LOOKING FROM THE LENS OF INNOVATION

The late Apple co-founder Steve Jobs was once asked about the one thing that best defined the secret of his success. He said, "Innovation distinguishes between a leader and a follower." Perhaps no other Filipino industry leader in the emerging technology industry has personified this adage more than Xurpas' Nico Jose Nolledo – more popularly known by his nickname, Nix – who is considered as one of the most successful pioneers in the Philippine Information and Communications Technology (ICT) industry.

The widely-celebrated CEO and co-founder of Xurpas – a company specializing in the creation of digital products and services for mobile end-users – graced the Anvil Business Club's 12th and final monthly Business Exchange Forum for the year with an incredibly informative, eye-opening peek behind the success of the USD500 million company he helped establish, as well as how today's new tech companies are leveraging new technology to change the world.

The dynamic recipient of 2015 Ernst and Young's "Entrepreneur of the Year" – the first winner coming from the consumer tech industry – generally thrilled his nearly 150-member audience as he talked about the technology industry "from the Lens of Disruption and Innovation." He commenced his presentation by narrating the story of the ice industry, where back in the 19th century, the business was originally dominated by ice harvesters, whose task it was to collect surface ice from lakes and rivers for storage in ice houses and sale as a pre-refrigeration cooling method. Because ice usually melts before it reaches homes, they were soon replaced by ice makers who produce chunks in factories. Of course, they were eventually rendered obsolete by refrigerator companies who were able to address the lingering problem of preserving the benefits of cold storage for various uses.

Mr. Nolledo used the story of the ice industry to illustrate how companies in the consumer tech space, like Xurpas, believe that their main product is innovation. "What we're selling today may not have anything to do with what we will be selling ten years from now," Nolledo explained. "The pace of innovation and the amount of capital that is pouring into this space is rapidly increasing, and the average lifespan of companies nestled in the dominant position has been going down."

Innovation, however is an ambiguous word, and Nolledo expounded this definition in much detail, from the perspective of tech companies, of course:

1. INNOVATION IS COLLABORATION. Harnessing the power of numbers, successful entrepreneurs have developed what they now call a "sharing economy" to drive businesses to the next level. Nolledo gave real-life examples like Brian Chesky, who went broke after the 2008 global financial crisis and decided to rent out a spare room in his apartment to make some cash. He soon went out to create AirBnB which now has ten million nights booked a month, using 1.7 million houses, spare rooms, apartments and villas. By comparison, the second biggest network is Hilton with 600,000 rooms. What is interesting about AirBnB is that they have not spent a single dollar in making a home. Not content being the largest hotelier, Air BnB now wants to become the biggest restaurant chain too, by turning homes into restaurants.

Another example is Uber, founded by Garrett Camp and Travis Kalanick in 2009, which has a financial forecast on pace for USD26 billion in revenue for 2016, a number that could outpace Facebook. Uber has 1.2 million people working for them, and is valued at more than USD50 billion in revenue. Interestingly, Uber does not have a single car of its own.

He cited other innovative start-ups that use the power of the Internet to leverage the wisdom of crowds, two of which include: Instacart, founded by Apoorva Mehta, a same-day grocery delivery startup offering delivery in as little as one hour, which is focused on delivering groceries and home essentials, where everyone can make money doing groceries for others, which is now valued at USD2 billion, adding to the grocery-delivery service's cash pile as it plans to expand to new U.S. cities.

And there's Kiva, founded in 2005 by Matt Flannery and Jessica Jackley, a non-profit organization which uses crowd funding to allow micro entrepreneurs around the world get access to capital from micro investors; Kiva gives anyone with an internet connection the opportunity to make a loan as small as USD25. It now has 1.3 million lenders operating in 83 different countries and deployed nearly a billion dollars worth of loans.

2. INNOVATION DRIVES COMMERCE. In the world of commerce, how you ship is as important as what you send. Today, shipping and logistics play an important role in how a company meets the ever-increasing requirements of its customers. Nolledo cited Jeff Bezos of Amazon.com, for instance. Bezos looks at a competitor and says, "your margin is my opportunity." Today, Amazon.com has a USD315 billion market cap, with over USD90 billion in sales, whereas their competitors – the physical retailers in the US – are now having a difficult time surviving the Amazon onslaught. They are so inventive that they patented what they call "anticipatory shipping" – to start sending stuff to customers before they've bought it.

Nolledo didn't limit his success stories within the confines of the United States. In South Korea, for instance, Homeplus Virtual Supermarkets have e-shelves made out of ultra hi-res wallpaper that are rapidly outstripping traditional shelf spaces. In India, PayTM developed a prepaid virtual wallet app for users. Today, there are 100 million mobile wallets vs. 20 million credit card owners. In Kenya, Safari.com developed a mobile app called M-Pesa. Currently, 40% of its GDP is transacted via their phones. It is, by far, the most successful implementation of a mobile wallet in the world. In China, the WeChat app has progressed to just being a mere mobile messaging program to becoming a virtual one-stop app; they allow the users to control their appliances through the app, place on-line lottery bets, act as payment centers for web/offline purchases, and providing a virtual interface to the world. They later created a WeBank, a virtual bank service. Within the first 9 months of the year, USD80 billion were deposited in this bank.

