on-line in real-time. Finally, the invention guarantees traceability of composed
data and ensures hand writing recognition (Torgny Hellström).
The Digital Pen and Paper as a consumer technologyIn Anoto’s early years, the company positioned it self as a consumer technology, selling
their products as ordinary consumer products through their partners’ channels as Log-
itech, Sony Ericsson, Maxell and Nokia. These large corporations were big players in
the high-technology industry and sold Anoto products as consumer products through
their own channels. Hermansen stated,
“The previous strategy failed and all the old strategic partners are not involved in
Anoto anymore. Actually, the technology didn’t take off as planned. The consumer
business wasn’t there, and no one really found the “killer application” for the pen.
We needed to create a need on the market. But that would take a lot of money and
strong brands to put that application on the market”.
Today Anoto has chosen a different path based on the strategy shift. The company
targets larger enterprises by building partnerships, whilst they still apply an indirect
business model. Today Anoto has over 250 partners world-wide (Torgny Hellström).
All technology and licenses are sold through their partners. The technology behind the
digital pen and paper are seen in large number of different commercialized products.
Anoto’s partners enable various applications as data capture, forms processing, docu-
ment management, signature capture, paper replay applications, note taking, interac-
tive whiteboard, education and toys (Torgny Hellström).
Lars Hermansen especially highlighted the company, PolyVision. As previously men-
tioned in the Anoto profile chapter, the Technology and Licensing business unit sell
Anoto’s technology to partners, as PolyVison, who further develop their own solutions
and products initially based on Anoto’s technology and digital pen. PolyVision will
integrate Anoto’s technology and digital pen in their interactive whiteboards, where
Anoto’s patented dot patterns will be incorporated in PolyVision’s surface. This is a
new exciting area of penetration for Anoto, and it might even lead to the redefinition of
Anoto’s current vision and mission statement (Interview with Lars Hermansen).
8.8 The original global strategy and visionThe Anoto Group was established in 1999. Anoto’s previous strategy concentrated on
building a broad customer base by collaborating with leading brand owners as Log-
itech, Nokia, Hitachi Maxell and HP. A series of pens were co-developed and sold by
Anoto’s partners.
47
Eleven years ago, Anoto positioned itself as a consumer technology. Today the main
business strategy has shifted, and Anoto is currently an enterprise technology. Her-
mansen stated,
“Before Anoto was 100% consumer focused. Today, Anoto is not investing in consum-
er business. We may have partners that drive consumer business, but we don’t do that
anymore. We don’t have the cash, organization, knowledge or the brand”.
Even though Anoto was teamed up with the biggest and most established players in the
industry, all the partners developed the same platform. No market or market need was
found. Additionally, no killer application was discovered, there was no product, and
time to market was 24-36 months. One could wonder if the digital pen and paper was
technology for the sake of technology? Anoto did not have full control over the product.
Rather, they only controlled basic routing. In other words, there was no control over the
value-chain (Torgny Hellström).
Dramatic Strategy ChangeIn 2006, Anoto was forced to revise their business strategy, which resulted in a drastic
change of the strategic direction. Anoto was cursed by having a very comprehensive
and complex offering, which was in desperate need of being simplified. Furthermore,
Anoto did not control any platforms. They were selling tools. The revenue streams
were too complicated to administer since the revenue came from numerous sources,
they were tied to different deliverables as the pen, the system, the software, routing and
hand recognition. Lastly, packaging had to be enhanced to make it more understand-
able and user-friendly for business partners as well as technology customers. Basically,
Anoto found itself in a position where they had to simplify, simplify and simplify some
more the product offering and the revenue model (Torgny Hellström). The strategy
was re-engineered. Appendix 5 outlines Anoto’s previous and current business model
(2008), where Anoto Forms Solutions is core.
The radical change of strategy ensured new benefits. A market was defined, time to
market had become more efficient, which enhanced rapid response in order to meet
customer needs and lastly, the sales organization received more focus and attention.
Today, Anoto focuses on the European, North American and Japanese markets. Anoto’s
present target groups are healthcare, customer relations, transport and logistics, educa-
tion, public sector, banking, insurance, finance and the service sector as a close follow-
er. Additionally, Anoto’s global market potential is enormous and the current growth
in users is approximately 25% per quarter for the last ten quarters. Finally, Anoto pays
special attention to interactive meeting rooms solutions. (Torgny Hellström)
48
8.9. The present business strategyAnoto’s business strategy is presented as follows: (Torgny Hellstöm).
1. Create a standard for Digital Pen & Paper (DP&P)
2. Supply the enterprise forms market with digital pens and a horizontal application
platform
3. License and supply technology for DP&P outside enterprise forms market
· Customized digital pens
· IP license to develop applications
· Development tools for applications
· Reference design for digital pen
· Proprietary ASICs for digital pen
· Key components controlled by Anoto
4. Indirect business model = sales through partners only
Within the last four to five years all the large strategic partners have left Anoto. Further-
more, Anoto still does not control a key component, the handwriting recognition. They
have partnered with a Swedish company, ReadSoft, and a French company, Vision
Objects, who are currently the leading European company in the field of handwriting
recognition (Interview with Lars Hermansen). On the other hand, Anoto has acquired
Hitiachi Maxell’s pen division, which is a promising project to yet be seen in its full
operation (www.anoto.com, 18.05.10). Lastly, Anoto has a very active IP strategy. Cov-
ering both wide patenting of all aspects of the digital pen and paper and deep patenting
on the core technology base. Further protection of know-how by encoding it in silicon
chips and use them as ‘black boxes’ that do not disclose the underlying code. Anoto
has an active out-licensing of IP and common protection of trademarks.
Selling the VisionWhen Anoto began to speak with the previous partners in the very beginning, there was
no technology to show, nor any prototype to demonstrate. The Anoto vision was sold
based on patents, images and verbal messages regarding the pen. However, Anoto had a
good reputation within the industry, since they were partners with Ericsson. A superior
mixture between the “hyped” innovation, Ericsson’s partnership and the C-pen’s his-
tory boosted credibility, and thereby landed various leading brands. Harryson (2006)
indicated in his research, that the product was mainly sold based on the unique vision
with honesty and emotional ability. The people behind the technology initially sold
the technology based on their humane integrity. In Harryson’s (2006) paper, a specific
interview with Ebba Åshly Fåhraeus, the Director of Partner Relations, is highlighted.
Her statement revealed the main drivers, as individual qualities are highly appreciated
by customers, when selling the technology.
49
»A crucial factor is that the people in the organization are the ones who developed
the technology. They love it and believe in it, and think that it is a revolutionary tech-
nology that improves the partners’ products. Another reason is our employees’ ‘Swed-
ishness’ that is described by our partners as driven by openness, friendliness, emo-
tional ability, humbleness, straight forwardness and honesty.«
(Interview, 06.05.04, Harryson 2006)
Demonstrations, prototypes and »proof of concept«Today, when Anoto enters a sales opportunity, they are expected to bring demonstra-
tions and prototypes to reassure the customer that the concept is actually proven.
Anoto has an eleven-year history, but from a business perspective, they are still a start-
up company (Interview with Lars Hermansen). Hermansen stated,
“We have a technology with millions of users – so we have a proven technology. We
have millions of users within toys, we have hundreds of thousands of users within
forms and data capture, we have hundreds of thousands of users within note taking.
So we have a proven technology that has been around for 10 years. We have our IPR
and we have all our documented case stories and sales successes. But STILL, we need
to show the prototype every time. We always have to prove the technology”.
This is one of the challenges Anoto has to face today, which adds further complexity
when presenting the technology to potential customers. Even though, Anoto’s technol-
ogy has been proven repeatedly, they are still stuck in a situation typically seen in start-
up companies. The reason Anoto is required to constantly provide proof of concept is
that awareness within the industry is almost non-existent and penetration is low.
To improve awareness amongst the industry and customers, Anoto decided to use suc-
cess stories from existing customers as a main marketing tool. These stories are found
on the Anoto website. In addition, a number of satisfied customers promote Anoto’s
digital pen and paper, by speaking at high technology conventions and conferences.
8.10 The original market approachAnoto’s primary market approach was to reach a mass consumer market through the
strategic partnership channels. Anoto recognized various market trends and challenges,
and attempted to exploit the opportunity. Consumer trends were identified as increas-
ing demands for mobility solutions to achieve efficiency gains, a lack of user friendly
solutions as new user groups turn mobile and lack of end user acceptance for current
solutions. Enterprise trends were characterized as the need to base a mobile workforce
on standardized IT-architectures and increasing security for mobile enterprise users
(Torgny Hellström). Even though Anoto wished to attend to these challenges on the
50
market, no killer application was identified and no consumer market for the digital pen
and paper existed. Anoto needed to create a unique need on the market, enabling them
to enter a niche space.
In the beginning, Anoto gained extensive credibility within the industry by acquiring
leading brands as partners. These powerful strategic partners made Anoto more appeal-
ing to other high standing corporations, which attracted more capital and “hype” with-
in the industry. Through the channels and markets of the strategic partners, Anoto was
internationalizing in numerous countries across the world.
8.11. The present market approachIn 2006, the dramatic change of strategy was implemented to ensure Anoto’s future ex-
istence. Today, Anoto operates through an indirect business model, selling and licens-
ing their technology to partners. In other words, Anoto sells to B-2-B customers only.
Moreover, the partners are responsible for branding, marketing and distribution of the
end product. Additionally, Anoto currently desires partners with a strong brands and
marketing skills, whom also already have a large existing customer base.
8.12 Leveraging trusted network ties based on personal relationships
Anoto’s previous CEO, Örjan Johansson, had access to big market players, which dated
back to the Bluetooth project times. Örjan Johansson was still able to use leverage on
these leading authorities within the industry when he undertook the CEO position at
Anoto. Prior relationships with Nokia and Sony Ericsson were originally built in Johan-
sson’s time at Bluetooth, and are directly related to his personal networks. Logitech, on
the other hand, had no real ties to the CEO or the Bluetooth experience, but Bluetooth’s
credibility and reputation was appealing. This resulted in another superior partnership
(Harryson, 2006).
Trust and honesty – main drivers of networking Furthermore, Anoto recognized that it was crucial to display trustworthiness and in-
tegrity to all members of the partner network to achieve a safe and comfortable space of
cooperation. Since some of the members within the partner network were competitive
rivals, trust-based relationships were essential to be established and moreover main-
tained. Some of the transferred knowledge and information between certain partners
and Anoto was confidential. These particular partners needed to feel secure when
revealing certain classified information to Anoto, since the information must not spread
further. Since Anoto heavily relied on their partner’s channels, Johansson exploited his
past experience from Bluetooth and deployed two roles as the door opener and peace-
maker within the network base. Johansson “opened the doors” between the different
51
networks, to enhance cooperation between the partners. Furthermore, he managed to
smooth out conflicts and acted more as a peacemaker for the various partners. Lastly,
to achieve Anoto’s vision, the CEO viewed the partner network holistically to establish
joint progress. This process was fundamentally based on trust-based relationships, to
ensure commitment and collaboration between partners in a safe environment. (Harry-
son, 2006).
In addition, Anoto leveraged trust to bring competitors into cooperation by establishing
an arena for all partners to meet. Anoto wished to enhance and promote communica-
tion and the sharing of networks between the partners. To achieve open communica-
tion between partners, Anoto identified honesty as the main driver to promote a seam-
less flow of information between themselves and partners.
Recruiting process based on personal tiesIn the exploration phases, where advanced research and early development of the
digital pen and paper were initiated, highly skilled employees were handpicked based
on personal contacts within the Anoto organization. In most cases, the newly recruited
employees had a common background with some of the original Anoto staff such as
co-workers or friends. Furthermore, these employees brought in their friends and past
co-workers, which enhanced a snowball effect within the recruitment process (Harry-
son, 2006).
Maintaining Partners in period of changeSince the founding of Anoto, there have been a series of changes in the top man-
agement team. More specifically, the CEO has been replaced on frequent occasions
throughout the years Anoto has existed. According to Lars Hermansen, it had been
quite difficult to maintain partners since there were so many changes in the top man-
agement team. However, Anoto was on the verge of changing their original architecture
or main strategy, which did not involve the previous partners. All the big strategic
partners were developing application and solutions based on Anoto’s technology. In
other words, the partners were doing the exact same thing. At that point, Anoto was
selling system developing kits (SDK), low level developing tools that were distributed
to Anoto’s partners. Since all the partners were engaged in developing the product, the
time to market of those customers, was two, three or even four years.
Since 2007, Anoto provides the standard platform for all the features and benefits
around the digital pen and paper. Anoto’s current partners add the last layer of the
product, integrate and industrialize the product onto the market. Lars Hermansen
stated,
52
»When we announced that (the new business strategy), they (the partners) started to
see us as a competitor. We announced that we wanted to develop our own platform –
Anoto Form Solutions«.
Even though, this announcement was not too popular amongst the partners, the part-
ners did not leave immediately. Anoto tried to maintain good relationship with the
old partners by improving the technology, such as printing. The new developments
not only enhanced the Anoto technology, the Anoto team added applications to the
partner’s platforms. This knowledge was shared and diffused throughout the old part-
ner network, which built a stronger bond between Anoto and the partners, enhancing
mutuality. Lars Hermansen mentioned,
»We worked a lot with building up and keeping the trust towards all partners be-
cause, to be honest, the main revenue within our enterprise business today is still
generated from our old partners. But, when try to recruit new partners. We are going
with the Anoto form solution. So that’s our main offer for new partners. We don’t sell
SDKs and development tools. We sell AFS (Anoto forms solutions)«.
The old partners are characterized by a number of small entrepreneurial companies.
Anoto has 350 partners located world-wide, which is a challenge for Anoto. Today,
Anoto targets partners with a stronger brand and an extensive sales organization.
9. Case 2: artingence
9.1 History - the birth of a new idea Karl Dorner, CEO and Technical Director of Artingence, has approximately 20 years
of extensive expertise and experience within the call center industry. Dorner gained a
degree in computer science in 1986 and has worked for the world’s largest outsourcer
of contact center service, Convergys Customer Management, as their Senior IT manager.
Dorner quickly recognized that call centers had become part of everyday life, as being
forced to use them, and it was often not a very pleasant experience for the consumer.
He became increasingly disillusioned with the inefficiencies of the industry. The end-
less navigation of menus, being thrown from one operator to another made the overall
experience very frustrating for the consumer. It had become increasingly clear to Dorner
that the current solution of outsourcing had huge problems regarding manpower man-
agement.
From the industry’s point of view, there are constant challenges of recruiting the right
calibre of operator, training and management. The concept of outsourcing arose since
53
large corporations did not want the hurdle of employing people outside their core, in
particular minimum wage people. Third parties were taking on customer relationship
handling from the companies in need. Extremely high resignations were typical in the
industry with attrition rates above 35% (Thite & Russell, 2010). This meant that it was
difficult to employ and train enough people, which resulted in the consumer being mis-
managed and placed in queues. Instinctively, Dorner believed an IT solution could be
configured with advance development of voice technology. It resulted in Dorner leaving
Convergys and beginning to work on these ideas at home (Interview with Karl Dorner).
9.2 Introducing ArtingenceKarl Dorner and partner, Mark Gilbert, established Artingence in 2008 with headquar-
ters in Newcastle upon Tyne, England. Dorner and Gilbert began to recruit the founding
management team which all possessed wide-ranging knowledge and experience within
the call center industry. Karl Dorner, CEO and Founder, is the technician and brains
behind the novel system. Mark Gilbert, the Commercial Director, fulfils the entrepre-
neurial element in the newly established company. Angela M. Gilbert, HR Director,
has a background in recruitment within the call center industry. Lastly, Cliff Dixon, the
Finance Director, used to run his own call center (Interview with Angela M. Gilbert).
It was planned that the research and development of the AIDA™ product would take
eighteen months, and budget would cost approximately 2.3 m pound sterling. The
funding for this was sourced from three areas: founders, private placement, and grants.
Artingence expects to have its first quarter break-even during 2010. Today, Artingence
employs 25 employees and expects to recruit another 25 employees by the end of 2010
(Interview with Mark Gilbert).
Artingence wished to address the previously mentioned issues and challenges within
the call center industry, however, not in a conventional way. Artingence invented soft-
ware operators, known as artificially intelligent directed agents (AIDA™). The benefits
were obvious. AIDA™ provided constant high performance and quality, eliminated the
need of high volume recruitment and training, and had the ability to handle the peaks
and troughs of call volumes at a fraction of the current agent cost (www.artingence.
com, 18.05.10)
9.3. The Founders – Karl Dorner and Mark Gilbert Even though Dorner had the technical ability, vision and ambition to create AIDA™, he
was a modest person and needed a push in the right direction. Mark Gilbert, a child-
hood friend from school days, had the guts and aggression to drive the business matters
and made sure that Dorner’s idea could be commercialized. Gilbert deeply believed in
Dorner’s technical skills and firmly motivated him to build Artingence in collaboration
with himself.
54
Dorner told the management team at Convergys that there was a better way of doing
business within their particular industry. As Convergys is a multinational corporation,
which already had a fixed routines and an ingrained system where they used human
agents, his idea was rejected. Dorner then approached Gilbert with his novel idea, and
Gilbert was hooked. Gilbert said,
»Karl was getting more and more frustrated. We knew each other quite well, and he
kept telling me that I could do this. I can change this completely. And I kept saying,
well, let’s have it then. Let’s do it! Me and you - let’s do it. It took me two years to get
him to actually leave his job and take the risk of not being cocooned in a large inter-
national company, because we could of lost everything doing this«.
Mark Gilbert had worked in many different fields in various places as Barcelona, Spain
and Austria. He had previously pursued a life as a musician, which lead to the estab-
lishment of several businesses including bars in ski resorts located in the Austrian
Alps. Uniquely, Gilbert owns significant, strong social and networking skills, which
trace back to the years in the entertainment industry. Gilbert is perceived to be highly
entrepreneurial individual that has leveraged personal and professional network ties to
facilitate the founding of Artingence on many levels, which will be further specified in
the organization chapter below.
9.4 The organizationThe technician behind the product, AIDA™, Karl Dorner, and business partner, Mark
Gilbert, were the main drivers of Artingence’s establishment. This unique match has
already reached their high ambitions of creating the dominant brand within the call-
center industry, but also had to fight for it. Compared to larger players within the indus-
try as Covergys, young Artingence had limited resources from inception.
