Corporate Entrepreneur Interview Carlos Moreira, Founder, Chairman & CEO of WISeKey Interviewed by Roman Protasevich, INSEAD 15D class participant Introduction I interviewed Mr. Carlos Moreira, Spanish-born, Swiss national, founder, CEO and Chairman of Geneva-based online data security firm WISeKey SA. Before establishing WISeKey in 1999 Mr. Moreira had many years worked as a UN expert on cybersecurity. He is a founder and/or a member of many respectful organizations and initiatives in this area. In 2013 Mr. Moreira was named to the Swiss bi-weekly financial journal Bilan s list of the 300 most influential people in Switzerland. Due to Mr. Moreira s experience and role at WISeKey the focus of our interview was mostly on topics such as maintaining entrepreneurial drive within a company, balancing Direction, Space, Boundaries and Support within organization 1, qualities required from a successful entrepreneur. We also discussed some examples of new ventures that emerged within WISeKey during its short but vibrant history. WISeKey background WISeKey is a cybersecurity leader in digital identification and authentication technologies. The company s mission is to transform the Internet into a reliable and fair tool for conducting secure, electronic transactions. WISeKey has developed a family of interoperable, standards-based PKI 2 products designed to enable, manage and simplify the use of digital certificates in Internet and e- business applications: 1. CyberSecurity Solutions - provides trusted e-identities, electronic signature and document dematerialization, corporate PKI solutions and projects like e-voting and e-invoicing; 2. Digital Brand Management an anti-counterfeiting and sales monitoring system that provides 100% authentication for luxury products or other valuable items; 1 As per the framework described in Birkinshaw, J. 2003 The paradox of corporate entrepreneurship. 2 Public Key Infrastructure (PKI) is a system of public key encryption using digital certificates that verify and authenticate the validity of each party involved in an electronic transaction. 1
3. WISeKey Mobile - a suite applications leveraging secure digital IDs and WISeKey technologies to bring secure data protection, secure communications, and rich interactions to mobile users. Although WISeKey exists much less than some of the companies we looked at in our class, it is already quite mature by tech sector standards. Since 1999 the company not only substantially improved its technologies but also came up with numerous innovative uses for these technologies, expanding from purely Internet business to offline products. Maintaining innovative drive in organization According to Mr. Moreira, the key to continuous innovation in a firm is to attract and empower like-minded people whose values are in harmony with corporate culture. He believes in intrinsic motivation and says that monetary incentives are not sufficient to attract entrepreneurial talent and foster innovation: My experience on talent was that if you want to bring talent to your organization you have to be very generous obviously on the organization itself, but also must share the values of the company with the people you are trying to recruit and synchronize on those values. People think that when you bring talent you only need stock options or big salaries. This is not necessarily true. WISeKey follows integrated approach to corporate entrepreneurship assuming that it is everyone s responsibility to innovate and generate new ideas. Mr. Moreira says: WISeKey acts as a very big R&D process where anyone in the organization can come with ideas and those ideas if they make sense in terms of being integrated into overall platform are accepted. There is however a notable difference in the nature of ideas generated at different levels of organization. While engineers working in labs usually suggest incremental innovations and improvements to WISeKey s existing technological platform, leaders of the company are responsible for strategic innovations: expansion of the core patents pool, reinforcement of existing patents, and applications of WISeKey technologies to new areas. Middle management combines strategic vision from the top with technological innovations from the bottom to develop new viable products and services. For this innovation model to work WISeKey makes sure that all its managers are not only administrators but also experts. Every manager must be well trained, knowledgeable on technology and most recent industrial trends. Mr. Moreira explains: I saw so many cases of Technology Company ran by non-technology people. The consequence is that it is very easy to instagnate because you won t be able to have the right vision of where technology is going and what gonna be the drivers of that technology. So having management which at the same time has a very strong technology background is essential. 2
