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IGNITION transcript

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June 4, 2003
Hyatt Regency Reston 


jack davies: think globally

 

I did an informal poll, which I'm not counting Mario in, but I talked to the speakers and discovered that I'm the oldest guy on the panel—although I did want to see John Sidgmore's ID. One of the problems when you get a little older, is that, first of all, your memory starts to fade so you can't remember what you're going to say. Then your vision fades and you can't see your notes. Hopefully you'll indulge me about that.

           As Kathy said, one of the ironies in my life is that I come from a very small town in Pennsylvania. Meadville, Pennsylvania is a town of 12,000 people. The claim to fame in Meadville is that it's where the zipper was invented. It's about 40 miles south of Erie, Pennsylvania, so, when you're making your vacation plans this summer, you may want to check out the home of zippers. The irony of it is this: Mario suggested I talk about international, and I'm struck by the fact that I've kind of become known as “the international guy.” It is really bizarre to me. I come from Meadville, Pennsylvania, and I wasn't on a commercial airplane until I was 18 years of age.

           Through a succession of jobs, I worked in some international areas for the first 10 years of my career at GE, then I went to work for RCA Records in London, then to work for Citibank in London, and, voila, a kid from Meadville, Pennsylvania, was transformed into “the international guy.” I had always had an interest in entrepreneurship, and I found an opportunity to make these two interests converge.

           Are we allowed to use that word, convergence? Convergence is dead. [A whoop from the audience.] Well, we have one fan of convergence.

           It converged after I left Citibank. I decided that I wanted to do something more entrepreneurial, and a head hunter I was talking to in New York, who happened to a be a classmate of Jim Kimsey's from West Point, asked, “Have you ever heard of a small company in Virginia called America Online?”

           I said, “Well, yes, I have.” I happened to have had some conversations with Prodigy, so I knew a little bit about AOL.

           He asked, “Would you like to talk to them?” I did, and one thing led to another.

           I started with AOL in July of 1993 and I was responsible for marketing and content. A little known fact, since Ted Leonsis cast such a large shadow, is that I was actually Ted's predecessor and I did the hard work. I took AOL from 300,000 customers to a million. That's the hardest part of it, and that took about a year. Once I had shown how easy it was, I handed it over to Ted.

           Steve Case, being not much of an internationalist then, felt that there was a mandate for AOL to expand internationally. He looked around the management team and determined that I had the most stamps in my passport, so that was my primary qualification to become President of AOL International. We had a big press conference, we announced all of these management changes, and Jack was anointed President of AOL International. I was assured that the full weight of AOL resources would be going behind me. Those of you who are entrepreneurs, know how that goes. The full weight included one other executive, my secretary, and no cash, but unlimited airfare for the next five years or until I got fired for not getting anything done internationally. That helped focus my mind. Fast-forwarding about seven months later, we did our deal with Bertelsmann to create our joint venture in Europe. About five months after that, in November of 1995, we launched our first service, AOL Germany, and, less than four years later, we had over four million members outside of the United States.

           What I had done was exceed the very modest goal I had set for myself upfront. In fact, I think it was in that first company meeting that I said my goal was to have more international subscribers than frequent flier miles, so I knew that my mission was complete once we got four million international subscribers.

           I read the letter that Mario sent, and it said that we'd share some nuggets of wisdom gleaned from our experience in the wars. So, I thought I might mention just a couple of things about building international businesses. One of the problems that I think many entrepreneurs have is that they're so focused on getting the job done here in the United States—it's all consuming—and there's a failure to recognize some of the international opportunities. There are a number of things that I learned over my time at AOL International, and you might find them helpful in your businesses.

           The first is pretty obvious, “It's a big world out there.” Not only is the rest of the world a big expansion opportunity, it's probably growing, certainly in this environment, at a faster pace than the United States. If you're a Net-based business, the latest statistic I've seen is that more than 75% of Internet users are outside of the United States. One of the good rules of business is to go where the customers are, and outside of the United States is an important place to consider.

           A second thing is, “Do it sooner rather than later.” One of the things I enjoyed about being on Raul's board at Proxicom, is that Proxicom recognized early, probably earlier than many of their competitors, that the Web services business—or whatever we used to call it—was really an international business. The customers thought about it internationally, so little Proxicom created international business early on. It's never too soon to do it. We found that the first businesses we launched did the best, and, progressively, they did less well as competition got hotter. Do it early and be one of the first people to take advantage of it.