According to Dorner, the time frame from the initial idea to a presentable prototype
took about four to five years. On the other hand, it took Dorner two and a half years to
bring his vision to life by documenting the technology source within the organization.
In the beginning, two highly specialized individuals were recruited and assisted him
in this painful and slow process. According to Gilbert, Dorner could have used several
extra years on the product, before they had something they could show to potential
clients. Gilbert stated,
»When Karl gets an idea, he can go off into different directions. I am constantly pull-
ing him back, saying that I know it can be better, but just give me something now«.
Gilbert had financial constraints since he invested everything in Artingence. He needed
55
the product to happen and was not shy to express himself. Considering that Artingence
did not have huge amounts of resources to draw upon, it was literally a four-man show
consisting of Dorner, Gilbert and the two high-tech individuals. Angela Gilbert added,
“The technical team was very small, so we didn’t have the resources to pile people’s
brains on it. Ian and Paul (assisting technicians) had to literally pull it (the idea/inven-
tion) out of Karl’s head”.
Artingence heavily relied on hybrid structures by drawing upon network ties to le-
verage additional resources as funding and expertise. Funding was accomplished by
approaching old friends from prior experiences. Value-adding expertise was achieved
from collaborations with Sutherland University, Sutherland Software City, and artificial
intelligence guru, Professor John MacInyre. How these relationships were established
and used throughout the organization will be more specified in the later chapters.
9.5 The environment of operationArtingence is on the verge of following a true BG route by firstly operating in the ar-
tificial intelligence environment, which can undoubtedly be characterized as a high-
technology industry. Since Artingence is a relatively young company, no global strategy
has officially been created. According to the company’s top management team, the
global strategy and business plan is constantly under revision and frequently moves.
However, they expressed great ambitions to enter foreign markets such as the Middle
East (Dubai), the United States and India within three years. Furthermore, Artingence
expects to reach 25% of revenue from export by 2014, and expects to reach 75% of
revenue from export by 2020.
9.6 The Artificial Intelligent Direct Agent – AIDA™Karl Dorner had an innovative idea that would revolutionize the call center industry,
but humbly stated,
»It was just a natural evolution to further automate the call center. All I’ve done is to
take that next leap to say that – we actually don’t need the people«.
Live agents are not paid to literally “think”. Most call center operators follow a heav-
ily scripted agenda, which they initially are trained and dictated to do. Since Dorner
and the Artingence team only had very limited resources to work with, they had to be
creative. Larger and more established companies in the call center industry were dic-
tated by their fixed routines and strict organizational structures. These elements did not
permit drastic change, even though an idea for a better business model was presented
56
to them. Instead, Dorner took matters into his own hands and stated,
»The large corporate entities that outsource call centers are »blinkered.« They just
think about their carrier. They don’t have to think. In America, it is all about what
your boss thinks. In Europe, it was slightly different, because we didn’t have as much
money as they did. So, we had to be inventive and make things work, when they
didn’t. They would just go out and buy something new like hiring new consultants.
We didn’t have that luxury. So we had to think outside the box. We had to actually be
creative and that was the difference – being forced to be creative, which programmers
enjoy. It’s fun«.
Appendix 6 illustrates how AIDA™ is built.
Whilst addressing the various challenges and issues within the industry and cutting
costs, Dorner has created the artificial intelligent direct agent. This product has been
given the acronym AIDA™. The unique re(combination) and linkage between exist-
ing technological elements as artificial intelligence, voice recognition and synthesized
speech with conversations management, and database access tools spurred the creation
of the novel invention, AIDA™. Furthermore, Voxeo and Nuance supplied Artingence
with automatic speech recognition technology (ASR) and Loquendo and Cereproc
supplemented the text to speech technology (TTS). The new combination has charac-
terized AIDA™ as being a cutting-edge and radically new. Dorner adds,
“It is revolutionary. It is disruptive technology. It is going to change the way business
has worked”.
AIDA™’s BenefitsThis alternative solution will assist companies to constantly provide high customer
satisfaction, by delivering continual high quality experience to the customer at lower
costs and reduced management overhead. The Artingence platform permits companies
to improve their quality and service levels whilst cutting costs by automating telephone
interactions. Compared to human call centers, Artingence offers a new approach,
which includes a total integrated system that can gain knowledge of the contact, whilst
superior performance is guaranteed all the time. In other words, AIDA™ does not feel
fatigue or fail to notice something important because it is having an off-day. Everyday is
a peak performance when using AIDA™. Gilbert stated,
»The cost effectiveness of the system makes it a no-brainer. The basic fact is a fully
loaded cost (salary, holiday pay, heating, car park space, taxis) of a human call cent-
er operator in England is 25.000 pounds a year. That is for an eight-hour day. But,
57
they need to take lunch breaks, go to the toilet, they get pregnant, they go on holidays
and have sick days. The AIDA system costs 12.000 pounds per unit, works 24 hours
a day and doesn’t take any holidays 365 days a year. So not only is AIDA™ half the
price of a human, it works three times as much. So it is six times as cost effective,
seven days a week«.
There are several beneficial aspects that AIDA™ can provide to companies and end-us-
ers. Not only will AIDA ™ ensure that a caller’s experience will be enhanced by always
receiving a top quality call, customers can personalize different features. An agent’s
features such as name, gender, and sound of the voice are just a few aspects that can
be selected to suit the customer best. Furthermore, the customer can choose how to be
addressed (i.e. Mr. or John) and voiceprint can be included for identification purposes
or security reasons. In addition, AIDA™ is a scalable product worldwide. The product
will be locally marketed at first, but is geared to market globally. Dorner explained,
“The brain we have invented doesn’t think in English. It is a computer, it just thinks.
So, we can train it in any language”.
Moreover, the AIDA™ records and stores all incoming calls. AIDA™ is highly trans-
parent system since there will always be an accessible and visible data trail. The data
trail is an important tool for the human supervisor, who will be at the on-site location
to oversee and manage up to 20 agents at a time. The data trail provides the supervisor
with the call flow, what decisions were made and why they were made. For security
reasons, all calls will also be monitored live. This presents the supervisor with the op-
tion to intervene or take over a call at the request of the caller, or if the artificial intelli-
gent agent is in trouble. AIDA™ has the opportunity to send distress signs to the super-
visor indicating that the agent is experiencing difficulties understanding a caller.
AIDA™ constantly learnsIf a caller is not being clear, or uses a certain word that is not programmed in the brain
of the virtual agent, the supervisor has to react within just a few seconds to avoid inter-
ruptions. The supervisor will need to intervene in a split second, so the caller will not
even realize there has been any outside involvement or interferences. The supervisor is
therefore equipped with a large touch screen that monitors all calls. This unique piece
of equipment is designed in collaboration with the Human Computer Interface Lab,
situated in Sutherland University, to be user-friendly mechanism. All the buttons are
placed in the right places and distinctive colors have been customized to improve rapid
reaction from the supervisor.
58
9.7 The global strategy and visionSince Artingence is a newly established company (2008), no official global marketing
strategy is formalized yet, but many ideas and proposals are still under discussion.
Artingence is always revising the business plan. When the main business plan is fully
established, a series of separate business plans will follow concerning the different
territories or foreign markets Artingence will embark on. Artingence’s current business
plan is illustrated in appendix 7.
However, the Artingence top management team agrees upon establishing themselves in
their home country, the U.K., first and then will conquer more distant countries. Artin-
gence is initially geared to penetrate the U.K. market, where they aim to capture 1 ½%
of the U.K.’s incoming market within three years. Conversely, Artingence perceives this
projection or prediction to be quite conservative and have further ambitions to gain a
total market share of 1-10% within the U.K. Furthermore, Artingence wishes to enter
foreign markets as the United States and India, through partnerships or joint-ventures.
Dorner stated,
“We will be very quickly moving into those markets (United States and India) through
the companies that we are already working with in the UK. So the multinational com-
panies that we are going to working with in the UK will lead us into those markets
quite naturally”.
Entering foreign markets in collaborations with partnersArtingence is also quite keen to export their technology to more underserved foreign
markets as the Middle East and China. On the other hand, Dorner remarked,
“China is just almost too big to think about. It is just ridiculous”.
Artingence is well aware of the many complexities or obstacles when entering large
territories as the United States, India and China markets. Since, Artingence is already
on speaking terms with potential people with expertise within the United States mar-
ket, they are planning to penetrate the United States with a partner or through licensing
agreements. The Indian Government has additionally shown strong interest in Artin-
gence’s technology. Even though Artingence is relatively new, global awareness has
already been established. Dorner added,
»Sooner than we think, we will be moving internationally and become a world wide
company«.
The Desired Investors Moreover, the company is prepared to acquire investors that own special expertise
within fields of business where Artingence’s top management is not so strong. This
59
would add great value to the company. Gilbert stated,
»When we were looking for investment partners, we were also looking for not just
money, but expertise«.
One type of investor has already been found in Dubai, United Arab Emirates. This par-
ticular investor has prior experience within large corporations. Extensive knowledge
within governance structures facilitates Artingence when developing agreements and
contracts with future joint-venture partners or constructing commercial contracts. In
accordance with Artingence’s current strategy, the company wishes to keep focus. Eager
customers that crave AIDA™ already frequently bombard Artingence through calls
and emails. Even though Artingence is tempted to already sell a huge amount of units
to these customers, they also recognize the downfalls that could appear with extreme
growth. Gilbert said,
»The problem is that if we grow too quickly, we run the risk of over stretching our-
selves and under delivering. That is as bad as not selling anything in the first place«.
Dodge (2010, web, 18.05.10) emphasized “focus” as a key pillar for start-up companies.
Focus refers to the carefully selecting customers, prioritizing opportunities and pro-
ductize even more specifically so the product is always in accordance to the strategic
vision. Problems may appear if Artingence was to be tempted to sell to any or every
customer. Even though the strong pull of numerous customers is an attractive position
to be in, a vast customer base may demand variations of the product, which are not in
alignment with Artingence’s original vision. This would tear Artingence apart and pull
the company in different directions, which would both be confusing of the organization
and the product quality would most likely decrease. In turn, Artingence should focus
and follow their initial strategic vision and only sell to cautiously selected customers,
which are considered a perfect match, and reject the more non-desirable customer base.
The Vision and thoughts for the futureThe Artingence organization is blessed with a large amount of brainpower and inno-
vative ideas. During the interview, Artingence mentioned a fantastic number of ideas,
which can be perceived as “spin-offs” from the original idea, AIDA™. Since Artingence
is juggling many exceptional ideas simultaneously, they still seem to keep themselves
grounded by presenting three planned waves of product execution.
1st WaveArtingence’s original vision is to revolutionize the call center industry by targeting
60
large call centers in the U.K. and foreign markets as the United States, India, the Middle
East, Africa and China. Today, Artingence has developed Version 1 of AIDA™ and has
Version 2 and 3 planned. Furthermore, Artingence expects to sell the technology under
licensing agreements and wish to target sectors, rather than individual customers. The
current target industry sectors are banking, insurance, call centers and gambling. The
1st wave will concentrate on targeting large call centers, where Artingence anticipates
to sell around 100.000 licenses to one enterprise.
2nd WaveDue to the similar financial reasons, Artingence also predicts the technology will at-
tract smaller businesses as well as large corporations. Dorner and Gilbert are aware of
the much bigger market, which patiently awaits attention and service. Through several
future variations and added features of AIDA™, the AIDA™ technology must undergo
some alterations and adjustments to meet the smaller company’s needs. Dorner ex-
plained,
“If you run a car hire firm and you are open from 9-5, but people want to hire cares
24 hours a day – we can help them by acting as a virtual receptionist”.
3rd WaveWithin the next two to three years, Artingence expects to put AIDA™ into people’s
homes. Artingence wishes to redefine their technology, hence AIDA™ would act as a
virtual housemaid or a virtual butler within residential settings.
More details regarding alternative versions of AIDA™ can be found in appendix 8.
The Patent StrategyWhilst Artingence is already in the process of developing new features and variations
of AIDA™, potential competition will be slacking behind. Artingence will always
be one step ahead of the competition at all times. Artingence protects the know-how
through protection of the underlying code and separation of insight into the core tech-
nology parts to further protect overall solution. Anoto has planned to apply for certain
application patents, however software itself is not patentable. Furthermore, Artingence
has sought to protect its trademarks.
Pilots and Prototypes – »proof of concept«Presently, Artingence is equipped with fully functional prototype of AIDA™ to show
potential clients. Additionally, Artingence has built demonstrations that can operate
within the targeted sectors as banking, insurance, telephone shopping, recruitment,
61
buying utilities and general maintenance, securing further validity at sales meetings.
At the moment, Artingence has two pilots, AIDA™ prototypes, running in two differ-
ent corporations. One is being stress-tested by the local government in Newcastle and
the other is located at Eaga, the leading provider of energy efficiency products in Brit-
ain. Artingence expects to officially launch AIDA™ when the product has been fully
stress-tested, which will be in May 2010. Stress-testing the product offering is a crucial
element that needs to be properly handled, before the official launch. AIDA™ is not a
generic system, it is tailor made for each individual client. The integration process of
this customized product requires several months, to ensure correct implementation in
the customer’s current organization.
More details regarding the implementation process of the AIDA™ software can be
found in appendix 9.
The customer is the marketing toolFurthermore, Artingence plans to use success stories from existing customers to
promote AIDA™. In addition, key customers will speak at various conferences and
conventions within the high-technology industry. However, Artingence expects that
“word-of-mouth” will ultimately spark sales within the industry. According to Artin-
gence, AIDA™ is a disruptive technology and will steal the role as a new dominant
design within the industry. If their ambition succeeds, awareness amongst the leading
corporations will spur a domino effect, dispersing “talk” of the invention throughout
the industry.
9.8. The market approach – addressing the »gap«For people that are not office-based, possess the skills and ability to use the Internet
or even have Internet connection, this is still an inconvenience. Dorner discovered
the problem and saw a window of opportunity. He wished to address the niche or gap
between human call center operators and the Web, which was in his words “massive”.
Dorner stated,
»We have developed a system that is the same sort of level of customer service as if
you were talking to a person, but the same cost level that the Web costs. So, it is a
win-win for the companies that take our system«.
Artingence’s the first paying customers will belong to the B-2-B segment and Artin-
gence will hopefully gain credibility in their home-market through these companies if
the product succeeds and meets the high expectations. When the main customers in
the U.K. are satisfied and the product has achieved successful results, Artingence will
pursue larger and more distant markets as the United States, India and the Middle East.
62
Since the artificial intelligent company is already in the process of speaking with poten-
tial partners in overseas markets, and is effectively establishing an office in Dubai’s free
zone, Artingence is approaching foreign markets in a rapid pace at a very young age.
Furthermore, Artingence intends to follow clients abroad. Dorner stated,
»If we were to work glocally with American Express and they speak to their head of-
fice in the States. If their head office wants us – we would definitely follow them«.
9.9 Leveraging trusted network ties based on personal relationships
As mentioned in the case, Artingence’s top management team was founded based on
strong and personal ties. Dorner and Gilbert have a history that dates back to child-
hood. They have built up an extremely close personal friendship over many years,
and can almost be perceived as “an old married couple” in their presence. Angela M.
Gilbert grew up in the same area of Newcastle with Dorner and Gilbert. Three years
ago, Angela M. Gilbert and Gilbert got married. Furthermore, Cliff Dixon was operating
in the call center as Dorner, and was recruited based on his industry experience and
expertise within finances.
Mark Gilbert, Artingence’s Commercial Director, possesses the entrepreneurial ele-
ment within Artingence and has extensive networking and social skills. Gilbert can be
viewed as the “door opener” (Halinen & Salmi, 2001) since he functions as the stron-
gest link between the founding team and has managed to acquire current investors to
AIDA™, by leveraging personal and professional network ties.
Identifying potential investorsGilbert began his search in their home country, England, and approached a number of
people. These people were intrigued and wanted to invest, however Gilbert and Karl
did not like their attitude towards them. Gilbert expressed,
»One guy in particular who has been hugely successful. He came in and sat down. It
was just his approach to us that we thought, al right we can get the money to move
the company on, but can we work with the guy? The answer was no«.
Even though the Artingence team realized that they were not in a position to be too
picky when recruiting investors, they had their standards. It was crucial for Gilbert and
the rest of the team to work with people that were likeable. Gilbert remembered that he
had a good friend from rugby times that was currently based in Dubai, the United Arab
Emirates, and proposed that Dorner and himself start searching for the right people off
63
field. When Dorner and Gilbert met with the “friend” in Dubai, the Artingence team
was not prepared sell the idea to this individual at first. Rather, they initially wanted
to approach the current investor and draw upon his influences in the Middle Eastern
world. Dorner and Gilbert wished to be pointed in the right direction to address the
right potential investors. On the way to the golf course, Gilbert explained about Artin-
gence and their product offering, AIDA™ to the personal friend. He was intrigued as
asked them to come back and give him a demonstration of AIDA™, whilst he would
put together a group of possible investor candidates. Dorner and Gilbert came back
and presented their technology to the small group of investors and the deal was sealed.
Gilbert added,
»We presented the system to them and luckily, because of the person’s influence and
personal interest, we not only got one investor that we liked. We got several. We liked
the way the group was put together«.
As mentioned earlier, the attitudes and personal characteristics of the investors were
prioritized greatly from Dorner and Gilbert’s point of view. As a result, strong ties with
investors were established. The investors were emotionally involved, which was ap-
pealing to Artingence, whilst arising from prior personal contacts. Further more, the
initial investor in Dubai became an unofficial Executive Director within the Artingence
organization, since he had the expertise and experience within large corporations. He
enabled Artingence to move into more structured grounds by introducing a new gov-
ernance model to Artingence’s organization. In other words, the investor transferred
knowledge and skills, which added great value to the founding, team within Artin-
gence. This exceeded Artingence’s original expectations, and every one is quite happy
with the result.
Furthermore, co-dependency and shared values result in a shared fate. Mutuality is
established between the particular investor and Artingence. Not only does the investor
own shares within the start-up company, the investor acts as an additional executive.
The idea makers and designersGilbert and Dorner were the perfect match in the early stages of Artingence’s establish-
ment. Dorner had the technological skills and the insight. Gilbert had the entrepreneur-
ial know-how and drive. They were both determined to succeed and carried a high
degree of ambition. The combination of these unique elements strongly enhanced the
emergence of the high-technology company and the recruitment of the top management
team began. Gilbert took charge of the essential employment and selected individuals
with similar backgrounds and a wide-range of knowledge within the different depart-
ments in the industry. Gilbert sought after individuals with prior experience, but quick-
64
ly observed that Artingence additionally required critical perspectives of technology,
finance, operations, human resources and sales. As mentioned earlier, the main team
held an enormous amount of knowledge, skills and experience within the specific field
and could relate to different aspects concerning call centers.
