Arabic Knowledge@Wharton

In Wharton Innovation Competition, Seeking Solutions for Middle Eastern Challenges

Tue, 14 May 2013 12:00:00 EST

Matching up blood donors, energy conservation software and a low-cost method to provide potable water in Yemen; the finalist proposals of the Wharton-HCT Innovation Tournament in Abu Dhabi this month spanned a range of social issues in the Middle East, from civil planning concerns to expanding support for charitable causes.

This year's competition received over 200 applications from around the region. After hearing a day of presentations, Wharton experts Karl Ulrich and Bulent Gultekin, among a panel of local business and academic leaders, decided to award first place to "DiaLife," a proposed diabetes management solution designed to meet the needs of regional diabetic patients and their caregivers, using the Internet and interactive tools.

For his work, Amine Bounoughaz, an engineering student from Algeria, was awarded 30,000 Dh (US$8,100). It was a poignant victory for Bounoughaz, who began his presentation with his own story: his grandfather had passed away from diabetes, his parents were Stage 1 diabetics, and he himself was at high risk to develop the disease.

His personal experiences led him to develop DiaLife, Bounoughaz explained. "I dedicate this win to my family, to my friend and the co-founder of DiaLife, who has diabetes, and to anyone who has diabetes in the Middle East," he said. "We want to make their lives easier and better."

Bounoughaz said the prize money would be reinvested in the startup. "The best thing is that it comes with no strings, we don't have to give any equity away for it," he said.

Discussing Innovation

Before the finals, Wharton's Ulrich spent a day discussing the concept of innovation to a crowd of students and professionals from the region. Wharton's Vice Dean of innovation and CIBC professor of entrepreneurship and e-commerce found himself fielding a number of questions about the nature of innovation and its process.

When asked, Ulrich explained that innovation and invention are two different things, though he noted they are used interchangeably by many. "Innovation need not the creation of a new solution, whereas invention does," he said. "Innovation usually has a commercial context, as a way to generate value, but not always."

There were external needs that required innovative solutions, Ulrich said, as well as internal needs within companies that the audience could immediately affect. "You are all innovators," he said. "Ideas are cheap. It's all about possibility."

Audience members raised the concern about the cost of innovation tournaments, and how that would be difficult to bear for many companies in the region. Ulrich acknowledged that the process was not cheap. "The central challenge in innovation is managing uncertainty," he said. "What will this innovation become?"

At the end of the discussion, Ulrich challenged every participant in the room to come up with 10 ideas, pitch them to their seated colleagues, and then present those ideas to the group. The end ideas were then voted upon. Ulrich noted that the most popular ideas were focused in health and wellness concerns.

Different Generation

Taking second place in the innovation tournament was Madad, a proposal to help Egypt's thousands of underfunded NGOs find funding. Presented by Sherif Nagui of Egypt, he was awarded 20,000 Dh (US$5,500). Nagui, currently a graduate student at the Wharton school, said the funds would allow the startup to launch in the coming month of Ramadan.

Having seen the competition, Nagui said it showed a change in the thinking among the region's youth. "This generation is different from the past ones," he said. "With so much information available now, young people are setting a path to act upon, rather than just trying to find a job and get by."

Coming in third place was an environment-driven entry from Aisha Al Shehhi and her classmates at the Fujairah Women's College. Their proposal was for a recycling bin that would operate like a carnival game, awarding recyclers with valuable retail coupons for recycling plastic bottles.

As the Emirati winners in the competition, Al Shehhi, 21, said she was extremely proud, and said it was encouraging for other female students who wanted to start businesses and become self-reliant.

"This gives us more confidence," Al Shehhi said. "We are so excited, and we will tell others that they don't have to feel shy, they have a chance."

Her instructor, Omar Ayyash, said the team's placing in the competition demonstrated the potential for the Gulf country. "A key pillar for economic development here and in the entire Arab World as well is entrepreneurship," he said.

Providing Oxygen

Rounding out the winning entries was Students' Initiative for Integrated Rural Development, entered by Uday Umakant Bhardwaj of India. It is a long-term effort to develop a "sustainable development model" using a village in rural India as a proving ground. It is a strategy and program that brings together college volunteers, the public and private sector and villagers.

Awarded 10,000 Dh (US$2,700), Bhardwaj said it was good timing that enabled him to come to the competition. He had exams the day before the competition, then got on a bus for a seven-hour ride to New Delhi, where he caught a flight to Abu Dhabi.

Though happy to be awarded a cash prize which would "provide oxygen," to the venture, winning was beside the point, Bhardwaj said. It was more important for him to meet fellow-minded entrepreneurs, network and make contacts. "It puts a fire in your belly," he said.

Though they did not come away with a prize, competing with college students and even professionals proved to be an exciting challenge for Madina Salavdiyeva and her classmates from GEMS Wellington International High School, in Dubai. Their proposal was to provide a cheap and efficient way to clean water for Yemenis.

Salavdiyeva, 16, said it was important for such innovation competitions to exist in the region. "It gives people a chance to share their ideas," she said. "Only a few people from here get access to the bigger competitions."

Wharton Experts: Middle East Innovation Needs Institutions, Policies and Quality of Life

Tue, 14 May 2013 12:00:00 EST

Karl Ulrich, the Wharton school's Vice Dean of innovation and CIBC professor of entrepreneurship and e-commerce, returned to Abu Dhabi for the second innovation tournament held by the business school and its local partner, the Higher Colleges of Technology. First place in this year's competition was awarded to "DiaLife," a proposed diabetes management solution designed to meet the needs of regional diabetic patients and their caregivers, using the Internet and interactive tools.

Though governments in the Middle East now support the idea that innovation and entrepreneurship are essential to transforming their economies, Wharton's Ulrich says that without institutions such as incubators, and business-friendly policies, innovation culture cannot take root.

Quality of life is also key, he says, noting that Dubai's ability to attract people and capital from across the Middle East and the world stands as a successful regional model. Wharton finance professor Bulent Gultekin, academic director of the Wharton Center at CERT in Abu Dhabi, adds that government policies, long-term vision and a shift away from oil wealth-centered structure are needed ingredients in establishing a more entrepreneurial economy in the Gulf.

An edited transcript of the conversation follows.

Arabic Knowledge@Wharton: Innovation is fast-becoming a buzzword, suggested as a cure-all for all that ails the Middle East. But given the lack of infrastructure and culture, how does this region do that?

Karl Ulrich: Culture follows from process. I normally think about that in the context of an organization. One of the levers that you have in that context is establishing an innovation process, and innovation tournaments are an example of the process. You put in place an explicit pipeline that identifies opportunities, evaluates opportunities and makes investments in opportunities, that culture follows from that process. Conversely, it's very hard to create culture if you don't have that process. You say, you want more innovation, 'Please be innovative.' Well that doesn't really mean anything. You have to say, 'We have a process for generating, evaluating, investing in and developing opportunities.' So at the level of society, I'd say, do we have the institutions that would support innovation? Without those institutions, it'd be hard to imagine that culture developing.

So what would those institutions be? Some sort of risk capital, angel capital, venture fund companies that are making investments in new opportunities; universities that have business plan competitions, courses that are project-based and experiential; incubators -- those kinds of institutions, you can't have innovation culture without those.

Arabic Knowledge@Wharton: Everyone around the world is trying to replicate Silicon Valley. Chile has Start Up Chile; India has Startup Village, with the goal of creating 10,000 startups in the next 10 years. Anything from elsewhere that could be applied to this region?

Ulrich: There are certain necessary conditions related to how easy is it to form an entity, and how good are the property rights. You start there, and then you layer on to that, is it a nice place for young people to live? Are the universities where people like to go and study, and do they stay? Places like Silicon Valley develop a network effect, wherein you go there because there are hundred companies that could hire you, and other interesting people are there. To develop those elements does take time, but you have to start with the basics -- there has to be a level playing field, there has to be relatively low friction to set up a business, there has to be efficient capital markets that can provide capital to start, all those things have to happen before you get people to come, start businesses and stay. The first part of it is, put in the necessary conditions for this thing to grow, and then let it take time.

Arabic Knowledge@Wharton: Yet in this region, the countries producing the most innovative entrepreneurs experience frequent instability, while the nicest places to live see a dearth of innovators.

Ulrich: It could also be that there's less to lose. But that doesn't apply to Silicon Valley. It's not a particularly painful place to live. So, that's something else, that's another effect.

It's the story of Dubai. It's the story of having places where it's not so hard to set up a business, where people are coming to be where it's not that hard a place to live, where it has some attractions, and its really a story of when you have a few people there, where else would you want to set up shop? Where there will be the right kinds of lawyers, accountants, incubator spaces, the kinds of vendors you need. All that develops where you have critical mass, where you have a consensus where you want to be.

Bulent Gultekin: This is something we tried as policymakers in the Turkey in the 1980s. One cannot explain Silicon Valley until they go back to the Second World War. If you look at cities in the United States with high tech areas, these were places where very heavy defense spending was done. It didn't start because of Stanford. Berkeley in the 1970s had 14 Nobel Prize winners in its Physics department, because they got all those Manhattan Project-funded physicists there, it was remarkable.

Arabic Knowledge@Wharton: The Gulf countries, though, are among the top purchasers of military weapons.

Gultekin: Purchasing is different, building is different. There is a spillover from that technology, that's how Stanford and all these universities became what they are. Once it becomes self-sustaining, it becomes almost like a region. We tried to build by developing certain region, helping companies, but it doesn't work that way. You really need an oasis, a large community; once that's built it becomes self-sustaining and self-perpetuating.

… In these areas, the policies we put into place 25 years ago in Turkey are only coming to fruition now because it required many things that needed to happen. You needed to have universities with enough people, you needed to build the entrepreneurial spirit, the economic environment -- it took us a generation, even though we knew exactly what we wanted to do.

Over here in the Middle East, first they have to compete, and one way to do this is by cloning -- by that I mean what Chile is doing. They make things happen, and if they have this community, then there could be a spillover effect everywhere else. But they have a long way to go, because of the education and entrepreneurship skills needed. They have entrepreneurs spread on the commerce side, but not on the manufacturing or engineering side. That requires quite a bit of engineering skill. That's why one of the reasons so many entrepreneurs than MBAs. You have to be an engineer and develop a product to be an entrepreneur. That's why the policy makers here have to figure out what they need to do, put it in a timeframe, and then go for it.

Arabic Knowledge@Wharton: So much of business and policy is driven by perception. You go to Silicon Valley because you expect to find innovators there. What then should the world look for from the Middle East?

Gultekin: With innovation it's easy to make generalizations. Some seems to come from individuals, because they are creative and come up with interesting applications -- Facebook is a typical example. Others are individual inventors, and they can be in any culture, provided that they received a certain education, and because creativity is not the monopoly of any nation or culture. And there are other types of innovation that require large structures, because they need big entities. So aerospace, for instance; you can't build a Boeing in your backyard anymore. Also, in many countries that tried to make innovation their domestic policy but it didn't always work, as the case in Korea, it came out in different ways. It's hard to predict. Energy efficiency and innovation may be easy to suggest, because these are energy producing countries. I don't know what is the comparative advantage, be it based on alternative energy or oil.

Ulrich: I don't know if that will get you to an entrepreneurial place. It might get you to a technology base for economic growth, but not entrepreneurship. For the reasons you say: the barrier to innovation is pretty high in some of those industries.

Gultekin: There's more competition now, and everyone wants to do the same thing. As economies grow, there will be more opportunities. The key over here is that policy helps and doesn't inhibit business, and that the environment is conducive to entrepreneurship. If you don't have that, it's a problem. In Abu Dhabi the government is the biggest employer, so the question how are you going to structure incentives for joining the private sector? That requires a whole different mindset and structuring of priorities for the economy. It isn't impossible, but it requires a macro vision. Having such a wealthy oil economy is a blessing and sometimes a curse.

Hardly Fragile: Tunisian Glass Artist's Effort Displays Women's Strength

Tue, 14 May 2013 12:00:00 EST

Years ago, artist Sadika Keskes became transfixed with fire. In glass, she discovered a medium that brought her into direct contact with the element. The atmosphere, the heat, the motion ignited something within her.

"Glass is a very lively material. That means that when we work on it, it is moving," Keskes says. "And movement, for me, is hyper important in all my creations and in my lifestyle, because movement generates development and creation. So, without movement, it's death."

Keskes, whose delicate features are framed by her thick dark hair, is credited with reviving the art of glass-blowing in Tunisia and breathing innovation into the field over the past few decades. Constant, fluid movement has fed not only her creativity but also the development of her successful commercial art enterprises, now employing 30 workers. With Tunisia's revolution, she foresees new frontiers for creative expression and avenues for artists to help rebuild their country. Unable to sit back, she is, as always, on the move. Through "Women, Show Your Muscles," an artisanal initiative for women in the economically strained interior of the country, she hopes to precipitate their self-sufficiency.

Making Future History

Keskes has a large white stucco complex on the fertile outskirts of Tunis, the country's capital. From her showroom, sunlight strikes through shelves upon shelves of green, pastel pink, blue and other colored pitchers, plates, lanterns and vases -- all made from recycled glass. A floor above, there's a tiled Moorish events hall, the grounds also include workshops with brick kilns and a spacious exhibition gallery.

As a child, while Keskes attended school in the old quarter of Sfax, on Tunisia's southeastern coast, at lunchtime she went to her aunt's house where she would watch her cousin replicate the works of the famous French sculpture Auguste Rodin. Her artisan family also exposed her to painting and woodworking, in which her father specialized. Later, as a fine arts student concentrating in ceramics, she saw a short film about glasswork and became hooked. In 1984, she traveled to Murano, Italy, a renowned center of glassblowing, where she trained in glass art, then the only woman in her program.

Keskes had the opportunity to remain in Italy. But something called her home. She turned down a job with a great master, saying she felt burdened by the centuries of glasswork in Venice. "It is impossible for you to create things that are different. You suffocate, totally," she says in French. "I wanted to reunite with my culture... I wanted to come back to Tunis to come closer to my culture. I want to create something different. I wanted to work with glass but not in the Venetian way. I wanted to create something new." An archaeology aficionado and observer of cultures, she sees a continuity with earlier ages, gleaning meaning from the past and tradition. But what's produced now, is that "something new." She says, once again, it's about movement. "Today, we are making our future history," she says.

What she learned in Murano, she says, was not enough and she knew she'd have to continue refining her skills in her own space. She got a 10,000 Tunisian dinar loan from a state program that allocated funds to recent graduates and artisans who launched enterprises. Her brother agreed to cosign the loan, serving as the guarantor if she ever defaulted from payment. "If you don't have a brother or another person to sign, it is not possible to get the money," she says. "It is very important because not all young people are lucky regarding this."

She worked out of a tiny workshop, turning to any and all sources that would furnish her operation. She went to factories to buy second-hand fireproof machines, constructed her own oven and made her own tools. And she only used recycled glass. "I practically worked in the red for five years. I did not make profits. I had to close down two or three times," she says. Additionally, she had to create awareness around her line of glasswork. "It was really difficult because people culturally do not make the difference between mechanically-made glass and handmade glass. So, my prices were more expensive," she says. At the same time, to supplement her income, she taught fine arts for many years.

Keskes had some sales in shops, participated in fairs and her mother aided by giving her pieces as gifts to the family. Her sister, who was an independent commercial agent, also helped by selling some of the artwork. At one point, she had to stop working with glass for a year, because she had to repay her loan, and took up designing clothes. It was the innovation and connection to her culture that she had so earnestly chased that ultimately became her greatest asset. Migrating away from merely copying Venetian molds, she searched for something new. She combined glass and Tunisian silver, with its distinct design and quality. That something new began to fetch her profits.

