Jockey or Horse?
In September 2003, Naveen Tewari arrived at Harvard Business School with no intention of starting a business. He’d grown up in a family of academics, attended the Indian Institute of Technology, and then worked at McKinsey in Mumbai for three years. His aim was respectability, not risk taking. Like many of his peers in consulting, he believed an MBA was a safe and prudent way to progress, though he wasn’t sure where the degree would take him.
Down the Charles River, at Massachusetts Institute of Technology, Jessie Yang had just entered her second year at the Sloan School of Management. Unlike Tewari, she was crystal clear on her aim: “I always wanted to be a CEO, running a business in China.”1 She’d put that statement in her application essay for Sloan.
During those days in Boston, neither of them knew that someday their paths would cross through a company called InMobi—today the world’s largest independent mobile advertising network, valued at over $1 billion and one of the very few foreign internet firms that have succeeded in China. Tewari founded InMobi in his home country, and Yang ended up leading the firm in China.
Tewari’s time at Harvard transformed his ambitions. He met a bunch of entrepreneurs who visited campus as speakers and mentors. Then came a summer internship with a venture capital firm, Charles River Ventures, which exposed him to the world of start-ups. He was hooked.
By the end of 2006, he’d returned to India. The following year, he persuaded three of his friends—Mohit Saxena, Amit Gupta, and Abhay Singhal—to launch a text-messaging-powered search business, which he called mKhoj. To access mKhoj’s service, a consumer needed to type key search words, such as the product and the location, and SMS (send a text message over a mobile phone) into mKhoj. The results would be a collection of deals for that product nearby. That venture didn’t take off, and Tewari shut it down within six months. “We were betting against macro,” he said. “The fact that the internet was going to take off meant that the SMS would go down. The SMS might be a good business, but it would never become large.”2 Tewari wanted big. At the time, the iPhone had just debuted, and the mobile web was showing early signs of promise. He and his friends decided to try a mobile advertising network—a platform connecting advertisers and publishers to serve ads to consumers—and changed their venture’s name to InMobi.
From the very beginning, Tewari knew India was a small market for mobile advertising. To really grow, he and his friends had to take InMobi overseas. They first went to neighboring Southeast Asia (“a large market with an easy access”) and then Africa and the Middle East (“no competition”). Then came the United Kingdom. Tewari waited until InMobi had built a large share in its other markets before entering the United States, the largest advertising market. “If we went there early, we would be beaten up,” he said. By 2011, InMobi had expanded into over five countries across five continents and employed around 350 people.
As Tewari was plotting out the early years of InMobi, Yang too was experiencing ups and downs. After Sloan, she’d returned home to China and landed a job with McKinsey. She hadn’t relinquished her CEO dream, but she said she felt as if 10 years in the United States had estranged her from her homeland. She wanted to reconnect with her fellow Chinese before trying to run a business of her own. She stayed at McKinsey for three years. Then a classmate from Sloan invited her to join a start-up called Sky Flying Media Group, an advertising firm, and she became the COO. The company raised $81 million from investors like Sequoia Capital and Goldman Sachs but never managed to do the IPO its executive team envisioned.
On December 31, 2011—a day she remembers vividly—a headhunter called, asking whether she’d be interested in a general manager position at a mobile advertising company. Though the headhunter didn’t disclose the employer, she figured it out. A few months prior, in September, InMobi had made headlines worldwide when Softbank pumped $200 million into the four-year-old firm, then one of the biggest investments in the mobile internet. With that trove of cash on hand, Tewari was making a play for China, a notoriously difficult market for foreign internet companies. eBay, Yahoo, Google, and Groupon had all flopped there; Groupon didn’t even last a year. “Everybody told us not to go to China,” Tewari said. But the Chinese market was just too enticing, with its 900 million mobile phone users;3 it was the second-largest market for the iPhone and the largest market for smartphones overall. By the time Tewari’s headhunter identified Yang, InMobi had been running in China for a few tough months. “It was complex,” he recalled. “You got there and didn’t know what’s happening. Totally different language and different people.” He’d hired a sales manager to lead a team of 20, but that wasn’t working out. He figured he needed someone with a global perspective and local roots, someone who was “looking to make a mark.” Yang clearly fit that description, but Tewari was concerned that someone with her credentials wouldn’t risk her career on a still largely unknown company. At the time, developed-world multinationals were scooping up the best talent in China.
His worries were unfounded. Yang met the team and was impressed. “They were so smart and so energetic—they really wanted to get things done,” she said. They soon cut a deal.
What Yang inherited was a typical multinational firm’s China branch. Employees came from everywhere: China, of course, as well as Taiwan, Hong Kong, Canada, and Korea. They may not have been skilled at their jobs, but they had one thing in common: They spoke good English. That was essential for communicating with their bosses in Bangalore. “There was no collaboration within the China team,” Yang said. And the pace was slow—“everybody had an easy life.”