Since Gilbert owned strong social and networking skills, Artingence was also able to
collaborate with some of the best academics within the artificial intelligence industry
in the early explorations phases. Many weak ties were acquired through the postgradu-
ate students from Sutherland Univeristy. They facilitated Artingence in the develop-
ment of some components within the AIDA™ system.
Applying “games technology” through academic brainpowerIn the early exploration phases when particularly developing the supervisor interface,
the touch screen, Artingence engaged in numerous weak ties by collaborating with
Sutherland University, which supplied extra knowledge. Sutherland University is
highly recognized for its expertise within the field of computer games development.
The University is equipped with a human computer interface laboratory that specifi-
cally investigates how a human uses computers. The laboratory particularly focuses on
tracking human fingers when playing a game, how the mouse is applied and follows
pupils to see where an individual looks on the screen. Postgraduate students from the
Sutherland University, which enhanced the amount of brainpower within the organiza-
tion, greatly influenced the enhancement of essential features as Artingence’s supervi-
sor touch screen, and resulted in improved efficiency and rapid responds. Dorner said,
»In a traditional call center, you don’t need that split second reaction, as you would
in a video game where somebody is going to shoot you. In a video game, you have to
hit the button very quickly. Our system is much more like a computer game than a
traditional call center application«.
Collaborating with artificial intelligence guru, John MacIntyreMoreover, Artingence received free expertise, credibility and superior acknowledge-
ment within the high-technology industry by collaborating with Professor John Ma-
cIntyre, Dean of the Faculty of Applied Sciences at the University of Sunderland and
a highly recognized scientist, who specializes in artificial intelligence. As previously
stated, Gilbert had started a number of bars situated at ski resorts in Austria and met
Prof. Johan MacIntyre, who is a keen snowboarder, at one of his bars. Gilbert spoke
casually with the snowboarder and found out that he was one of the leading authori-
ties in the artificial intelligence world. Over a few drinks, Gilbert explained the concept
behind Artingence to Prof. MacIntyre, and the professor was immediately fascinated
by the idea. After several months, Gilbert was able to arrange a meeting between Prof.
65
MacIntyre and Karl Dorner. At this point the AIDA™ system was still at a prototype
level and was presented to the professor at Sutherland University. As a result, Artin-
gence received free technical expertise, free work from the postgraduate students and a
knowledge transfer initiative with Sutherland University, which was extremely valu-
able for further development of the AIDA™ system. Since Prof. MacIntyre is a highly
respected academic in the industry, his influence and personal engagement provided
Artingence not only with strong awareness from some of the leading companies in the
industry, but also lead to grant funding from the government.
Lastly, based on the professor’s vast influence, a well-known American IT-journalist
took interest in Artingence by featuring them in one of his articles. The IT journalist
basically wrote that Artingence were the leading authorities in the world on combining
TTS (text to speech) and ASR (speech recognition technology). An amazing start for a
couple of men that loosely discussed a new idea in Dorner’s kitchen, which shows how
strong network and relationship ties can be of importance.
In other words, Artingence made know-how acquisition through know-who based
networking. Furthermore, each tie added value in the different phases of exploration
and exploitation. Lastly, in Sharma & Blomstermo’s (2004) words, Artingence’s interna-
tional operations and their networks ties thus co-evolve.
10. Cross-case analysis
In the previous theory chapter, six parameters of the BG theory were identified: the
founder, the organization, the environment, the product, the global strategy and vision
and the market approach. Firstly, the paper will investigate to which extent both case
studies are BG. The degree of being BG of each case study will be established based on
the total sum of the scores from the rating of the individual parameters.
10.1. Scoring the born global parametersThe below figure scores and illustrates to what extent Anoto and Artingence is born-
global, taking departure in the initial commercialization point. The paper has applied a
scoring point mechanism, the Likert scale, from one to five. “Strongly disagree” scores
1 and “strongly agree” scores 5, see appendix 2. Five presents the highest degree of
being BG. In addition, this scoring method is used in scoring the network and relation-
ship management parameters. The factors that qualify each parameter are situated in
the BG parameter category. In addition, factors that explain the grade are summarized
in the score category.
66
Table:13. Scoring the born global parameters. Source: Own analysis.
Born Global Parameters
Anoto Score Artingence Score
Founder:
· Background expe-
rience and com-
petences within a
particular indus-
try.
· Managerial atti-
tudes
· The founder’s in-
sight and worldly
mindset.
· Profound social
and networking
skills.
· Innovative and
risk-seeking be-
haviour and com-
petitive aggressive-
ness.
Christer Fåhreaus:
Company founder
and inventor.
Technology insight
and vision.
More of a techni-
cian than a marke-
teer.
5
(+) Tech-
nology in-
sight and
vision.
(+) Strong
network-
ing skills.
Karl Dorner: In-
ventor/specialist
and CEO. Broad
call center indus-
try experience.
Product vision.
Mark Gilbert: Com-
mercial Director.
Entrepreneurial
background. Ag-
gressive and ambi-
tious with strong
network and social
skills.
Angela M. Gilbert:
HR Director. Prior
experience in call
center industry.
Background in re-
cruitment and HR.
Cliff Dixon: Finan-
cial Director. Used
to run a call center.
5
(+) Broad
industry
experi-
ence.
(+) Prod-
uct vision.
(+) Strong
network
and social
skills.
67
Born Global Parameters
Anoto Score Artingence Score
Organization:
· Risk-taking
· Flexible
· Tightly networked
· Hybrid structures
· Unique knowledge
base.
· Technological ex-
pertise and learn-
ing capabilities
· “Learning advan-
tages of newness”
· Knowledge inten-
sity
Swedish high-tech
company. Patent
protected.
3 business units:
1) Anoto Products:
sell products and
solutions to enter-
prise customers
around the digital
pen.
2) Technology
and Licensing:
sell basic technol-
ogy to partners
that develop their
own solutions and
product based on
Anoto technology.
3) Imaging Tech-
nology
Today, shift from
consumer to enter-
prise.
3
(+) Patent
protected.
Hybrid
structures.
(+) Tech-
nological
expertise
(-) Not a
competen-
cy based
setup.
Fåhraerus
was too
involved
outside
sphere of
compe-
tence.
(-) Liabili-
ty of new-
ness. New
tech, no
market,
no need.
English high-tech
company.
Active patent
strategy to extend
barrier to entry.
A lot of internal
protection and
know-how.
Sell system under
licenses.
5
(+) Hybrid
structures.
(+)
Knowl-
edge
intense.
Eager to
learn from
investors
and cus-
tomers.
(+) Tech-
nological
expertise
68
Born Global Parameters
Anoto Score Artingence Score
Environment:
· Floating environ-
ments have made
markets more
homogenous
· Operate in high-
technology indus-
tries
· Time to export.
· Ability to adapt to
and innovate more
rapidly in new and
dynamic environ-
ments.
Established in
1999.
Global ambition
from inception
(Based on partner-
ships with major
established players
in related indus-
tries).
Leveraging on uni-
versity resources.
Time to export: It
is assumed that
Anoto was export-
ing from product
launch, because
the international
investors sup-
ported the com-
pany from first
round of financ-
ing. (Nokia, Sony
Ericsson, Logitech,
HP). Their inves-
tors were also their
partners.
5
(+) Op-
erate in
high-tech
industry
(+) Export
a year af-
ter launch
of first
product.
Established in
2008.
Initially targets the
call center indus-
try.
Time to export:
Business plan
states that the first
three years are fo-
cused on the U.K.
market (always
revising business
plan) – will fol-
low international
customers abroad
in tune with their
demand. First UK,
then U.S. (through
partners or JV),
India, Middle East
and China.
They already have
interest from U.S.
and India, but due
to organizational
restrictions, they
are controlling the
growth.
Leveraging on uni-
versities resources
and their interna-
tional networks.
5
(+) Op-
erate in
high-tech
industry
(+) Expect
export
within 2-3
years.
69
Born Global Parameters
Anoto Score Artingence Score
Product
· Launch unique
high-technology
and innovative
products or ser-
vices.
· Standardized
products.
· The cutting-edge
technology or
novel inventions
Digital pen and
paper.
High-quality inno-
vative product.
4
(+) High
tech prod-
uct.
(-) No
need.
AIDA™: Artifi-
cially Intelligent
Direct Agent.
High-quality inno-
vative product.
Revolutionary
product. Referred
to as “disruptive
technology”.
5
(+) High
tech prod-
uct
(+) Dis-
ruptive
technol-
ogy
70
Born Global Parameters
Anoto Score Artingence Score
Global strategy/vi-
sion
· Internationaliza-
tion is a slow and
incremental pro-
cess, illustrated
in the Uppsala
model.
· “Leapfrogging”
or the skipping of
stages in the tradi-
tional internation-
alization model.
· Dominating the
world with a
standard product
by targeting niche
markets.
· Fast followers or
imitators rather
than first-movers,
by concentrating
on product devel-
opment.
· Alliances and
partnerships when
entering foreign
markets.
· Knowledge inten-
sity and network
ties
· Niche markets
Earlier, used al-
liances through
investors.
Today, sell tech-
nology licenses
to partners (big
enterprises) – be-
fore Anoto was
positioned as a
consumer technol-
ogy, today they sell
to big enterprises.
Today, Anoto owns
the technology.
Vision: Revising
present vision -
from digital pen
and paper to
digital pen and
surface?
1
(-) Busi-
ness
model not
sustain-
able.
(-) 10
years after
founding
resulted
in change
of strat-
egy.
Sell system under
licenses.
Current product
is version 1 (plan-
ning version 2 &
3).
Vision:
1st wave: Revo-
lutionize the call
center industry by
targeting large call
centers in UK and
foreign countries.
2nd wave: Target
smaller businesses.
3rd wave: AIDA™
in the home (2-3
years).
2
(-) no offi-
cial global
strategy.
(+)Plan is
in place.
The
planning
is more
important
than the
plan.
71
Born Global Parameters
Anoto Score Artingence Score
Market approach
· Focus on carefully chosen
market segments, and
exploit opportunities that
are otherwise ignored by
larger corporations.
· Apply alliances and
embark on foreign markets
with an aggressive ap-
proach
· Enter niche markets across
different types of indus-
tries to adapt to changing
customer needs.
· Customized products to
exceed customer expecta-
tions and add value to
existing products.
· Follow clients overseas.
· Psychic or geographic
distances are irrelevant
for BGs.
· Focus on niche markets.
· Gain credibility in the
home-market first before
embarking on markets in
overseas markets. Target
not only global niche
markets, but also B-2-B
segments.
· Create networks and enter
partnerships to build up
potential alliances when
entering foreign markets.
Enter foreign
markets through
strategic partner-
ships.
Niche market.
1
(+) Es-
tablished
alliance
partner-
ships
(-) Posi-
tioned as
consumer
tech.
(-) No
killer ap-
plication.
(-) No es-
tablished
market.
Enter foreign mar-
kets through part-
ners and/or JVs.
Fills the gap be-
tween call center
and Web. Direct
broad attack on
call center indus-
try versus niche
market.
3
(+) Enter-
ing es-
tablished
market
(+) Clearly
differ-
entiated
product.
(+) Cred-
ibility in
home-
market
first.
(-) No
current
alliances
(-) Reac-
tive rather
than pro-
active
Sum of scoring 19 25
72
The highest possible individual score is 5. Therefore, with six parameters, the highest
theoretical score is 30. The scoring can range from 1 to 5, with the median being 3. The
sum of the scores for the individual companies is 19 and 25 for Anoto and Artingence
respectively. The median scores are 3.5 and 5 for Anoto and Artingence respectively.
The high total score and median points towards that the companies are truly BG, which
aligns with the theoretical framework. The scoring revealed that Artingence scored
higher than Anoto in the BG parameters, thereby supporting the hypotheses, H1. As a
result, this confirms that H2 and H3 are meaningful. The analysis will now continue to
score the other dimensions to test whether the data supports or rejects H2 and H3.
10.2. Scoring the network and relationship management parameters
The below figure illustrates to what extent Anoto and Artingence have applied their
ability use networks and relationship in furthering the business. The scoring point
mechanism used is the Likert scale from one to five. Five presents the highest degree of
actively using networks and relationships.
Table: 14. Scoring the network and relationship management parameters. Source: Own
analysis.
73
Network Theory/
Relationship Man-
agement Parameters
Anoto Score Artingence Score
Network ties and
types of relation-
ships
· Strength of weak ties.
· Internationalization
process is driven by the
knowledge supplied by
their network ties.
· International operations
of BGs and their network
ties co-evolve.
· The differences between
weak and strong ties;
each type of tie could add
value to different phases
as exploration vs exploita-
tion.
· Rely on channels/net-
works when rapidly
internationalizing.
· Connection between
organizational learning
and the capability to learn
from partners and initial
customers.
· Differences between
direct and indirect ties;
structural holes.
· Different roles of personal
relationships -Personal
contacts can act as a door
opener or a gatekeeper, a
door closer or a termina-
tor, and a peacemaker or a
troublemaker.
Very strong ties in
commercialization
phase with former
strategic partners
(had ownership
stakes in Anoto) –
relationship build-
er: previous CEO,
Örgan Johansson.
Had connections
with large brand
names through
prior workplace at
Ericsson.
Today strong ties
with PolyVision
–the interactive
white board (most
important partner
at the moment) –
shifting from paper
to various surfaces.
Collaboration with
Lund University
and the Lund Insti-
tute of Technology
in early explora-
tion phases.
Recruitment of old
friends and former
co-workers from
previous experi-
ences.
5
(+) Strong
ties in ex-
ploration
phase: I-U
collabora-
tions and
partner-
ships.
(+) Strong
ties in ex-
ploitation
phase:
strategic
partners.
Strong and person-
al ties within the
main management
team.
Strong ties with
investors (emo-
tionally involved &
personal)- explora-
tion and exploita-
tion phase. Many
weak ties (Suther-
land University
collaborations) in
product develop-
ment/exploration
phase.
Partnerships and
suppliers started
as professional re-
lationships (based
on emails) and
grew into more
personal relation-
ships.
5
(+) Strong
ties in ex-
ploration
phase:
investors.
Weak ties:
I-U collab-
orations.
74
Network Theory/
Relationship Man-
agement Parameters
Anoto Score Artingence Score
Mutuality
· Mutual needs and
co-dependency
are main drivers
of maintaining
pre-existing re-
lationships and
establishing new
relationships.
· Mutuality enhanc-
es alliance oppor-
tunities, open col-
laboration process,
industry-academia
partnerships and
the use of web.
Co-ownership of
Anoto to partners
results in mutual-
ity.
4
(+) Co-de-
pendency.
Strategic
partners
co-invest-
ed.
(+/-) Part-
ners took
greater
share of
value-
chain.
Shared values and
mutuality with in-
vestors/sharehold-
ers (shared fate)
Mutuality with
suppliers (Artin-
gence built its core
technology on the
bases of other ex-
isting technologies
that was brought
in.
3
(+) Inves-
tor adds
expertise
and com-
petences.
Trust
· Relationship com-
mitment and trust
as key mediating
variables in busi-
ness relationships.
· The best way to
build and inter-
nationalization
strategy is to
implement and
start with strong
existing personal
relationships.
Previously, Anoto
built trust by creat-
ing an arena where
the partners met
to communication
and network.
Today, annual con-
ventions.
3
(+) Creat-
ed area for
mingling
and dis-
cussions
with all
partners
(+) Per-
sonal rela-
tionships
with co-
workers.
Trust is embedded
in the personal
relationships with
investors and co-
workers.
Internal Protec-
tion. Except for the
technology found-
er, nobody has the
complete picture
of the know-how.
2
(+) Per-
sonal
relation-
ships with
investors
and co-
workers.
Sum of scoring 12 10
75
The highest possible individual score is 5 therefore, the highest theoretical score is 15.
The scores can range from 1 to 5, with the median being 3. The sum of the scores for
the individual companies is 12 and 10 for Anoto and Artingence respectively. The me-
dian scores are 4 and 3 for Anoto and Artingence respectively.
10.3. Scoring the theoretical overlap
In the below figure, an overlap of the BG and network and relationship management
theories has been presented to highlight areas of relative strengths and weaknesses.
Table: 15. Scoring of the theoretical overlap. Source: Own analysis
Dimensions of overlap Anoto ArtingenceBG Strong: Founder 5 5BG Strong: Organization 3 5BG Strong: Environment 5 5
BG Weak: Global strategy/vision 1 2BG Weak: Market approach 1 3
Network/Relationship Strong: Network ties and
types of relationships
5 5
The only network/relationship management parameter that had a strong overlap with
the BG literature was network ties and types of relationships. In the same way, of the
six BG parameters, founder, organization and environment had strong overlap with
network/relationship theory whereas global strategy/vision and market approach had a
weak overlap (See previous table 13).
For the network ties and types of relationships the score was 5 for each of the two cases
(i.e. an average of 5 and a median of 5, the maximum in both cases).
For the strong BG parameters (founder, organization and environment), Anoto had an
average of 4.3 and a median of 5. In the case of Artingence, the strong BG parameters
had an average of 5 and a median of 5. With all the scores being at the high end, and
well above the median, compared with the ‘network ties and types of relationships’
that scored the maximum average and median of 5, I conclude that it supports the hy-
pothesis, H2: Areas of high literature overlap will show similar relative strengths.
For the weak BG parameters (global strategy/vision and market approach), Anoto
scored 1 in both parameters. (I.e. it had an average of 1 and a median of 1). In the case
of Artingence, the weak BG parameters had an average of 2.5 and a median of 2.5. With
all the scores being at the low end, and below the median, compared to the high end
maximum score of the network ties and types of relationships, I hereby conclude that it
76
supports the hypothesis, H3: Areas of weak literature overlap will show dissimilar rela-
tive strengths.
According to this analysis, with all three hypotheses supported, I can conclude that
Artingence is born global company with total similar strengths and profile to Anoto, a
case proven in literature to be BG. High and weak overlaps of literature will direct if the
BG profiles are similar or dissimilar.
11. DISCUSSIONS AND CONCLUSIONEarlier studies (Servais et al., 1997) have shown that in most cases multinational com-
panies have superior performance. BG is one way of becoming multinational. The
framework presented in this paper has focused on how network ties and business re-
lationships effect the profile of BG companies, and has been researched through theo-
retical study and practical fieldwork, since initial studies from Sharma & Blomstermo
(2003).