WISeKey tries to balance Direction, Space, Boundaries and Support within organization. Direction provided by top managers 3 comes from the vision that WISeKey is a cybersecurity company. Mr. Moreira says: Because we are a cybersecurity company you have to be in line with the security aspect. We will not necessarily execute ideas that are totally unrelated to cybersecurity. Sometimes it happens, we have entered for example sports business. Those ideas came from the lab and at the beginning did not make any sense for us, but because we managed to find a relation between sport identity, cybersecurity and fans ecosystems those ideas got approved and became products. Employees of WISeKey have got Space to innovate. Its leaders encourage creativity in their people and are open to any ideas coming from them. There is no specific dedicated time for innovation like Google s famous 20%, but initiative is strongly promoted and well rewarded: Anyone who really wants to make the difference in the company regardless of what type of ownership he has is encouraged to do so. We have many examples of people who started in very low positions and got into pretty high positions in very short time period because they were key in generating and executing ideas. In our discussion Mr. Moreira stressed that there are clear Boundaries set for WISeKey employees: We encourage people to have creativity, although in the security market creativity is limited by the requirements of the market. Any innovations that may compromise security of WISeKey systems and/or its reputation in cybersecurity domain will not pass. WISeKey provides Support to its corporate entrepreneurs by bringing right people with appropriate skills on board of a new venture. While it is corporate entrepreneur s ultimate responsibility to persuade people join him, top management of the company facilitates the process, helps identify complementary skills necessary for the venture to succeed, frees up time of required specialists and, when needed, hires external talent to strengthen the team and ensure efficient knowledge acquisition. In addition to what we discussed in class, Mr. Moreira emphasizes that from CEO s prospective Focus is also an essential part of corporate entrepreneurship strategy in a firm. There can be many interesting ideas and many problems to address, but it is not possible to develop everything at once. You can be ambitious but when it comes to serious investment you should solve problem after problem starting with the area where your company has specific capabilities making it better than competitors. Once you have developed solution to address this initial problem this solution starts generating income which can be used to attack the next problem, and so on. 3 Mr. Moreira himself and Kevin Blackman, Chief Technology Officer 3
Mr. Moreira believes that successful innovation is usually a result of collective effort rather than outstanding individual performance and designs monetary incentives accordingly: Success for one person is only possible because the team behind that person contributed to that success, so the policy is to reward everybody equally. There can be some rare exceptions, but generally WISeKey follows the philosophy of rewarding the team rather than rewarding individual. Selection and execution of innovative ideas WISeKey uses experimentation to select the best ideas among those that have received buy-in from company leaders. Mr. Moreira describes the process: The number of ideas that are being rejected is actually pretty high, and this is traditional in technology companies, because a lot of people think that they have great ideas, and another day those ideas are not that great. So the testing and validation of new ideas or technologies is done to make sure they work and can reinforce the overall architecture of WISeKey. While generation of ideas is deemed important at WISeKey, for Mr. Moreira as CEO it is essential that corporate entrepreneurs have ability to execute: I am not so much about only generating ideas because ideas you can create a lot. It s more about the execution capabilities that you might have to bring those ideas to maturity. I think this is a critical aspect: being able to prove that you can bring something from concept to the operations in a short time. Mr. Moreira says that prospective ideas at WISeKey, even non-core ones, typically go through incubation period during which they can be tested and proved: If we identify that idea has potential, but would require one or two years more to maturity, then the company will put the resources in terms of facilities, offices, time from our financial people, funds and operations from the labs to try to bring this idea to maturity. Normally it takes two to three years before those ideas become mature enough with clear market potential. After this incubation period two conditions must be met for idea to become a new business vertical within WISeKey. Firstly, it must have a commercial sponsor, i.e. first client or partner company besides WISeKey ready to invest own money in the idea and try it. Secondly, senior managers must make final decision that the idea is within WISeKey s corporate scope. If there is commercial sponsor, but the idea is outside of WISeKey s corporate scope, the new venture is spun off to exist further as an independent entity. For example, the sports business mentioned above is now being prepared for spin off. Usually corporate entrepreneurs who come up with a promising idea take the lead of it through the incubation period and recruit the project team (initially working part-time with increasing involvement later). If the idea has grown into a profitable business, its originator becomes the head of it and initial team also gets new leading roles. This practice is similar to 3M approach. 4