Outside the company, the scene differed. Though mobile advertising was nascent, start-ups were popping up willy-nilly. “There were more than 100 companies competing with us,” said Yang. These were primarily venture-funded Chinese firms—they were agile and understood the market. Coming out of McKinsey and a failed start-up, Yang remembered feeling a little intimidated. She wasn’t well connected with her new peers in Chinese tech companies. “I was pretty much nobody.” Plus, her stint with McKinsey had marked her as a corporate type, someone content with routine and wary of risk. She set out to prove that image wrong. She spent her days meeting with potential clients and her evenings firing off emails. She recalls feeling grateful when she got to bed before 2 a.m. “It was really hard for her,” said Tawari. “But she took it and grew the business bigger and bigger.”
InMobi’s product, an intermediary between advertisers and publishers, helped. Advertisers are brands, such as Procter & Gamble, L’Oréal, or Nike, and publishers are websites or mobile apps that host ads. InMobi aggregates publishers and packages their ads based on certain parameters, then sells the packages to advertisers. It profits from the difference between what it pays publishers for advertising space and what it receives from advertisers. InMobi was the first ad-tech company in China that introduced a platform for native ads (ads that don’t really look like ads but blend into the environment in which they’re placed). The look, feel, and function of the ads match that of other items on the publisher’s site or app. Such an ad might just look like a piece of news in a news app or a social feed on a social media site. It’s less intrusive and more likely to pull users in. Before the native ad platform appeared in 2014, InMobi’s products were mainly banner ads and interstitials, but it had still managed to find an edge over competitors with better ad targeting. “If you were hungry and an ad of a restaurant nearby popped up on your phone, would you click?” asked Kevin Wang, InMobi China’s marketing head.4 In many cases, the answer was yes. InMobi had been using machine learning to deliver the right ad at the right time. In other words, it was making ads more relevant. That’s something all advertisers strive for but don’t necessarily achieve.
InMobi’s biggest global competitor was Google. Google introduced native ads in China a few years after InMobi had done so. After it moved its Chinese-language search engine to Hong Kong, its mainland China business back then was mainly “outbound,” meaning it helped Chinese advertisers target international audiences. That left space for InMobi to thrive in China’s massive domestic market.
Yang, for her part, had learned a great deal from her previous disappointments, and she put those lessons to work in her new job. “If I joined InMobi right after McKinsey, I don’t know if I could make it successful,” she said. In the two months after she took over, she hired 20 sales reps and charged them with identifying the right customers for InMobi. At the time, there were two kinds of customers in the mobile advertising world that sales reps tried to avoid. Firms in the first group didn’t have the budget for InMobi’s services but pretended they did to get a peek at the latest ad technology. Firms in the second group had the budget, but their products weren’t suitable for mobile promotion.
InMobi’s sales reps, over time, learned to weed out those kinds of customers and move quickly to high-potential leads. Today, InMobi’s customers include some of China’s leading companies: ecommerce giant JD.com, retailer Suning, and ride-hailing company Didi Chuxing. Compensation for InMobi’s sales reps reflected their contributions to the company, something that wasn’t always true at the multinationals in China. Starting in the 1990s, multinationals had attracted employees as they do everywhere—through competitive salaries and benefits and the promise of job security. But the rise of Chinese companies, especially internet firms, which often rewarded top performers with heftier pay and generous stock options, dimmed the multinationals’ allure. Rigid corporate compensation systems even inspired the invention of a term of derision: “capitalism big pot,” derived from “communism big pot,” meaning everybody at a multinational firm received equal pay, regardless of his or her contribution. That sort of structure drove away ambitious risk takers. At InMobi, sales reps were compensated on commission from day one: the more deals they closed, the more they earned. “As a start-up, we needed to hire hungry sales people,” Yang said. In 2013, a year after Yang joined, InMobi China increased its revenue tenfold.5
Once customers were locked in, they showed unusual tolerance for InMobi’s mistakes. Early on, its platform crashed, which would’ve been a disaster and an embarrassment if it had happened in the United States or Japan. But customers didn’t leave. “The Chinese market is not about perfection,” Yang said. “Even if your product isn’t mature, your clients still want to test it out. What they want is speed—get the product out first and then improve it along the way.”
To tailor its product to China, InMobi has undergone three stages of localization. In the first, it offered the globally standardized ad platform with minor adjustments. “We only had one product team in Bangalore, and we only localized the language for China,” Tewari said. Soon it became clear that wouldn’t work in China.