The BG literature is in itself global and cases have emanated from countries and set-
tings spanning from Australia (Rennie, 1993) to Finland (Autio et al., 2000). This has
lead to different definitions and conclusions. Other variables that directly effect BGs
include the global financial environment – economic and technological bubbles to eco-
nomic crisis, general industry entry barriers, innovations and product strategies.
Hypothesis, H1, has confirmed that Artingence is a born global company, similar to
Anoto. The hypotheses, H2 and H3 were also relevant since H1 was confirmed. To
further understand the true nature of the similarities and dissimilarities should be ad-
dressed in further research. For example, if there is any correlation between any of the
components underlying H2.
11.1 Managerial ImplicationsA main element for management implication can be highlighted. It is clear from my
study that network ties and types of relationships are a key to focus on when building
a true BG company. The study discovered that network ties and types of relationships
effect three (i.e. the founder, the organization and the environment) of the six relevant
BG parameters.
A stronger focus on building and strengthening network ties and types of relationships
will drive BG companies to successful performance (Servais et al., 1997). Depending on
whether the company is in the exploration or exploitation phase, the approach maybe
more or less closed and rigid.
11.2. Limitations and Further ResearchThe theoretical framework leans itself against in-depth theoretical research, however,
only two in-depth case studies form the empirical base. If the findings of this study are
77
put into their proper perspective, several limitations need to be pointed out. With the
limited sample size of two case studies, the statistical significance might be questioned.
In order to be able to further generalize on the theoretical basis, quantifying the study
could demonstrate that the study is statistically significant and further expand and/or
refine the framework. More case studies would shed light on what influence variables
such as development stage, age, geographical location and the global financial environ-
ment would have on BG companies’ profiles.
Understanding how the performance of BGs is linked to the six parameters presented
in this thesis and the other variables (e.g. those mentioned above) could have an impor-
tant impact on the economy of start-up companies.
Furthermore, since the three parameters, network ties, mutuality and trust are present
in both theories (network theory and relationship management theory), I have chosen
to merge the two theories into a common denominator when comparing to BG theory
and its profile. Is the network theory and relationship management alike enough to be
merged, or distinctly different and cannot be merged? Further research should clarify
this uncertainty.
From a network theory perspective, the importance of structural holes as an element of
the BG profile and development could add further to the understanding of more ele-
ments in network theory and its relationship to the BG theory.
The confirmation of Artingence’s born globalness (H1) allows the further comparison of
the two cases between the two founding teams, the two organizations, the two environ-
ments etc.
Finally, I believe this expansion of my research will add further relevance insight to the
current studies of being BG and network and relationship management theories.
78
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83
13. Appendices
1. Interviews (Anoto and Artingence) Source: Own analysis
Date: 19/3/10
Place: Copenhagen Business School
Interviewee: Torgny Hellström. Senior Vice President & General Counsel.
Interviewer: Nadia Dolmark
The interviewees were presented with a “briefing” before each interview. The “brief-
ing” initially defined the focus of the interview, which hopefully made the interviewee
more comfortable.
I have read two articles written by Sigvald Harryson: “Entrepreneurship through rela-
tionships – navigating from creativity to commercialization (2008)” and “ Anoto: En-
trepreneurship from Creation to Commercialization (2006)”. Additionally, I attended
Torgny Hellström’s lecture about Anoto at Copenhagen Business School.
Today you are senior Vice President and General Counsel for Anoto Group.
What is your history with Anoto? Where did it start / how did it begin?
I used to work for Ericsson. I was at the corporate headquarters, where I was responsi-
ble for global legalization. Ericsson was one of the founders of Anoto. So, when Erics-
son was the largest stockholder, Anoto faced a loss in the U.S., so they needed help.
They asked me if I could help them. The chairman of the board, Christer Fåhraues, and
I worked together, and he asked ifI would continue full-time. I moved to Anoto and
Ericsson sold it’s shares in Anoto.
What is the management history of Anoto – from founding to now?
It has had many CEOs. So, if you look back in time, Anoto used to change their CEO
once a year. This is the first time where we have the same CEO, and actually, we have
had the same management team for 3-4 years. It is also vital to have a stable manage-
ment team if you want a turn-around like we have, otherwise it wouldn’t work.
84
Anoto has a series of business relationships.
Which relationships do Anoto pay special attention to?
Why?
Since we have an indirect business model, our partner’s success is our success. Our
partners are of course essential to what we are doing. So we try to take care of both ex-
isting partners and new partners.
Who are the relationship builders/managers – for example between Anoto and;
Commercialization Partners (like Sony Ericsson, Nokia and Logitech)
Finance partners
Technology partners
Production partners
Distribution partners
Customers
It is different now than earlier, because the business model has changed. When the
company started, they had quite an advanced system. They always had a sales or opera-
tions officer responsible for the relationship. And then the company had one executive
from the management team as a sponsor. So each relationship had a sponsor in the
management team.
How did the partners react to frequent changes in the CEO?
I think they were often pleased that we have had the same CEO now for three years.
They are very pleased.
Have you lost some of the partners because of frequent CEO change?
NO. Not that I know of.
If you had to categorize Anoto’s business relationships into two categories: 1) close/
strong relationships and 2) weak/less formalized relationships – which relationship
would you put in which category?
All relationships are formalized in the sense that they are partners with us, and there
is always some kind of licensing arrangement or licensing contract as a basis. But then,
when you work together you need to have good relationships. Companies are not com-
panies. Companies are the people working with the companies, and their relationships
85
with those companies need to be built, maintained and fostered. So that is why we
have identified key account managers that are responsible for specific partners etc.
Would you regard all your partnerships as close and strong because they are all for-
malized? No. Because we have something like 300 partners, but out of those, there are
50-100 that are commercially successful and of course we pay much closer attention
to those partners. And the more money they make, they more attention they get. Obvi-
ously.
How did these relationships originate?
Are they of professional or personal character?
Did they emerge in positions or private situations from previous times, or dur-
ing the times of working within Anoto (does Management leverage previous
networks, build new ones or both?)
I think it is a combination of two things. First of all, our technology is mind-blowing.
So many partners have identified us. Wow, we want to work with this. The partners
have come to us. And then, you have the fact that Sony Ericsson was the first pen pro-
ducer. The obvious fact that both Anoto and Sony Ericsson are in the same city, Lund,
and have personal relationships, obviously. Also given the ownership that Ericsson
was one of the founders of the company. The idea from Ericsson was to have a stake in
Anoto, help to build the pen because one of the ideas of transferring data from the pen
was over the mobile network. So it was aimed at creating traffic amongst other systems.
Does Anoto have any structured mechanisms to allocate time for relationship build-
ing/management (budget for wining and dining, social events, other)?
Absolutely. It is much more refined than that. In our enterprise business we have a part-
ner program. We have different levels of partners, depending on revenue, depending
on how active you are. And then we create closer and closer relationships to them. We
have platinum partners. Those are the partners we help the most. We invite them invite
them to seminars, we exchange thoughts and ideas, and then we have a scale on how
we maintain relationships with partners. We communicate through a partner network
and we have websites etc. It is very structured.
Has the strategy and vision changed throughout the history of Anoto?
The strategy change was explained in the Anoto lecture at CBS.
Who else would you suggest I should meet? (Ideally Ebba Fåhraeus, VP Sales, and the CEO)
86
Lars Hermansen or Ebba Fåhraeus. We have dedicated people to run our partner pro-
gram. We have one annual partner gathering, where we bring them to Lund and ex-
change experiences and we discuss how the business is going, what areas are hot, what
are not etc.
When the interview came to an end, a “debriefing” was given to the interviewee. A “de-
briefing” was applied to sum up core answers throughout the interview, which allowed
feedback from the interviewee.
87
Date: 7/4/10
Place: Anoto Headquaters. Lund, Sweden
Interviewee: Lars Hermansen, EVP for Sales and Marketing
Interviewer: Nadia Dolmark
The interviewees were presented with a “briefing” before each interview. The “brief-
ing” initially defined the focus of the interview, which hopefully made the interviewee
more comfortable.
I have read two articles written by Sigvald Harryson: “Entrepreneurship through re-
lationships – navigating from creativity to commercialization (2008)” and “ Anoto:
Entrepreneurship from Creation to Commercialization (2006)”. Additionally, I attended
Torngy Hellström’s lecture about Anoto at Copenhagen Business School.
What is your history with Anoto? Where did it start / how did it begin?
Different role when I started 3 years ago than now. Today the new org. is organized in
2 business units. When I started, my role was working for the entire company (EVP for
sales and marketing). Now: Lars is heading one of the 2 business units within Anoto.
2 business units: Lars’ business unit – 1) “Anoto products” – basic change in strategy
(how to go up the value chain): Products and solutions for enterprise customers around
the digital pen. (partners and sales).
2) New business unit: “technology and licensing” – OEM sales organization. Sell basic
technology to partners that develop their own solutions and products based on our
technology. Like Leapfrog, Lipescrib, and Polyvision: These are the latest more impor-
tant OEM customers that we have (interactive white boards). These customers have
their products, their channels, their marketing, and their branding.
What is the management history of Anoto – from founding to now?
Lars Hermansen has been with the company for just over 3 years. Background: from
the software industry and the IT industry. Working with Adobe, Microsoft (7-8 years),
Canon, NEC. Before Anoto, worked for the new 3G carrier. Recruited through our CEO,
Anders. 3 years ago they changed the chairman of the board. Hans U. came late 2006
and the first thing he did was to recruit Anders N. as new CEO. He wanted to recruit
another person to take care of sales and marketing within the company. Recommended
by the chairman of the board (Hans) – because they had worked together.
To an extent, the board has been quite consistent. Some of the major shareholders have
been sitting on the board for 7-8 years. C.F., the entrepreneur behind the company, be-
88
came CEO in the company. Member of the board until May 2009 – still is a shareholder.
Not working in Anoto or at the board (just a shareholder). Sister, Ebba, is still around
(8-10). Working with L.H. in marketing and PR.
Since 1999, Anoto has spent about 1.6 billion SEK. In hindsight, would less capital
have forced Anoto to choose a different strategy? Maybe one closer to the strategy held
today?
Probably. It is a very strange situation that one can spend that kind of money and still
be in business. But, I think that the value in the stock exchange of Anoto was very high,
and the expectation of this technology was very high.
The background: Anoto was first positioned as consumer technology. Today, we are
much more into enterprises. Before Anoto was 100% consumer focused. Today, Anoto
is not investing in consumer business. We may have partners that drive consumer busi-
ness, but we don’t do that anymore. We don’t have the cash, organization or knowledge
(the brand). When Anoto started, it was a consumer technology and then went into
partnerships with partners that could drive consumer business in a consumer industry,
as Logitech. They produced one pen, and they sold the pen as another input device.
They are into input devices. Then there was Maxcell. Also a lot of consumer products,
although it is very big Japanese company. Nokia – consumer. Ericsson – consumer and
business (their org. was also different at that time). A lot of consumer business with the
mobile etc.
Both the strategic partners and shareholders saw this technology as a major change and
a new consumer product that is going to be a major hit. And that’s why they invested
so much money. But it never actually took off, as you know. And, to be honest, we have
very few of our partners that have been able to have a great success within the consum-
er field with our technology. The only one I could think of, I would say that has been
successful is Leapfrog. And they produce toys. “Point and click” for small kids going
through a text book etc. Very cheap product and uses our pattern and our technology.
And they sell millions of units. But if you look into other consumer-oriented applica-
tions, as note taking etc., they have never been successful.
To be honest, the old strategic partners have all left us. Logitech, Maxcell, Nokia, Er-
icsson, HP is not around anymore. HP developed an enterprise platform or enterprise
solution for taking care of forms. When did they leave?
The last one left a year ago when Logitech sold the remains of the IO2 product (their
digital pen) to Destiny (UK based company). They had a certain number of pens they
could produce before the “end of life” of the product. HP left 4 years ago. Ericsson 4-5
years ago. Actually, the technology didn’t take off as planned, the consumer business
wasn’t there, and no one really found the “killer application” for the pen. Necessary to
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create a need on the market. But that would take a lot of money and strong brands to
put that application on the market. And, I think for instance, Logitech, that is selling
millions of input devices as mice and keyboards etc. When they brought the digital pen
and notebook to the market, they tried to sell that the same way as they sell a keyboard.
But, it is still a product that needs demoing, proof of concept, need to see it, need to use
it. A keyboard, you can just take from the shelf. They tried to sell the note taking ap-
plication the same way as an ordinary consumer device, and that was difficult. Another
thing that is crucial, which is very closely related to the digital pen, is handwriting
recognition. To just capture the ink, or your handwriting as a picture, that’s very easy
and is always 100% correct. But most people want to turn those handwritten notes into
text. And, the same thing within an enterprise solution. So, handwriting recognition
is still a key component within our product offering. And we don’t control that. Even
though, we have moved up the value chain, and we now have the IP with close to 300
patents. And one thing we did the best when we started, was to take care of the Intel-
lectual property rights, which we have invested heavily into controlling. We have the
patent, the enabler for the technology. Now we have control of the pen. We produce
the pen in China under our brand. Therefore, we have become a hardware producer as
well (new challenges). We have some of the business applications that we also develop
and sell licenses for. Handwriting recognition (HWR) is still a key component that we
have no control over. So we use another Swedish company, called ReadSoft. They have
a HWR engine and we also work together with Vision Objects, they are from France.
They are the leading European company within HWR. But at the same time, now we
see new quite exciting things showing up on the market. So, HWR is a part of Windows
7. And with tablets and new devices, I think the HWR software is going to be every-
where. On mobile phones, on the tablets or smart books. I think we will see a change in
HWR. That has been a major challenge, because people expect to have close to 100%
correct HWR. And that is extremely difficult. Especially on handwritten notes. It is
easier on some kind of structured data, for instance a form. Because a form could also
consist of tick box, check boxes. Very clear space of each and every letter and you can
connect databases in the background to recognize companies products, their number
of what prices. You can connect a lot of intelligence within the databases for a profes-
sional use. Note-taking application – its more difficult.
What stage was the product at when Anoto raised the initial capital? (1999)
Did you have a real product?
I wasn’t present at that time, but I don’t think we had (when we started raising the
money and C.F. was very good and still is very good at raising money) but we went to
these strategic partners, who could actually produce that pen in high numbers and in
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high quality. I imagine, that that was quite an extensive process. Going into that, pro-
ducing hardware, and in this case – we actually went to the semi conductory industry
to develop some customized components. So, some of the components in the pen are
not off-self standard chips. That also takes time. So I would say, the time from design-
ing, building the pen and getting the components, finding a producer like Logitech,
Nokia or others, producing the pen and getting it out to the market would take, I would
say, around 24 months, at minimum, probably 36 months.
How was the product at the point where you raised capital?
Can’t really answer, because I wasn’t there. But I would assume that there was a proof
of concept, demo and things like that. I don’t think we had a ready product.
Anoto has a series of business relationships.
Which relationships do Anoto pay special attention to?
Why?
Partnerships – quite simple because everything we sell is sold through an indirect
business model and through partners. So, we don’t sell anything to end-users or to
enterprises, we always go through a channel. That is a key part of the strategy, even in
the new strategy. Within Anoto products where we sell data captures, signature cap-
tures, and forms to the enterprise base. That is a very horizontal product. Gartner says
that 85% of all business processes starts with a form. That could be an E form on a
webpage, but it’s still a form. So 85% of all business processes start with some kind of
form. So, our offer is very horizontal and should be, but we need the partners to carry
out the industrialization of the solution. And they know the customer process and they
know their business and they know their back-end system. They may be even sold and
integrated to their back-end system, because the data that we retrieve is getting into
some kind of back-end system. CRM or ERP. So that’s our main focus – to attract the
right kind of partners. It is the same thing, within the TNL (other business unit) because
within Anoto Products we have seen in the past will all have respect for former part-
ners, they haven’t been the right kind of partners. They have been small, entrepreneur-
ial companies that see a very good technology, and start to develop their technology,
but they don’t have resources for sales or marketing. So now we are focusing on getting
partners like large system integrators, ISVs and such, that could bring our technology,
include that in their offer, go to their existing partners and customers and sell that. The
same thing within TNL, because it is just as important when we choose the partner
for instance to go with “whiteboarding” We need to find a partner that has established
channels, customers, market shares and market communication. We don’t want to want
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to go in with a partner that 2% market share, no reach. We want to identify the market
leaders. The partner is in every aspect the most important focus we have.
Are there one or more partners that are more important than others?
We had a situation in the past, where some partners were more important that others
because they produced hardware, they did things for us. But, today where we have
more control, I would say that it is not that dramatic anymore. Of course, from a busi-
ness point of view, you always have partners that are more important than others, sim-
ply because they sell more or bring more revenue into the company. We have started
to see some very strategic and very important partnerships. For instance, within the
interactive white board. So, we probably have some that are more strategic than others.
Within TNL they have like 10-15 partners. Within Anoto Products, we have 350 part-
ners. So, it is a totally different set-up.
With changes in management/leadership, how does Anoto maintain relationships with
business partners?
In a way it has been quite difficult and at the same time I think we had some luck,
because for a while we were actually heading off in a direction where it had been very
difficult to keep those partners, because we were about to change the architecture again.
And I can’t explain that, because if we look into the Anoto products as such, we had a
number of partners, and they actually all- everyone did the same thing. They all devel-
oped applications and solutions based on our tech. And what did Anoto sell? We sold
SDKs (System Developing Kits). Low level developing tools that we put into the hands
of our partners. We experienced that to market for those customers took 2, 3 maybe 4
years, because they started to go into developing. They had to finish their developing,
and they had to test that and have the documentation around the platform or prod-
uct. Then they had to market, with the tech, with low awareness and low penetration.