After about seven years, she moved to a new place in Ras Tabia, a more popular location than her earlier site. She also started to get some recognition when her work was featured in the media and many films, which she calls her only form of marketing. The director of a film financed by the tourism ministry was dumbfounded that Keskes wasn't better known. He helped her move to La Marsa, a tourist district near the sea where she remains until today. She again borrowed another loan from the state investment channel, this time, for 250,000 Tunisian dinars to build on the La Marsa plot. The cap amount for arts and crafts loans was 10,000 dinars, as she had first received. But she needed a bigger sum to expand this time around, so in her application, she represented her outfit as an industrial enterprise. That money paid for the initial structures, and later with the profits she made from the growing glass sales, she created the sprawling complex that now stands.

To Keskes, her advancement as an artist is seemingly inseparable from her entrepreneurial success. "I think that the most important thing is that the engine of development is creativity. Each time that I created something good -- that changed the enterprise. Because, as you look through the development stages of my enterprise, you'd find the work of silver and glass, then when I was in Ras Tabia, I created objects with forged iron," she says, introducing another take on the form. In her collections, there are her own creations and sculptures that she herself makes as well as mass products which she designs but that her team manufactures. In essence, creativity ensured sustainability. That must be fortified as well with resolve to withstand the difficult times. "First, there is passion, but also I believed in my work, and I was sure that there was need for resistance," she says. One must be able to resist hardships, she says, such as long bouts of not having any money. "You cannot establish an enterprise, especially the innovative type, and think it would work in a second."

Keskes' inventiveness led her to take out a third loan to copyright and patent stackable, iridescent glass cubes that she created. International copyrighting is expensive and she needed funds to register the design. The cubes, of all hues, are not just for aesthetics. They can be used to build walls and when filled with water can conduct the temperature for the setting. Keskes says they reflect the future of central heating systems. It has helped her multipliy her sales 15-times over, she says. Unlike the other handmade wares she offers, she subcontracts the cube production to other industrial firms, which make tens of thousands of the objects to meet the skyrocketing demand.

Through her design and production center she has passed on the art of glassblowing to about 200 people. With growing interest, she's mulling over the idea of establishing a formal training facility to prepare the next generation of glass artists.

Free is Beautiful

On the flip side to all that Keskes had achieved, there was the dark undercurrent of functioning under the repressive regime of former Tunisian President Zine El Abidine Ben Ali. The constriction of open expression took its toll. Though she did create, the context was far from optimal. "My work is very related to culture; it is not merely industrial. So, as artists, we suffocate," she says. "Everything was going towards pressure, not expansion. By the end, I almost had depression, I rarely went out and it was a dreadful life."

She can catalogue countless examples of how Ben Ali's machinations pervaded even her artistic abode. There was the time when Keskes spent the entire day being interrogated by police about a play, performed at her center, that had political themes. Another time, she was asked to sign a propaganda letter in showing the arts community's support for the president. And once officials insisted that she hang Ben Ali's photograph in her studio when Morocco's queen came to visit. (She refused on both counts.) Government handlers also hovered over any civic efforts such as when she wanted to set up environmental or artisan groups. "We are controlled to the extreme. Whenever I organized an event, the police would be here," she says. "There was intimidation all the time."

The choked creativity and authorities' ceaseless surveillance prompted Keskes' decision to relocate to the Greek island of Crete, where she also has a shop. But then, a month later, the revolution broke out.

"The most beautiful thing is the street has become free," Keskes says. Rather than flight, she turned her gaze inward, deep into her newly unfettered country. "What I started doing right after the revolution is that I started traveling across the country. I would go see young people, and participate in the sociocultural activities, not only in my center in Tunis, but also in other places to which we did not have access before. So, that was a great source for inspiration for me."

Ask Keskes for signs of post-revolutionary Tunisia, and she points to the red woolen shawl draped across her shoulders and the gray rug beneath her red-leather ballet slippers. Driven by her desire to contribute to society, she spearheaded a movement that is now an official association to train women within Tunisia's interior, which is where the revolution was ignited but where the population still experiences high unemployment and socioeconomic woes. The program's name comes out more as a motto, "Women, show your muscles." (In French: "Femmes, montrez vos muscles.' In Arabic: "Shammar ala dra'k ya mra.")

Keskes's groups buys wool, she makes the designs and the women wash and then weave the material into textiles. There are men working with them as well, she says. But true to her form, she connects sociocultural activities with an enterprising dimension. She says some of the women have been without jobs for decades. It's not about donations or charity, but instead she says the goal is supporting them to make a living through their own work and to eventually create their own profitable entities. Part of that requires stressing quality work. "We show them how designs should be made and then they become independent and they enter into the economic dynamic," she says. The effort itself is a product of the revolution, since Keskes points out that she would have faced governmental harassment attempting to establish such activities under Ben Ali's rule.

Keskes notes that artists also contributed to the dictator's fall, through demonstrations and other acts opposing the regime. The revolution has heralded in an explosion of expression across various modes, from film, painting, photography, theater and more. She says the creative community will continue to play a role as the country redefines itself amid this rush of newfound voices. "The Tunisian society has never been in need of art and culture as it does today, because it is the only thing that will move people's minds," she says. "Because, without cultural development, you cannot achieve economic development." Through culture, she says, minds can be opened. "If we do not work on this, society will not move forward. The fall of the regime is not enough. Revolution is now."

Who Dares, Succeeds: Fighting Fear and Finding Creativity

Tue, 14 May 2013 12:00:00 EST

Adam Montandon is a British digital futurist based in Denmark who first began designing cyborg (part-man and part machine) projects in 2004. He's also the E-Concept Associate Professor at Lillebaelt Academy of Professional Higher Learning, in Denmark and a specialist consultant for innovative businesses. He co-founded the digital production agency HMC Interactive in 2003. In 2005 Adam Montandon founded the HMC MediaLab Organisation, a future-focused digital-arts community. In just two years, HMC was named as one of the top ten showcase technology companies in the Best of British award. In 2007, his company was acquired by Twofour group.

In 2010, Montandon left HMC Interactive and Twofour to become an independent specialist. His newest book, The Awesome Department, was published in December, and is available in digital format online. He spoke with Arabic Knowledge @Wharton about creativity and finding the courage to take risks.

An edited transcript of the conversation follows.

Arabic Knowledge@Wharton: You recommend that people do something terrifying for their creativity. Can you elaborate on that?

Adam Montandon: I have this concept that you can make any workplace more creative. The book is called The Awesome Department. This idea of creativity has to do with a lot of people are frightened about creativity, frightened about the ideas. They say they like new ideas but really they want the same old idea in a new way. You can terrify a lot of people and as soon as you terrify a lot of people, you end up falling back on the old ways, the safe, trusted things.

What I do is create a series of creativity spikes. A creativity spike is something where it seems really, really dangerous but it's not dangerous at all. It's something that seems edgy but it's not really. When people work in that area, they find they embrace that danger and there are no bad side effects at all.

One of the things I do is I found you can do is buy huge, huge inflatable balls online that are two to three meters tall. If you inflate a giant ball in the middle of your office or your classroom, people will walk in and they'll see this giant ball taking up half your space. It's so crazy. They have to ask you, "What's the deal with this huge ball?" You have to say, "Before we have this meeting, you have to jump on top of this ball and stay on top of it for 10 seconds. It takes a lot of determination. You have to take off your shoes. You have to turn, run and jump and hold on. And once you're busy holding onto the ball, I will film it and put it on YouTube.

When you stay on top of the ball for so long, you feel a sense of success. So my team and I decided to create a Ball of Fame and you can sign your name on the ball. It built up with more and more names until it was filled up. When you are brutally serious that you have to jump on the ball before you can have a meeting - even if you're a lawyer, accountant, if you're in the most uncreative job ever - instantly you're having fun. You're doing something a little bit dangerous, a little unusual and all of a sudden you realize that if I can do that, I can do anything. It changes the dynamics of the meeting. It changes the dynamics of the space. If whenever you're doing something a little unusual, seemingly a little dangerous, but it's fun - that's a creative spike. You can be creative in a number of ways. It doesn't have to cost a lot of money.

Arabic Knowledge@Wharton: Creative spikes can come from rock-climbing or skydiving, and people might say "Oh, I don't have time." But what you're saying is that if you do something creative, it might make you more productive?

Montandon: Well, it just changes your mindset. If you think differently, even for a little while, it'll help you even in the short term. If you're approaching the same thing, the same way every time, you get the same results every time. I like to mix things up.

Arabic Knowledge@Wharton: The values of your book The Awesome Department are quite inspirational. Things like "Awesome means different things to different people" or "Awesome starts small." What made you decide to come up with that list?

Montandon: I've been working on it for a couple of years now, testing out all of the different ideas. Because I do hundreds of different lectures all around the world for many kinds of different people, instead of doing the same one, I always change it for the audience. I want the audience to create something new.

Some people say, "You should never do the same thing twice" but I think, "You should never do the same thing once." You should always be editing and changing and trying new things to see how it improves.

I like to set this challenge: Think about everything you did at work today. Did you do the same sort of thing last week? How about last month? How about last year? If you did exactly the same sort of stuff today that you did a year ago, that's the reason why you're not moving forward.

I've interviewed hundreds of people from the smallest companies to the biggest companies. From little independent eco-friendly surfing schools right up to huge global companies and everybody in between to find out what they said. The same sorts of topics came up every time. Also, the same sort of problems students have came up. I'm not saying it's the proper way. It's just our way. You can try it or ignore it, which is fine. I'll admit it is weird to say you write a book and then say, "Oh you can just ignore it. You'll probably be just as successful if you don't do anything in the book. If you do, that's excellent too."

Arabic Knowledge@Wharton: What are the usual reasons stopping people from doing cool stuff?

Montandon: Everybody wants to do cool stuff but there is a lot of fear because once people realize that they can do cool stuff, it's this sudden realization, "Oh no, now I know I can do cool stuff, I have to actually do it." People invent a lot of excuses that are convenient because sometimes you want to do cool stuff, it's easier not to. It takes just as much effort to do something boring as it is to do something cool. There are only so many hours in the day to get on with your stuff. If you're going to do something, you might as well do something amazing. But it's difficult. And often people who care about you are scared [for you]. Every entrepreneur, every innovator has been told their idea won't work by millions of people. Most of their ideas won't work. So it's perfectly good advice. But if you start thinking your idea won't work, you'll never know. If you never get to make it into reality, you'll never know if it'll be a spectacular failure or not. It's a lot better to know you're going to have a spectacular failure than to think you might not have one.

Arabic Knowledge@Wharton: So people may block their creativity by never trying. And you also mention on your web site that you spent three years researching what really blocks creativity in businesses. So what are some of those things? How do people get over this hump that you're talking about?

Montandon: Basically, there are hundreds and hundreds of different ways to boost your creativity and to change it. There are lots of books and websites that tell you, "Go and have a walk. Or look outside the box and all these clichés." But the truth is you can do an audit where you look at absolutely everything. Every tiny thing - it could be your company, your environment or your school - you can absolutely look at everything and ask yourself exactly what it is and what it means. Just ask yourself, "Can I make it just a bit more creative?" I'm not talking about radically changing it but just a little tweak for every single thing that you do. If you do it in an interesting way or if you do it enough, you start to spread stories.

Storytelling is really a benefit of a creative company. What happens is if you meet the company and you come home and sit around the dinner table and tell your family what you did today. "Well, actually, I went to this place and jumped on this great big ball. And then I saw this and then I saw that. You know what happened to me?" And then it becomes a really interesting story. So the more stories you can make, the better.

A really good example of that is that for the past three weeks, I've been giving out business cards. Everyone gives out business cards. And everybody's business card has their name, address and phone number and that's what you're supposed to have on your business card. I thought, "If I do that, is there something I can do that will be more creative?" There are a million different designs of business cards. I didn't put my name or my address or my phone number. I just put "This card is worth one favor. It can be redeemed at any time."

Instead of business cards, it's a favor. I'll help you with a favor. If you want me to come give a lecture at your school or help you move furniture or look after your kids or whatever you need, I'll do the favor. The only problem is you'll have to find me. You'll have to remember me. You'll have to track me down. But once I give them a card, they never forget me. That's one of the ways I've been able to travel around the world, giving lectures and all sorts of cool things. They'll say, "Adam, I need a favor. Can you come out and do this? And of course I'll say "yes" because I owe them a favor. It's a phenomenally creative thing to do and it costs exactly the same to print a creative business card as it is to print a normal business card. It's no cost to business. But the results are fantastic. Those are all sorts of different creative things to do and that's just one thing that can be done really cheaply.

Arabic Knowledge@Wharton: How should people cultivate a creative relationship with a mentor?

Montandon: I talk a lot about mentors. I came up with this idea and it's called "hoarders or ignorers." It's two different ways you can work with a mentor. You can pick one of the two. It's really fun. With a hoarder, you grab everything you possibly can from a mentor, every bit of inspiration. Read every word. Whatever they tell you to do, you do it. The opposite of that is the ignorer. You listen to a mentor and whatever they tell you, you do the exact opposite. Forget you ever heard it and do something completely different. Now, one way is not better than another. They're just completely different. People grow in different ways. Sometimes, it can be interesting to have a mentor you can use as an ignorer instead of a hoarder. Sometimes you can have superfans that are hoarders. Ignorers can be useful in a different way. It can be really useful to have that.

Arabic Knowledge@Wharton: It sounds like what you were referring to in other writings when you say, "You should just listen to yourself." When you're "ignoring" someone, you're encouraging them to listen to their own intuition about what's a creative solution.

Montandon: Yes, that's right. Sometimes, what happens in education is things are really well paced. You have a timetable and plan. You have different lessons on certain days and it's designed the same year after year. But the real world is not really like that. You have big periods where nothing happens and you have big periods where everything happens all at once. You've got a thousand presentations. You might say you don't have time for research and you need to be confident to make a decision. It doesn't have to be the right decision but sometimes it has to be a fast decision.

I do this experiment with my students, which can sometimes be quite dangerous. We have computer labs with big huge brand new Apple Macintoshes. I might take a basketball into the classroom. I might ask the question and throw a basketball at the same time. And see who it hits. I think I've broken three or four Macintoshes this way. But I'm basically throwing the basketball very quickly. It's not "what is the answer" but "what is the answer now."

The problem you have on a Monday morning may be different than one you have on a Friday night. How you approach things is important. It's not what the right answer is but what the answer is now, in general. It's doesn't work for all subjects. You can't do that for algebra because you can't change the answer just because it's Friday.

Arabic Knowledge@Wharton: The idea that you have to give an answer now sounds almost like advising people not to procrastinate or hang on to their creative hurdles.

Montandon: If you do stuff fast and you know it'll be a disaster, then at least you'll know if it's a disaster fast. You won't worry whether or not it'll be a disaster. Then you can improve on it. This stuff doesn't work for everybody. It can help if you ever feel stuck. You can give it a shot. If you're stuck, then you're doing nothing. You may still be doing nothing but at least you're having fun doing it.

Why Global Real Estate Developers Are Eyeing the U.S.

Tue, 14 May 2013 12:00:00 EST

Earlier this year, one of China's biggest real estate developers, China Vanke Co., announced its entry into the U.S. housing market -- a partnership with New York-based Tishman Speyer Properties to build luxury condos in San Francisco. What do developers from China -- and elsewhere -- see in the U.S. market, which has experienced a considerable downturn since the bursting of the real estate bubble in 2008?

According to speakers at a March 27 real estate forum at Wharton -- which was produced in collaboration with top Chinese real estate firm E-House and included senior real estate executives from China and the U.S. as well as Wharton faculty -- changing demographics, pent-up demand and limited supply suggest that more housing is needed in the U.S., and savvy consumers are looking for new options in housing and lifestyle.