In the United States, InMobi had partnered with Rubicon Project to build InMobi Exchange, a platform that enables the use of software to purchase online ads (as opposed to the traditional way, where ad buyers and sellers negotiate to get deals done). Rubicon operated in countries such as the United Kingdom, Australia, and Japan—but not China. Plus, Yang’s China team wanted their own local product, not something developed by a third party. So engineers in Bangalore got to work and created one. The product worked so well that other regions picked it up too, even InMobi US. Few foreign companies have been willing to make a product just for China. But for InMobi, China mattered mightily: It generated one-quarter of the ad tech company’s global sales. Tewari had to keep pouring in resources.
When InMobi entered China, the local internet giants weren’t committed to mobile. Baidu, Tencent, and Alibaba were born in the desktop era. Though they’d watched the rise of the mobile internet and even developed products, they were still experimenting and testing. Many of their products weren’t designed with a mobile-first mind-set. Yet a couple of years in, they all realized mobile would replace the web as the main way consumers accessed the internet in China. When that happened, InMobi began to feel pressure. “We can’t compete with BAT on scale,” Yang said, referring to the three companies as an acronym. “But we can be faster than them, releasing products a few quarters ahead of them.”
InMobi’s engineers in Bangalore strived to stay ahead, but they found themselves whipsawed between China speed and the more methodical pace of the rest of the world. “Global markets often have a one-year product road map, but Chinese companies have a three-month road map,” Tewari said. “They always launch, launch, and launch. If a product fails, they don’t care. If it succeeds, they do it more. They just move fast.” When he met with Chinese clients and partners, he’d hear they wanted to move even faster; they wanted new products, new features, and faster rollout. In other markets, the pace was slower. Engineers would lavish time on details, making sure everything was right before releasing a product to the market. “China wants speed. The global market wants perfection. When you have the two things, they collide with each other,” he said.
Working fast created internal frictions, exacerbating the language and cultural differences between Bangalore and Beijing. The China team and Indian engineers in Bangalore worked hard at communication, but, with China racing ahead in the mobile internet, the two teams were often out of sync. As a result, Tewari decided to let InMobi China form its own product team and design products specifically for China. “We had asked for it for three years,” Yang said. That product team now works in the Beijing office, and its 40 members build “whatever they want to build,” according to Tewari. Their data are stored in InMobi China’s data center in Beijing, as opposed to on Microsoft’s Azure, the choice in InMobi’s other markets.
By October 2019, one-quarter of Chinese customers were using InMobi’s China-exclusive products. “But two years from now, I think it will be 100%,” Tewari said. He said he regretted not making the transition earlier. “I kept China on the global platform too long.” China generated around $100 million in revenue for InMobi annually, and Tewar wanted to double and even triple that quickly. He knew this wouldn’t happen if he didn’t unshackle his China team. “If we want China to do $500 million in three years, how will it do it on a same global platform? You have to give China everything.”
Having its own product team is just one way InMobi China operates differently from InMobi’s businesses elsewhere. It also has an independent strategy, one that’s consistent with those in other markets but not determined by them. In advertising, there’s an ongoing debate over whether to focus on the supply side (the publishers) or the demand side (the advertisers). InMobi China picked the supply side from the beginning and has stuck with it. Yang’s logic is this: Internet traffic is the foundation, and the business monetizes that traffic. So recruiting high-quality publishers is her top priority. Once that high-quality supply is secured, it attracts demand; advertisers care about whether their ads are displayed on channels that will generate the results they want.
InMobi China is also selective about the advertisers it works with, contracting only with premium ones, which ensures high-quality ads. Premium clients often develop better ads, thus delivering a better experience for users of the publisher’s site or app. The users are then more likely to engage with the ads. A virtuous circle ensues: High-quality publishers attract better ads and more consumers, which brings in more publishers.
Still, Bangalore did develop global strategies and asked each region to follow through. That’s what a smart headquarters does, using centralized management to gain benefits of scale or cost efficiency. But in China, many of these initiatives encountered resistance. One spat arose over ad campaign management. InMobi services its clients through sales reps and campaign managers. Sales reps set out to understand customer needs and meet them. Campaign managers, on the other hand, run the ad campaigns for customers. They work closely with customers, setting up campaign strategies, tracking performance, and optimizing results. They often handle tricky situations, like seemingly unreasonable customer requests. A customer might tell a campaign manager: “We are going to run a campaign tomorrow, and we don’t have all the materials needed yet, but we’re going live tomorrow!” The campaign manager, instead of flatly turning down the customer, tries to make this work. InMobi’s headquarters, at one point, wanted to centralize campaign management in Bangalore. It thought this would dramatically cut costs. Yang balked; Bangalore insisted. Yang kept pushing back, and eventually her bosses relented. InMobi China was the only region that didn’t implement the strategy. “They probably felt I was difficult to work with, but I just wanted to do the right thing for the business,” she said. “They would understand when they saw the results.” Those results came a couple of years later. InMobi China had continued to thrive while other regions, especially non-English-speaking countries, like Japan and Korea, had suffered. InMobi Japan and Korea wound up rehiring their campaign managers.
