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Philippine Business Magazine: Volume 9
No. 3 - Visions
Building A Silicon Valley Culture
How do we create technology-based
products?
By Diosdado Banatao
A Filipino who became one of Silicon Valley’s
pioneers and innovators, initially in product creation, is now an
entrepreneur himself who finances technology-based ventures. Diosdado
Banatao talks about what it takes to build a Philippine Silicon Valley.
If you look at developed countries in the world, they are those that
are ndustrialized and they are industrialized because they rely on
science and technology and the discipline of engineering as basic
building blocks for their economy. They produce products that are
technology-based, and there are very successful companies that support
a thriving industry in technology. Assuming that that is a basic requirement
for industrialization in a developing country like the Philippines,
then I believe that we need to get on with technology.
Technology-based products are the result
of the work and genius of engineers based on their knowledge of basic
science and technology principles. Technology-based products enable
us to be more productive in doing the “basic” things we
have to do – a simple sending out of email, composing a letter
through Word, using the PC. We take for granted that we have a PC,
but if you go outside of Manila, where in some cases there may not
even be electricity or power, you’re out of luck.
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| For Dado, the Philippines must learn to support
and reward its engineers and scientist |
The creation of these products is a fairly complex
and involved process. Let me come up with the five different steps
that we go through in Silicon Valley to come up with these kinds of
products. First, you have to define it. Then, you have to design and
verify the functionality of the design. You have to make sure that
the product is reliable and that there is a certain level or standard
of quality into the product. Then, of course, the product has to be
manufactured and tested, and then it has to be merchandised. All of
these take time, money, and of course, qualified people.
Assuming that a product was defined to be useful, any one of these
five phases has its value — value usually equated to the price
the consumer pays for the product. The front-end efforts – the
definition, the design, where a lot of creativity was put in by the
engineers – these tasks usually get the biggest portion of that
value. If you look at the percentage of the value associated with
the front-end part of creating this product, they usually get anywhere
from at least 60% to 80% of the value of the product.
We, as a country, may choose to be in any of these very involved tasks.
Let us assume that we want to do the whole thing. Then, an excellent
model to study and imitate is Silicon Valley. There have been a lot
of books written about Silicon Valley but one model that I always
like to use when somebody asks me what Silicon Valley is all about
is an “insider approach” or, more specifically, the “product
creation” approach.
Product definition requires proper understanding of the market and
user requirements. Design is where a lot of the creativity happens
– where math, physics, material science, logic and all of those
associated disciplines all meet into the engineer’s head somehow,
and tries to achieve the functionality based on those market requirements.
Reliability and quality assurance are all important. Manufacturing,
of course – somebody has to produce the product — and then
they have to be sold.
To create a Silicon Valley in the Philippines, we have to know how
to do these things, and we must have the capability to manage all
aspects of the operations. So, it’s not sufficient, from an insider’s
point of view, to be able to know how to go through all the steps
of designing and creating the product. We have to know how to manage
these things. Part of the success of Silicon Valley is that, over
time, there is a great pool of managers that not only understand the
implications of state-of-the-art technology but are also capable of
putting them into practice, creating the products, and managing the
enterprises that are involved in the creation of these products. This
means that we have to not only know how to create products but also
how to manage people.
One thing that’s nice with the industry I’m in is that it
attracts some of the brightest people in the industry. It’s good
and bad, obviously. It’s good when you have all the bright people
under you, but that’s hardly the case. There are a lot of bright
people in other companies, and you have to compete with them. That’s
hard. Managing bright people is very difficult. They all have their
own crazy ideas. But out of those crazy ideas come beautiful inventions.
So you have to learn how to give them enough slack and sometimes you
have to bring them back in and slap them around. But managing a technology-based
company is a totally different process. At least, I find it slightly
easier because I myself went through that whole process – having
created some products, designed it myself – it gives you the
background and the insights about what goes through an engineer’s
mind or a scientist’s mind.
To be able to have a Silicon Valley here in the Philippines, we need
to learn and fund the process of learning itself. We need engineers
and scientists and we need to glorify them. One thing that has always
puzzled me here is that it is rare that I see an extensive article
about the creation of good products. It is rare that I see engineers
and scientists really getting a lot of credit. There’s always
talk about all kinds of other things — of course, politics. If
we ever want to get on to this culture of developing products, you
better begin to understand and know how to respect and really reward
your engineers and scientists.
We need entrepreneurs who are willing to take the risk of failure
and who are willing to go all the way for that ultimate goal. We need
managers who know how to manage the operations and also service industries
such as legal, accounting, real estate, communications, utilities.
We need investors who are not only willing to risk their money but
who are also capable of adding value at the board of directors level.
We need an educational system that can provide globally competitive
engineers and scientists to sustain the growth of companies and the
industry. We need a government that gives incentives to these types
of companies, facilitates the creation of technology-based product
companies, and, generally, just gets out of the way.
We also need a society and culture that creates and rewards engineers
and scientists. We need this special breed of engineers who really
thrive in taking the ultimate risk. Silicon Valley is all about engineers
who are risking it everyday. They may come from HP or Sun Microsystems
— they’re high-level managers with good salaries, good stock
options — but these engineers are willing to forego all of that
and create their own enterprise based on a seemingly small idea at
that point in time. Finally, we need a private industry that is willing
to fund these companies and also the educational process.
I believe that we can do that here. However, we need to be patient
and we need to go through this methodically. We need to put the building
blocks together properly – as in the construction of a building,
everything starts with the foundation. If the building does not have
a strong foundation, it doesn’t have enough strength, integrity,
or longevity.
The foundation needed in creating a technology-based industry is education
– a science and technology education that is globally competitive
in basic research and engineering practice that largely depends on
funding from private industry and philanthropy. This is how a lot
of the advanced universities in the U.S. dealing with technology disciplines
are being funded. I believe that this country has enough wealth to
do this. I do not think that the government can afford to do this.
It is now based on this group of people here who represent the elite
of industries in the Philippines to get on and do this stuff. But
it takes money. It takes a lot of money to be able to set up an environment
similar to Silicon Valley, but it can be done. So the challenge is
on you. Honor your engineers. Put your money where your mouth is.
Excerpts of speech delivered before the Makati
Business Club, 30 April 2002, Manila, Philippines
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