Stephen Kim, managing director of equity research homebuilding and building products for Barclay's Capital, shared his views on the market during a presentation at the forum. His talk was followed by a panel including Peter Brumme, vice president and general manager of Builders Digital Experience (BDX), a provider of digital marketing services for homebuilders, and Frederick N. Cooper, senior vice president of finance, international development and investor relations at luxury homebuilder Toll Brothers. The panel was moderated by Peter Linneman, Wharton emeritus real estate professor and founding principal of Linneman Associates.

Kim used a series of statistics and charts to make a compelling case for optimism for homebuilders. He first spoke about a significant change in statistics on housing starts -- any unit that is beginning construction - noting that up until around 1980, the number of homes being built for rent versus sale was roughly the same. By 2005, there were almost three times as many homes being built for sale as for rent, with housing starts reaching a record 2.069 million that year.

By 2009 -- following the bubble -- housing starts had fallen by almost 75%, to 554,000, though the ratio of homes for rent versus sale had largely normalized. Currently, housing starts in aggregate are running at slightly over 900,000 per year. "That is a very repressed level," said Kim. "Our outlook is a very optimistic one, as we expect that figure to rise to 1.6 million by 2015."

A Growing Need

A key driver of demand for housing is household formation, with a household being defined as any individual or group of individuals who are living independently. For many years, the ratio of household formation to population growth was stable, but the ratio changed dramatically in 2008-2009. "Housing starts and household formation declined, but population growth in this country did not," Kim noted. "One of the distinctive aspects of the U.S. is that we have a net birth ratio -- the number of births less the number of deaths -- which is the highest among all developed nations. The population has been consistently growing, and as a result, we need more houses."

According to Kim, the U.S. can expect to see about 1.3 million households newly formed each year for the next decade, making housing starts at an annual rate of around 900,000 inadequate. Also, demand will further increase because of the disproportionately high number of shared households resulting from people being unable to support a household because of the recession, and the fact that home ownership is at unprecedented lows for every age group expect those 65 and older.

"As people in the U.S. get older, they are more likely to head a household. It really isn't until past the age of 75 that they begin to go into institutionalized care, nursing homes and things like that," observed Kim. "With the baby boomers not even close to 75 - they're in their early 60s down to their late 40s -- we have a significant period of time where we're going to see some very, very strong household formations and household growth."

The final factor driving housing starts that Kim spoke about was demolitions. The U.S. removes houses at a rate of about 250,000 per year, which includes damage from such events as hurricanes. "We have about 125 million houses in this country, and if you are demolishing 250,000 of them a year, it implies that the average home being built today will be around still in 500 years," he said. "Clearly, the demolition rate is too low, and you're going to see an increase in that rate over the next few years."

Customization -- and Confusion

How rising demand will be met and what homebuyers are looking for was the focus of the subsequent panel discussion, which explored trends in home ownership.

Toll Brothers is the largest luxury homebuilding company in the U.S., with prices ranging from US$350,000 to several million dollars. Typically, the homes are ready for families to move into. Cooper spoke of some of the changes in the market that Toll Brothers is seeing. The company started out building/selling single-family homes but is now building everything from attached homes to high-rises in New York City. Recently, there has been increased demand for "active adult housing" targeted at people 55 and older.

"These homes and communities are for people who are still very healthy but are ready to live a little different lifestyle -- whom we call 'empty nesters,'" he said. "This type of senior housing is becoming much more of a big business in the U.S. as baby boomers continue to be a larger portion of the population. Many people, particularly in the South, are looking to move into a planned community with amenities."

Linneman observed how the housing industry has had a similar evolution as the car industry -- with selling first focused largely on a very small number of basic products at various price points that had few distinguishing characteristics. As customers' buying power increased and tastes evolved, companies have been able to profit by allowing them to customize their purchases. This, in turn, has influenced how companies reach and sell to their customer base.

The amount of customization that builders facilitate for homebuyers has created both opportunity and confusion, according to Brumme of BDX. BDX, a joint venture between BHI and Moving, which in turn owns Realtor.com in the U.S., focuses on providing marketing, advertising, listing and sales services to homebuilders. Listings are distributed to hundreds of other sites, including sites for homebuilder associations and newspapers. "The hardest thing for people to do in some of the larger metro areas is choose a home," Brumme said. "In Houston alone, we have more than 9,000 plans on our site of homes than can be built by hundreds of builders. We've been trying to create some type of intelligent mapping to make the process easier, developing content that allows people to visualize the home that they're going to build." BDX's technology allows prospective buyers to see not just what their dream home will look like, but what the customization will cost.

The advances in this kind of technology have also proven to be beneficial to homebuilders. In the past, they relied on model homes to showcase their capabilities. Because of the expense of these homes, builders could only construct a few, showcasing a narrow range of options, which in turn limited customers' ability to imagine themselves in a particular home.

"If someone walks through a model home that has a white kitchen and they hate white, they are going to walk out and feel like they don't like the house, because they don't have a sense of what can be changed and how it would look if all those things they didn't like were changed -- countertops, cabinetry, colors," said Brumme. "Now, a company can build a single model home and we can show what it would look like decorated in 20 different ways, and people can see them all and get a feeling of what type of home they would like to live in. Then, the chances of them buying a new home increases."

Virtual Experience for Home Shoppers

Home shopping has in fact become not just a more visual but a more virtual experience, according to Cooper, who said that Internet traffic to Toll Brothers' sites has increased dramatically over the last few years. "At Toll Brothers, we recognize how important it is to have something that works really well on a tablet [computer], because we know people are shopping on their tablets."

Linneman questioned how long people are likely to spend on a site. "How much of this can they really tolerate?" he asked. According to Cooper, the average amount of time someone spends in an online viewing session is about seven or eight minutes. "That's why being able to provide lots of imagery that people can flip through quickly is really important," Cooper said. He added that people typically make repeated online visits.

The increase in Internet traffic has not led to a corresponding increase in visits to actual home sites, according to Cooper. "We measure every possible data point and we've noticed in the past few years that physical traffic -- people actually showing up in our communities -- has stayed very flat. However, the conversion rate for those visitors to actually buy a home is much, much higher."

He attributes this to the fact the people are able to do so much research on the Internet. "Customers are much better educated when they walk in the door and much more ready to buy," he said. "They understand our process -- you pick a home, you add rooms, customize the home physically and create new features. He pointed out that the average customer adds US$100,000 or more to the base price of the home through customization.

What motivates people to buy a particular home could be something extremely specific - and can be hard to predict, according to Brumme. "What we found in our research is that people pick homes for very weird reasons. Somebody will pick a very simple home because they like the railing that's over the front door, or they don't pick a house because they don't like color of the garage door."

In terms of specific features that are driving sales, Cooper said people are not as motivated by the green options that are being offered as much as they are by more "visible lifestyle features," such as bigger kitchens, elaborate media rooms and sophisticated sound systems. This type of consumption is not what his company expected. "Coming out of the downturn, we would have thought that Americans would pull back a little bit, but it doesn't seem that way," Cooper noted. "The buyers that we get still want to expand as much as they can and put 18%-20% in value added options into their homes."

Another factor that is influencing people's buying patterns is low mortgage rates.

"The affordability in the U.S. right now is very attractive because most people buying a home have a mortgage, and the interest rates are very, very low," Cooper pointed out. "I would say in general people are spending between 25%-35% on an annual basis of their income on servicing their mortgage, home insurance, and the other components [of home ownership]."

Linneman observed that historically, about one-third of homeowners in the U.S. have no mortgage or pay it off very quickly, with the typical homeowner carrying a mortgage of about 65%-80% of the home's initial value. He cautioned people to recognize the "aberration" of the housing bubble, pointing out that in 2005, the typical mortgage was 96% of the home's initial value. "What people forget is that wasn't true before that little window, and it's not true after."

In response to a question from Linneman about entering the Chinese market, both Brumme and Cooper acknowledged that the size of the potential market is attractive, but said their companies are disinclined to pursue opportunities in China right now. "There's still so much mining to be done in North America," said Brumme.

Film Personality Boman Irani: 'An Actor Has to Feel Unfulfilled'

Tue, 14 May 2013 12:00:00 EST

Film and theater actor Boman Irani was introduced to cinema at a very young age; when he was only 12, his mother used to insist that he go and watch the same movie 20 or 30 times and learn from it. But he took a meandering path to becoming an actor. His first job was working as a waiter. He then sold burritos from the family store, and later became a photographer. Getting into acting was almost an accident.

Today, with more than 60 films under his belt including hits such as Munna Bhai M.B.B.S. and 3 Idiots, Irani has also forayed into television with an interview-based serial titled "The Achievers Club." The problem with Indian cinema, he notes in this interview with Wharton operations and information management professor Kartik Hosanagar, is that there are no good scripts. Irani was a participant at the recent Wharton India Economic Forum (WIEF) held in Philadelphia.

An edited transcript of the conversation follows.

Kartik Hosanagar: You joined films a little late in your career. Can you tell us a little bit about how you got into acting?

Boman Irani: I've always been interested in cinema. I was a student of cinema even when I was a 12-year-old in Bombay. We had a theater called Alexander Cinema and my mom used to actually encourage me to go and watch a film almost every day. If I watched the film, the next day she would ask me what I was doing. "I'm just playing." So she would tell me to go and watch the movie across the street. "But I watched it yesterday," I would say. She would ask me the name of the film. "Pyaasa," I replied. Then she would tell me to watch it again and this time pay attention to the lyrics. And she would send me again and tell me to pay attention to the cinematography and the lighting. I never really understood why mom would encourage a person -- her son -- to watch so many movies. I used to watch movies 30 or 40 times, movies that were way beyond my age group. I wasn't watching Disney movies.

I was probably dyslexic when I was a kid. In those days, we didn't have a name for that kind of deficiency. We were known as the duffers of the class. That was the terminology and I was not really academically inclined. When I [graduated from] school, opportunities were not great for someone like me. So I took up a waiter's course and was a waiter for a couple of years at the Taj Mahal hotel in Bombay. Then my mom had an accident (I had never had a dad.) We had this little shop, which I took over. It used to make and sell burrito chips. That wafer shop was in the heart of the cinema district. So every night, after I closed the shop, I would go and watch a movie. We had about 30 cinemas around us; half of them have shut down today.

After 12 years of sitting in the shop, I got married. I had responsibilities. The money that came from the shop ran the family. I needed to do something different and I picked up photography. I bought myself a camera. I started doing very basic photography -- wedding photography, going to the airport and shooting groups that were going away. I made Rs. 20-Rs. 30 (40 U.S. cents to 50 U.S. cents) a picture. By the time I was 32, I had started doing professional photography.

Then [dance choreographer and Hindi film personality] Shiamak Davar walked into my studio and said: "You know, you're an actor." I said: "How do you figure that?" "Because I'm telling you," he replied. He took me to meet [theater personality and ad filmmaker] Alyque Padamsee, who auditioned me for a musical. Davar insisted that I act in that play. I was paid Rs. 200 (around US$3.50) a night. We only did 10 shows. Five months of rehearsal and that was it. But I got great reviews....

Then I got another offer for a play. We'd booked three shows for it. It was an experimental play -- two men on a park bench having a conversation. It ran for 10 years in the big theaters. It became a huge hit and people started talking about me as an actor. I had never bargained to be an actor. Suddenly, I realized that I was learning acting on the job. I read a lot of books; I observed. I used to do a lot of exercises on my own, developed by myself, take notes all the time. I was naïve. Because I was naive, I had no ego about learning. Long answer, sorry.

Hosanagar: No, I appreciate that. It set up the context really well. You have acted in close to 60 films by now. Today, as an actor, what kind of opportunity excites you? Is it working with a certain kind of actor? Is it working with a certain kind of director? Is it a certain kind of screenplay?

Irani: I have this theory about screenplays. I think that you can give a great performance in a mediocre movie and it will demote itself to an ordinary performance because the screenplay isn't great and there's no resonance. But if you do a good performance in a great film, it promotes itself to a great performance. So I think it's very important to pick scripts that are relevant.

Why should every movie be about social change? Why can't we have movies that touch your heart and talk about human nature -- relationships? Where's the social change involved in all that? I want to be challenged as an actor but only in good scripts. Otherwise, I am very happy to lend myself to an entertainer. I am very happy doing that also, but [there is] always one for the people and one for the soul. That's my mantra at this point of time. Like all actors, I think no actor can really operate or do better if he's not frustrated as an actor. He should feel unfulfilled at all times, even if he's got six Academy Awards. He should feel unfulfilled because it is only when you are angry with yourself that you need to go out there and say, "I have a lot more to give you and to myself and I'm not doing enough." It is not about opportunity; opportunities come. But Indian cinema is suffering from mediocrity today. We do not have scripts that can make a mark on the international stage.

Hosanagar: How do we fix that?

Irani: I wish there was a quick fix....

Hosanagar: What is the underlying issue? Is it that good scripts are not being green-lit? Is it that good scripts are not being written?

Irani: I think good scripts are not being written. There were some very important films that were made last year. It was like a good French wine year for cinema. But not one of those films could hold its own internationally. Sometimes good scripts need not be [successful]. But if there is a plethora of great scripts, at least a few will get green-lit. If there is just one great script hanging around somewhere, nobody's even going to know. There has to be a plethora of great scripts coming from every angle because, from that, five or seven good films will come out in that year. But we don't have great scripts.

Hosanagar: Do you think the industry is not nurturing writers?

Irani: Yes. But, of late, there have been attempts. We are moving in the right direction and certain people have been working on it with great sincerity. But, otherwise, the scripts that are being green-lit are about business.

You have a great script, come to me. But those great scripts aren't really internationally great. I'm not saying they should be winning Oscars. But they should receive respect and credibility across the board -- across the world -- in festivals. Oscars are not the ultimate thing. We believe that only because we have grown up on Hollywood films. I think we can do well internationally. We have the talent. We might not have the education.

Hosanagar: Let me switch gears for a little bit and talk about your recent participation in the TV side of media. You've had your own show. Can you tell us a little bit about how TV as a medium differs from cinema? What are some interesting challenges you face there? What were some of the factors that motivated you to move in that direction?

Irani: I think when you talk about TV, there are two types of television. One is the soap. Let's not talk about news because it's not about entertainment, even though news is very entertaining these days. The other is the reality show. The soap to my mind is a little regressive; the reality show is sensational. I had been offered a few reality shows and I have no problem as long as they entertain people the right way.

This opportunity -- "The Achievers Club" -- came along and I ... asked the studio head: "What is the idea behind this program?" She put it in a nutshell and said something that made me agree to it immediately: "It should be like a handbook for young entrepreneurs to become achievers." The moment she said that, I said, "OK, done. Let's do this. We won't get great ratings. We won't get great advertising. But what we will have is respectability. If there is a generation of youngsters watching and one line that can influence a young mind, I think victory is ours." [I asked Infosys chairman emeritus N.R. Narayana Murthy]: "You're a rich man. What's your definition of money?" He said: "The power of money is the power to give it away."

Hosanagar: I remember that.

Irani: That shook me completely. I said it changes a young man's perspective. I got some wonderful reactions for that.

[UTV Group founder and chairman Ronnie Screwvala's] crew said on the show that to fund your first project may be easier than funding your second project and he gave reasons. [Screwvala] was the first cable operator in India; look where he is today.

I think it's important that we highlight achievers, not famous people. Successful achievers need not be famous and all famous people need not be successful. I feel that everybody wants to become famous at some point. The people who came on the show didn't have to be entrepreneurs. But their lives had to have an impact on the youth of India. I would be [like] a little schoolboy sitting and listening to these people [talking about] what they're doing and their philanthropic work. It makes you feel small and that's a good feeling. One should feel small, only then can one grow. I used to happily feel small and dwarfed by all these wonderful people.

