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Modu - Turning a Dream into Reality / by Hila Yaakobi

Modu was founded in January 2007 based on an idea conceived by the company's president and founder, Dov Moran (inventor of Disk on Key), centered on a tiny, modular cellular device. The first unveiling of the device took place in February of this year at the Mobile World Conference (3GSM) held in Barcelona. The enormous interest the product drew exceeded all expectations. We spoke with Liat Arad, vice president of human resources and a member of the director's board, about the innovation the company is bringing to the cellular world and about the challenges the company faces, and heard a bit about her unique approach to human resources.

What led to the company’s founding?

Before the company was founded there was a group of people made up of Dovi [Dov Moran, company president and founder] and five other people, mostly from msystems [a company owned by Dov Moran that was sold to SanDisk in 2006 for $1.6 billion], who started to move forward with the idea to set up the company. The starting point was a vision, a dream of a man who had already made dreams happen in the past, and within a short time we began to make this dream into a reality, too. On the day of its founding the company had 12 people.

What’s the concept at the foundation of modu’s development?
The concept is divided into three: the world’s lightest cell-phone [just 40.1 grams or 1.4 ounces] that offers all of the functions of cell-phones currently on the market.
The second part is modu jackets, which alter the form and character of modu and expand its functionality. The modu fits into each of the jackets and expands is usages while remaining a cell-phone with everything that's fed into it (i.e. a phonebook, text messages, music, etc.).
The third part of the concept is called modu mates, electronic consumer products manufactured by other companies with a slot designed for modu, which will unite the functionality of the cellular device and the device its connected to, giving them cellular communications abilities.


Liat Arad, vice president of human resources
 and board member

How did the idea take shape, turning into a product?
At the starting point all three elements of the dream existed at the idea level. In July of 2007 we were still 30 people, and within seven months we expanded to 100 and developed an initial product we presented at the Mobile World exhibition in Barcelona, where the modu was first unveiled. Just seven months is all it took to turn this dream into the beginning of something tangible.

What happened in Barcelona?
We arrived at the exhibition with lots of hopes and expectations, but nobody anticipated what happened to us there: an extraordinary success that went far beyond what we’d expected. Our setup did not match what happened there in practice. We had one booth with four meeting rooms, which we were convinced would be enough to meet our needs. We wound up having to rent chairs and tables and improvise meeting rooms. Interest was so strong and the enthusiasm was so widespread that it was simply an amazing experience.

Which delegation went to the exhibition in Barcelona?
We planned to send 29 people. That’s a lot relative to our size, but it was intentional. It was important to us both to learn from the exhibition and to present the product and hold meetings. In the end all of the 100 employees then at the company wound up coming to Barcelona.

How did you reach the decision to fly out all 100 employees to the exhibition?
We found out a special round-trip flight was set to depart for Barcelona, including entry tickets to the exhibition for $600, so we decided to add another 10 people to the delegation. It wasn't easy, but eventually we managed to form a list. Two weeks later we were notified the flight had been cancelled because there wasn’t enough of a response. We convened a board meeting and then from the other end of the room Dovi said to me: "I have an idea." Generally when that happens I grip the table tight. And then he said: "Why don’t we take everybody?" I cried out. I really didn’t like the idea.

What were your arguments against it?
We’re a young company getting started. How will it take root? We don’t have budget funds for it, and why should we take 100 people, including people who have been with us for less than two months? What does that say about us as a company? Where is our modesty? To send 100 people to an exhibition in Barcelona for one day costs a lot of money. Then I stepped outside for five minutes to calm down, and when I came back he had very little trouble changing my mind.

What changed your mind?
There wouldn’t be a lot of other opportunities like this. Modu won’t be founded again. And there really was a group of 100 people who worked hard and did the impossible. You don’t put a phone on the market in seven months. It doesn’t happen and it never has happened. It was clear that the added value this step would provide would be tremendous, both in terms of the way our staff felt and the noise we’d make there.

And is that what happened?
We made a lot of noise and it make a huge impact, both inside and out. The level of enthusiasm was tremendous. It was a moment of camaraderie after we had worked day and night to get there. It was definitely a special moment.


The modu staff at the 3GSM World Conference in Barcelona

What did you present in Barcelona?
We came to Barcelona with a working prototype of modu and modu jackets. We held a demonstration that showed the dream could become reality.

Besides the buzz the product caused, did your exposure in Barcelona have ramifications in terms of business?
In February 2007 the dream happened, and in February 2008 it was clear the dream would take hold. Today we’re in a situation where we have potential contracts on the table with many of the world’s major cellular operators. At the moment we have to choose and decide who we want to go with.

Have contracts with cellular operators already been signed?
We signed strategic partnerships will Cellcom in Israel, Beeline in Russia and Telecom Italia Mobile, and there are other offers for numerous partnerships laid on our table. At the moment we need to reach a decision where and with whom we want to go.