Yang said her job requires that she be willing to speak out when she thinks her bosses are wrong. Her Chinese roots have given her a deeper knowledge of her market than her colleagues in India. What’s more, as a former consultant, she has seen multinationals fail in China. She said she believed one of the reasons for these failures is that local staffers deferred too much to headquarters, even when they knew global strategies didn’t make much sense for China. So when her turn came, she was willing to argue (though she picked her fights judiciously). She was often right, and that built her credibility within the larger organization. “Autonomy is earned,” she said.
“Jessie is practical,” said Kevin Wang. “She knows when to be tough, when to soften. She can get things done.” This applies to not only how she acts within the organization but also how she navigates outside. InMobi competes with Baidu, Alibaba, and Tencent head-to-head, yet it also collaborates with them. Some of their apps, such as Baidu Video and QQ music, are part of InMobi’s platform. How could they not be? InMobi is the biggest independent ad network in China, partnering with over 30,000 apps and covering 80% of iOS users and 40% of Android users.
Yang conceded InMobi China wouldn’t have achieved this without Tewari. By all accounts, Tewari is unusually open-minded. Every time he travels to China, he meets with at least 10 customers. He wants to know them and what they want from InMobi. “They will tell you what they need,” he said. “Once you understand what they need, you just give it to them.” When it comes to China, he said he’s developed a looser approach to management: “You have to let it be loose about what your culture is and what you do here.” He lets InMobi China operate like a start-up. All the reporting lines go through Yang. He has let her create a local corporate culture, and he doesn’t mind InMobi losing its identity as an Indian company. He wants to blend in. “A lot of people in China think we are a Chinese company, which is exactly what we want,” he said.
InMobi China has done well enough—and differs enough from its parent and peers—that Tewari has even decided to spin it off, making it an independent company that, in theory, can grow even faster. He said he aimed to “unshackle” it. This is, needless to say, an unusual decision for a foreign internet company—maybe an unprecedented one. The company originally planned to make it happen in 2020, yet decided to postpone due to the COVID-19 pandemic. But the China unit is already running independently.
Once InMobi China becomes an independent company, Yang will have realized her CEO dream, and Tewari’s creation will have become the first foreign internet company to achieve real success in China.
The Chinese internet market has been notoriously difficult for foreign players to break into. These factors were critical to InMobi’s ability to do what many bigger, older firms couldn’t:
These elements and other factors in the framework are noted in Table 7.1, along with our subjective assessment of the decisive factors.
|
Factor |
Explanation |
|
|---|---|---|
|
Demand |
▲▲ |
Very rapidly growing mobile computing ecosystem in China. |
|
Access to market |
No significant barriers to a wholly owned foreign entity entering mobile advertising. |
|
|
Advantage |
▲ |
Initial product advantage, with a transition to customer network as the primary alpha asset. |
|
Commitment |
As China became increasingly important to InMobi’s global revenue, the company kept injecting capital and giving the China unit the resources needed to maintain momentum. Now, China constitutes 40% of the company’s total investments on sales and operations. |
|
|
Governance |
▲▲▲ |
Tewari granted substantial autonomy and eventually allowed a nearly completely local product. |
|
Leadership |
▲▲▲ |
Yang proved a skilled leader, bringing the right mix of a consultant’s insight discipline and an entrepreneur’s drive. |
|
Strategy |
▲ |
InMobi’s strategy was to leverage its established technology to gain a foothold in China and then build local advantages as the company grew there. It succeeded so well on that score that it’s now spinning off its China unit. |
|
Product |
▲ |
InMobi has gone through three stages of product localization—from the initial language-only localization, to developing a product for China, to eventually hiring a separate Chinese product team to build “whatever they want.” That effort to achieve on product-market fit is rare. |
|
Agility |
▲▲ |
Yang was an entrepreneur at heart and was given autonomy from headquarters. She could act with the speed of a local entrepreneur. |
|
Luck |
▲ |
Yang exceeded expectations and thus proved to be a lucky choice for a leader. |
|
Note: Upward-pointing triangles indicate a positive factor. Downward-pointing triangles indicate a negative factor. The number of triangles is our subjective assessment of the relative importance of the factor. We omit indicators for those factors that we do not believe were significant for this case. |
||
We now turn to the story of Intel, a company whose alpha asset of indispensable product technology proved to be decisive in its success.