If you mention a successful startup called Ness Technologies, there is a goodchance that a US listener will assume it is one of those high-technology SiliconValley companies. That listener would be mistaken. Ness Technologies is amultinational information technology (IT) services corporation, created inIsrael in 1999. It is also the first company in this book that does not have itsheadquarters in the US.

This chapter will examine how the Israeli entrepreneurs who founded Ness dealtwith the challenges of a global marketplace. Within five years of its founding,this Israeli startup became a leading company in its field with operations inAsia, Europe, and the Americas. Its rapid rise to prominence has fully justifiedits name, which means “miracle” in Hebrew. It did so by meldingsubsidiaries in countries with cultures as diverse as Bulgaria and Thailand intoa global corporate culture, with a common set of goals and expectations that washeld across national boundaries.

DEMAND FOR IT SERVICES RESHAPES THE WORLD

Ness Technologies is a provider of IT services to other companies. As such itdidn’t “invent” any basic technology. Like Ronald Stanton’sTransammonia, its innovations took the form of a new business model and newapproaches to international service. Unlike Transammonia, however, Ness operatedin an industry characterized by the most rapidly advancing technology inhistory. Even those who lived through the rise of the computer can hardlybelieve how quickly and profoundly digital data processing has changed the waythe world does business.

Mobile data service is more than a booming business; it is a global phenomenon. Teenagers text each other on their Droids as obsessively as business people check email and corporate data on their iPhone® or BlackBerry® smartphones. TV stations show video clips of everything from cute babies to the rebellion in Libya, captured and sent by people on cell phones. We take it all for granted. Yet none of these capabilities was available as little as a dozen years ago.

Just as remarkably, Aicent, a Silicon Valley startup founded in 2000 by an entrepreneur born in Taiwan, is a world leader in providing the data interconnections among the international wireless carriers that enable these functions across their networks. For example, if you are visiting China or Indonesia and access your emails on your BlackBerry, the chances are that you are using a network connection managed by Aicent.

If you happen to make a wireless phone call to China, it may be routed through amicroprocessor chip produced by Raza Microelectronics Inc. Although RMI (latermerged with NetLogic Microsystems) only began supplying integrated circuits inmid-2005, its microprocessors now power some of the most advanced communicationsnetwork equipment in the world, and it counts the leading Chinese equipmentsuppliers among its customers. It has become the acknowledged technology leaderin its chosen market.

How a Silicon Valley startup developed the world’s most sophisticatednetwork microprocessor is a remarkable story. It is also especially relevant toour theme of global entrepreneurship, because RMI’s success hinged asmuch on its understanding of international markets as on its technicalexpertise.

RMI’s management realized early on that overseas markets were more open tonetwork chip innovations from a startup than the domestic US equipmentmanufacturers, who had well-established chip suppliers with long-standingreputations. So the company decided that its primary sales target should beChina, the world’s fastest-growing network equipment maker.

Imagine having to re-program your smartphone, digital camera, music player,tablet computer, e-book reader, or similar device with phone numbers, photos,songs, or other crucial information every time you turned it on. Or think howmuch bigger its battery would be, and how often you would have to recharge it,if you decided to keep it powered up all the time so it would remember thatdata.

Fortunately, that’s one dilemma we don’t have to face. Ourelectronic devices keep all our information in memory, ready for use, even whenwe turn them off. They store the data in semiconductor chips called“flash memory,” either in the devices or on handy, removablememory cards and USB thumb drives. Their convenience and functionality are owingin large part to the flash memory innovations of Dr. Eli Harari.

Dr. Harari did not invent l ash memory. Credit for that goes to Toshiba , thegiant Japanese electrical and electronics company, which developed thesemiconductor chips in the mid-1980s. But he did i nd ways to improve theirreliability. Even more important, he developed l ash memorysystems. He developed and commercialized these systemsthrough SanDisk , an amazingly successful startup, which he founded in 1988 inSilicon Valley.

President Bush’s 2005 report on the economy (quoted above) identifies innovation as the prime driver of economic development. And while Democrats and Republicans might disagree on how to promote it, innovation is officially a bipartisan cause. The Obama administration trumpets the need to foster innovation if America is to maintain its leading position among the world’s economies.

Joseph Alois Schumpeter would be gratified. The great twentieth-century Austrian-American economist was the foremost theorist of innovation as the source for economic growth in the industrial world. Schumpeter knew that all technologies eventually became obsolete, and according to his theory this presented an opportunity for change and growth that could only be realized with innovation. In his view the decline of older technologies makes room for new ones. Through a process he called “creative destruction,” innovation enables vibrant new enterprises to replace obsolete industries.

Forty years ago China had one of the most strictly controlled economies in the world, with all major businesses owned by the state. Now the government permits private ownership of companies, and seeks a higher level of innovation to keep its economy growing.

In other parts of the world individuals rather than politicians and strategists are driving the creation of enterprises. One striking outcome of the Egyptian uprising in early 2011 was the emergence of young entrepreneurs rushing to form new businesses. It seems that, in the aftermath of Hosni Mubarak’s overthrow, the new business registration process had become easier. So these aspiring businesspeople, with guidance from experienced American entrepreneurs, took advantage of the opportunity and launched their own enterprises.