What’s the significance of this interest?
The world’s major cellular carriers said they want it, and they want to be first. These are companies that are constantly encountering startups trying to sell them technologies. The technology market surrounding the cellular industry is the hottest there is and they’re saying they want it even before anybody’s seen the final product. They’re signing agreements with us and pledging to invest, so the problem is not whether there will be customers. Our test right now is taking the dream and turning it into reality.

How do you explain this?
The contracts were signed based on the concept and prototypes, and based on the confidence they have in Dov as someone who has already proven himself. The confidence required to decide to go with us is enormous, and it’s a really big gamble for them. This goes to show how much interest the product is drawing.

What phase is the product in at present?
The product is still in the development phases. We plan to launch it at the end of the year.

**********************

Liat is an industrial management engineer and her first job at modu was chief operations officer.
What led to your transition from your previous post to your present post as vice president of human resources?
From the onset I considered my job as COO temporary, while the company was being founded. I don’t have experience in human resources. At msystems I worked with Dovi on building the management and processes in management, and naturally I was channeled there and I started dealing with it on the strategic level. I find human resources fascinating: the ability to create something out of nothing, to start a company from the ground up with all that entails – the processes, the type of people recruited, how to recruit them, in which direction is will help them grow and what the employee will see at the end of the year when he looks back, besides a bonus and options. It’s a tremendous challenge and it really is possible here. That’s what my choice stems from.

What makes it possible here?
I knew the combination between Dovi’s personality and the kind of people we have here makes the field of human resources such that things could be done here that you don’t find anywhere else, and that fascinates me. It allows setting up a company where learning and personal development would be its backbone.

How do you design an organization with a forward view toward a time when it will be several times the present size?
There are two ways to build an organization. One way is that the proportion of management fits the scope of operations, as is the case today, and then bring managers from the outside in accordance with the scope of operations that have been generated. The other way is to hire managers from the start with a look toward the future. We built in advance a management staff that appears somewhat overqualified for a startup numbering 100 people. These are people who definitely know how to handle the large organization that it will become.

Wouldn’t you be better off letting the organization grow gradually and the management along with it?
The option of an organization that grows gradually and forces you to bring in managers from the outside is not a better option when you want to grow fast and grow well, so we’re getting the organization ready from the start. Our structural organization is such that to the outside observer it appears a bit megalomanic. There’s a relatively large managerial staff which now heads an organization of 160 people, but in the future it will head an organization of 1,000 people. We’ll grow to that size very quickly.

Isn’t this a problem for the managers who held very high-level posts at other companies?
There are quite a few people here who used to be COO’s or CEO’s and vice presidents and today manage no more than ten people. People here go down in salary, in title and in the scope of their job. Many of them came here to join the management, the staff of vice presidents, and at first it was very hard for them to understand why not. I think they find their work to be really interesting and they’re enjoying themselves. They work so hard that if that weren’t the case they wouldn’t stay. The issues we’re handling here are so substantial and exciting that all of them realize this is going to be something big.

How big?
We’re talking about a company 1,000-strong, with projected sales of a billion dollars in four years.

What characterizes the company’s current phase?
We have an extraordinary group of exceptionally high-caliber people, and on the other hand we have a tremendous challenge. On one hand it appears the concept has taken hold and there’s a lot of demand from the cellular operators who want it, and want it now. On the other hand, our intention is to alter consumers’ usage habits and to accomplish that it’s very important we reach a critical mass. All this means we have to launch it with a lot of cellular operators and fast. The challenge is enormous and the deadlines are very aggressive.

During this mad race have their been endeavors to work on how to shape the company?
A month and a half ago I summoned a group of 20 managers at the company, all of the managers of the large groups, for a meeting called, “Where is Modu Headed?” I described the meeting as a discussion of the question of what this company will be when it grows up, not from a business angle, but from an organizational angle. I didn’t know what the response would be like because the workload on every one of these people really is enormous, and I took up a whole day of their time, from morning to evening. Except for two managers who were out of the country, all of them showed up. I told them that in order to start deciding how this organization would look, how it would function and what it would be when it grows up, which principles would guide it, what kind of people it would employ and what kind of managers it would have, I needed them to work with me.

Why did you choose this approach?
I can build a human resources setup that will start to think, do surveys and look into what other companies are doing, or I can use this staff, whose commitment, intelligence, intuition and managerial experience are such tremendous added values that it’s a shame for me not to use them.

What was the reaction to the viewpoint you presented?
In the meantime there’s already been a second meeting and [the participants] have agreed this forum has to continue. I find it really amazing. We spent a whole day sitting and dealing with human resources affairs, organizational communication, the question of how to transform the organization into an organization that learns and how this organization – in the middle of its mad dash – can find time to learn from its mistakes and make the organization better. In my opinion this reflects the unique positioning of human resources at the organization and the desire and commitment of the people here to turn this organization into a different kind of organization, to determine how it will look when it grows up and to take it there.