Hosanagar: Do you have an interest in the business side of cinema?

Irani: Baby steps. I am a creative person, so I write and direct. My interest in the business side is not necessarily to make money. It is to protect the creative person in me. I will not let an entrepreneur twist my arm to make the kind of cinema that will make him money. So if I am making or losing money, I would like to be a producer so that I can protect myself as a creative person. That's a stupid policy to have, but that's what I believe in.

Hosanagar: It's not uncommon for a creative person to say that. Finally on a lighter note, what's your favorite movie of all time?

Irani: You know, you are going to be very disappointed because you are not going to get a very intellectual answer. It is "The Sound of Music."

Hosanagar: Why? That's a really nice movie.

Irani: Because it brings back fabulous memories of innocence. I think it's one of the most innocent movies ever made. It's about the genesis of music, which is very close to my heart. It's shot magnificently. It is great cinema, but it is cheesy cinema that was actually palatable. When I watched it after many years -- I watched it again recently -- and the moment the titles came on, I had tears in my eyes because that movie pulls. There's something very special about that movie. I'm sure people who believe in cinema will say "What a bad choice." But I don't care.

Hungry for Growth, Arabic Foods Taste Success in Global Markets

Tue, 30 Apr 2013 12:00:00 EST

Few businesses can claim as meteoric a rise as Just Falafel, an Arabic restaurant chain. From four stores in 2010, the Abu Dhabi-based firm had more than 650 franchises across 15 countries. Sales have grown from 18 million dirhams (US$5 million) to 45 million dirhams (US$12.2 million) between 2011 and 2012. The firm receives up to 300 franchisee requests on some days and it has nearly a million Facebook fans. "We are growing exponentially," says Fadi Malas, Just Falafel's founder and CEO.

Malas is one among a clutch of Middle Eastern entrepreneurs that are successfully persuading palates in the west and elsewhere to Arabic fare as healthy alternatives to fast foods and a worthy complement to other cuisines. Others include Saudi Arabia's dates and gourmet foods company Bateel, Lebanese confectioner Patchi, and a Dubai-based shawarma chain Wild Peeta. The recent Gulfood event in Dubai drew 4,200 exhibitors from 110 countries, a record in its 26-year history.

Even as the new brigade of Arabic food marketers stress the health attributes of their offerings, they face several challenges as they grow. For one, many western consumers view Arabic foods as "street food," a perception rooted for some in the Middle Eastern food trucks at university campuses in the U.S. and elsewhere. Second, established competitors could raise concerns about the quality standards and hygiene of Arabic foods. To overcome those, Arabic food marketers must spread awareness about the health benefits, pay close attention to quality, secure the best locations and avoid head-on confrontations with entrenched players, say experts at the Wharton School and elsewhere.

Marketing channels in the west differ significantly from those in West Asia and elsewhere, notes Barbara Kahn, Wharton marketing professor and director of its Jay H. Baker Retailing Center. As Arabic food chains face competition in new markets, they need to understand local market practices, retail supply chains and appropriate pricing, according to her. "These are very important issues and the reason other companies failed (e.g., Carrefour, Walmart, Tesco) at least initially when entering new global markets," adds Kahn, whose research interests include brand loyalty and consumer behavior in seeking variety.

Big Growth Lies Ahead

The gains could be large if Arabic food marketers get their global growth strategies right. Worldwide, Middle Eastern full-service restaurants are poised to grow their combined revenues from US$31.5 million in 2011 to US$42.2 million by 2016 (based on 2011 exchange rates), or nearly 40%, according to Euromonitor International, a London-based research services firm specializing in consumer markets. Middle Eastern fast foods are on a faster growth track, and Euromonitor forecasts a 73% growth in their sales, from US$15 million to US$26 million between 2011 and 2016. They will see their biggest growth in their home markets of the Middle East, Turkey and Africa, followed by Western Europe, Australasia and North America, according to the data projections.

Just Falafel's Malas is acutely aware of the big markets that await Arabic foods, and the obstacles on the way. A former banker who last worked at Chase Manhattan Bank in London before turning entrepreneur in 1996, he chose to innovate his way into new markets. Traditional falafel is a deep fried vegetarian ball of chickpeas or beans wrapped with salads and sauces in a pita bread. Malas sees his falafel sandwiches fitting in nicely with the growing shift to vegetarian foods and as "an addition to existing food categories instead of eating away [market share] from burgers and pizzas."

Malas "reengineered" the falafel to develop some 10 variants to suit different cuisines like Italian, Mexican, Indian, etc. He did have to overcome "resistance" from skeptics as he introduced falafel burgers and other fare. Getting prominent retail operators to open Just Falafel outlets was also difficult because of the street-food perception, he says. Eventually, acceptance replaced skepticism, "and we proved we can innovate in food," he adds. Today, he works 18 hours a day to keep up with the expansion pressure, and has a staff of five processing franchisee applications.

Just Falafel's network spans the Middle East and the U.K. This past January, Just Falafel opened an outlet in London's Covent Garden. It plans 19 other branches in the U.K. and Ireland, including in university cities like Cambridge. Next, it is looking at India, where it is putting together a joint venture to open outlets in Mumbai, Chennai and Ahmedabad. "India is a sweet spot for us, where half the population is vegetarian," says Malas. He also sights the U.S., Canada and Australia as his near-term growth markets.

Health Benefits Lead the Caravan

The record attendance at Gulfood is evidence of the expanded global market for Arabic foods, says Mark Napier, its show director. The event drew more than 75,000 trade visitors from the food industry. "Many of our international visitors come to Gulfood explore new Middle Eastern flavors that they can introduce in their home markets," he says. The number of exhibitors from the Middle East looking to trade in global markets has grown exponentially, he adds.

Napier says the health benefits of Arabic foods were a big attraction. Arabic foods use ingredients like olive oil and sesame seeds that have a multitude of health benefits. Dates are a local delicacy, and are popular for their sweet taste and their nutritional properties, as they are rich in amino acids, dietary fiber, essential vitamins and iron.

Of late, people have begun to recognize the health benefits of camel milk, consumed both plain and as an ingredient in gourmet chocolates, says Napier. Camel milk is witnessing rising demand in United Arab Emirates (UAE) supermarkets and restaurants, he says. The Food and Agriculture Organization estimates camel milk trading could be worth $10 billion in the near future, he informs.

"Consumers are getting more adventurous in the type of fast foods they are eating, especially falafel, and we are seeing chains from the Middle East gaining critical mass," says Michael Schaefer, head of beverages & foodservice at Euromonitor in Chicago. Middle Eastern foods have been around in the U.S., the U.K. and Western Europe for a long time as fast foods, but Schaefer now sees more attempts to make them mainstream.

Building Global Brands

The growing popularity of Arabic foods is good news also for Wild Peeta, a four-year-old Dubai-based firm founded by two brothers. Wild Peeta's specialty is shawarma, a Middle Eastern grilled meat preparation shaved of vertical, rotating spits and served with breads and salads. "We wanted to create the world's first global shawarma brand," says Mohamed Parham Al Awadhi, a cofounder. "It is the most popular sandwich thanks to the Greeks, the Arabs and the Turks," he adds, referring to shawarma's patron base.

Al Awadhi wants to grow his brand's popularity, but grow its retail footprint cautiously, chastened by some early setbacks. Wild Peeta initially opened two outlets in quick succession, but they did not take off as planned because of wrong location choices and had to close, he says. "We grew too fast and didn't give ourselves too much time to learn," he adds.

The initial experience "grounded" the Al Awadhi brothers. Wild Peeta reopened in Dubai in March at what Al Awadhi rates as a better location; he says it is less expensive than the first two and more accessible. It plans to open a second outlet, but that will take shape after consolidating the gains from the current location.

Notwithstanding his caution in expansion, Al Awadhi is convinced that Arabic foods will find a bigger place among international cuisines, but that will take time to gain critical mass. "If raw fish found global traction and people are lining up to pay a lot of money for it, then we can sell Middle Eastern food," he says. "It took a long time to bring sushi to where it is today. Middle Eastern foods need time and they will be among the leading foods in the world."

Wild Peeta is actively using social media to promote its food, and has created an online community of loyal fans. As he eyes the U.S. as one of his future markets, Al Awadhi says he would choose places that already have Middle Easterners and communities "where people are open minded," listing San Francisco and New York.

New Markets, New Challenges

However, Arabic food marketers may face unfamiliar challenges in their new markets. "As with moving to any market, the vendor must learn local customs, cultures and regulations," says Kahn. "Many food chains have failed with moving to new global markets because they do not understand this." For example, the best locations will be most likely already occupied, she notes. "Putting a store in the wrong location can lead to failure - e.g. locations where people tend to work and not live, and hence do not shop for groceries." Here, understanding consumer behavior is critical, such as whether they drive and how often they shop, she adds.

Getting consumers to acquire new tastes is also not easy. "Changing consumers' food habits is very difficult," says Kahn. However, many ways exist to promote a new cuisine, especially if it is healthy and tasty, she adds. "Social media, public relations campaigns and food/restaurant events may help build awareness."

"If a company enters a new market and there is entrenched competition, the competitors will do what they can to thwart the new entrant," says Kahn.

Competition from international brands is familiar territory for Middle Eastern marketers, says Malas. His home market of the UAE has the second highest penetration by global brands after the U.K., he points out. "We already operate in an ecosystem that is at par with the most developed markets in the world."

Focus on Quality, Perceptions

Despite the new buzz around Arabic foods, Schaefer does not expect dramatic changes in how western consumers respond to them. The branding efforts of eatery chains like Just Falafel will elevate the perception of Arabic foods to "better quality fast food, not fine dining." He puts them in the basket of "fast casual" food chains, which have limited menus but with better quality than street food and fast food. He says Mexican food chains have done precisely that, and done it well.

Here, Schaefer cites Chipotle, a chain of Mexican eateries that is popular in many U.S. cities. Such chains have emphasized the use of fresh and high quality ingredients, and designed their restaurants for consumers to see their food made in front of them. "Chipotle came in and offered a fresh and simpler take on the process," he says, noting its "almost fanatical insistence and emphasis on quality and showing where the food is coming from." Nothing short of that model will help higher-quality foods grow demand in the U.S., he adds.

The growth will be gradual for Arabic foods in western markets, says Schaefer. The earliest converts will be in big cities like New York City, London and Chicago, where people are familiar with Middle Eastern food, he says. "Even a tiny fraction (in market share) is going to mean big numbers," he adds. "I see Arabic foods taking that path."

From New York to Tunis, a Daughter Returns to Foster Local Entrepreneurship

Tue, 30 Apr 2013 12:00:00 EST

As a graduate student at New York University, Alia Mahmoud was penning her master's thesis about the role of private sector development in post-conflict countries when Tunisia's revolution began. Although the country wasn't emerging from a war per se, she noticed similarities with her father's native Tunisia in transition and post-conflict societies. With the extraordinary circumstances paralleling her interests and work, she planted herself in the capital in June 2011.

Mahmoud says she's felt welcomed, and in her role as the managing director of the Maghreb Enterprise Development Initiative, affiliated with the Mediterranean School of Business, she dove into research and partnership-building around the entrepreneurial ecosystem in Tunisia. She speaks expertly about the lay of the entrepreneurial land and recently joined Microsoft Tunisia, where she wears two hats -- as director of the Microsoft Innovation Center, which incubates tech entrepreneurs and startups -- and as the citizenship program manager, where she oversees corporate social responsibility initiatives on youth employability and sustainable development. She is also a member of Global Shapers -- an initiative of the World Economic Forum that seeks to mobilize youth to have an impact on their communities.

An edited transcript of the conversation follows.

Arabic Knowledge@Wharton: How would you describe the entrepreneurial landscape in Tunisia?

Alia Mahmoud: I feel like even just the concept of entrepreneurship is something that is sort of new, in the sense that, even those who are entrepreneurs or have been entrepreneurs never considered themselves entrepreneurs until the whole post-revolution, Arab Spring lingo flowed in from the rest of the world, until all the donors wanted to support entrepreneurship and Arab Spring entrepreneurship and small-medium enterprise development post-Arab Spring.

I think that these people were already working, but were never put in this box of, 'Oh, you're an entrepreneur, what are you doing?' They're like, 'I have a company; that makes me an entrepreneur? OK.' I think also that there was a negative connotation for private sector, for successful private sector actors before, inevitably because it meant in some way that they were in cahoots with the old regime. So now there's this new wave, 'I'm an entrepreneur and I have nothing to do with the old regime.' Meanwhile, the very successful companies from the old regime have sort of been burying their heads, which has created this dynamic where you're seeing all the newbies being featured a lot more, which is interesting in a way because it gives them an opportunity to shine and it gives them an opportunity to maybe have access to opportunities that they didn't have before when they were in the shadow of those who were much closer to the regime.

But also the landscape has changed dramatically due to the influence of outside organizations coming in. As I mentioned, whether it's from the U.S. perspective or a European perspective, developing entrepreneurship in Tunisia during the transition has become one [of] the main goals at the economic level. So whether... they're working on high-level economic reform, whether it's with the financial system or the central bank or the stock exchange, on the ground level, everybody is promoting entrepreneurship development. So it's very quickly become a lingo… every program manager, every person visiting from these international NGOS is looking at entrepreneurship -- which I think is good and bad.

Arabic Knowledge@Wharton: What do you mean by the increased interest from outsiders in entrepreneurship development as being "good and bad?"

Mahmoud: Good, in the sense that we should be talking about entrepreneurship. I think it's a good thing in that I genuinely believe in the role of entrepreneurship in post-conflict countries or in-transition countries. Developing a local private sector that will drive the economic growth of the country, create jobs and hopefully boost innovation, I think it's extremely important.

But I think it's bad, in the sense where people come in with a mission to support entrepreneurs, so they'll go about labeling people as entrepreneurs -- maybe that's not what they need right now, maybe they're not yet entrepreneurs, maybe it's just somebody with an idea and that's fine. But there's this effort to sort of put everyone in a basket of, 'Oh, I'm working with entrepreneurs, I'm working with entrepreneurs...' We don't really have to call them that; supporting businesses is great, but I think because of the very wide application of the term, it's starting to lose meaning.

Arabic Knowledge@Wharton: So then, what or whom is an entrepreneur to you? Who's allowed to be called an entrepreneur?

Mahmoud: To be honest, it depends. I don't have a very strict definition of it... There are people that like to make the difference between an 'entrepreneur by necessity' or 'an entrepreneur by opportunity.' So there's a lot of people who don't want to consider an entrepreneur the guy who opens a store on the side of the road... There are others that only want to consider entrepreneurs those that are "innovative," which then brings me into a whole other issue that bothers me, which is how people like to define innovation. People come in with different concepts of what innovation is and in Tunisia, there's still this consideration locally that innovation has to be like a new shiny machine that like flashes or does something new, when really "innovative" can be something that has already been done all over the world, but it's never been done here.

So, I don't necessarily think that it's a bad thing to have a broad definition of entrepreneurship or to want to support entrepreneurs. I just think that people who come to Tunisia and want to do programs with entrepreneurs just need to be careful about the kind of impact that they want to have, and in what way they want to support them, because there are a lot of organizations -- they come and they do a program with them and there's not really a lot of follow-up, there's not really a lot of support or building of the local ecosystem. They come and they do a competition or they do a program, they do a training session, which is great, and then they leave. But what's the linkage with the sustainability of that initiative?

Arabic Knowledge@Wharton: How would you describe the existing resources available to entrepreneurs in Tunisia? What infrastructure is already in place?