Then go into solution selling – which is also very time consuming, even if you go with
a well-known tech. Our partners did that with an “unknown” tech. So they all ended
in the piloting, evaluation and testing. So time to market was too extensive for those
partners. Most of them went bankrupt before they went to market. Because, they spent
2-3 years trying to sell something. So, quite early on, we saw that we had to change the
business model. That’s why we go higher up in the value chain. So, instead of having
50 partners that actually do the same thing – developing tech, how to route handwrit-
ing over mobile phones. They all did the same thing – so now we are going to provide
the standard platform for all the features and benefits you need around the digital pen
and paper. And they should add the last layer of that product and do the integration
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and industrialization of that product. But, when we announced that, they started to see
us as a competitor. Announced this in January 2007. We announced, that we wanted
to develop our own platform – Anoto form solutions. We also felt that we had different
types of architecture through the years. We thought that the architecture we were on
wasn’t able to enable some features that you need in an enterprise solution for instance,
inscription. How could we get inscription on every stroke in inscripted in the pen? We
solved that, so we are still on the same architecture as our partners, but in the past – we
talked about moving to another architecture doing an upgrade, turning their investment
into a less “important?” And that wasn’t so popular. They didn’t leave, and we tried to
support them the best way we could. But what we have done through our own invest-
ment and our own creation of the platform is that we have enhanced the tech. We have
added things into the tech. A lot of those things were hurdles in their products. We im-
proved printing. Also key – how to print those dots. We have developed and enhanced
our tech and those improvements were shared with our old partners. So, we actually
added things to their old platforms. Shared our knowledge and spread that information
and gave them those features and functionalities into their products.
Does that build up a strong bond between Anoto and partners?
It actually does. We also worked a lot with building up and keeping the trust of all part-
ners because, to be honest, the main revenue within our enterprise business today is
still generated from our old partners. But, then try to recruit new partners. We are going
with the Anoto form solution. So that’s our main offer for new partners. We don’t sell
SDKs and developing tools. We sell AFS.
Who are your old partners?
A number of small entrepreneurial companies. We have 350 partners and they are all
over the world (challenge for Anoto). Now targeting partners with a stronger brand,
stronger sales organizations that have existing customers that could bring our tech into
those customers. We have a totally different set-up for the partners we are targeting.
New partner is very different from old partner. We see them coming. We have done
implementations with the larger system integrators in Europe, U.S. We are progressing
in the right direction.
What were the reactions from the partners if key-management positions changed of-
ten?
Even though we have changed parts of the management team, we still have parts of the
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management teams that have been around for many years (7-8-9 years). Torgny is one
example. Ebba. Within the rest of the organization we have high consistency of people
working. Partners can still relate to Anoto. I do think there has been more like a posi-
tive feeling that we changed some of the management, even though in the beginning
not everyone liked our new strategy. Which I think they do today. I think they under-
stand why we are doing this and they understand why we have to do this. We have also
brought them new features and functions. And we have been supporting them, but I
think many of the partners have seen that we brought new management into the com-
pany. We set new strategies and we communicated our strategies very clearly. We have
been 100% in our communication to our partners. What, how, and why we are going to
do. They saw positive changes, they saw improvements, revenue go up. Of course they
were worried whether Anoto was going to stay in business or not. They were totally
depending on us.
Was there a specific person in Anoto that created these partnerships?
It’s a group. Management team and account managers that take responsibility for a re-
gion – with that, a number of partners. That’s team work, not one individual. Maybe, it
could be more like that if you go into a strategic partnership. CEO to CEO – find a con-
nection and so on. Otherwise, it is always team work.
How did these relationships originate?
Are they of professional or personal character? Have some relationships gone
from professional to personal relationships?
Probably some partners have been personal of course, but I think today our main tools
for finding new partners are via our WEB. Even though, some people have different
thoughts about our web and blab bla… you always need to develop and push the web
forward with new information and layout etc. But I think we have been quite successful
in that. We have around 20.000 unique hits per month on our Web. And that generates
the main part of our leads. Product inquiries, people that want to become partners. So
the Web is the main tool. From a marketing perspective we put (limited marketing bud-
get, of course) funds mainly into PR. And how to carry our success stories through PR.
So we have PR agencies in Sweden, France, Germany, UK, US, Japan. And what they
tried to do is to pick up our case stories with a well-known brand and a multinational
company and tell the story – Why did they start using the digital pen? What are the ben-
efits of the pen and paper? What were the cost savings or efficiency goals with digital
pen and paper compared with competing tech. So we tried to promote that and to drive
the PR and make fuss and buzz around that tech. That has been very successful.
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How does Anoto tell the stories?
PR goes into industry magazines, they put in editorials. We go to conventions and have
key speakers. The UK is probably our most successful market now. We have a big,
health-care event in Birmingham (April). Then we have two speakers from custom-
ers telling the story – why did we start using the digital pen. What were their benefits
and gains? The customers are used as promotion tools. The pen, as such, without an
application is just a very expensive bold pen. Because the platform or solution is for
enterprise users, you don’t use classical editorials or promotion around a platform for
an end-user. So that’s why the main tools we have are to use PR and to promote our
success stories. Web site – find 70 case stories. Published 20 last year. Through these
case stories, is the best way to understand how you can use the tech. Case stories shows
the value of the tech. We try to bring forward the benefits, and to be honest, we could
still get into situations where you go to the customer’s side and meet their management
teams – the most difficult person to sell to is the CTO. Because the CTO says, pen and
paper – we do IT stuff here. We don’t need pen and paper. So the users can relate to the
tech and the ease of use. One of the key selling points around the tech within the en-
terprise base is that the pen is simple to use and everyone can use it. No training, very
little support. The IT guys can sometimes be way too focused on the tech and not the
benefits to the user.
Does Anoto have any structured mechanisms to allocate time for relationship build-
ing/management (budget for wining and dining, social events, partnering events, an-
nual gatherings [Christmas/summer])?
Not so much wining and dining or social events. We have one main event driven by
Anoto once a year – Anoto Functionality Conference, where we bring all the partners
into Malmö on an annual three-day meeting. Agenda: we have the official part with the
power-point presentation, strategy information etc. Lately, we have also included more
small, round-table discussions or forums where you can bring forward problems with
tech etc. So it is not just one too many conversations, but also mingling. Wining and
dining of course, but it is very important that we have those smaller groups at round
tables. Time to go into things and details, which is not much about technical things but
more like business, marketing and positioning. That is our main event.
Then we also have events for new partners that we have recruited. (It could be a track
of the main event – to communicate with new partners that haven’t sold one pen com-
pared with an old partner.) Old partners know the tech and the benefits, they know the
hurdles, they know the TCO, they know the ROI. Therefore, there is a different story
to tell. We have to tell them how to sell, how to bring forward the benefits with digital
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pen and paper. We need to teach them how to sell the product. We try to meet the new
and old partners separately, because there is a different agenda. The story is very differ-
ent and that you can duplicate. At the main convention we also have the strategic pitch
from the management within the company. We also utilize, through Ebba, who has
been driving that from a marketing perspective, the social media on the WEB – through
Twitter and Facebook and Youtube. One example: we started to use Youtube. Within
our media room, we post all our company demos and videos on Youtube. Started 6
months ago. Our videos, our user videos, have been seen by around 20.000 people.
That has been very successful. Our marketing department works a lot with social media
and blogging and twitter, which is a way to build a community.
Has the strategy and vision changed throughout the history of Anoto?
The vision is the same. Connecting pen and paper to the digital world. We are thinking
about changing that. Because, we are not just talking about paper anymore. We are talk-
ing surface – the whiteboard (not paper), exploring screen overlay tech – so that you
could put our dot pad on any type of screen and you have a small pen, maybe sliding
out from the tablet pc. You can turn every screen into an interactive screen with our
tech – much cheaper than producing a touch screen. We are on screens, white boards,
on paper. We even have companies that want to put our dots on furniture or on the
walls and tables. A brain-storming meeting can be digitalized on the table and project it
on a bigger screen. From paper to surface.
Within the management team we are discussing, are we going to change the vision.
Should we remove paper form “connecting pen and paper to the digital world”?
The strategy has totally changed! Of course we have key components. To take own-
ership of tech, and control of our tech and revenue stream from our tech – we had a
business model that was more or less impossible to control within the enterprise space.
Because Nokia, Maxcell, Logitech – they sold and distributed the pen. We had sold the
developing tools years back. Then we tried to get hold of some kind of license related
to using the pen. Imagine our partners that bought an STK, they developed an applica-
tion. We didn’t know exactly what they were doing with the application, what market
they were selling the application to. Then they bought the pen from somewhere, and
then we knocked on the door and wanted to collect a license fee related to that pen.
That was a very difficult business model. Today, we sell a pen. And in that pen we have
embedded a license for using this pen for professional use. It’s like an IPhone or laptop.
You don’t question what type of license you pay to Microsoft for the OS of the laptop.
It’s included, but at the same time it is an OEM license. When one buys the pen, it’s
fully licensed for all kinds of business applications. Over time, if or when we see sales
going up, we want this pen again to go into a standard distribution model. Today, we
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actually do the distribution. Partners are ordering the hardware from us. So we have
started to ship and produce hardware. Shipping has been added to the Anoto services.
And over time, then we go into distribution channels. That’s what you do in the IT in-
dustry. You can’t go into such a model with a certain number of pens and revenue.
What if Christer Fåhraeus had the same idea today – how much capital do you think
he would receive in today’s environment?
Without those players like Nokia, Ericsson, HP, Logitech, I think we would have got
200- 250 million. Not more. The shareholders saw all these multinational brands that
were going to invest in this tech. So they saw the consumer market, and saw millions
of pens sold worldwide. The story today is totally different. The focus is totally differ-
ent. I think that if Anoto did the right thing from the start, Anoto could maybe manage
on 100-250 million. To develop a new pen today, it’s like 2 million euro to have a new
product out on the market with the knowledge we have today. At that time it was a big-
ger investment. They had a totally different set-up and strategy in the company.
We brought in capital into the company on at least two occasions, I think. The official
story is that we brought in 1.6 billion SEK. They got that in at least two instalments.
What is Christer Fåhraeus’s role today, if he were still in the organization?
Without being a management consultant or management guru, but working in the IT
environment for 25 years, I would say that it would have been very difficult. I know
C.H. and I worked with him when he was on the board. So he is still a very entrepre-
neurial guy. To come up with new ideas, raise money, set up a new company. But at
the same time, to move from being an entrepreneurial company, to becoming a real
company – with all the things that had to be put in place, and to be honest, 3 years ago
– this company was in quite bad shape. Not just from a sales and revenue perspective,
but as a public company. Processes, routines, tools for measuring, follow-up. How to
actually drive the day-to-day business. You didn’t have a financial system that gave
you sales on a daily basis. We didn’t have the tools, we didn’t have the internal pro-
cesses and set-up etc. As much as we have been changing strategy, we have been heav-
ily investing in these processes – necessary processes. How to run a sales organization,
how to get everything into a CRM system, how to drive communications, how to set-up
partner programs, how to build up the Web and PR. How to do the case stories, how to
the developing, how to measure finance and investments, how to document the differ-
ent developing projects. Totally different story than 3-4 years ago. I think that is C.H.’s
strength as a manager, to have the entrepreneurial insight and to drive processes and
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details. He is a different type of person.
Is Fåhraeues still trying to drive entrepreneurship in the company?
Or is he “leaving you alone”?
Not anymore. He has no involvement in the company today more than he is a share-
holder. He’s still around sometimes. He was at the Christmas party. So, he still has
friends and knows people within the company. He is not engaged in a day-to-day per-
spective in any kind of operations. Not even in the board. He is busy with all his other
companies, raising money.
What does the market today require when selling a product to potential investors?
Is an idea enough?
Does the investor need proof of concepts and patterns?
Prototype?
I think if you have a very strong idea, a unique idea that you can bring to the market,
you can probably raise money and start from an idea. When we meet customers, in a
way we are still a start-up company. Even though we have a 10-year history, from a
business perspective we are still a start-up company. Maybe we are starting to move out
of that phase, but in a way we are still a start-up company. We see that when we take
our tech into white boarding or other new areas, that we always have to have demos,
prototypes, proof of concept. And we have a tech with millions of users – so we have a
proven tech. We have millions of users within toys, we hundreds of thousands of users
within forms and data capture, we have hundreds of thousands of users within note
taking. So we have a proven tech, that has been around for 10 years, we have our IPR
and we have all our documented case stories and sales successes. But STILL, we need
to show the prototype every time. We always have to prove the tech. That is one of the
business hurdles we have today. If you were to buy 1000 tablets from Apple, you don’t
look into if the tablet works or not. You know that it works. You don’t need to test the
tech. You check for prices and quality, features and functionality that you need. You
don’t look into the basic tech – does it work? Every time we meet with enterprises, they
ask if the tech works. We have to prove the tech over and over again. Even though we
have millions of users, we are still in that situation.
Why?
Because the penetration is low. The awareness is low. Many people have never heard
about the digital pen and paper, and even seen it. It takes time and solution selling is
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always time consuming. To add that dimension on solution selling, not just solution
selling but also technology with low awareness and low penetration. This adds lots of
complexity into the business and selling.
What would be easier to produce/pursue – a local mass-market product or a global
niche product?
If you find a killer app – if you find something that everyone likes, then adoption can
go very fast. Very good example – the IPhone. They had not made one single mobile
phone in the history of Apple – and they brought their product to market, where they
“whipped the floor” with Nokia and Ericsson and Samsung. Apple had the brand, the
marketing and the channel. If you could find that killer app or add something unique,
you could do that. From an Anoto perspective, I think we will always be a niche player.
But, we could be a healthy and profitable niche player within our field of digital pen
and paper. I don’t think we will ever be able to sell millions of digital pens (like other
consumer devices).
What is the value of being a born global firm?
In a way, I think Anoto started off in a different way driven by these strategic players
(multinational players). I don’t think you start up and go with a tech like ours – you
start in Sweden, then Nordic, then European, then US then Japan etc. You don’t go
global from start. If the strategy had been different, I don’t think at this time we would
have been global. Today that’s difficult, being a small company with 110 employees
and try to sell in each and every continent, even though we have focus. We focus on
Europe, US, Japan and Korea. But we actually have partners on every continent. I think
that is driven by the way Anoto took the tech to the market. If we had the kind of strat-
egy that we have today, not consumer driven, not those kind of strategic partners, and
not that kind of mega investment. The strategy was very different, and we would have
taken globalization step by step. With the strategy today, we would not have become
born global. Born globalization in one blow – because of the strategic partners is a very
unusual set up. Engaging with all these big players at the same time is unique and
amazing.
The turnaround strategy of Anoto seems to have worked. It looks like Anoto will
break-even in 2010. How and where will Anoto focus on growth?
Focus areas in the 2 business units (BU) are somewhat different and somewhat the
same. The thing that connects the BU is that we want to stay in control of the pen.
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Produce the pen under our own name. Or it could be a branded pen like an OEM prod-
uct as well. But, we want to stay in control of the pen because that adds revenue and
control over our Business model. So even if we go into Polyvision (white board) we are
producing the pen to their app. With that, we can have economy of scale in produc-
tion. Share components, share platforms. You start buying at 100.000 not 10.000. You
can’t be a player if you don’t have economy of scale. That’s shared between the BU – to
say in control of the pen, produce the pen, and add value and revenue by selling the
pen. In Anoto Products we also want to take control of the business applications. Then
have our partners adding the industrialization. On the TNL side, there we want the
partner to drive all that. The channel, branding, application. Then we are more like a
tech provider. But nowadays in that tech is also the pen. To drive pen sales from both
perspectives, is the core thing within the strategy. Then 20 people are developing the
business application for the enterprise solution. Then we have developers around the
pen. Today, we have a very small r in Research and a big D in development. Over time,
in order to maintain and bring new products to market (GROWTH), we need to level
out the investment in R&D. We need to bring new features and functions to the pen.
Today, we are spending more in development than research, but over time it needs to
level out.
With an active patent strategy, giving 20 years protection from filing of the patent,
where do you see Anoto in 10-15 years?
We have good protection on many of the basic patents for another 10 years. That has
been very useful. Companies have tried to look into our tech. Microsoft has used
months looking into our tech. Even set up their own research team, to find out how to
reproduce Anoto’s tech. But our patents are too strong. They realized that. On the other
hand, they could of just bought us, if they wanted to. We are still adding new patents,
but not to the same extent as before. It’s still growing over time. In 10 years time, we
should be the owner of the digital pen. That is what we tried to communicate out from
a branding and marketing perspective. We want to be the owner, the inventor of digital
pen and paper. We could be that in 10 years without 100’s of patents, if we get to the
market position and nurse that position. NOT likely, to protect our tech. Greater aware-
ness! The beauty of the tech works every time. No complaints about the tech, but still
there are hurdles. Printing – we need a generic print support (as a consumer product)
All the partners say the same thing about the essential tech – it is a beautiful tech and it
works every time!
How do you see the competition from electronic pads, such as the IPad and note-
books?
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We are competing against different tech, although we don’t have direct competitors in
the digital pen and paper field – very few and very small (smaller than Anoto). They
are almost non-existent. Our main competition is within competing tech. In a way, I
think that is going to increase. But we also know that different types of tech have differ-
ent benefits. For instance, a lot of the projects our partners are running are evolving out
of non-successful tablet projects. Some of users in RES do not work very well with the
PDA or SmartPhone. The tablet is a different story. A great product. Microsoft has been
trying to drive tablets the last ten years. They haven’t been successful yet, but I believe
the tablet will boom. Tablets have a screen like a notebook. Before there were PDAs.
Like an IPAD – but the IPad is the next step from the tablet. (no keyboard) Tablet is a
combination, where you can turn the screen around. The screen overlay tech we are
working with – we could have our tech in those types of devices as well. We will see
increased competition from new devices, doing the same thing. Will affect the price on
our products over time. Cost of owner ship etc. We will always have user scenarios and
situations where the pen and paper is favoured. Less support and less training by using
the pen and paper. Major problem for some parts of the world – they don’t know how
to use a PC. Cost of ownership from Gartner – the most expensive thing with a tablet in
an enterprise solution is training and support. Almost no training is needed with the
digital pen. BENEFITS WITH THE PEN AND PAPER: Main thing. One main thing is
the paper. Paper will still be needed as the original contract or original documents. 2)
Not an intrusive tech. 3) structured data with a lot of information requires an overview
where a tablet is smaller and more difficult to use (scrolling).
When the interview came to an end, a “debriefing” was given to the interviewee. A
“debriefing” was applied to sum up core answers throughout the interview, which al-
lowed feedback from the interviewee.
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Date: 15/4/10
Place: Artingence headquarters: Newcastle upon Tyne, England.
Interviewees: Karl Dorner (CEO and Technical Director), Mark Gilbert (Commercial
Director), Angela Gilbert (HR Director) and Cliff Dixon (Financial Director)
Interviewer: Nadia Dolmark
The interviewees were presented with a “briefing” before each interview. The
“briefing” initially defined the focus of the interview, which hopefully made the
interviewee(s) more comfortable.