3. INNOVATION IS GLOBAL. The rise of technology conglomerates now have a global reach which operates much larger than entire governments. Apple's cash hoard, for instance, is 10 percent of all the cash held by US companies combined. At one point, at USD733 billion, Apple was worth more than the whole of Switzerland. Google's Android now dominates mobile operating systems in emerging markets. Not stopping there, they created balloons to go to places around the world which are not covered by Internet and beam cyberspace down using laser technology. They also launched a company called Titan Aerospace which is developing solar-powered drones designed to stay up in the atmosphere for five years. They later bought a company called Skybox that produces ultra high-res video imaging from kilometers away. Combining the technology developed from the mini solar-powered drones, coupled with Skybox, Google is looking to track the entire world in real time.

Dispelling notions that the Philippines is devoid of such technological initiatives, Nolledo cited companies like Rappler (online 24-hour news network); Salt (which developed a lamp powered by saltwater with 90 lumens, equivalent to 7 candlepower for more than eight hours); PawnHero (an online pawnshop which turns every cellphone into a pawnshop. Since there are no physical shops, it offers services at half the cost of a traditional pawnshop with the lowest interest rates, no hidden costs, no penalties); and Coins.ph (which uses an app to efficiently transfer cash, pay bills and make phone loads without the need for credit cards and bank accounts. It is a virtual ATM machine, which moves money without having to deal with a bank. It is the only company where Eric Schmidt – Google co-founder – is an investor).

The tech titan then posed a serious question to Anvil members: "As business builders, how do we drive innovation?" He explained that, for tech entrepreneurs, an idea is generated when they "combine two things previously known into something new." To this end, he shared some key take-home lessons, such as:

1. Every time you come across an opportunity, ask yourself: "Am I solving a pain or am I just making something slightly better?" "Am I a vitamin or am I a pain killer?"

2. Build something people will jump hoops for... then take out the hoop.

3. Don't just build a product; build a platform. Remember, the most valuable tech companies in the world make money from other people's content (i.e. Facebook, WeChat, AirBnb, TaoBao, Instagram).

Curiously, the Xurpas CEO book-ended his talk by sharing his company's key to success. "Many already know that we started our business with just Php62,500, with a 40-square meter space in Legazpi Village, and never raised venture capital," Nolledo asserted. "With zero loans, and no funds to buy lunch money, how were we able to build the kind of company that is now bigger than all consumer tech companies in the Philippines combined?"

His answer was so simple that it left most of the audience dumb-founded.

"Typically, in an FMCG (fast moving consumer goods) company," he declared, "they go through four steps of a consumer journey: Discover (promote the product through advertising); Buy (purchase the product); Consume (use the product); and Share (tell friends about the product). Normally, each step can happen at a different place and time, which may take several weeks or months. In Xurpas, all four steps can exist in a single device. Transaction can happen in moments."

Indeed, Xurpas has engineered itself as an emerging market superstore, with 100 million branches (i.e. those who own smartphones) nationwide, open 24/7, with a virtual endless supply. "I've always wondered why advertisers do ads and they drive you to find the product elsewhere," Nolledo mused. "Why can't you complete the transaction right here in your phone? Why is there a gap between discovery and purchase?"

Nolledo then revealed Xurpas' four-step entrepreneurial process:

1. Move quickly, don't waste time. When we have an idea, we implement it as soon as possible by budgeting quick tests;
2. Implement in smaller controlled environments;
3. Assess quickly and abandon if it isn't working. Measure, measure, measure. Data is better than opinions.
4. Roll-out something that works; and invest in rapid development. Minimize failures and maximize our successes.

He ended his talk with a food for thought: "The fundamental mistake most businessmen make about the Internet is that they see it merely as a medium, and not as an economy."

Certainly, while the name Nix Nolledo may not ring a familiar bell as soundly as our “traditional” taipans – like the Tans, Sys and Gokongweis, his story is one that has already inspired countless millennials of this generation to try and make it big in the burgeoning information technology sector. We are supremely confident that the name Nix Nolledo will be mentioned in the same breath as those industrialists who came before him and more: he has already left his mark as the “taipan of tomorrow” who will build communities that have no boundaries.

The potentials are limitless.

Kudos to Anvil member Kristoffer Ngo for facilitating the invitation to Mr. Nolledo, to the alluring Tin Reyes for a superb hosting, and to Vice-President for Programs Patrick Cua and Director for Meetings Lorina Tanfor capping the year's final Business Exchange Forum with a "BANG!"