Mahmoud: Whenever I think about an entrepreneurial landscape, I kind of think about it on three major levels. The first one is education. In Tunisia, there's a history in the educational system of prioritizing quantity over quality, which means that they wanted to churn out the highest number of graduates in elite fields, whether that be doctors, dentists, lawyers, engineers, all of the above, to be able to say, 'Look at how highly educated our population is, we have this many hundred-thousand engineers graduating, we have this many doctors.' Which is not a bad thing, You see the result whenever people used to talk about Tunisia, they used to cite the highly educated middle class population, which is not false. However, you can only grow these sectors so much to be able to absorb all of these engineers; it's not like we have NASA in Tunisia. What are you going to do with all of these highly educated engineers? And unfortunately, these people were never equipped with any entrepreneurial skills, they were technically equipped to be specialists, but they can't sit for an interview; they have no idea how to write a CV, how to make a presentation or... how to sell themselves or be creative. It was not part of the educational system.

And so that, for an entrepreneurial ecosystem, is extremely detrimental, because you're churning out people that don't have problem-solving skills, critical-thinking skills, the ability to work on a team; all of these things that were not prioritized by the higher education system. Which is why it is remarkable here: you talk to so many startups, who for the life of them, cannot find an office manager [to] manage the schedule, call the meetings, manage travel, pickup phones, be polite and cordial with people who walk in the door, write meeting minutes, share them among the staff, coordinate. You can find an engineer that can code a rocket ship more easily than you can find an office manager.

…In order to have a healthy ecosystem, in order for entrepreneurs to be able to thrive, you need to have a good banking system and also venture capital and private equity. Both of these things are lacking in Tunisia... There are far too few banks that run the show. There should be more banks providing more options and opportunities to entrepreneurs. Getting credit here, like in many other emerging market countries, is a nightmare because it's a very risk-averse country. Or I should say risk-averse financial sector. You hear nightmare stories from entrepreneurs about just getting a loan, they have to put a house down as collateral, or their parents' salary, or a piece of land their grandfather gave them, to get a loan.

The reason it's so hard is because there's not enough financial services at the early stage. For a startup, for example, it's hard to get seed funding, the first investor that's going to take that chance on you, 'I'm going to give you 100,000 dinars, because I believe in you,' that doesn't happen here. There's very few business angels, there's very few venture capitalists, that have that sort of financial liberty to be able to make those risk investments. There are a couple of seed funds that have popped up, which is good to see...

What they did here in Tunisia is they started something called SICAR, it's the French model [société d'investissement à capital risque] which is basically the rough French translation of venture capital. There are about 20 SICARs in Tunisia... there are essentially two different kinds of SICARs: the first one is a bank spinoff, a little agency called the SICAR of the bank, where technically this SICAR is supposed to take riskier investments that don't necessarily follow the bank's regulations of the credit requirements.

But the problem is once again, like the teachers, the SICARists are bankers and they were bankers and then they swerved into this spinoff. So they still think like a banker and they still read business plans in the mentality of a banker. And the other problem with SICARs is that... a bank gets a tax write-off for having a SICAR, but they don't have an incentive based on the success of the companies they invest in, they only have an incentive on the amount of money they invest. So what the SICARS will do is invest, but not necessarily in the best companies, not necessarily in the ones with the highest potential or the highest revenue and then they don't really follow up, because they don't really care. 'Whether you really succeeded or not is fine, it's just cause we can quote that we invested this much money.'

The other good thing -- good and bad -- the public sector has more than 15 financial instruments to help entrepreneurs. They've been created for all different ways of providing incentives for people to start businesses. They're good in a way because they work for some entrepreneurs. They're bad in the sense that there's too many of them; nobody understands really how they work and nobody knows really who governs them. It's this other thing that we've inherited from the old regime: when something is broken, instead of fixing it, create a new one. So you end up with this multi-layered bureaucracy of nobody knows who is responsible, who started it, and how it works. Which is why if sometimes an entrepreneur wants to take advantage of one of these instruments, they'll get shuffled around to 12 different offices and end up being so discouraged that they give up. So in theory these instruments are supposed to help them, and in reality, a lot of the times, they don't.

The one that works and that entrepreneurs generally like is called FOPRODI [Le Fonds de Promotion et de Décentralisation Industrielle]. FOPRODI is an instrument that helps them with their working capital. So a lot of the times in order to get a credit, you need 10% of the credit from your own personal capital. A lot of these entrepreneurs don't have any money. FOPRODI will give you that 10% of the credit that you're asking for and once you have the credit, that allows you then to get the investment from a SICAR or another investor. So it sort of helps the entrepreneur fill that hole in the chain of their financing that doesn't let them get any further, if they don't have it. So a lot of people say they need to reform FOPRODI and a lot of entrepreneurs say, 'No, don't reform it.' It's been around for 35 years, it's helped a lot of people start their own businesses. I think, in terms of finance, that's sort of what's holding it back. There are the public finance instruments; they don't work very well, there's a nascent venture capital scene, but it's still not there and then access to credit is very difficult.

In Tunisia, there are 26 pépinières -- a loose translation in English for incubator -- they're basically a public structure under the ministry of industry and technology, which is then governed by the agency for promotion of industry and innovation... [It] has this network of 26 incubators in every single governorate (there are 24 governorates, plus two extra in universities). These incubators are supposed to be available to entrepreneurs to be able to help them write their business plan, help them start out… It doesn't work the way it's supposed to; they're badly managed. The people who work there are public functionaries, they have no incentive to see the success of the person walking in the door; their pay doesn't change; their hours are never going to change; they're never going to get a bonus if, of the 12 entrepreneurs walk in the door, 7 of them succeed and start their businesses; it doesn't matter to them, so what's their incentive to do better?

On top of these 26 incubators, there are 24 business centers, governed by another agency. So [the incubators and business centers] don't actually communicate. The only difference is that the incubators are supposed to be in the sector of industry and business centers can be in any sector. Then there is something called the 'spaces for entrepreneurship,' which is another structure under another agency that is supposed to be a space for training for entrepreneurs. It's a public space [where] you can come find a mentor, you can get certified in these two specific trainings that say you have entrepreneurship training. On top of that, there's the vocational and professional training centers, which are governed by another agency.

It's confusing and completely unproductive. When I first came to Tunisia and I started learning, I thought, 'Whoa, this is incredible. On paper, they have this and this, it's amazing.' And then you start talking to people, you start talking to entrepreneurs, you start talking to people who work there, you start visiting them; you realize, 'This is not an incubator,' and the entrepreneur is telling you, 'I got shuffled between all five of them and ended up with nothing.'

Arabic Knowledge@Wharton: In light of the present economic and politic realities now in Tunisia, is it even a good time to be an entrepreneur? What challenges does the country now face?

Mahmoud: I think that one of the biggest struggles with the economy now, at least related to entrepreneurship, [is] the inability to attract investment right now. On the one hand, you have a deadlocked political system, where the opposition so badly doesn't want to see the ruling party succeed that they will block economic success to prove that they're incapable. So even people with maybe some good ideas and maybe some decent economic programs that they could push through, won't do it, because they don't want the success to be reflected upon the ruling party. It's to the point of pettiness where elections are coming up soon, 'We're not going to push something innovative and amazing through to boost the economy, because then that's going to make people think that Ennahda [the ruling party] is succeeding... So there's this pettiness that governs the political system, that basically leaves everyone in deadlock. It makes nobody want to make a decision, because they don't want to support the other side.

It's to the point where it's become, thus far since the [2011] elections, ingrained that politics is for them [the politicians]. It's about their success, it's about their sustainability. It's not about, 'Put the people first, put the country first.' It's about, 'What about me and my party? [People ask] aren't you guys supposed to have the mindset that you're here to change the country, you're going to be revolutionary, since you were voted in by the people for the first time? No, they're already getting comfortable, they're already behaving as, 'We're here, not really showing anything, not showing any results.'

That prevents foreign investors. When they look and they see that the political situation is deadlocked and nobody is making any moves, that prevents foreign investment. People don't want to invest in a country like that. Plus, they want to wait and see what happens in the elections... So if the political situation can improve, at least in the sense of prioritizing economic development and foreign investment over their petty political problems, I think it could actually get somewhere. But they're not.

The other problem -- the inconvertibility of the dinar -- is going to have a detrimental impact as this country grows. The Tunisian dinar is unconvertible, in the sense that, I cannot take my dinar outside of this country. When I leave Tunisia, my Tunisian dinars are completely worthless. I cannot fly to Paris and arrive with 300 dinars and transfer them into euros. I can do it in Tunisia, with difficulty. So that means, what's the incentive for foreign investors to gain dinars? Why would I invest in a country where my only return on my investment is going to be in dinars? Let's say I make an incredible investment and I'm a risky investor and I come in from the U.S., and I make a million dinars... then what? How do I get my money out of the country? Nobody is going to take them. Nobody is going to change them. So, in the long-term it's going to become a bigger and bigger problem, and it's going to once again prevent foreign investment from coming into the country. Because the only thing you can do with your damn dinars is reinvest in the country, which is OK, I could buy a building, which could then make money; then maybe I could start a bank account that has double currency, which then I could technically bring in my dollars and spend dinars; there's ways about it in the longer term if you're an investor that wants to stay, that wants to buy property, that wants to build a factory. But for somebody wanting to come in and invest in companies, invest in entrepreneurs, invest in startups? No way.

The other thing, in terms of the unemployment issue in the economy, is that the hiring and firing policies are ancient. In order to fire someone, there's an extremely long procedure, something along the lines, once again speaking generally, you have to give them a letter a month in advance with a warning, and then another letter, and then another warning, and then they can't come to work, it's like a suspension. The firing process is so unbelievably tedious. And financially for the company, it has to pay when they fire, six months of an employee's salary after they fire them. It's like a severance package, but for firing.

So there's no turnover in the job market, think about it. [For] a new green, motivated, innovative, smart graduate, there's no opportunity to be recycled in the job market because the useless, old, unproductive worker who has been in the same job for 20 years can't get fired, because in order for them to get fired it's a huge financial loss for the company. It's a disincentive for the company to fire them, then they start rationalizing, 'Why would I fire them? I should just keep them. It's not like they're losing me that much money, they're just not being very productive.' So then you end up with an unproductive working population and then a potentially much more productive unemployed population. And unless the labor laws and the labor code changes, guess what? When would a labor code ever change with a deadlocked government? So they go hand-in-hand.

Arabic Knowledge@Wharton: What are you doing in your role at the Microsoft Innovation Center to help facilitate entrepreneurship amidst such conditions?

Mahmoud: The purpose of Microsoft Innovation Centers [MICs] is really to serve as a community center, especially for the populations of universities, students, developers, people who are obsessed with technology, passionate about technology and IT professionals. So the MIC in Tunisia serves two purposes. One is that we have all of our programs for startups, for students, for developers, but at the same time, it's a professional space where our partners -- a Microsoft partner is either someone who sells Microsoft technology or does service to support Microsoft technology -- can come and use the center. The nice thing about the MIC in Tunisia is that it really has become a space for startups, not necessarily all MICs, let's just say it's not a global mission for all the MICS to support startups. It's much more about developers and students and technology, people who are obsessed with technology.

What I like about working with the Microsoft Innovation Center is that I can have an impact on the entrepreneurial ecosystem in a narrow way, in a specialized way. You work with people in a specific sector, with specific skills and specific talents that you can complement based on the core business skills of Microsoft. It's very give-and-take in the sense that: 'You want to develop software? I have the software you need to develop on. You need expertise in this software? I have the expertise to give you.' It's a matching process that makes a lot of sense. It is much harder to do when you're an NGO. When you're a company, you have core operational competencies. We are Microsoft, we are an IT company, we are specialists, in such and such technology; you're a startup, you need that expertise, or you want access to that software, or that tool or that thing that will be able to take you from unknown to having a full-developed product. We can fill in that gap. And I think that's the remarkable role that companies have to play in developing the entrepreneurial ecosystem in Tunisia. It doesn't only have to be NGOs providing sort of generic entrepreneurship training. It can be companies that are specialized in HR providing HR tools to a company that needs HR tools to develop.

Arabic Knowledge@Wharton: What are the areas of growth where entrepreneurs could have an impact? For instance, is it in mobile and web applications or is it software or other areas?

Mahmoud: Apps, definitely. If there's any reflection of the 21st century, it's the rise of applications and smartphones. Think about the potential of an app. I'm a student and I'm a developer, and I'm really good at developing and I hook up with Microsoft as a 'Microsoft student partner' and the guy who mentors me -- he's called the 'technology evangelist' at Microsoft, it basically means 'the geek' -- knows everything about all the technologies, about the coding, about the development, about how you go about it. You match up with him for your final project in your senior year. You code an app, you make an application that's relevant to people around the world, whether it's facilitating the access and the use of another Microsoft software -- the most interesting thing is when people create an app to make a Microsoft software more easy to use. It sounds funny but that has global implications rather than developing something just for Tunisians, which is also cool. I like seeing local apps where it's somebody created [a version of] the local card game called rummy -- we play a card game in Tunisia called rummy, it's like gin rummy but it's a lot more complicated -- it's a very Tunisian thing that nobody else would care about, but Tunisians love it.

Other than that I would say IT definitely, the medical sector, pharmaceutical and tourism, [there's] so much potential. It's not necessarily a bad time, as long as you're not looking for foreign investment. In a way, it almost has a positive impact on developing local investment, because there's nowhere else to go. If that means a local angel business association creates successful businessmen, which has happened, that's good. It's not easy.

Reaching Out to Africa's Poorest Heart Patients with Mobile Cardiology

Tue, 30 Apr 2013 12:00:00 EST

The central African country of Cameroon is slightly larger than California, and home to more than 20 million people. But for the entire population, there are only 30 heart surgeons available to help those suffering from cardiovascular disease and virtually all of them are located in the two largest cities. For those patients with heart conditions living in remote areas, they must endure arduous treks to reach a specialist doctor, sometimes exacerbating the patient's health condition. The Cardiopad is a device inventor Arthur Zang developed to help reduce the risk to such patients.

An edited transcript of the conversation follows.

Arabic Knowledge@Wharton: Can you tell us what the Cardiopad does?

Arthur Zang: The Cardiopad is an embedded system for medical use. It's a medical tablet PC with several features. It can perform electrocardiography (ECG) examinations of patients to acquire cardiac signals from the patient and then to filter, process, display, and print a report of the examinations. It also provides the transmission of test results from the ECG examinations via the GSM network to the remote cardiologists. There is also a presentation of an intuitive user interface to the cardiologist for computer-assisted diagnoses. This task is to process the ECG signal to extract the information for diagnostics and present this information to the cardiologist via a man-made machine and user-friendly interface. In addition, there is also data storage capabilities and management of ECG exams [to provide notification when a patient's exam is due].

The Cardiopad will be able to store information related to ECG examinations in a database with messages and notifications, which will be sent to the cardiologist through the GSM network to inform him or her of the presence of a new examination to interpret.

There is also remote and real-time monitoring of patients. The Cardiopad will allow for remote monitoring of patients by the cardiologist whereever he is. The cardiologist may consult the current state of a patient's health in real time.

Arabic Knowledge@Wharton: How does it work?

Zang: The Cardiopad is very simple to use. Suppose that we are in a district hospital where there are no specialists in cardiology. What happens is the patient arrives in a district hospital where there is no cardiologist. Using the Cardiopad, the nurse performs an ECG examination. The ECG examination data is then transmitted to the national data center where the data is stored in a server.

The cardiologist who follows the patient is notified by a message on his Cardiopad that there is a new examination data available. The examination results are then downloaded from the data center to the cardiologist's Cardiopad.

The cardiologist interprets the examination using Cardiopad's computer-assisted diagnostic embedded application. The diagnosis of the cardiologist is uploaded to the national server through a GPRS connection.