Within one year the company grew from 30 to 160 workers and it looks like this is just the beginning. How do you run such a massive recruitment drive?
At the beginning of the year we held a conference for placement companies and invited representatives from the leading placement companies. I started with a survey on the company completely unrelated to recruitment, to show them what we’re dealing with. Afterwards I laid out before them our strategic vision in terms of human resources, where we want to go and what kind of company we want to build, and finally I showed them a plan broken up into quarters – who we want to recruit and when.
Each of the managers recruiting personnel introduced himself, his department, what he wants and what he expects.
We explained to them that we’d gauge them according to how they meet goals determined in advance. My job is to bring the right people at the right time, and I wanted them to understand that I consider them full partners in achieving this aim.

Which recruitment channels do you use?
We use all of the recruitment channels – websites, job fairs, employee referrals – everything. We want to get our hands on the best people and you never know where they’ll come from. Different people come in different ways.

Did your exposure in Barcelona create a change in recruitment, too?
Until Barcelona most of the recruitment was through employee referrals. After Barcelona the level of accessibility to the company went way up. We posted the website and there was a lot of media interest. During the week of the exhibition in Barcelona we received 800 resumes in four days.

***********************

How does your professional background affect your view of human resources?
I come from the world of business and I took part in the formation of modu from this angle, and now as well my angle on human resources is from there. Together with Dovi, I’m the one who leads the process of defining the company’s business goals. I don’t think there’s any other organization where a human resources manager is involved in this. If you look at human resources as being in charge of recruitment and employee compensation and benefits, to me it’s less interesting. But if you look at human resources as the initial steps of setting goals and carrying them out, then you’re dealing with much broader questions, such as which people, which organizational structures and which organizational systems will lead to attaining these goals.

What is the most important issue in human resources as you see it?
There is no one issue that’s important in my view, but one of the issues I find most interesting is personal development. I think that although this company is very attractive, in the long run money is not what will make people stay. The people here are so good and talented that there will always be somewhere else that can offer them more money. The interest, the challenge and the dream we’re dealing with are important, but in the final analysis I believe at the end of the year an employee has to be able to look back and see what happened to him, what he learned, where he’s headed and how he’s grown. I still don’t have the answer to how this is done. It’s one of the things I put a lot of thought into.

What do you see as the greatest challenge in building the organization?
The triangle formed from these three elements – your abilities, your desires and the organization’s needs – is a magic triangle. When we recruit a person we know what’s the link between the three sides of the triangle, but the point of interface between these three elements is a point in motion because over time the organization’s needs change, the person’s abilities change and his wants definitely change, and this needs to be managed. If today we know how to manage this properly and look toward the organization’s future, which direction it’s growing and what its needs are and will be, and which direction the employee can and wants to grow in, then together with the employee we can choose the track that fits him and us and together make it happen. It’s a huge challenge and to me it’s fascinating.

What typifies the organizational culture at modu?
“People first,” is our motto. At most organizations, if you ask people about this slogan their reply will be cynical. A commercial enterprise and “people come first” appear to be a contradiction in terms. Only if you understand how important it is for them to go together can it work. “People first” is not about you as an employee, but you as a person, both with respect to your job and irrespective of your job.

Does this come across in the company’s benefits policy as well?
We just went for a vacation in Eilat, with families. I had a lot of hesitations regarding this vacation. My arguments were similar to those I had regarding the trip to Barcelona: we’re a startup, we just got started, what does that say about us? We want and need to be a modest company. It’s mistaken to think that because we raised a lot of money we can take the whole company and their families down to Eilat. We need this money to raise up this enormous operation. And there was also another problematic aspect. If you want to give your employees a bonus, give them a hotel coupon and let them decide where, when and with whom they want to take a vacation. Why should you decide for them where and with whom to go on vacation?

How did you wind up solving this issue?
Part of the success of this vacation was that in addition to the fun activities we did together, we gave people a lot of time to themselves with their families. The name of the trip was “Modim Lachem” [“Thanking You”; a play on the name modu]. We wanted to thank the employees, but we also looked for an opportunity to say thanks to the family members, who pay a price for this dream. We thought about how not to be a burden, i.e. not placing a modu sign everywhere you go in the hotel. The main goal was not to bring the company together. That would happen some other time. The goal was to say thanks.

Where is modu headed in terms of the projected growth rate?
If I could wave a magic wand and turn the company into an organization of 300 today, we’d be better positioned to meet the tasks before us. I can’t do that because it would kill the organization. We’re supposed to recruit more than 15 people per month, but we won’t do that. Not because we can’t, but because at some point you have to limit the company’s growth rate in order to allow people to assimilate and for the organizational culture to take shape. There’s a limit to how much an organization can grow and still grow right. We need a lot more people, but you have to walk a fine line between harming business due to a lack of personnel and harming the organization when the growth rate is abnormal.

 
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