INTRODUCTION

Entrepreneurs, inventors, and innovations have driven the electronics revolutionsince its chaotic beginnings in the early years of the twentieth century.Unfortunately, the astonishing advances of the last thirty years have obscuredthe contributions of the pioneers of that era. These men laid the foundation fortoday’s wired and wireless society, but they rarely get the credit theydeserve.

Case in point: David Sarnoff of the Radio Corporation of America (RCA), thecompany he built and directed for a half-century. Sarnoff was the Bill Gates orSteve Jobs of his day, a visionary who pushed his company to develop or adoptnew communications technology, create a market for it, and become the dominantplayer in that market.

Under his leadership RCA successfully commercialized both radio and television,either inventing the technology or licensing others’ intellectual property (IP)as needed. At Sarnoff’s urging RCA later invented most of the technology forcolor television, from the cameras to the displays. It was also the i rstcompany in the world to successfully commercialize these innovations. He alsounderstood that he couldn’t commercialize major innovations alone, so helicensed RCA’s IP to competitors. They helped him create market momentum, andthe license fees generated a handsome revenue stream.

We quote Emperor Leopold here because his touching concern for his subjects’ welfare (and their ability to pay their taxes) communicates a clear message: the government needs to play a big role in expanding his country’s economy. Instead of issuing a proclamation encouraging local entrepreneurs to innovate, he instituted an active policy, backed by state funds, to create important new industries. The idea of depending solely on local entrepreneurs to build such industries would not have entered his head.

Leopold was neither the first nor, certainly, the last head of state to hold such views. Rulers of his era were well aware that building a country’s economic prosperity had the desirable side-effect of increasing its power in international affairs, and many acted on that realization. In the late 1600s Sir Walter Raleigh observed, “Whosoever commands the sea, commands the trade, whosoever commands the trade of the world commands the riches of the world and consequently the world itself.” As a result, the competitive race to industrialize and sustain national trade advantages was a constant source of international friction, sometimes leading to war.

While globalization has opened up markets everywhere, it has also thrown theinherent tension between government economic activism and entrepreneurialfreedom into sharp relief. We now take up crucial questions about the properrole of government on the one hand, and the place, indeed the very future, ofentrepreneurship on the other.

In our global economy entrepreneurs are frequently competing with companiessupported and directed, and often controlled, by the governments of thecountries where they do business. It is hardly an even match: such policiesinevitably engender hidden or overt preferences for buying local products.

Clearly, state-controlled economies pose a serious challenge to the basic conceptof entrepreneurship and the ability of foreign corporations to operate freelywithin those economies. By raising barriers to international salesopportunities, they clearly increase the inherent risks of launching newentrepreneurial businesses. Under such conditions, it is fair to ask whether theindividualistic and “random” entrepreneurial process, gated by so manyunpredictable circumstances, can be counted upon in the future as a signii -cant economic driver. Must governments everywhere become much more involved insupporting ambitious entrepreneurs focused on creating new markets? This is apressing issue for countries like the US, which have a tradition of free marketsand limited government support of their industries.

Unlike the other entrepreneurs and innovative companies in this book, RonaldStanton and Transammonia Inc. are not involved in a high-technology industry.While David Sarnoff, for example, built his electronics empire by envisioningmarkets that did not yet exist for technology still under development, Stantonachieved success by setting up an innovative but non-technical service companyin a commodity industry.

Without doubt his business innovation has had a huge impact. Stanton startedTransammonia, a company that trades in anhydrous ammonia, in 1965 with only$2,000 of equity capital. In 2008 it became the twenty-eighth largest privatecorporation in the US, with over $11 billion in revenues. It is the world leaderin its sector, and has branched out into other commodity chemicals and liquidnatural gas.

That is a remarkable achievement. But why do we include a commodity tradingbusiness in our study of global entrepreneurship when all our other cases focuson the high-technology electronics, computer, and communications companies thatseem to dei ne our age? In a word, the reason is clarity. It is easy to bedistracted by the glamour of the latest technology from appreciating thefundamentals of building an innovative business that creates lasting economicvalue. With Transammonia, there is no danger of that. Its history and well-deined business model embody the essentials of innovation and entrepreneurship.

China’s influence on the global economy has been a recurring topic ofdiscussion in this book – and in the world at large. How could it beotherwise? It is literally changing the balance of economic and political poweramong nations.

Just thirty-five years ago this would have seemed impossible. The country was insocial and economic turmoil following Mao Zedong’s Great ProletariatCultural Revolution. In a resolution issued on June 30, 1981 the ChineseCommunist Party said that this initiative, “which lasted from May 1966 toOctober 1976, was responsible for the most severe setback and heaviest lossessuffered by the party, the state and the people since the founding of thePeople’s Republic.”

Today China has recovered from this low point to become the world’s secondlargest economy. Its factories churn out consumer goods and industrial productsfor export to every part of the globe. Its balanceof- trade surplus is the envyand despair of its trading partners. The Chinese people are increasinglyaffluent, buying modern conveniences and luxury goods that many never dared todream of possessing.