The diagnosis and prescriptions of the cardiologist are downloaded from the center to the Cardiopad of the nurse, who is then notified of this by the software program. The nurse communicates the results to the patient and the treatment required.

In order to do a cardiac examination with the Cardiopad, it requires two accessories to acquire the patient data. There are four electrodes that acquire the cardiac signal from the patient and an ECG wireless sensor transmits the signal to the CardioPad where the examination is done by a set signal processing operation applied on the signal.

This method has advantages because cables don't get tangled up, multiple tests can be performed simultaneously, the patient won't risk an electric accident and it allows the patient to move without stopping the recording so the patient has mobility.

Arabic Knowledge@Wharton: Can you tell us about some of the challenges of getting an ECG in a heart specialist's office in Cameroon?

Zang: In Cameroon, there are very few specialists in cardiology, and they reside only in the biggest towns and work only in central and general hospitals. In Cameroon, there are fewer than 40 cardiologists for more than 20 million inhabitants and these cardiologists only work in the two major cities of the country, Douala and Yaoundé.

The consequences of this problem are disastrous both medically and economically. Indeed, patients living in rural areas must often make long trips to reach experts resulting in greater risk, time and money. The costs of examination and treatment are compounded by the cost of transportation and housing. All this contributes to a deteriorating quality of patient monitoring by specialists, which possibly increases the mortality rate for cardiovascular disease.

Arabic Knowledge@Wharton: How did you become interested in medical uses for your invention?

Zang: It was in 2009 when I was a student in my fourth year in the Polytechnic National High School of Yaoundé that I did an internship in a hospital and I discovered that there were only 30 cardiologists for all of the country. From that day onward, I have worked on a solution that will help cardiologists monitor their patients remotely to facilitate the work of the cardiologist and [improve the] life of the patients living in rural areas.

Arabic Knowledge@Wharton: What are the differences between the Cardiopad and the traditional electrocardiograph?

Zang: The differences between the Cardiopad and other electrocardiographs in order to perform an ECG exam with the Cardiopad, the patient is not physically connected to the device because the Cardiopad use a Bluetooth wireless connection to connect with the patient.

The result of the examination can be sent to a remote device from remote diagnosis using a GSM/GPRS/EDGE/3G wireless module, which is integrated inside the Cardiopad.

The Cardiopad can also be used as a scope, or electrocardioscope, to monitor a critical patient and it can also perform an ECG. The Cardiopad also has an embedded digital cardiology encyclopedia named Cardiopedia. It's a 5,000-word-encyclopedia in a software program that can be used by the nurse or the cardiologist for a computer-assisted diagnosis.

Arabic Knowledge@Wharton: In some parts of Cameroon, there is the challenge of electrical supply. How does the Cardiopad cope with that issue?

Zang: The Cardiopad has a seven-hour autonomous battery that can be used economically. An ECG examination can be performed on a patient in just five minutes.

Arabic Knowledge@Wharton: What is your next step?

Zang: In order to manufacture our products in industrial quantities and deploy our solution on a national and continental scale effectively, it is obvious that it is absolutely necessary to have an industrial-sized hand coordinator. This is why I created a company called Himore Medical.

Himore Medical is a company that designs and manufactures medical-embedded systems, such as autonomous electronic and computer systems, for use [in the healthcare industry]. It also provides medical services to hospitals by providing the necessary equipment to perform remote examinations at low prices.

This business consists of several engineers and specialists of all stripes working together in order to find technological solutions to the problems that are the most devastating public health [issues] in Africa, such as malaria, cardiovascular disease and many more. We have four employees who are essentially researchers and engineers.

In addition to product development, the Himore Medical Team provides technical support services to Cardiopad users.

Arabic Knowledge@Wharton: What are some of the challenges of inventing in Cameroon?

Zang: There are several difficulties in Cameroon when it comes to invention. One of them is that first of all, there are no funds for the research and no venture capital. Also there isn't a culture of risk. People want to see the things work before [they] believe and participate [in the projects]. And that is why it is very difficult. People here are must interested in the realization [of a project rather] than the idea.

Hanan Abdel Meguid: Choosing Personal Happiness and Career Success

Tue, 30 Apr 2013 12:00:00 EST

A small caricature painted on glass hanging in Hanan Abdel Meguid's office features her garbed as a superhero, riding a surfboard above a big wave, her voluminous locks blowing out. Over two decades, Abdel Meguid, has lived out this spunky spirit as a tech entrepreneur in Egypt. She founded several high-performing firms and currently serves as CEO of the Cairo-based OTVentures, where she oversees 700 employees working in online and mobile technologies. A subsidiary of Orascom Telecom, the company has exclusive partnerships with MSN, Facebook and more than 90 content providers, as well as offices around the Middle East, North Africa, South Asia and North America. She previously was chief solution officer at LINKdotNET, one of the largest Internet service providers in the region, and CEO of its spinoff software development outfit, LINK Development.

This is the second of two parts of this interview. The first part can be read here.

An edited transcript of the conversation follows.

Arabic Knowledge@Wharton: Can you give us an example of how having less cash pushed you to be innovative in running the companies?

Hanan Abdel Meguid: Actually, it applies to everything including creating the right culture to attract talented people, because we had the problem of not having enough money to kind of attract the right talent and you had the competition from a lot of big companies that used to pay more. And our way to fight back was creating the right culture. Khaled Bichara, our CEO, used to start the meeting with the statement, 'Every day feel that we're going to do something different and be different.' And we used to have events where we eat together, have some time out together. Again, we did not have a lot of cash to spend, be it to give out great salaries or amazing benefits, but we arranged a lot of these events that built us the right culture and attracted a lot of talent.

Because cash was not available, we grew our business in an incremental way. For example, we had an Egyptian operation and we were dreaming of going to the Gulf. 'OK, for us to go, we have to get a big contract, but we are a small Egyptian player, how can we get this big contract?' We kept on trying -- actually, the contract that got us go to regional was a Microsoft support contract -- and while pitching for it, it was kind of a crazy dream, because we were up against very big companies and we did not even exist over there.

Based on this contract, we went to the Gulf and then got other businesses and it was very incremental. We did not have a problem stretching or not having luxury -- we persevered and reached our goal. We were very keen on our cash. We did not want to use it except to deliver value to the business and growth, so if we get enough, we don't go and spend it on something. We spend it on machines. This meant a lot of sacrifice, while other people working for the IBMs or for the big companies were living a totally different and easy life.

Arabic Knowledge@Wharton: How do you cultivate a work culture that's cohesive and people feel like they want to be here? How do you lead others?

Abdel Meguid: I believe that engagement is the most powerful tool in leadership. Engagement starts with having open communication around everything. For example, in my company currently, I meet every week for three hours with all the senior members, where we share the overall numbers across the big projects that we're working on. What is being cooked, the failures, the successes. So you engage into the problems that you have and actually, one of the great things that when you share sometimes problems with people that are not related to these problems, sometimes they get so creative. (For instance) if we have in this area, restricted cash and in this area and this is creating a very big problem for us, you'd find a person (and say): 'OK, why don't we do this service in this part of the world'...you get all kinds of creativity and innovations. So the engagement is starting off by sharing openly all the facts and the strategy and the issues and the areas of improvements that we need to have, so that when you come to a meeting on one-on-one and we start discussing why are we doing this, you kind of have all the background information needed for you to have the mindset to think. So, engagement is extremely big. It's not command and control by any means.

I think this has always been my kind of leadership style... I don't give the aggressive front. Sometimes when I take the very tough decisions, people are very greatly surprised. When I reach the right decision, I don't have at all a problem implementing even if it's very tough and this is sometime surprising for a lot of people, because I give a very softer interface.

Arabic Knowledge@Wharton: What do you tell up-and-coming entrepreneurs?

Abdel Meguid: Focus on what you really need to build. This is the essence. Actually, sometimes you face people: 'I want to be on to entrepreneur.' 'What do you want to do?' 'I want to do something big.' 'What do you want to do?' 'I want to-' 'Fine.' The target is the passion for the idea or the thing that you want to implement. The target is not to be there or to take the funding, it's for you, you see a gap and there is a passion that you want to do or you see a gap and the society that you need to bridge with your technology and you leverage this kind of funding and this kind of support for you to make it happen.

Focus on your product, focus on your passion, focus on the idea that you want to develop and everything else will come, honestly, everything else will come. I am a big believer that it will be tough, it needs a lot of perseverance. There is a big advantage also that I have to mention that we are much open, we did not back then have the Internet. Actually, I go to [university] graduation projects presentations and I found the guys, not only that they finish the project, and there are people in the States and Europe using it and they have all kinds of feedback on it, so you start with an accelerator because the world is much, much more... People were talking about globalization, it is happening. You have a company in Alexandria doing an app that made tons of success across the world, so the mobile revolution and all the marketplace is open and you don't need people in the middle. All you need is the really good idea and good execution and the world is yours.

Arabic Knowledge@Wharton: You've witnessed the development of the IT industry in Egypt over the past 20 years. How do you see technology and digital business shaping the future Egyptian market?

Abdel Meguid: I think it will play an instrumental role in our in economy. Maybe, it will take us a few years, but the market is for the first time and I actually not only in Egypt, in the Middle East, when we used to work in online advertising and in software online services, online commerce, it used to be very small kind of business and even to our holding company now, when you see the numbers, you say, 'Fine, these are good numbers, good growth,' but it is not the big business. Nowadays, the market has grown so much. The usage of the technology and the Internet and the level of engagement and also the Arab Spring and everything it validated for a lot of businesses and old school kind of thinking that people are there and it's a serious market. So the numbers and it is becoming sizable. The opportunities again, to innovate and to deliver bigger value during the coming five years, it's going to be tremendous, in my opinion.

Arabic Knowledge@Wharton: What are those areas that you see as having potential in Egypt or the region? How can that innovation be facilitated?

Abdel Meguid: I am hoping that we take this to the areas of health, education. Technology can present a big vehicle for quality of life improvement. I participated in the e-government project in Egypt. And for me, it was kind of a dream to see this come true and I still believe that this is our vehicle for improving the quality of life and for delivering, because again, as a country, we don't have a lot of cash, we don't have a lot of resources, so we need a lot of creativity, so that whatever resources we have, if we have good teachers, we want to make their efforts go to as much as needed across the country. If we have health resources and investments, we need to make sure that it spreads, so if we have some information and a bit of projects, we need to make sure that it goes to the best people out there in the universities. I believe that technology is not for us, kind of another fluff or luxury, it's an essential creative tool, so that we use the scarcity of our resources to maximize our potential. And I am sure that this will happen because I see the youth in the country are just amazing.

I think we lack the funding and this is something that is, again, like I say, it's going to improve with the presence of a big market and with the stability that we will witness, hopefully. The expertise, nowadays we find a lot of people who I call them the 'human bridges' with the West, because it is more than money. You find a lot of Egyptians, a lot of Arabs that are working abroad and with the opportunity that exists currently in the Middle East, you find them a come exchange and invest and work with youngsters. And this is a very big opportunity because if you have these human bridges, by default enjoy a lot of access to expertise. The Internet made it much much easier to access the knowledge and the access the know-how and again, like I said, we need a lot of maturity in the ecosystem for us to learn. But that's happening and I'm optimistic that it is going to happen.

Arabic Knowledge@Wharton: How did the revolution impact OTVentures?

Abdel Meguid: Definitely in Egypt, it's affected, but the thing about OTVentures is that because we are regional and we are spread across different types of businesses, and that's it grew up to be by design because we're hedging to our bets in this volatile region, so we survived much better than anyone else. So what we did is we rotated a lot of our resources and a lot of our attention to other countries and new domains to manage the effect. But definitely, the effect in Egypt, as far as the online advertising, as far as the software development division that we had and a lot of mobile services, of course, we've had periods where life totally stopped, and so it definitely affected our numbers but I believe that the effect will be an acceleration in the coming years, because it validated the use of technology and the importance of technology in our society. It kind of did the awareness that we needed in all cases. You find a lot of people, maybe if they don't kind of take their money out of their pocket now, but you'd find the interest is amazing to have discussions on what can be done and how can we do that and what are the different things. So, once the situation is restored, I'm sure that we will accelerate, not [just] move forward.

As far as the online advertising, actually, I have to tell you that although, for example, there were periods of time where the industry was frozen and nobody was spending money until the situation cleared out, and when they woke up, the offline and the traditional marketing budgets were cut, but online marketing had increased and even persisted, from the businesses that we deal with.

Arabic Knowledge@Wharton: In this evolving climate, where do you see OTVentures headed? Where do you want to take your business?

Abdel Meguid: We intend to leverage the regional reach that we have and to leverage the online and mobile reach that we have within our countries, to act as kind of the launching pad of the local innovation that we have across not only Egypt, across the Arab countries that we operate in, and also, we like to position ourselves as the gateway for international companies that want to operate across the Middle East region because our region is a very interesting region, but it's fragmented. To have any decent operation here, you have to operate in several countries and with different conditions.

What made me start my company is I'm always infatuated with the concept that you have all these big international companies that stood the test of time for years and you don't have a lot of local companies. That's why I'm a very proud member of an Egyptian company with Egyptian people, and Egyptian money. I always tell people, 'OK, we are a showcase, and it's a very clear example that it can be done, so, I'm sure that you'll do even a greater job than us, and that's for sure.'

Arabic Knowledge@Wharton: You said entrepreneurs will serve as 'saviors' -- what do you mean by that and how is that going to help?

Abdel Meguid: Let's face it, we have the bureaucracy of the government that will never change. I have to tell you, and I know that people will not like this, but I cannot say in some of the ministries, especially in the IT and the MCIT [ministry of communications and information technology] we had a lot of great revolutions happening, but now, with the bureaucracy and fear and a lot of uncertainty, I can safely say that you cannot count on the government to move you forward, you have to count on entrepreneurship and the ecosystem that will exist to move you forward if you want to do anything. I know that even in the big companies, of course, they need to operate a good business in Egypt, so I'm sure that a lot of them have lost a lot of money and a lot of momentum. So entrepreneurship is going to push a lot of people as a way to create your own future. I see this happening to a lot of the newly graduated people, because out of need, because there are not a lot of available jobs, they just go out and they have a lot of energy and passion and they're channeling it into these new ventures, so I think something great will come out of this.

When the door is closed, you know that you have to get out and do something, so I think this will play to the advantage of the entrepreneurship.

Arabic Knowledge@Wharton: What do you think about gender dynamics in the tech world and women joining the sector?

Abdel Meguid: Actually, one of the interesting things is when I started talking [at events and programs], you know because I'm a woman and in technology, I always tell them I don't like to be different, and there's a statement that I love which is, 'I'm unique like everybody else.'

I think I'm different and I have a lot of confidence in myself but I'm not a special case as a woman. I hate someone to treat me like a special case, and I hate woman who like to be treated as a special case. And maybe this is something that a lot of women will not like, but I think positioning yourself as a special case is not always appreciated from my side, so I get invited to a lot of conferences where they talk about women and they keep on asking me about women stuff.

So recently, I felt that being there and just giving out these features. It's just that sometimes they just want to see that this can happen, you know, and this can happen and you're normal. It's very strange that there is a picture of a woman, a successful woman in everybody's mind that either she's not, she doesn't have a married life, she will never have kids, or she will always be a kind of a stereotype of very rough, especially if you work in technology or this domain, you're not working in as an artist or something, you're going to look ugly. So it hit me that just being there and discussing, just telling them, 'Guess what? I'm normal, I'm not a special case. I'm there, I did it. So probably, you can do much more.'

Arabic Knowledge@Wharton: You've had this long, flourishing, demanding career alongside caring for your family. How do you maintain or balance the various facets of your life?