How did the idea or insight for the creation of artificial intelligent direct agent
(AIDA™) come about?
Karl: I’ve been in the call center industry since it started in the U.K. The word “out-
sourcing” didn’t exist, even 20 years ago. American companies would start coming
to the U.K., and took work off them. So, Lloyd’s Bank, American Express, Procter &
Gamble – they needed to speak to their customers on the phone, but they soon discov-
ered that it was a nightmare to start employing minimum wage people, bringing them
in, training them up and all that. The banks didn’t want to do this, so the concept of
outsourcing appeared – third parties taking on customer relationship evolved. Today
everyone uses call centers, and a lot of people don’t even realize that they actually are
not speaking to the certain company. The customer service that the call centers were
providing became more and more important and more expensive (big companies closed
those types of departments down) – outsourced their customer service. In the UK and
the US, that meant that things started going offshore. So, calls were being answered in
India, Peru, Eastern Europe, Philippines and so on. Companies realized that this was
getting too expensive, so what they decided to do was push everybody under the Web.
The internet came along. The British Government have now said that all their services
under 5 years will be done over the internet. But, there are a lot of people that don’t
want to or can’t use the internet. Our parents for example, wouldn’t be logging on to
check their consul tax and things like that.
Mark: Or in fact, in a lot of cases, it’s very inconvenient for people that are not office-
based to do everything on-line.
Karl: So, call centers were getting more and more expensive, the solution, people
thought, was to go through the Web. But, there is a big gap in the middle, where lots of
people, typically people who aren’t the premium bank customers or the high spenders,
who get good customer service. And all people that are applying for low-level jobs or
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inquiries, as Mark says, you are sitting on the bus on the way to work. You see some-
thing, you want to ring that number straight away. You don’t want to wait till you get
to the office, even if you have got access to the Internet at the office. So, there is this big
gap in the middle. That’s the niche that we are filling. We have developed a system that
is the same sort of level of customer service as if you were talking to a person, but the
same cost level that the Web costs. So, it’s a win win situation for the companies that
take our system. They get something that is a lot cheaper than live agents, but provides
the same level of customer service to their customers, like a live agent would, but at
Web prices. So, we are filling that gap in the middle that is massive. We have got inter-
ests from the UK government. The local authorities in the UK are being hit by the credit
crunch or the current economic climate. They are getting 25 % reduction in their bud-
gets coming up, but they still have increased customer service targets to hit. So, they
can’t afford the people they have got, but they have to provide the same level of service.
We are a God send to them. They can’t wait to bring us in.
Mark: Back to the real question Karl.
Karl: It was just a natural evolution to further automate the call center. When we start-
ed with call centers, people were working with paper. And then we moved to computer
systems, than integrated computer systems, and then CRM. The computer system got
more and more sophisticated. All, I’ve done is to take that next leap to say that – we
actually don’t need the people. For most of the transactions, and most of the calls, you
don’t need a real person because in the call center now, everything is so heavily script-
ed. If you ring up, they are reading it from a screen. And they can’t talk about anything
else, other than reading that. And that’s all they know. That is what they are trained to
do.
Mark: Karl is being a little bit modest. One of the reasons I’ve gotten involved, and I’ve
known Karl since school. He was the first I knew that used a computer. The first job he
went into, he totally revolutionized their computer systems. That’s when the computers
were as big as this room. I spoke with his various colleges as he went on from computer
firm to computer firm. And they all said the same thing. This guy is clever. When Karl
moved to Convergence, he became their European systems director. Convergence had
a major problem with Y2K in the States. They spent something like 30 million dol-
lars in hardening software to solve the problem. And they couldn’t solve it. Karl had
solved the problem in Europe, using in his words “string and cello tape”. That’s just a
metaphor for how he knocked the system together. So Karl went to the States with Ian
and Paul (employees at Artingence) and fixed their problem, for nothing. For the cost of
their salaries. And then they basically put sheets over the systems they had built.
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Karl: Literally, at computers that had cost 15 million dollars, and they covered them up
with blankets, when we left, because they didn’t need them.
Mark: Now I’m going to answer your question. At that point Karl was telling his bosses,
there is a better way of doing this. But they already had it, as is always the case with
businesses. They had a system which was ingrained in, where they used human agents.
And Karl was getting more and more frustrated. We knew each other quite well, and he
kept telling me that I can do this. I can change this completely. And I kept saying, well,
let’s have it then! Let’s do it. Me and you, let’s do it. It took me two years, to get him to
actually leave his job and take the risk of not being cocooned in a large international
company, because we could have lost everything doing this. The first two years, we
didn’t have anything. Everything was in Karl’s head or on paper. But, that is where the
idea came from. And, to be fair, as you will see in the demonstration, he has actually
done it!
Why hasn’t the invention been seen before?
Mark: Because there hasn’t been anyone with Karl’s vision or ability. That is the truth.
Karl: The large corporate entities that outsource call centers, they are “blinkered”. It
is a carrier thing. What do you mean by blinkered? They just think about their carrier.
They don’t have to think. In America, it’s largely based. It’s all about your carrier and
worrying about your next months review, and thinking about what your boss thinks
and so on. In Europe, it was slightly different, because we didn’t have as much money
as they did. So, we had to be inventive and make things work, when they didn’t. They
would just go out and buy something new. Go hire some consultants. We didn’t have
that luxury. So, we had to “think outside the box.” We had to actually be creative and
that was the difference – being forced to be creative, which programmers enjoy. It is
fun.
Is it a scalable product worldwide?
Karl: Yes, yes. Absolutely it’s a worldwide product. The brain we have invented, it
doesn’t think in English. It’s a computer, it just thinks. So, we can train it in any lan-
guage. Obviously the biggest markets we are going to go for are initially the Indian
market. Obviously English worldwide, Spanish worldwide, Chinese – at some point is
going to be huge for us. But, no it is absolutely a worldwide product. Everybody uses
call centers now.
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What was the time frame from the initial idea to prototype or demo to show?
Karl: 4 years, 5 years, from the initial discussions.
Mark: From when we actually started the company to when we had something that
wasn’t just an idea. It was something that we could show to potential clients that was
2 and a half years. But I genuinely believe that in a large organization, it would never
have got off the ground, because we fought each other everyday. Obviously, I have the
financial constraints. We have to make this happen. When Karl or all of them get an
idea, they go off into different directions, and I am constantly pulling them back, saying
that I know it can be better, but just give me something now. Start with level 1. Now,
the boys are already working on level 3. They are working on the voice ID. And the rea-
son for that is, as soon as we have sold it to someone, just like the Microsoft model, we
can then say, that one is out – you should take the next one as well. Upgrades and vari-
ous other things. 2 and a half years from we/he actually started putting pen and paper
until we could sit down and show somebody our work. It was a long 2 and a half years.
Angela: To be fair, we didn’t have the resources either. So it was literally a two man team,
then Ian and Paul. The technical team was very small, so we didn’t have the resources to
pile people’s brains on it. Ian and Paul had to literally pull it out of Karl’s head.
Mark: There were constraints on resources because the tech was so cutting-edge. We
had to be really careful about who had the information and how it works.
How do you protect the technology? Do you file patents?
Mark: We are filing a patent on the system. But because it is predominately software,
we will get a patent pending, which will give us 18 months protection. We are not go-
ing to file it until we put the first commercial system on the market, because we need
that 18 months protection. The problem is nobody ever gets patents on software. It’s
just internationally recognized. You just don’t do it. We have two elements of protec-
tion. 1) how far ahead of the market we are. Now, by the time we file it, we will be
three years ahead of the market, and we will have 18 months protection on the patent
pending and then they lift the patent pending, so we are 4 and a half years ahead of the
competition. That is a lifetime in software.
Karl: We will have established the dominant brand. Like Microsoft for example. You
can go on the internet now and download open office, which is an exact copy of Mi-
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crosoft office. And it’s free. Takes five minutes to download and you’ve got it. Some
do this, students and so on. But, most big businesses stick with Microsoft – they stick
with the brand leader. And that’s what we are. And we are recognized already as being
cutting-edge. We are already working on version 3 of the software, which will go on the
market in probably a year’s time. And that’s how we will stay ahead. People just won’t
be able to keep up with us.
Mark: The other side of it though is when you are selling software, you are selling the
license. So we will be selling our system under licenses and there are legal things we
can take if people try to copy the system or the license. Software is notoriously difficult
to protect and therefore you have to be agile. You have to be way ahead of the competi-
tion, which is actually why we kept our cards very close to our chests.
Karl: So, the first 18 months we didn’t have a website, and we didn’t tell anybody what
we were doing. Even now the website does not say very much about the software inten-
tionally. We don’t want to let people know or see too much about what we are doing.
There are only three people, myself, Paul and Ian who pretty much know how the sys-
tem works. The stuff they don’t know, which I only know and my brother knows about
– we are keeping very compartmentalized within the company. Some of the newer guys
we brought in, plus the people we are thinking of taking on in Dubai that write scripts
and things like that, they won’t know anything about how the actual system works.
They’ll see the end product, the same as our clients will, but they would never see the
source code or anything like that. There is a lot of internal protection.
Angela: So, we never send them on the same bus or taxi or plane.
Mark: In the company now, there are certain people working on parts of the system.
And others work on other parts of the system. It is only Karl that knows the whole
system. So if one of them was to jump ship and go with the competition, he would only
take a fifth of the system with him, which is useless. So, it has been an interesting time.
What is so unique about your product?
Mark: There are a number of features about the product that are unique. The major
components of the USPL is that each agent is trained to exactly the same high standard.
Now, in a human call center, you won’t find that. You will find one guy who has not
listened during the training course, and is just filling the numbers up to earn a bit of
money to go travelling. On the other hand, some take pride in their jobs. The problem
with that is that a caller can get one guy one day and another guy the other day and get
completely different levels of satisfaction from the call. With AIDA, the name of our
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agent, they always get exactly the same level of service. Always. Now, if you have a
400-person call center and you are turning over 40% people a year, you are constantly
having to bring in and train new people. That in itself is a huge cost and once again you
get different levels of agent skill. With AIDA, if you got 200 people in the call center
and you need to get another 200, you just load it with another 200, and they are in-
stantly at that level. But more importantly, because of the artificial intelligence that is
built into the system, we don’t claim that the system is infallible and in fact we don’t
want it to be at this point because we want to be constantly be seen improving it. What
happens is, the supervisor who will sit controlling the agents has a record or a report
every time a system fails or doesn’t understand something. Now at the end of a shift or
at the end of a week, all supervisors can come together and say, OK – the system has
consistently failed on this word or this approach, and then they can upload that infor-
mation into the system, so it doesn’t fail the next time. Now, what would happen with
a human is the supervisor would come round to the human and say, you have done
this wrong. But he can only say that to one human at a time. As soon as the informa-
tion is uploaded on the system all 400 agents have the information. Over the course of
months or years, at a particular client, what will happen is the agent level of skill will
get higher and higher every day, but so will the skill of a supervisor. So, what basically
happens is, because the supervisor has to intervene less, he can handle more agents
– more calls at one time. So the company has higher quality supervisors dealing with
many more agents at one time. A great number of agents at any time. And the cost ef-
fectiveness to the client is massive. The cost saving at this point is already exponential.
But, what we are actually saying to a client is, you are taking our system 1 – if 5 years
time you will see added value at each stage every year, every month, every day. So it is
a no-brainer, as far as the end-user is concerned. Now that in a nutshell is what the USP
of the system.
Karl: Technically as well, what we have built is something that mimics human con-
versation. What could be considered competition that is out there is basically adding
voice capabilities to IVR systems. You know when you are asked to press 1 for sales,
2 for support? Now you can actually say Sales or Support. And you can talk to it. But
it is typically one-word answers, very short, very narrowly focused. With our system,
you can have a normal conversation. It will understand what you want to do by just
naturally speaking to it, as you do with a human. You don’t have to sit and listen to the
menu and go through it. As you would say to a real person if you were ringing, I want
to check my bank balance, or renew my mobile phone contract and so on. None of the
other companies out there that are doing speech recognition – can do what we do. They
normally ask very specific questions where it only requires one-word answers. With
our system you just talk, as if you were talking to a normal person. And it talks back to
107
you as a normal person. We built lots of features in the system so that even if you rang
every week, you would always get a different response from it. As you would naturally
with a person. So, where we tell it to say things like – is there anything else I can help
you with – it’s got ten different ways to say that. Its totally random the response you
get, so it sounds natural, much more human.
Angela: From the user’s point of view, it saves cost as well, if you are using the IVR
system – press 1 for this and 2 for that, you’re home phone bill is clocking up. This
way, by going straight in with your initial question, which takes it to the right part of
the script, you are instantly getting the information, you are off the phone a tenth of the
time if you are doing it in the current manner.
Mark: One of the major criticisms of IVR systems is that, what happens when what you
want to speak about isn’t on the menu. You go through the whole menu, nothing refers
to your problem, and then just begins from the beginning again. As a result, companies
are losing clients because of that frustration. With us it is a much more satisfying expe-
rience. (27, 10) In fact, we did it backwards. As part of the building of our system, we
have also built an IVR system. For commercial reasons. If we go to clients who insist
on having and IVR system, we can sell them one. Because the IVR system is so much
simpler than ours. I think we built it in two days. We linked onto the bottom of the Art-
ingence system and it was so simple to build, we did it in two days. Now we hope we
don’t sell any IVR systems, but if they want it, we have it.
How does your product differentiate from other products in the industry?
Karl: Commercially effective, 24/7 efficiency, and robust product – easy to upgrade and
little maintenance. The only real alternative at present is human solutions which are
slowly failing and very expensive e.g. Call-Centre. The real difference could be that it is
destructive technology but yet it works very well with existing business models and no
real new investment required.
What is Artingence’s value proposition / what is the customer’s reason for buying?
Karl: Real value proposition is high revenues leading to high profitability and growth
for shareholders and for staff at Artingence. Customer reason is cost effective, efficient,
no queues, no more HR issues, totally confidential and can interlink with existing busi-
ness set up.
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What is Artingence’s channel for marketing?
Mark: We have always known that marketing the product will not be a problem when
proving the system works. Our clients with this version of the system are all big corpo-
rations. Big clients taking big numbers. The truth of the matter is, that once we get into
Eaga, which we are already in (Pilot), and into the local authorities and we have case
stories to prove to potential clients, then the market strategy will handle itself. Because
the cost effectiveness of the system makes it a no-brainer. The basic fact is a fully load-
ed cost (salary, holiday pay, heating, car park space, taxis) of a human call-center opera-
tor in England is 24.000 pounds a year. That is for an 8 hour day, but they need to take
lunch breaks, go to the toilet, they get pregnant, they go on holiday, sick days. With the
AIDA system is 12.000 pounds per unit. But AIDA works 24 hours a day, doesn’t take
any holidays 365 days a year. So not only is AIDA half the price of a human, it works
three times as much. So it is 6 times as cost effective. And seven days a week.
Karl: Version 1 is not a consumer product, not a mass-market product. Our customers
will probably number in the dozens to start with, not thousands. Because they are all
going to be very large corporations who will take this on.
Mark: Our sales Ex has a list of 150 target clients. He has contacted those target clients
and they are already asking us if they could have the system. We don’t want to push the
system in too soon until we have stress tested it and we have the case studies to prove
that it is the real deal. Because if we go in too fast and miss something, we then miss
the opportunity of having that momentum in the market. Part of keeping everything un-
der the blanket for so long, was part of our marketing strategy. Because now people are
knocking on the door saying what are you doing. Rather than us going to them asking
them do you want to know what we are doing? It is working very well.
Angela: A bit reverse psychology
What is Artingence’s global marketing strategy?
Mark: We don’t have one at the moment and that is the honest answer. We are looking
at the UK market first, which is the market Karl has particular expertise in, as the rest
of the team in fact. We set out initially in our business plan to capture 1½ % of the UK
incoming market alone. Now there are 800.000 call-center operators in the UK. About
40% of those do incoming, and we only want 1½ % of the total business in the first
three years. If we do that, at the end of year 3, we turn over 270 million pounds. The
numbers are phenomenal. The truth is though, if we get 1½ % of the market, we will
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have a much bigger slice of that market.
Karl: We have been very conservative. We have kept that number down very low, be-
cause if we had it where we thought it was going to be – the business plan looks ridicu-
lous. The numbers are so big at the end, but Mark is saying is, it will be so successful
that it won’t only be 1½ %. It might not be 10, but it will be up there.
What is Artingence’s go-to-market strategy?
What is the first customer segment to target?
Karl: North East England Government or quasi Government authorities.
What markets or industries does Artingence aim to penetrate? (1st wave? – 2nd wave).
Karl: 1st Wave will be to scale up much of the same to different counties in England,
later Scotland/Ireland/Wales and of course the EEC. After this the product will be ag-
gressively promoted in the world on parallel or sequential depending on what gives the
best advantage at the time. If phase 1 is about Government bodies , phase 2/3/4 will be
call-centres scaled up followed by industry specific uses e.g. language teaching to level
1 or 2, hospitality etc. They will also be some lateral growth in technology companies
Artigence uses to form mutually advantageous alliances with (e.g. Voice Technology
and others).
Is Artingence expanding their market in a different way versus the offering by regular/
normal/old school call centers?
Mark: The expansion will be based on profitable lines. For example if staying in the
Call-Centre space is best then this is what we’ll do. However, there is a need to con-
stantly continue to develop other specific applications. Each of these will use a dedicat-
ed approach and may include some or all the above i.e. regular/normal/old school etc.
Does Artingence have ambitions to enter foreign markets? If yes, which ones?
Mark: It will be client driven. In fact the group of investors in Dubai own the rights to
the Middle East and Africa. The US is a particularly interesting market for us, but we
think we will go into the US with a JV partner, for the simple reason that it is a huge
territory and we need someone with expertise in that territory. So we might do it under
a licensing agreement. But actually, when we were looking for investment partners, we
were also looking for, not just money, but expertise. And that is where Mo brought us.
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He is hugely experienced in developing agreements with joint venture partners, go into
commercial contracts and so on. He has a level of experience of that none of us have.