Digital Brand Management - founding story Digital Brand Management is WISeKey s business associated with the most radical and at the same time most successful innovation in the company s history. For many years WISeKey had been a purely Internet business, but this changed in 2007 when the company decided to try use its encryption technologies in a completely new area of protecting physical objects from counterfeiting. WISeKey invested 95 million dollars into new extension of its technology under assumption that all major Swiss watch brands suffering from counterfeiting will be happy to protect themselves, but when the new technology was ready the project team made an unexpected and unpleasant discovery: After interviewing the brands which we did after developing the technology we realized that counterfeiting was not actually their main concern. They prefer sometimes to be counterfeited because this is a kind of prestige for them it means that the brand is powerful. So when we tried to approach them and tell them buy the technology to solve counterfeiting problem, they said they did not want invest money. Despite this WISeKey did not give up and slightly modified technology, moving the main focus from reducing counterfeiting to empowering brands to build complex CRM systems and engage with their customers. This new functionality was much better accepted by the market, and today Digital Brand Management business is one of WISeKey s major sources of revenue. The company now plans to extend the use of anti-counterfeiting technology to other areas such as medical products. Mr. Moreira admits that contacting watch companies late probably was a mistake and uses this lesson to demonstrate that every good innovation must address customer s needs and resolve some real problem. Before requesting substantial resources and making serious investment a corporate entrepreneur must check and verify that there is very specific, concrete and important problem his new business will resolve. Another important takeaway for me is that very often entrepreneur has to try many different uses for his new product or technology, and initial failure with one use should not discourage from trying the others. I can see here a clear parallel with 3M s persistent and in the end successful attempts to commercialize control film. 4 Nature of entrepreneurship In the end of our conversation we briefly discussed the nature of entrepreneurship. For Mr. Moreira entrepreneurship is a separate skill not necessarily related to innovation. Innovation is a natural reaction to curiosity, while entrepreneurship is the ability to convince people around you to invest their time, resources, money and influence into making your innovative idea happen. Great 4 HBS case 3M Optical Systems: Managing Corporate Entrepreneurship 5
leaders who change the world demonstrate innovative, entrepreneurial and managerial talents together. Mr. Moreira believes, that entrepreneur needs to be hungry and have natural willingness to do something with his life. Too much comfort, too big salary and too friendly environment prevent people from developing immunity against many future attacks required in entrepreneurship career. Mr. Moreira says corporate entrepreneurs need essentially the same skills as usual entrepreneurs to grow their venture. Despite there is a company behind them, they still have to develop an attractive and viable business idea and convince people around that this idea deserves investment of resources. Key learnings and advice to entrepreneurs Answering my questions during the interview Mr. Moreira shared many insights and recommendations for entrepreneurs. Below I summarize those of them that I personally found most valuable: 1. You need to think about solving a problem, not only about making money. You have to be passionate about solving one specific problem, whatever that problem is, and developing solution which will improve the state of the world. 2. Reach out to people, explain them the problem you are trying to solve and convince them to become part of your solution. You can only do this well if you are really passionate, well prepared and persuasive. 3. You won t have all the talent yourself. You need to complement your team with other people who will compensate deficiencies you may have and help solve your problem in a fast and efficient way. 4. Success comes from the ability to clearly define the problem, decompose it into smaller objects and address them one after the other. Every big problem can be solved by sequential solving the elements composing that problem, don t take it as a wall. 5. Focus your efforts at one element at a time and do not try to do too much with too little, otherwise you will get stuck in the middle lacking resources or skill or time to accomplish your mission. 6. Don t be arrogant. When starting a new venture inside existing company, don t think that your idea is better than everything the company has done before and now everybody must support you because you came up with it. 7. If you have a founding idea, i.e. the idea which nobody has done before, create your own company and build your ambition. You will obviously have more burden on you, but you will also have a big reward if you succeed. 6