Abdel Meguid: You have two kinds of people. One, who is always trying to strike a balance. I say there is no balance; there is a choice, that is my way of approaching it. The second types of women I have seen are the kinds that live in denial. 'I don't have dual responsibility. No, he has to help me. We both have a job,' etcetera.

Both types, I think, end up very destructive because in my book, we as humans need to have balance and appreciation both at home and at work, and for that you need to live a good life. You don't need the feeling that your work is cannibalizing your personal life and then because your personal life, you are unable to pursue a career. They need to coexist in love, the work and the personal aspect. For you to do that, you have to recognize and acknowledge your dual responsibilities.

In our part of the world, maybe it's different somewhere else, but you have to make sure that the house is clean. You have to make sure that there is food. You have make sure that your kids are learning, and their details are settled. He will help, but it is your core kind of thing.

Arabic Knowledge@Wharton: Well, how is that different than striking a balance?

Abdel Meguid: Because striking a balance, in my book, means that you want to be able to do everything. The reality is you will not be able to do everything. Striking a balance means, 'I want to be very social. And I want to see my friends and I want to see my families. And I want to do that.' So for me, this is the kind of balance that a lot of people are seeking, while it's never going to happen. It's a choice and you set your priority. I set my priority on my husband, my kids, my immediate family, mother, father and sisters. And I know and I don't torment myself on my ability to be really social in any different way. So I am very strict in the kind of social gathering that I attend, and I tell everybody, I love people and this is sometimes difficult, but I know that I have to make choices.

Arabic Knowledge@Wharton: How does your husband deal with you being very successful in your career?

Abdel Meguid: When I knew him in the university, he used to say, 'I'll never marry a woman who works.' I always tell him, 'God punished you.'

How did he deal with it? I think, because he loves me. He loves the things that I love, and I love the things that he loves. He works in a totally different field. And he talks about his passion and I talk about my passion. I think one of the great things that we have is that before we find love we found friendship, we were friends and -- I don't know, it went incrementally, it was not planned, but he was always of a great support and it was not easy on him.

I have to admit; I'm not a feminist. I don't believe that men and women are exactly the same. I believe they are equal in rights and equal in potential, but they are not exactly the same. I have to make sure --this is one of the tricks you learn, and it matters for him that I am fresh -- that I take care of myself. Otherwise, if you don't, he starts having this discussion: "Hanan, I think your work is affecting our life." And I make sure that we have our very special kind of trips and moments, so we kind of take an overdose and then go live a normal life.

Luxury Resurfaces in India, Cutting a Wider Swathe

Tue, 30 Apr 2013 12:00:00 EST

India has been no stranger to branded luxury. The shopping lists of Indian royalty are still remembered long after princely titles have been reduced to mere courtesy. In 1926, for instance, the Maharaja of Patiala gave iconic jewelry house Cartier its largest commission to date -- the remodeling of his crown jewels, which included the 234.69 carat De Beers diamond. The result was the Patiala necklace weighing 962.25 carats with 2,930 diamonds. In 1928, the Maharaja of Jammu & Kashmir placed 30 orders in six months for trunks from luggage-maker Louis Vuitton, including one for a shoe maintenance kit. In the 1930s, 20% of Rolls Royce's global sales were from India.

These might be stray indulgences, but they highlight the extreme contrast that followed. For close to 50 years after Independence from the British, anything remotely opulent was frowned upon as India flirted with socialism. But in the past decade, the onset of liberalization and capitalism has enabled India's new maharajas -- industrialists, entrepreneurs, professionals and the rural rich -- to blatantly covet all things luxurious. "Those who have made money in the past 15 to 20 years are the real big spenders in this segment," says Vispi Patel, group director, Louis Vuitton Moet Hennessey (LVMH) India. "The new, young, upper middle class who will spend rather than save will be new-generation, first-time customers for luxury products. They will fuel growth."

In 2012, millionaires in Asia outnumbered their counterparts in North America for the first time, according to the World Wealth Report 2012 released by consultancy Capgemini and RBC Wealth Management. The Asia-Pacific region has 3.37 million high net worth individuals (HNIs), compared to 3.35 million in North America. Asia surpassed Europe in 2010. India recorded a marginal decline, but that was largely because of notional losses in the exchange rate and a stock market slump. (The markets have recovered since, and the rupee has stabilized.)

The new feature of the growth in the number of HNIs and the spread of luxury wares is that they are no longer restricted to the metros. It is difficult to get a handle on the number of rich in rural areas. Agricultural income is tax-free in India, and there are no reliable records of rich farmers. There is anecdotal evidence, however, that small-town luxury spending is shooting up. While the economic slowdown has impacted automobile sales, the luxury car segment has managed to retain its momentum, growing at a compound annual growth rate (CAGR) of 30% to 40% from 2008 to 2012. Mercedes Benz India marketing director Debashis Mitra told India Knowledge@Wharton recently: "Two to three years ago, Delhi and Mumbai accounted for nearly 70% of our sales. Today, this percentage has declined to 50%; the rest is accounted for by Tier-2 towns."

Innovative Marketing

At a luxury conference last month, organized by business daily Mint, Joydeep Bhattacharya, head, and Sandeep Lodha, principal, of Bain & Company's consumer products and retail practice in India, presented a report, titled "Small Ain't Beautiful -- Point of View on India Luxury Market." According to the report, India's traditional luxury market -- which includes personal luxury goods such as watches, jewelry, apparel, accessories, fragrances and cosmetics as well as non-personal items such hotels, cars, boats, yachts, furniture and fine dining -- is valued at about US$6 billion and growing at 15% to 20% a year. Of this, the personal luxury goods segment is valued at US$1.5 billion.

The primary driver for such growth has been a 200% increase in the number of HNIs (with more than US$1 million in onshore liquid assets) since 2006. The total number of HNIs is expected to reach 132,000 in 2013. The report also estimates there will be 1.1 million households with an annual disposable income over US$100,000 in 2013, a 60% increase since 2006.

Consequently, luxury brands are responding by increasing awareness with innovative marketing campaigns and events. For instance, Judith Leiber decided to tap into India's burgeoning bourgeois even in Tier-2 cities with an exclusive trunk show in Indore. The luxury handbag brand, which typically sells about 300 bags in India a year, sold 30 pieces ranging from US$500 to over US$6,000 in one event.

It's not just one-off trunk shows, explains the Bain report. Luxury retail is moving out of five-star hotels into "hybrid" malls, with a mix of luxury and non-luxury stores with customized service. Says Atul Ruia, managing director of Phoenix Mills, the company that owns the upscale Palladium and mid-market High Street Phoenix malls in Mumbai: "Hybrid malls have been a huge driver of luxury goods' sales, because the customer who shops at Zara here also shops at Burberry. All the brands realize that five-star hotels are not the way to go. The kind of numbers we have seen at Palladium in Mumbai or DLF Emporio in New Delhi are phenomenal because they reach a much wider audience. The numbers are surprising the luxury companies themselves."

Another factor that has driven awareness and consumption has been the influx of high-end fashion magazines in India. While Elle and L'Officiel have existed for over a decade, the launch of international fashion bible Vogue in 2007, followed by Harper's Bazaar, has raised the fashion and lifestyle aspirations among middle-class India. Even Robb Report, the definitive American ultra luxury magazine for the uber wealthy, featuring cigars, cars, yachts and other toys for the rich and famous, has found its footing in India.

Jamal Shaikh, editorial director, Robb Report India, says: "I think luxury magazines have exposed what was traditionally considered obnoxious spending to a people that believed that being frugal was the only way to live. Where Robb Report is concerned, our responsibility is not just putting out luxury, but curating and developing taste."

The Visibility Factor

Bain's report suggests that a unique Indian interplay of supply and demand factors has determined the current penetration levels and growth of certain categories within the overall luxury segment. Luxury cars, with their high brand visibility, mature market and developed distribution and advertising, is the fastest growing category. Apparel, accessories, perfumes and cosmetics -- categories most popular in other parts of the world -- remain at the lower end of the penetration spectrum.

The report attributes this disparity to "new money" -- individuals who find it easier to "show off" with a branded car as opposed to bags and accessories. This is even truer of small towns. A psychological shift in the mindset of the Indian consumer, brought on by greater wealth, has also contributed to the increase of luxury retail. Bain expects that the upper middle-class Indian consumer will be more "status-driven" with a greater aspiration for "visible" luxury -- where the brand is obvious.

LVMH's Patel counters this assertion. "While it is true that cars do show easier than a watch or handbag, portability is the greatest reason for the differing CAGR among these segments. Both are status symbols, but it is easy for a consumer to purchase a handbag or a perfume when traveling abroad; nobody will buy a Mercedes S Class. This disparity is seen in other markets as well, be it Singapore, Malaysia or Dubai. Patel emphasizes that in India, supply creates demand and not the other way around. "India is an investing market. If you set up a particular store or brand, even one that is relatively unknown, if you choose the right location, stock it adequately and promote it sufficiently, there will always be demand. Indians are keen to acquire, are inquisitive as a race and are open to trying new things."

The long breakeven period is perhaps one of the reasons the actual size and penetration of India's luxury market remains small. The U.S. luxury market for personal luxury goods is estimated at US$75 billion as opposed to India's US$1.5 billion. The more relevant comparison, to other BRIC nations, also suggests a considerable lag. Brazil's personal luxury goods market is at US$4 billion with 130 stores while China has surged ahead at US$20 billion with 1,100 stores. (India has around 60 stores.) Unlike India, both countries also exhibit an awareness and appeal for luxury goods that goes beyond HNIs. The Indian way, albeit changing, largely follows a typical austere investment pattern -- house first, then jewelry, followed by car and, last, other luxury products. That makes Indian branded jewelry the highest-selling luxury goods segment in the country.

The Luxury Gap

Bain's report offers several explanations for this "Luxury Gap." First, India has fewer HNIs than Brazil and China. Second, luxury companies have made limited retail distribution investments in India. After suffering heavy losses in the first round of investment in 2000, luxury vendors are reluctant to put in more money, as returns are higher in other emerging markets. High growth might be difficult to achieve given the limited supply-side investment early on. China, for instance, had 270 stores in 2003, when luxury companies had only first started investing in India.

Patel compares LVMH's experience in China and India: "For LVMH, the first Vuitton store opened in China only in 1992, 13 years after China introduced progressive reforms. Between 1992 and 2000 our main retail business in China was through our perfume and cosmetics business in department stores. The acceleration has happened only in the past eight to 10 years largely because in that time China has gone from being a poor country to a middle-class economy with greater purchasing power. In India, growth has followed a similar pattern. India will see its own acceleration as well."

Additionally, Bain's report claims that in the six brands with the largest presence in India, there has been a marked slowdown in the number of stores opened. While 2010 saw 22 stores open doors, 2011-2013 is expected to have only eight. Even marketing investment in India remains low at less than 5% of sales as opposed to 15% of sales in other parts of the world. Patel offers his view: "The brands that have deep pockets are investing in India, but all luxury companies don't have the means to do that. Through our wine & spirits, watch & jewelry and fashion & leather businesses, we have been investing in India for over 10 years." But he concedes the return on investment is sometimes higher in other emerging economies, which is a deterrent to foreign investment.

Regulatory factors have also been a significant deterrent in spurring growth of the luxury sector. High import duties mean that goods are 30% to 40% costlier than home country prices. 100% FDI is still to play out in practice as limits on sourcing restrictions still cap investment. And, like all other industries, luxury suffers the typical hazards of doing business in India -- mediocre infrastructure, challenges of operating with local partners, high rents and lack of talent. "But there will be improvement in each of these aspects with the onset of hybrid luxury malls that are currently under development," says Patel.

Bain puts the growth potential at 20% to 30% in the short term. Patel and Ruia agree. "An inflexion point will take five to seven years," says Patel. "But it will definitely come."

Is the Latin American Technology Sector Ready for an Entrepreneurial Revolution?

Tue, 30 Apr 2013 12:00:00 EST

In 2011, four college friends decided to create a search website that would provide discounts, bargains and benefits for those users who had one or more credit cards or debit cards. They gave birth to Skonto, which became the first Argentine application to take part in Store, the Microsoft software shop for Windows 8. Thus far, the founders - including marketing students Diego Verzino and Federico Del Pup, and two students specializing in computer science -- have depended on support from UADE, the Argentine business school, but they are working to ensure that the business will eventually pay for itself.

Skonto is one of several technology companies that have been emerging all across the region in recent times. According to some experts, the trend indicates that the sector is poised for a revolution. Last October, The Economist took note of that phenomenon when it published an article entitled, "The Lure of Chilecon Valley." That piece highlighted the public policies of the country, exemplified by Start-Up Chile, an initiative established in 2010 with the goal of attracting technology talent and creating a Silicon Valley on a small scale.

"Basically, the initiative involves the Chilean government co-investing with local investors in a non-recoverable fund," notes Paris de l'Etraz, director of the IE Business School's Venture Lab. The goal of the fund is to incubate the development and growth of start-up companies. The state-owned entity provides 90% of the funds for developing the group, up to the level of US$40,000 per company. "But it does not try to become an investor; it only wants to help local companies grow. If an entrepreneur arrives with references, and is qualified, [the fund] assumes part of the investment," notes De l'Etraz. Thanks to this initiative, which requires entrepreneurs to stay in the country for at least seven months, Chile is taking the lead in the region when it comes to entrepreneurial initiatives.

Nevertheless, comparisons with Silicon Valley can be exaggerated, adds De l'Etraz, who just attended several "Venture Days" in Latin America, during which start-ups presented themselves to audiences of local and international investors. "People believe that Silicon Valley is something that can easily be replicated, but its entrepreneurial ecosystem is quite special." In his view, the most outstanding thing [about Silicon Valley] is that its angel investors have previous experience as entrepreneurs and, as a result, they "recognize the entrepreneurial mentality; they can identify an entrepreneurial project and team; and they know how to evaluate it and make it grow." Nevertheless, in most areas of the world, including Latin America, angel investors and those who manage investment funds do not have an entrepreneurial character. "They come from investment banking, not from entrepreneurship." So, "the mindset of this type of investor needs to be changed."

Beyond that, Silicon Valley has two of the most prestigious engineering schools in the world - Berkeley and Stanford - as well as a diversity in its population that is very hard to replicate. Many countries have tried to duplicate the model of Silicon Valley, and some of them have succeeded a great deal, such as Israel. "But [Israel] is a special case, because it takes in a lot of money from the United States, and there are lots of investors and funds that originate in the U.S. In addition, there is a very strong entrepreneurial culture there," he points out.

Now, however, the barriers to becoming more like Silicon Valley are starting to fall away, says De l'Etraz. He notes that countries such as Spain are transforming themselves into new destinations for establishing their own start-ups because in these countries "salary levels are lower [thus, more competitive]; there is a good educational system; there is a workforce with technical experience and the quality of life is high. Meanwhile, prices in Silicon Valley are prohibitively expensive." As an example, he cites Tyba, a company founded by foreign students who live in Spain, which helps connect companies with young talent over the Internet.

The same conditions that exist in Spain are surfacing in numerous countries in Latin America. Javier Zúñiga, director of computer engineering at UADE in Argentina, notes that entrepreneurs in his country depend on "a very good quality of human resources in its educational system, and a high level of English training for international projects and activities, which is something fundamental in IT."

The Obstacles

Nevertheless, there are some obstacles that still need to be overcome. Del Pup, the 29-year old Argentine who co-founded Skonto, complains about the lack of risk financing, not just in his homeland but in the rest of the region. He adds that there are not enough governmental institutions that support entrepreneurs, "despite the fact that the [technology sector] is growing and needs to be pushed."