           The third thing sounds very clichéd, but it's so true, “Think globally, act locally.” You've got to look at what you do that's unique, what makes you special, and then tailor that for the local markets. One of the things that we did at AOL International was that we created truly local services. We used the AOL technology, the infrastructure, but we have local language, we have local management, we have local content. Localizing those services while taking advantage of your strengths is a big deal.

           A fourth admonition is, “Get down with OPM.”Do we all know what OPM is? Other People's Money. That is the best way to fund an international business, particularly if you have a short supply of cash in your US business. One of the keys to our success internationally was to do 50/50 joint ventures around the world. We would go to our partners and say, “Have we got a deal for you! We'll bring you our technology and know-how, and all you have to do is put up all the money.” My used car selling experience came in handy.

           I remember having a meeting once with France Telecom. I said, “Our goal is to be the world's largest online service.” At that time they were operating Minitel. The guy looked down his nose at me and said, “We already are the world's largest online service.” So, it was a tough challenge.

           Finding smart money is the best thing, such as venture capitalists and local partners. We have the good fortune—Mario, Raul, and I—to be associated with General Atlantic Partners, a very globally-thinking private equity firm. There are many of those around, so smart money is good to find, especially somebody who can help you expand internationally. Local partners can be great, but they come with a cost. Bertelsmann was a great partner, but even they had their own agenda. In Japan we partnered with Mitsui, which is one of the largest trading companies in Japan. It was interesting. We had apprehensions, but they convinced us that they would be a great partner. They ended up being a real liability and our business was not very successful there. Ken Novack, who was our Vice Chairman at the time, said that the problem with Mitsui as a partner was that they were dumb money with aspirations. The worst thing is to do a partnership with somebody who has dumb money but doesn't know they're dumb money. That was a very difficult situation.

           Is someone from Mitsui here? I'm retired now.

           Those are what few nuggets I have to offer. I want to say one thing about Mario. Mario has been really, truly an inspiration to me. I had the good fortune to get to know Mario better as I was stepping down from my job at AOL and I was kind of wondering what to do. I felt this compulsion and drive to give back to the community that had blessed me so greatly. I met Mario and I had the good fortune to get in on the ground floor as an investor, as a board member, and as an executive committee member of Venture Philanthropy Partners, which is an extraordinary business-oriented approach to philanthropy. After doing that for awhile, I started to get involved in a couple of the nonprofits that we work with. I'm here to tell you that I went into that process thinking, “Well, imagine all of the stuff I can give! I can give time and I can give money and I can give advice and whatever.” I got on the board of two nonprofits. One is Heads Up, which is an innovative after school program in DC that deals with inner city kids and uses college students as mentors. It’s a great virtuous circle. It helps the kids and it helps the college students have a life-changing experience. We're going to help that organization build from serving 400 kids to 2,400 kids in the next three years, which is unheard of growth. The other organization is See Forever Foundation, which runs the Maya Angelou Public Charter School, which deals with 85 of the most at-risk kids in Washington, DC. Forty percent of the kids have been involved in the criminal justice system, 40% have been dropped out of school for at least a year, and 30% have special needs, yet 70% of the kids who complete the program go on to college. This is extraordinary, and they are the kind of organizations that Mario and VPP are instrumental in funding. It's been an honor to be involved in that.

           So, anyway, I was impressed with all the stuff I thought I could give, but I had no idea how much I could get back from it. One of the things I would encourage everybody in this room to do is to give as much as you can, as much time, because, I guarantee you, you'll get back more than you give to it.

           So, thank you, Mario, on behalf of the region, thank you on behalf of the community, and a great personal thanks from me for everything you've done.

 

Ms. Bushkin: I don't think it's a coincidence that all of these folks are saying it's not only about your business goals, it's about your giving back that matters. I know that's what we're going to hear from Mario when he concludes, as well.

           Our next panelist is actually two panelists, Phil Merrick and Caren DeWitt. I want to tell you a little bit about Caren. Caren started out drawing cartoons, and she was good enough that she was winning the junior art champion contest in her local newspaper. Not satisfied with that, she went on to take on the game show circuit and made six months salary in one game show called Press Your Luck. That probably had nothing to do with her later marrying Phillip, but it was the way she got her start in an entrepreneurial way.

           Phillip, on the other hand, came out of Australia and started out bagging groceries in a local grocery store. He was assigned to do produce and got so good at it that they suggested he might have a career in it. Luckily, he decided there were other produce opportunities for him and he came to America, started webMethods, and we know what happened from there. Phillip and Caren, come on up and join us.

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