What start-ups can learn from multinational firms

There was a technology industry here before the current explosion of start-ups. Apple, DEC, Intel, Nortel and others set up subsidiaries that employed a generation of Irish engineers working on the products that enabled the personal computing revolution and the build-out of the internet. They paved the way for such internet companies as Facebook, Google and Twitter, who have chosen Ireland as their European home.

These Irish subsidiaries of US technology companies have survived and thrived through recessions, organisation disruption and, in some cases, the demise of the mother company. With some exceptions, Irish multinational subsidiaries and technology start-ups live in parallel universes, close geographically but separate in terms of culture, outlook and priorities. A closer look, however, reveals that successful subsidiaries and start-ups have remarkably similar approaches in important areas.

One of the most positive aspects of Silicon Valley start-up culture is the willingness to share learning, experiences and time within the start-up community. The idea of "paying it forward" has been around since the early days of Fairchild, HP and Intel. Robert Noyce, chief executive of Intel had no obligation to mentor a young, brash Steve Jobs but he did.

As Jobs told author Leslie Berlin: "Bob Noyce took me under his wing,I was young, in my twenties. He was in his early fifties. He tried to give me the lay of the land, give me a perspective that I could only partially understand."

There is now a choice of meet-ups, books and blogs where aspiring entrepreneurs can soak up knowledge and learn from the mistakes and successes of others. At the highest level, the combined wisdom of this crowd can be distilled into three rules: innovate to differentiate, hire the best people and listen to your customers.

Remarkably, successful Irish subsidiaries follow the same playbook.

Developing competencies

DIT’s Dr Pamela Sharkey Scott is an internationally acknowledged researcher of strategy and capability development in large organisations, and has published in the world’s premier international journals in business.

She is clear on the importance on innovation: “Irish subsidiaries of foreign companies must constantly work to maintain and grow their operations by being entrepreneurial and developing new competencies. Those subsidiaries which are not engaged in research and development directly, must be particularly innovative if they are to remain current and continue to be valuable to their parent organisation. This requires not just constantly achieving excellence in performance (that is a given) but maintaining current and distinctive capabilities to be a viable location for the next generation of products and services.”

The role of the leader of the Irish subsidiary, what Dr Sharkey Scott calls “the subsidiary CEO”, is critical. “Maintaining currency and credibility requires the subsidiary CEO to remain close to headquarters, to be able to anticipate and align the Irish operation with emerging organisational strategy.

“In addition, the subsidiary CEO must encourage subsidiary entrepreneurship across his unit, so that opportunities are recognised and exploited and then brought to headquarters’ attention. Irish subsidiaries must constantly strive to gain distinctive positions within their organisations if they are to survive and grow.”

Galway has two remarkable Irish subsidiary success stories: Avaya and Hewlett-Packard. Both started life in Ireland as part of companies that no longer exist. The Galway Avaya location was founded as a subsidiary of Canadian Northern Electric in 1973. Northern Electric became Nortel, rose to dizzying heights in the dotcom boom and crashed to bankruptcy shortly afterwards. HP's Galway site was established in 1971 as part of Digital Equipment Corporation.

DEC missed out on the transition from mini-computers to PCs, resulting in the closure of hardware manufacturing in Galway in the early 1990s. Compaq took over Digital in 1998, merging four years later with HP. Yet both subsidiaries have carved out strategic positions and today have critical global mandates: Avaya Galway in enterprise software and HP in cloud computing. How have the Irish locations survived and thrived in the midst of these tectonic shifts?

Ollie Daniels, leader of Avaya R&D in Ireland, has driven a “never-ending start-up culture”. “Fostering a start-up culture comes from insisting the team in the subsidiary adopt a small company attitude. All of the costs are theirs, the onus on creativity and innovation is theirs and keeping the customer satisfied is theirs. Irish subsidiaries need to own the issue of survival and growth.

“We all have a spoken and an unspoken mandate. The spoken one involves delivering, as defined by the mother ship. The unspoken mandate is about owning the key indicators that ensure you remain competitive and have an edge. Innovation in R&D, in process development, cost control and customer engagement are all vital.”

Mark Gantly, who heads up HP's R&D operation in Galway, believes passionately in building great teams. "Hire great technical leaders, ideally with start-up experience. They should be 'T-shaped' in terms of expertise, meaning breadth of knowledge across technical domains and real depth of knowledge in one domain.

“They should be great communicators. Specifically they should be adept at networking across and outside the company, and they should be the people that customers love to meet. If you hire great technical leaders, they will attract talent to them to form great teams. Ultimately it is great teams that deliver success.”

Close to customers

Both leaders are strong in recommending the need to get close to customers, as opposed to relying on HQ for customer insight. “Don’t think like a passive, dependent subsidiary,” says Gantly. “Find a way to build direct relationships with customers and engage early in new technologies. Build networks of influence across the company.”

For Daniels, nothing matters more. “If I was to impart one piece of advice, it would be know your customers, and understand their issues. Getting creative people close to the customer build a true innovation dynamic, and is the key to success.”

The following holds true whether you are in start-up or a multinational subsidiary: If you want to survive and thrive, build a great team with a culture of ownership, innovation and listening to customers. In this age of the cult of the entrepreneur, when we lionise start-up founders whether they have built a PowerPoint deck or a billion-dollar company, it’s important to recognise the sustained success of the multinational technology sector in Ireland, and great leaders like Daniels and Gantly.