So, what we have agreed to this point is – we will get the UK market, we will establish
ourselves. And then as a group of people we will find out where we will go next. The
problem is that if we grow too quickly, we run the risk of over stretching ourselves and
under delivering and that is as bad as not selling anything in the first place. So at the
level of infancy that the company is at at the moment, our aim this year is to sell 1000
units (agents) That is 12.000.000 pounds in sales this year. I believe we will smash that
out of the water. In truth, we do not have enough people to really go beyond that and to
scale up. Very much in the same way as the call centers, if we scale up too quickly we
run the risk of diluting the quality of the people that we have. So, we are far better off
establishing ourselves on those numbers. Next year in the UK alone, we have targeted
at 5.500 units. Year 3, we have targeted 15.500 units. The truth is by 3rd quarter 2012,
the company is already in profit and it is self-funding. And at that point with confi-
dence, we sit down and develop a marketing strategy so we can grow quickly and in
many different directions, without putting the company’s finances at risk and without
putting the company’s employee base (without diluting the quality of it) at risk. The
business plan states that the first three years are focused on the UK market, but we do
we don’t know yet. This is the point. If someone came to us and said we want to be
your JV in the US, just licensee your tech to us and we will do everything else in the
US, then in actual fact that doesn’t cost us any more, it’s just a revenue stream.
Cliff: You are going to find the UK customers are outsourcing now. They have already
got global partners. So it will go from the UK into the apparent company. All the inter-
ests the States have in the UK, they will get referred back by the satisfied user in the
UK. So that will automatically open the door.
Mark: What is going to happen is that probably within the next 12 months a huge cor-
poration is going to come along and offer us a huge amount of money for this company.
What are plans if that happens? The truth is, we don’t want to sell it. We want to build
a great big company here in England, in the Middle East, in America, something that
we can be proud of. If we were to get 10 million pounds by selling the company now,
then we could have 300 million pounds in 20 years. What would you do? I believe
what we have already got is worth a huge amount of money. So that is what our plans
are.
When do expect to reach 25% of revenue from export?
Cliff: By 2014
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When do expect to reach 75% of revenue from export?
Cliff: By 2020
How would you describe the invention? Very new or something extremely radical?
Karl: It is revolutionary. It is disruptive technology. It’s going to totally change the way
business has worked. We are potentially going to reduce the workforce by 90%. Typi-
cally you would have a team leader sitting at the end of a row of desks with 6,8, 12
people working in their team. We are going to take away the need for the 6-12 people
and have one person there. More importantly, that person does not have to be in an of-
fice. They can be working at home. So, you could have people, college students, mums
with kids, people with disabilities that can’t easily make it to work. They can be sitting
in their house with “broad band” (everyone has it) 38.53. We give them +a large touch
screen, they can log on. We know they have logged on. They can answer some calls
and they can feed their baby, then they log off. So they have done 40 minutes work. But
they haven’t had to worry about childcare, they haven’t had to worry about going into
the city. As long as we know that we have enough people to cover all of our clients, that
is great. So, this changes the whole way businesses will work as well as it is dramati-
cally reducing the cost base of how they work. So it is truly revolutionary in terms of
what it is doing.
Do you think that could be a barrier for adoption?
Karl: A year ago or more when we started talking to the local authorities, they first said
that we don’t want to get rid of jobs. This will put people out of work. But actually
most of the type of work that we are targeting has disappeared from the UK already. It’s
gone to India to the Philippines and so on. It’s gone. So we are not getting rid of jobs
from here, what we are looking to do is actually bring jobs back to the UK. But the jobs
we are bringing back are high-level, knowledge-economy jobs. The supervisor’s job is
not an easy job. They will have to be trained and they will have to work hard. But it
will be a well-paid job. It’s not a minimum-wage type thing. We are additionally obvi-
ously creating a lot of IT jobs and support jobs around that. So it is actually seen as a
very positive thing to the UK economy. And we are particularly interested in bring jobs
back to the Northeast.
Mark: But it is still is huge barrier to adoption. The reason Convergence wouldn’t do
it is because that was not how they did things. Once we have established a new way
of doing something, we have introduced the internal combustion engine instead of the
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horse, then everybody will start using the internal combustion engine and will just use
the horse for leisure purposes, looking back in history. Now the hardest thing for us
was to get the application in with someone in the first place. Now when we went with
the local authorities, it was probably the hardest route to get in, but the reason we did
that, is once we got into one, there are 157 of them in the country. So we don’t just get
one customer, we get all 157 of them in one go. The other reason is that they are not
commercially responsible in the way that a private enterprise would be. So, they have
a number of key performance indicators so it wasn’t just about costs with the local
authorities. On a better note, in Britain in the local authorities must by law pay. We are
guaranteed to get paid and once they are satisfied they say to everyone else, look how
good we are. If we get even a third of the 157 authorities in the next 12 months, we will
smash our sales numbers by 500% from one customer. Barriers of adoption will always
be there, but we have 2 pilots running. We can show people how the system works.
How many years from founding to break-even?
Cliff: It’s about 4½ years. Inception was 2008, we should come on revenue stream in
the last quarter of 2010, and we should reach full revenue stream in Q3 of 2011. Link-
ing with your burn rate, we are currently running at 60.000 a month. We have raised
1.7 million as investments. We have full quarter in hand. By the end of this year we can
run till Feb of next year, if we slip by a quarter. So if things don’t come on line by the
end of this year, we can go to the first quarter of next year and still be comfortable. We
have a buffer of a full quarter.
Mark: How do we raise revenue from the product. We are not in effect selling the li-
cense. We are leasing the license. We are leasing on a 12 monthly basis. So, if a human
operator costs £24.000, that would cost the employer £ 2000 a month. We employ a
leasing company to lease under a financial agreement, our software to the end user. The
end user pays the leasing company £1100 a month but the leasing company pays us
our £12.000 upfront. At the end of the year, they pay us another £12.000 and so on and
so on. So we always own the technology. We rent agents to companies like companies
hire people. When I said this year we target to sell 1.000 and next year 5.500, next year
we will only have to find 4.500 new sales because we already have 1.000.They are just
repeating.
Cliff: The way that the finance will work is that it will be the three-year deal. So you
will be tied in for 3 years and at the beginning of the renewal periods, we will get the
full 100% of the fee, but the client has the spread over three years. So we get it that
way.
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Mark: There is another revenue stream. This is really important and it’s not even in the
business plan, because we will leave that out because it is just the icing on the cake,
if you like. Great example. There is a volcano eruption in Iceland and it closes all the
airports in Britain. Now we have been on websites and on the telephone trying to find
information for ourselves, trying to get new flights. The problem is that the systems are
affected. The websites are going down because they are overloaded. What Artingence
can do at this point? At some stage we will establish a warehouse or holding area in
which we will have thousands of agents. British airport authorities can call us and
say we have got a crisis. We need you to upload this information to 5.000 agents now
maybe only for a matter of hours or days. So when people call, they come to our over-
spill center and they are given information. The worst thing anybody can have in this
age of tech is not being able to get any information. Now the beautiful thing is – even
though we are only renting these agents for half a day or two days – it is at a premium.
If they want our agents that quickly for that short space of time, we can charge what we
want for it. Now the number of times we can actually do that is infinite, just in Britain.
You have the swine flue epidemic, where they employed 2000 human agents, just to
answer the phone on 11 questions for six weeks. That alone would have made our sales
target for the year. Then you’ve got flooding, you’ve got rail strikes, airport strikes. All
of these things at the moment where human call centers can’t cope with the demand,
we have an overflow center where we just have our own agents. Where we are running
them ourselves. That is a revenue stream which isn’t in the business plan, which could
potentially be as big as a revenue stream in the business plan. So we have a number of
ideas, how to add value in terms of how we bring revenue in from what we have al-
ready got. Bear in mind, AIDA is already built. It is not like building a car. AIDA cost us
1 million pounds, the next one will cost us 10 pence and so forth.
What is the founding team’s relevant experience with their specific tasks?
Angela: The obvious advantage with Karl is his technical ability to invent the system
in the first place. Mark is the entrepreneurial element. My background was recruitment
and HR. So, I wasn’t really needed in the initial stages to do that side of things. But, I
am now:-). And Mike, our operations director, has come from a very similar and techni-
cal call center background. So obviously, lots of call center experience. I used to recruit
for some of the largest call centers in the UK when I worked in the recruitment indus-
try, British Gas, British Telecom etc. So there was this link between call centers and us.
Cliff actually used to run a call center. We can all relate to the people on the ground,
because I have recruited those types of people, or the supervisors, or the people behind
the scenes that do the technical – backup support and inventions. So we all seem to
have that in common. And obviously Mark, with his entrepreneurial know who was
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the person who could link us all together. Even though we all know each other, the
skills come before the relationships.
Karl: Newcastle is a big call center area now. Coal mining disappeared 10-20 years ago
and our accent is considered to be trustworthy and friendly. So there are lots of call
centers in Newcastle. Partly because of the Jordi accent. People feel comfortable talking
to people from here. I can point to three call centers from here that employ thousands
and thousands of people. It is one of the biggest employment areas in the Northeast of
England. There is a big call center focus here. We have all done lots of different things
in our past, but actually it just all fits together so well with the backgrounds and the
commercial experience that we have got – and the technical expertise. So it does look
like we have sort of made it up. It is too good to be true, but actually it is.
Mark: I’m not the least bit modest, because this is the truth – if it hadn’t been for me
this business would not have existed. I knew what Karl could do. I knew we needed
Cliff and Angela. I was responsible for kicking the business into life. When we needed
more investment, I was the one that went out and found it. I also recognize that my
skill sets are going to reach critical mass at some stage. And when that time comes I
have no problem with bringing in a chief executive and saying you are the professional
business C.E. Governing our company. Because I (or anyone) would do this – I don’t
have an ego so great that I think that this is my company and I am going to run it, even
to it decrement. Because that is just stupid. I would quite happily turn up 3 hours a
week and have somebody else run the company. We are not in that position at the mo-
ment, but when that time comes, and we will all know when it is. I am too aggressive a
person. They will not let me deal with HR now, because I don’t have any patience with
people. That is all right when the company has the size it has now, but when it gets to a
big corporate organization level, then I am not the right guy. What I am good at is find-
ing the right people and making them like us, which is the first part of what we have to
do. If you are going to be in any kind of business relationship with people like Voxcia
who we have an agreement with (supplier), the first thing I did – these guys have been
working with them for 2 and half years over email – I dragged in the UK sales director
and made friends with him. We had not even spoken yet. So we go out and form a per-
sonal relationship with them, which actually facilitates the professional relationship.
The time will come when the operation is too big to do that, where Mo’s governance
document will come in, the structure will come in – and that is starting to happen now.
When the time comes, I think we will all know when the job is too big for us, and we
will step aside.
Cliff: We have people now that are actually asking us to actively join us. It’s only a
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question of time.
Is Artingence’s business plan something that you follow or was it mostly used as a tool
to raise capital?
Mark: It is something that we have intended to follow. The problem with the business
plan is that it is always a finger in the air. The business plan was as much a guide for us
as it was for anybody else. We have revised the business plan many times over the last
3 years and I think we are at the point now, where we have to sit down and do it again.
Of course we use it as a tool for raising capital, but in actual fact that was the only
tool we had apart from what we could show people and what we could discuss with
people. In short, it was less of a tool to raise capital and more as a target and guide for
ourselves. One of the problems with working with computer geeks is that they all work
under the principle that we can make this much better, much better, much better. There
has to be someone that says I don’t care if it’s “finished” perfect. In fact, I don’t want it
perfect, I want a product. In fact, now we have three products.
What is your business plan today?
Mark: Well, my business plan is based on sales targets and revenue. Our business plan
to this point is that we will increase the staffing with probably 50 or 60 by the end of
this year (now we are 25). I don’t think we can grow any quicker than that and not
dilute the skills that we have. Apart from every thing else, just to recruit that amount
is a huge amount of work. The sales target is a 1000 units which give us revenues just
on software and not on hardware and additional services of 12 million. 5500 for year 2
takes us into break-even by Q3 on 2011. 2012 we get 15.000, this is just in the UK. And
if we do that, we have already made profit. But I would think that somewhere along
those lines, bear in mind that you always revising business plans, that we will have
to sit down as a company and say right now is the time to hit the US or explore other
middle east and Africa. The main business plan will be built up and we will have a
separate business plan for different territory. So it’s constantly moving. If you ask me to
pin it down: I want 1000 this year, 5.500 next year and 15.500 the year after. And if we
do that we make 270 million pounds. It’s that simple for me.
When does Artingence expect to launch?
Mark: Well we effectively have. We have two pilots running. One is with the local
government and the other is with Eaga – they are one of the major call center operators
in the country. As soon as we have the case studies from those two pilots. The northern
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county authorities will be 6-8 weeks and Eaga will be 12 weeks, by that time – we are
already in the market. They will also be our first paying customers. In truth, we could
go out and sell 200 systems tomorrow, but until we have stress tested it, we are waiting.
Cliff: The thing with the local authorities, just so you understand, there are 180 in the
UK (with Scotland). One takes it and then it just filters down. It’s like dominoes, so
they will all just talk to each other.
Mark: What happens is, and this is why we have to take our time: day 1. Client says
they want 200 agents. But on day 1 they won’t get 200 agents. We have to put an ana-
lyst in with them and that process may take two to three months, where the analyst
sits with them and asks what do you need from our system. Because it is not a generic
system, it is tailor made for each individual client. Let’s say the client is an insurance
company and they want AIDA to answer questions on car insurance. With the analysis
we have to sit down and discuss with the client exactly the kind of questions that we
would expect to get from their clients and any pitfalls we might come across. And then
we may stick in maybe 6 agents. We stress test their system with six agents and we will
find out the information the client has forgotten to tell us. And then we go to 50 agents.
Then when 50 agents are working properly, by month 3 – we will have 200 agents in.
Going to one client and getting an order for 200 agents is a long process. The other
problem is that process for 200 agents will take 4-5 of our staff, and if we take on 20
clients, then we don’t have 100 staff. So that is why we have to build slowly.
Who are your typical customers? Who are you trying to target? British, international,
foreign?
Mark: Anybody. We will sell to anybody. When we started this, we thought that we
would sell to the major call-center operators. But it quickly became evident to us that
we can put the major call-center operators out of business because they can easily take
their systems back in house, because they don’t need big buildings full of call-center
staff. Banks don’t want to run call centers, but they would be quite happy to have a
room with five people running 100 agents.
Karl: The reason companies outsource is the people problem. So, American Express
for example. They need to talk to their customers, but they don’t want the hassle of
hiring 200 people and 40 of them leave every other week and they have to keep on
hiring and keep on training. They don’t want that, so that is why they outsource. With
our system, they don’t have that problem. Instead of getting another company to do all
that stuff, American Express can do it themselves, which they want to do, because they
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don’t like giving other people access to their systems. Various outsourcing companies
have total access to their computer systems. They don’t want to do that. They don’t
feel comfortable doing that. Plus, these people who are employed on £5 an hour are the
face of American Express. They are not being trained by them. They have no idea of
the quality that their customers are getting. And it’s a big problem for them and we are
solving that problem for. They can literally bring the call center in house because they
don’t need a big room or a massive area of space for 100s and 100s of call-center human
agents.
Mark: We have built up (so far) demonstrations on banking, insurance, telephone shop-
ping (massive area in UK) recruitment, buying utilities (massive area in UK) – gas leak
and so on. Another big area where the demonstrations are almost finished is gambling.
It is tailor made for our system. The problem with human operators on that is that they
are prone to make errors. Because, not many people are gymnastics with mathemat-
ics. Computers are designed for it. So we target different sectors rather than individual
customers. As we bring the system on line, it is time to go into the banking sector. We
will go to Lloyd’s Bank – who have a big call center in Sutherland and we will say we
have a demonstration to show you that will cut your costs. Once we get one bank on-
board and we prove that it works, the rest have to follow soon because the bank that we
have already taken on, is saving so much money that they are more cost effective than
the competition. So that is the strategy we have developed. We can make a new dem-
onstration in two days. You take an industry sector, we get on the phone and find out
what their call-center operators do and we can build something that almost replicates
that exactly, or replicates it well enough so we can go and say that we can do this much
cheaper. So that is basically how we are going to approach it.
If and when you have international customers, would you follow them abroad (client
followship)?
Karl: Say American Express, we work glocally with them and they speak to their head
office in the States, and their head office wants us – we would definitely follow them!
(mentioned by Cliff previously).
Mark: We built this thing to sell it. Once we start selling it, we are going to keep selling
it.
Which relationships do Artingence pay special attention to?
Mark: There are certain elements of the system that we buy in. The speech recognition
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exists. The voice synthesis (called TDS) already exists, so we didn’t need to build that.
We needed to buy it in. Now, at first we did under development licenses which was
very expensive. We then started developing relationships with Voxcio and Saraproct
(our suppliers) to basically bring down the costs of the licensees that we had to pay
for each individual system. Karl and I in particular worked very hard on those people
for the last 6 months, because we are getting to the point where we are going to have
to spend a lot of money with them. Along with Cliff, we have also been developing a
network of people with influence within certain industry sectors. Part of the problem
with this kind of thing is, if you get on the telephone and want to speak with the buy-
ing department saying that we have this great system, you never ever get through to the
person who has got the money, authority or the need to buy it. So what we have done
is that we have gone in through the back door, if you like. We have spent a lot of time
“smushing” with people with influence within various sectors. So that when we go and
present our system, we are presenting to the guy who can buy. That is coming on line
more and more now. And that is something we all do.
The investors that have invested in your business – are they mainly based on personal
relationships?
Mark: It was actually by chance. We come from an area of England that is not eco-
nomical robust. We knew that we needed to bring in some partners with experience
and with money. And we approached several people in this area and in fact we were
offered the money we were looking for by a couple of people, but you know what, we
didn’t like them. One guy in particular who has been hugely successful. He came in sat
down, and it was just his approach to us that we thought, all right, we can get the mon-
ey to move the company on, but can we work with this guy. And the answer was No.
And we quit looking around, and there are very few of those individuals in this area.
We are not in a position to be too choosy but we didn’t want to get half way down the
line and be working with people that we can’t stand. So, I said to Karl, I know a couple
of people in the Middle East. Let’s look further afield. And when I approached Mo, I
didn’t approach him for investment. I approached him to see if he used his influence
to put us in front of the right people. After I explained to Mo a little bit about the Artin-
gence system on the way to the golf club, he said – can you show it to me. So we went
back, got the system, flew back to Dubai (Karl and I) and Mo put together an investor
group (including your mum). We presented the system to them and luckily because of
Mo’s influence and personal interest we not only got one investor that we liked, we got
several. At the end of the day, this is bigger than all of us put together. There is enough
in that machine to keep us all busy forever. We liked the way he put the group together.
Mo said, from our end, give me the information and I will disperse it and keep every-
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thing straight from this end, and all you need to do is keep me in the loop in terms of
the governance document (Mo became the executive director) and for us, is it a model
that fits and suits us very well. If we had gone with the other guy from Newcastle, we
would have got the financial funding, but we wouldn’t be sitting in this room feeling
good about ourselves.
Angela: He would never have been emotionally involved. He had no respect. He was
not interested in how we were going to do it, or why, or the personalities, or any of the
questions you are asking. He was just like OK, when am I going to make some money.
He didn’t want to work with us or give anything of himself to us. That wasn’t going to
work.
Mark: On another note, they have the most successful software company in the UK.
Even his partners threw him out of the company because they didn’t like him.
Angela: It’s all about the people!
How did you get into collaboration with Prof. John MacInyre, and in what phase did
you collaborate with him?
Mark: I will start by telling you how I met him. I have started a number of companies
and I had a few bars in ski resorts in Austria and Prof. John MacInyre is a keen snow-
boarder. Socially, he is a very interesting guy, very interesting company. I knew he was
a professor at Sutherland University, and he told me that he was involved with artificial
intelligence. I still don’t have a clue what that is, to be honest. I am not the technician
in this company. When Karl and I got together, I told him that I got a really good friend
in Sutherland University and he deals with artificial intelligence. Maybe we should get
together and have a chat. Now John is a busy guy. He flies all over the world. He is one
of the leading authorities on artificial intelligence in the world. So it took me ages to
pin him down. And a year and a half ago – still at prototype level, we went to Suther-
land University, which is only 10 miles away. We sat down with John and said, you
know me well – you know I know nothing about this stuff, but this is my business part-
ner, this is what he is doing. And I let them get on with it. For the next 2 hours I didn’t
understand a word they said. But we left that meeting with the professor absolutely
fired up with what Karl was doing. He basically said that he could help us with this.
Anything I can do, I would happily add to it. So, what we achieved from that relation-
ship so far is a huge a amount of free technical expertise and employees that have been
through the company and have worked for us for free (postgraduates from the universi-
ty). And a knowledge transfer initiative with the university. These guys are academics,
they come to us, they get experience working in commerce and we get their technical
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expertise. So it’s been very valuable to us. Particularly, in developing the interface – the
supervisor screen.
Karl: The postgraduate students have helped us develop some of the artificial intel-
ligence system. As well as artificial intelligence, Sutherland University are very big on
games development. They have something called the human computer interface lab.
What it is designed to do is to look at the way people actually use a computer. So you
are sitting playing a game or doing word processing or whatever, they track where your
fingers are moving, how often you have to use the mouse, where your eyes are going.
They actually look at your pupils and see where you look on the screen. They have
helped us make our system much more efficient and easy to use. In a traditional call
center, you don’t need that split second reaction, as you would in a video game, where
somebody is going to shoot you. In a video game, you have to hit the button very quick-
ly. Our system is much more like a computer game than a traditional call-center appli-
cation. Because, the supervisor is sitting there and somebody says something that our
virtual agents doesn’t understand, the supervisor has got to be so quick to carry on with
the caller, without the caller realizing that there has been any interruption or any inter-
vention. So, we needed to make our system react really fast, and they have helped us
with that. So, it’s all touch screen, the buttons are all designed in the right places and
right colors and so on to make it easy and fast for people to use. And that is going to be
ongoing as we move forward. So they have helped us with 1) the artificial intelligence
(the post-graduate students that have come along and helped us build some things) and
most of that is actually going to be in the newer versions. It is stuff that we are going to
bring in in version 2 and 3. To make the system learn faster and be capable of under-
standing a wider range of vocabulary and they way people think, the way people say
things. And 2) the interface, to make the system as efficient as possible as well. It has
been great and we have great relationships with them.
Mark: There are also other benefits we have received through the prof. He obviously
has a great deal of influence within the science community. And he basically has
championed our company. So he has gone round to anyone with influence and said,
you need to look at these guys. When we applied for grant funding, he has championed
our cause and he has gone to organizations like One Northeast, through whom we are
raising free money for the company. And he said this is the kind of company you need
to back, cause these guys are going to do it. That gives us access to jump ahead in the
queue.
Karl: It is all geared to creating jobs in the region, around here. That is one of his big
pushes.
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Mark: He heads up an organization called Sutherland Software City. One specific ex-
ample: There is a journalist in the US who is very well respected, who is a IT journalist,
but his speciality is putting down useless products or products he thinks are useless
and pointless. He wrote a write up about Artingence, having seen never our product,
thanks to John Mc, and basically said these guys are the leading authorities in the
world on combining TTS (text to speech) and ASR (speech recognition) tech. Going out
in a technical journal in the US for a few guys that started up in Karl’s kitchen, this was
just great! And this is a person who normally puts a lot of IT companies down.
Karl: We buy in the actual speech recognition. The company that we are working with,
who is a very large multinational corporation, their head of strategic partnerships came
to visit us. Now, this guy doesn’t visit people. He came to Newcastle for the day, which
is a really big deal, and he was looking at the product and said, why didn’t you use our
conversation engine. Why you use this? I said it is just not good enough. We built this.
He said, oh yeah, yours is a lot better. Now this is a multimillion-dollar corporation.
Mark: talks about the DIAGRAM (1,21, 40). Between TTS and ASR - in the middle is
a MRCP. Is a protocol that allows all these pieces of technology to work together. In-
cluded in the MRCP is a conversation builder. Suppliers: Voxeo, Cereproc, and various
others. This is basically and IVR system. What Karl has done, he has built a brain. This
brain basically increases the operational capacity of this IVR system exponentially.
Now this guy, head of strategic partnerships, sat down and had a conversation with
Karl based around this diagram. And he said, why didn’t you use our conversation
builder and Karl said, it was rubbish and ours is better. And this guy went, PARDON?...
And then he had a look at it and said, yeah, you are right. I am not a gambling man, but
I bet Voxio would come and offer us 100 million pounds for this company, sometime
within the next 12 months – just for the brain.
Karl: Not only Voxio, but Saraproct as well. They have created the voices that we use.
And we were doing stuff, and Paul rang them up one day with some problem he was
having and they said, you can’t do that. It doesn’t do that. But it does. They are ringing
us up now, asking how to use their product because we are pushing it so far ahead of
what they are doing, what all their customers are doing. They are actually ringing us up
asking how our product works.
Mark: I will give you another specific example of that. Voxio, who are the market lead-
ers of what they do in the world and Saraproct who are the market leaders of what they
do in the world, couldn’t actually get their products to work with each other. They
have tried with several different companies. We were not actually using Saraproct. I
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pushed the boys to go with Saraproct because it was half the price of the other sup-
plier. And they said, we can’t get it to work. And I said, make it work. 3 days later we
got the phone with Saraproct and said we got you working with Voxico. And they said,
we don’t believe you. Back to relationship building, we have actually never met these
guys. The geeks upstairs just email people. I said, we are getting on a train, and we are
going to look them in the eye and say this is who we are and this is what we have done.
And we sat there (based in Edinburgh University) with a bunch of other academics and
they could not believe we did it in 3 days. SO the reputation of the company within the
industry is blossoming. Simply because we are doing stuff, we are already pushing the
boundries. We are pushing these guys further than they have ever gone.
So this is how the system works (DIAGRAM): somebody calls in, it goes into speech
recognition. The speech recognition engine listens to it and turns it into text. So ev-
erything is recorded in writing. That then goes into the MRCP and as a result into the
brain. The brain manages the conversation, tells the system what is needs to do and
what direction it needs to go in. And then it goes to the TTS engine. It is called TTS,
because it converts text to speech. So it converts it back into speech and spits it out as a
voice again. In the middle, it is all recorded and reported. And the genius of what Karl
has built is that it already existed in a very simple form. (Press 1 for this etc) the brain
actually just makes it work like a human. That is what took them 1.5 million pounds
and 2 and half years to build! That is AIDA.
What is Artingence’s present strategy and vision today? Will it change?
Mark: Sales, sales, sales. Further development. We already have a number of ideas on
the table on how to improve the system on voice identification. We plan to offer the op-
tion to choose the person you are listening to, to name that person, to have them recog-
nize you.
Karl: The strategy is, first of all, to establish ourselves in the UK. It is a market we
know very well, a very big market. And even if we were not to go international, we
could make a very good living out of the UK. When we get established in the UK, next
– America and India. That is probably 90% of the call-center market in the world is
covered by the US and India at the moment. We will be very quickly moving into those
markets through the companies that we are already working with in the UK. So the
multinational companies that we are going to be working with in the UK will lead us
into those markets quite naturally. We are also very keen to move into markets that are
currently not well served such as the Middle East, China. China is just almost too big to
think about. It is just ridiculous. Obviously that would mean, establishing partnerships.
We are already talking with a couple of people in the US, potential partners. The Indian
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Government wants us to go there. They want to know what we are doing. So we will be
moving internationally and become a world-wide company sooner than we think
As far as the vision goes, the product that we got today, Version 1. We have 2 and 3
planned. So we know what we are going to be doing for the next 18 months to 2 years,
in terms of the technical development of the product. But, there are several variations
(or spin-offs) on the product that we might look to and consider bringing in. At the mo-
ment, we are looking at large call centers. We are targeting people that are going to take
100.000 licensees. The product also is capable of working in small businesses, for the
same financial reasons. So you own a pizza place, someone who hires cars, we could
help those people as well. Where they might only take two agents. So, there is a much
bigger market. The vast majority of companies in the UK have less than 10 people
working for them. And we can help those companies too, at a lower price point than
we are selling to the big corporations. And we have a cut-down version in some ways.
But if you run a car hire firm and you are open 9-5, but people want to hire cars 24
hours a day. We can help them by acting as a virtual receptionist. The next phase that
we have discussed is putting this into people’s houses. Bill Gates famously said, “One
day every home will have a computer.” And everybody thought it was a joke at the
time. I probably have 8 computers in my house now. Everybody’s got 2 or 3 laptops in
their house now. We could put this in as a virtual housemaid or a virtual butler. Using
tech, all mobile phones are GPNS enabled now. You have got something called RFID, a
new tech which has been developed and is going to big very big. Radio frequency iden-
tity. It is a little chip. They are talking about putting in into clothes and so on. So if you
walk into a shop where you bought that shirt, last week, you walk in they will know
you bought the shirt last week. So you would get a text message on your phone be-
cause it knows your phone number and who you are, saying “ oh that shirt you like, we
have got a new color in and they are on sale this week.” They know that because you
walked into the shop with this chip that is embedded in the shirt somewhere. What we
are talking about is having chips in your kid’s phone. So as the children come in from
school, the system automatically knows and AIDA, the brain, which is plugged into
the phone or a consumer unit that we will create, will text you saying Sofie just got in
from school. So you will be able to keep track of your family, keep track of your house.
You will be able to ring up and leave messages and things. Just as you would if you had
your own real live butler or housemaid.
Mark: You take milk out of the fridge, drink it, throw it into the bin, and AIDA sends
you a message – you need to buy milk. When will that happen?
Karl: In 2-3 years. We could do it now, but we have enough to do now. This shows that
we are always thinking about keeping ahead of the competition. So we have got a fan-
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tastic amount of ideas. It will always keep us one step ahead of the competition.
Mark: Another application that I am hugely excited about is – Have you ever been to
a drive-in take away place like McDonald’s. A little person stands with a headphone
and asks what would you like. And you order, then you pay. Now, if you could go to
every take-away place in the world and take away that employee, take them out of the
cost base, simply by having AIDA there when you drive up. Your car goes over a bell,
AIDA says yes sir, what can I get for you. Takes the order, prints the order through to
the kitchen. You go round, pay with your credit cards. Next window, there is your food.
Now, if we can take one employee out of every McDonald’s in the world, the cost sav-
ing is massive. But that is technology.
Karl: There are probably 10 people working there, and if you can take one person out,
that is a 10% saving. That is a massive saving in salaries.
Mark: But this is just a piece of useless info. Everyday I have a new idea for AIDA. But
that is why it is so exciting.
Who do you see as your competitors?
Karl: Technically, there is nobody doing anything like what we are doing. Our competi-
tors are the live call centers. Some people might prefer just to use real people. There are
certain areas that we are not targeting. The seven star hotel in Abu Dhabi, will probably
not be using our system for a while. But there are 100s of low cost chains – I mean there
are hotels now where there is nobody in the reception. You walk in and put your credit
card in, there is no staff. That is absolutely perfect for us.
Angela: AIDA could be used when calling room service.
Mark: Let me turn your question on its head. And this is really mind-boggling. Who
do we see as our competitors? We can actually make ourselves the competitors of our
clients. Because, what is to stop us if we wanted to. We could run our own call centers
with our own technology.
Karl: So instead of selling our system to Convergence who has, for example, Lloyds
Bank as their client, we could go to Lloyds Bank and say, we could do that for half the
price. Lloyds Bank would come to us. So if we are not selling the technology, we could
set up a company that is a call center.
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So why aren’t you doing that?
Mark: It is something that I would love to do, but you have got to take one step at a
time.
Is that one of your goals?
Karl: It is something that we are thinking about.
Mark: The thing is, we have the call center expertise within the company. Everybody
apart from me has worked in a call center or with call centers. So effectively, we could
bring in the staff that could go and get the business, we could set up the company and
set up the call centers in buildings that are a fraction of the size of traditional call cen-
ters and we can wipe them out of the market, because they can’t compete with us. They
can’t compete with the price. So as you can see, we have much to do.
When the interview came to an end, a »debriefing« was given to the interviewee. A
»debriefing« was applied to sum up core answers throughout the interview, which al-
lowed feedback from the interviewee.
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2: The Likert Scale - AnotoSource: Own analysis
Strongly disagree Disagree Neutral Agree Strongly agree
The founder is important for Anoto
XIn the early exploration years he had a very important role. From idea to captial rasing.
The organization is important for Anoto
X
The environment is important for Anoto
X
The product is important for Anoto
Xno market or market need.
The global strategy/visionis important for Anoto
X
The marketapproach is important forAnoto
X
The barriers areimportant forAnoto
X
2: The Likert Scale - AnotoSource: Own analysis
Strongly disagree Disagree Neutral Agree Strongly agree
The founder is important for Artingence
X
The organization is important for Artingence
X
The environment is important for Artingence
X
The product is important for Artingence
X
The global strategy/visionis important for Artingence
X
The marketapproach is important forArtingence
X
The barriers areimportant forArtingence
X
127
3. Anoto’s finacial figuresSource: Anoto
Net Sales (SEK Thousand)
250.000
200.000
150.000
100.000
50.000
0 2005 2006 2007 2008 2009
Profit/Loss after tax (SEK Thousand)
200.000
150.000
100.000
50.000
0
-50.000
-100.000
-150.000
-200.000 2005 2006 2007 2008 2009
Cash flow for the year (SEK Thousand)
200.000
150.000
100.000
50.000
0
-50.000
-100.000 2005 2006 2007 2008 2009
4. Anoto’s digital systemSource: Anoto
128
End Users
Partners
Digital Pens
Partner Platforms for DP&P
Anoto Tools
Anoto Architectures
5: Anoto’s old business model
End Users
Partners
Anoto Digital Pens
Anoto Forms Solution
Anoto Tools
Anoto Architectures
5: Anoto’s new business model
5. Anoto’s previous and current business models Source: Anoto
129
Local Government
CentralGovernment
Commerce
SalesSupport
ProductLeasing
ProductTraining
AIDAThe Product
Artingence
AIDA(The Brain)
Media ResourceControl Protocol
MRCP
TelecomSwitches
Text To SpeechTTS
Automatic SpeechRecognition
ASR
5. The Artificially Intelligent Call CentreArchitecture Technology OverviewSource: Artingence
6. The Artificially Intelligent Call CentreBusiness ModelSource: Artingence
130
7. AIDA™ - extra versions Source: Own analysis
3rd wave: Extra details
The company expects to integrate a newly developed technology, radio frequency
identity (RFID) that looks like a little chip, into AIDA™. According to Dorner, the RFID
chip could, for example, be embedded in a child’s mobile phone. As the children come
home, the parents would automatically receive a text message from AIDA™, making
them aware that their children have come home from school. This technology would
enable constant tracking of family members or the household. Mark added,
“You take milk out of the fridge, drink it and throw it into the bin. AIDA™ sends you a
message – you need to buy milk”.
The Icing on the Cake
Another future application the Artingence team was extremely excited about was pen-
etrating the drive-through fast food market such as McDonalds. Artingence wishes to
eliminate excess staff such as the individual who takes you order. According to Gilbert,
AIDA™ could easily be implemented into these companies by replacing the minimum
wage position. If AIDA™ could replace just one person within all McDonalds glob-
ally; the savings in salaries would be substantial for the McDonalds enterprise. Gilbert
ended the conversation by stating, “This is just a piece of useless information. I go
everyday and have a new idea for AIDA™. But that is also why it is so exciting”.
Damage control in periods of crisis
In addition, Artingence mentions another potential revenue stream, which is not speci-
fied in the official business plan. According to Gilbert,
“This is really important and it’s not even in the business plan, because we will leave
that out because it is just the icing on the cake, if you like”.
Artingence can be applied in periods of natural disasters, hence the volcanic eruption
in Iceland or the swine flue epidemic. Whilst all telephone systems are overloaded, no-
body is receiving any information, which is horrific when reflecting on this age of tech-
nology. Artingence expects to have established a warehouse or holding area in which
thousands of agents will be kept. In a time of crisis, the government authorities will be
able to call Artingence and order an x amount of agents for a limited time. As a result,
a caller will be transferred to the overspill center and will be attended to. Since the
authorities will order these argents in a short time space, Artingence needs to respond
rapidly. However, Artingence can charge a premium price in these situations.
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7. AIDA™ - implementation procesSource: Own analysis
Implementing the AIDA™ software:
If a customer wishes to purchase 200 virtual agents, Artingence’s specialized analysis
initially discusses with the customer what kind of questions AIDA™ may expect to re-
ceive from callers and what drawbacks may appear. After the first meeting, Artingence
may supply the customer with around six virtual agents, which are used to stress-test
the customer’s system. The stress-testing process is fundamentally relevant and is used
to discover additional hidden information or pitfalls concerning the customer’s system.
When the first stress-test process has succeeded, Artingence will further deliver 50
virtual agents to the customer, confirming that the product’s performance is at the opti-
mal level. If there are no additional problems or inefficiencies, the original 200 virtual
agents will be released to the customer. This process takes around three to four months.