De l'Etraz adds that during a recent visit to Argentina, he noticed that entrepreneurs were nervous about the shortage of foreign confidence in the local market, which has compelled many start-ups to leave for other countries. "On Venture Day in Mexico, there were several Argentine projects. The same thing happened in Colombia. Argentines are very entrepreneurial, and they know how to sell. The country offers many opportunities, but so long as the political situation remains unstable, things are not going to grow the way they should."

According to Martin Vivas, the facilitator of Startup Weekend in Buenos Aires, an initiative that aims to set up new companies in just three days, the investment funds don't always get to Argentina. "Investors try to create a relationship with entrepreneurs and, in that sense, [entrepreneurs here] are a bit far away," notes Vivas, who is a member of Palermo Valley, a community of entrepreneurs that tries to promote the Internet sector while traveling to other markets. "We have seen projects of other countries that were not different from ours. We have high quality professionals," he says.

De l'Etraz notes that there is a crucial problem to solve in the region: How to create favorable fiscal policies for angel investors through tax deductions in case they suffer losses. "On July 10, we have a Venture Day in Colombia, and one of the requirements is that the companies are Colombian. But what does it mean to be Colombian when many companies are set up in Miami but do business in Colombia and in other places because of the tax situation [in Colombia]?", asks De l'Etraz. "Governments must take this topic seriously and create policies, such as those in the United States, in order to attract investments and make it attractive, in terms of taxation, to take risks in the world of the start-up."

Given that situation, De l'Etraz does not believe that a technological revolution is taking place in the region at this time. However, he does believe that it will take place in the future. The number of entrepreneurial events has increased, he notes, and there is greater involvement on the part of governments. He points out, for example, that there is a "macro event" for entrepreneurs organized in November by the government of Peru. Nevertheless, he warns that the private sector has to get involved if the long awaited growth in this sector is to take place.

The Accelerators

Meanwhile, some entrepreneurial "accelerators" and initiatives that are looking for innovative projects have arrived "at the end of the world," as the new Argentine-born Pope Francisco has dubbed Argentina. These initiatives have provided an economic boost to the country.

One such initiative is Wayra, an accelerator that belongs to Telefónica, the telecom firm. Wayra provides seed capital of up to $50,000 to those start-ups that are "hungry" to grow and expand beyond their own frontiers. "Wayra was conceived for Latin America because we imagined that [the region] had the entrepreneurial ecosystem that we were searching for," notes Andres Saborido, country manager at Wayra Argentina. "We knew that the projects in this region were good ones, so we expanded first in Argentina, Colombia, Mexico and Spain. The conditions were ideal in the sense that there was a lot of talent -- people who had various initiatives and ideas but who did not have the resources to move forward.

"We offer these people a work space at Telefónica, and for four to 12 months we help them with coaching and mentors so that they will focus on understanding legal aspects of corporations, as well as product design. We try to provide them with quick methods for developing applications, testing them and giving them value, even within just a weekend," says Saborido.

Once all that has been completed, Wayra offers the possibility of working with Telefónica. "This gives the entrepreneur a scale [of operations] because we are in 12 countries. In return for these services, we retain 10% of the equity or capital of the start-up, but the decision about whether or not to provide services to Telefónica is left up to the entrepreneur," he says. That happened in the case of Joincube, an Argentine business-to-business social network that involves both Telefónica as well as firms in other countries. In Chile, Joincube even received capital from an investment fund.

Wayra's Saborido notes that entrepreneurs are often waiting for the arrival of angel investors. However, since capital is not available for everyone, in his view "the interesting thing is that companies focus [instead] on a regional or global market, so that they can access foreign funds." Wayra has already invested in 18 companies in Argentina, and 180 companies worldwide.

Learning How to Fail

During the initiative known as Startup Weekend, each participant pitches an idea for one minute. The best pitches are chosen in a vote, and the winners are equipped with teams for developing them. However, it rarely happens that the "start-ups become real companies," notes Vivas. Nevertheless, in his view, these events help participants acquire the skills and experience that are going to help them forge their future as entrepreneurs. They learn how to make mistakes, which is very useful in the case of Argentine entrepreneurs, who are "very easily frustrated, unlike English-speaking entrepreneurs, who know how to wait until an idea [catches on] and matures over time."

Vivas stresses that although Argentines have other strong qualities - such as skill at resolving complicated problems - they have trouble planning ahead, "perhaps because we are constantly in a crisis mode." As a result, it is hard for them to plan over the long term, with a view five years ahead. In Argentina, "Entrepreneurs expect great results in just a short time," he says.

On the other hand, entrepreneurs in the region face another handicap from a cultural viewpoint. "An entrepreneurial failure is considered a personal failure," notes De l'Etraz. In his view, tax policies also have an influence on all this. "They are always telling you not to be afraid of failing, but they don't help you to feel that way because if your project does fail, you can't just wipe the slate clean, since you carry your debts with you [into the future]. In contrast, in the U.S., if I am an entrepreneur and I fail, and my company goes bankrupt, I can wipe the slate clean and start all over again."

In addition to learning how to make mistakes, experts note that Latin American entrepreneurs must overcome their fear of relying on an idea. As Vivas explains, "Often, entrepreneurs believe that they are going to be robbed, and this also has to do with their fear of failure. In Latin America, they start with the view that competition is the enemy -- that it is bad to make mistakes. But [in fact,] our enemies teach us. This is a transparent industry, and if you are doing well it is because you are doing things the right way."

In that respect, Skonto's Del Pup offers this recommendation: "Although an idea may seem like a small one, you need to talk about it and act on it. You have to consider the project, and the more people who participate in it, the better. It can't be just one person against the world." In fact, his company brought in Ignacio Raffa and Nicolas Vilela, two computer science students, to add value to their technical department. "It was very important because it added a different perspective for the business. Everyone wins when your plans bear fruit; it is another way of cooperating in a cost-effective way."

On the other hand, UADE's Zúñiga notes that some projects that begin within a computer science career path lack commercial vision. "We help [those sorts of students] link up with students who have other specialties. We try to work with them and add the part that they are missing in their professional training, such as how to create a business plan," he notes.

Overall, adds De l'Etraz, universities have a great deal to contribute when it comes to strengthening entrepreneurial activity in the region. "Students are the ones who have to begin to think like entrepreneurs. We have to start teaching them that learning how to fail is as much a part of the learning process as learning how to sell. This is the big challenge."

Using Mobile Phone Technology to Ensure Fair Voting in the Middle East

Tue, 16 Apr 2013 12:00:00 EST

While the shift from dictatorship to democracy in the Middle East has been difficult, some consider a bellwether of the post-revolution success story the ability of countries to carry out free and fair elections. This year, Egypt and Tunisia will again be put to the test when holding their parliamentary and legislative elections. Ensuring a smooth process could lie, in part, in a voter's cell phone.

Civil society groups, entrepreneurs and developers are finding ways to capitalize on widespread mobile phone penetration in the Middle East and North Africa to boost both awareness around electoral participation as well as monitoring of the voting experience. They are employing SMS and voice-based reporting schemes to keep an eye on polling stations and undertake public opinion polls. They are also utilizing crowd-sourcing, social media and interactive mobile applications to collect data directly from voters. New mapping technology is allowing them to present voting statistics in cutting-edge formats.

There are challenges, however. The coding for some programs can be complicated for NGO election monitors; governments may not be responsive to reported election complaints; and illiteracy and funding can be hurdles to implementing such initiatives. Still, high-tech tools could play a big role in the oversight of upcoming elections, especially at a time when several Arab governments are setting new precedents for how their institutions should operate.

Experiments in using mobile phone technology in election monitoring and voter engagement are already under way in several Arab countries.

In 2011, Project Rakeeb, made up of two established civil society groups, partnered with the firm Advanced Computer Systems to screen Egypt's first post-revolution parliamentary elections. Observers at polling stations used their cell phones to send text messages about what they witnessed to a data center, where specialists then processed and mapped the reports. The group says it was the first time this type of innovative, statistics-based method -- known as parallel vote tabulation -- was used in the country.

Although social media networks like Facebook are often credited with aiding the Arab world's revolutions, mobile phones remain a more powerful tool, experts argue, given their reach.

"At the end of the day, the reality is that most people have a mobile phone and really only a third of people, especially in the developing world, have consistent access to Internet," said Leila Dal Santo, community projects manager for Souktel, a Ramallah, Palestine-based company, during a conference in Tunisia's capital last month organized by FW: [Forward], an initiative from Democracy International, Inc., on technology and elections.

Tapping Mobile Tech

When Tunisia held its first national elections in 2011, after uprisings ousted former President Zine El Abidine Ben Ali, Souktel partnered with the Tunisian Bar Association to set up a hotline for citizens to SMS incidents of electoral fraud and voting irregularities. A team of 80 lawyers received the roughly 1,000 reports in a customized web platform, which allowed them to classify the complaints and track their responses, so that only one attorney was assigned to each report.

Lawyers followed up directly with the those sending the texts to get details of the events. In the system, however, only a person's mobile number was available, to guard their identities. "You still want to preserve that level of anonymity," Dal Santo said. "You don't want people to feel like they're going to be persecuted for reporting an incident of election fraud. I think that's key -- that people feel they can participate in the electoral process in a way they feel it is safe, they feel protected."

Besides monitoring, the company has also tapped mobile phone technology for surveying and voter education. Last year, in Egypt, Souktel targeted women and youth, sending them informational SMS alerts on the voting and registration procedures, and asking for their feedback via text on the electoral process. And in Libya, they worked with Al Jazeera to take stock of residents' views in the lead up to last year's poll, asking: "Will you take part in the July 7 elections and why? What do you hope to achieve in these elections?" The project received some 5,000 responses. A map displays the names and locations of the participants, if they chose to provide those details.

"This was really, for a lot of Libyans, the first time that they could safely, and again without free of persecution, contribute to a healthy debate about the elections," Dal Santo said. "This is another way to safely contribute to the national dialogue in a way that it didn't feel like they were going to be hounded down later."

For independent election monitoring groups that may not have the resources to hire firms to do opinion polling, some developers are providing their mobile phone-based programs available for free. For instance, Formhub, an open source tool created through the Earth Institute at Columbia University, allows people to design surveys and questionnaires, say on polling inconsistencies, in Excel and then distribute them on Android devices or online. As the responses are collected, there are features that let users interpret and visualize the data. In place of paper surveys, program developers say mobile devices carry not just the data but also record timestamps and GPS coordinates and allow for photos, upping the reporting accuracy.

Some Limitations

As an election monitoring medium though, there are limits to SMS and cell phone technology. Namely, it's dependent on users being able to read and write.

"You can see in Tunisia and Lebanon, the number of illiterate people are relatively low, but if we go to some of the other countries, even though literacy rates seem high, there are still millions of people who can't read and write, and usually the great percentage are women," said Brenda Burrell, technical director of the Zimbabwe-based Freedom Fone, an interactive voice-response data collection system. "If we don't introduce tools that people can use with their voices, we basically take away the opportunity of all those people to contribute information-sharing."

Burrell acknowledged that voice is not an easy medium to manage, but she said it's compelling and harder to fake when conveying reports. The content can also be easily transferred to public outlets like radio broadcasts. Her software platform, Freedom Fone, doesn't require the Internet or smartphones, but instead relies on SIM cards and conventional phone service to get running.

Deploying election monitors can be expensive for organizations and in some countries, governments may restrict observers from certain locations or impose other constraints, she said. That's why it's critical to develop instruments that allow people to report what they're seeing.

"There's a lot of stuff that's going on that we don't get to see or hear about," Burrell said. "The big challenge, for those of us who mobilize around the elections, is that the election cycle lasts a lot longer than the election itself. And our challenge, really, is how to complete the informational picture knowing that elections monitors are on the ground for a very short time in the duration of the election cycle."

In a similar vein, Dal Santo of Souktel said they also offer voice-based services. An example includes an audio library service they provided to Somali citizens, who could call a hotline and learn more about civic subjects such as the constitution-drafting process. Such setups are ideally "reverse-charge," she said, so that callers don't have to pay.

Once the job of collecting and analyzing data is done, how the information is presented can be crucial in making it relevant. Various visualization tools are helping election monitors and officials enliven their findings.

Eric Gundersen, president of Development Seed, fashions it as storytelling. Through MapBox, his open source software, people can visualize their data by layering different strains of information onto custom maps, from vote counts at polling stations down to details about literacy and population and even the terrain at specific points. The maps can then be published online. This kind of stacking of various data sets, he says, makes identifying patterns - that aren't otherwise obvious - possible.

"You just can't do that when data is locked into a PDF," Gundersen said. With layers of context, maps can act as a canvas for communicating and telling that story. "Look at your data and tell a story around that data."

Development Seed applied mapping data tools in Afghanistan's 2009 presidential elections and is now preparing for the country's elections next year. "In the case of 2014 prep in Afghanistan, what we're doing is our open data work is going to help domestic observers, international observers, the government, civil society organizations and the media," and those entities will be able to deliver that data more efficiently to the public, Gundersen said.

As such countries rebuild their institutional foundations, he hopes data collection and presentation becomes a priority. "Data is essential national infrastructure -- just as important as the roads, just as important as telecommunications infrastructure."

Connecting Dots

While mobile phone and SMS technology might have greater reach now, many entrepreneurs say potential lies ahead in social media and mobile applications as election monitoring tools.

Jorge Soto, co-founder of Citivox, a startup using crowd-sourcing technology in Mexico to enhance civic engagement and transparency, said he uses "integrated reporting channels" that include SMS and social media sources when collecting reports from people on elections and other fronts.

"We need to close the feedback loop," Soto said. "We need to understand that we cannot separate civic life with social life…we are already talking on Twitter, on Facebook, so we just need to connect the dots."

Citivox worked in Yemen's post-revolution elections to collect SMS incident reports, with about 8,000 coming from citizens and 1,000 coming from official observers. Additionally, last year, the company worked with an Egyptian organization called Dostour to engage people over Facebook on the nation's new constitution, wherein folks downloaded the draft of the constitution and they were asked to dialogue on specific topics. It fetched 68,000 participants and because it was on Facebook, Citivox was able to derive demographics on respondents. Soto said demographics are very important for institutions when making decisions. Elsewhere, in Venezuela's elections, the company analyzed Twitter to ascertain which phrases were used most in discussing the elections, identifying who said them and even pinpointing what words appeared to get people to participate.

Many organizations undertake election monitoring, but streamlining their efforts can make them more influential. That's what Citivox found when it started out in Mexico's 2009 midterm elections. Soto said there were about a dozen groups with the similar aims and his company was able to align them on the same high-tech reporting platform to track elections. Security is a priority, he said, as hackers have tried to hit the system, so details on citizens or monitors sending in election reports are encrypted.

Independent groups using such technology are, in a way, providing a service that some governments are unable to perform, because their operations lack that level of sophistication. To make the point, Soto displayed photos of authorities in Mexico's "department of administrative modernization" doing analytics on a dry-erase marker board; managing reports with stacks of file folders; and carrying out "real-time mapping" with a map pasted to a wall.

"This is how the government is doing analytics in many countries, not only Mexico," Soto said. It's important to link the work of outside groups with what's going on at the top. "The governments, as long as they don't see themselves within this network, we will not have a direct conversation with them." The technology provides "tools that give us [the] chance to reframe or rejuvenate our institutions."

Emerging Tools

Other tools emerging from the Middle East and North Africa region include applications and services that look to the media as a space for gathering views and trailing issues. In Tunisia, Jazem Halioui said media monitoring can improve election and transition processes. His startup WebRadar provides meticulous monitoring of news, social media and blogs in Arabic, French and English, offering to collect and clean content on specific topics or events. They then extract knowledge on social engagement, audience and other areas to create analytical and statistical reports. Take Tunisia, for instance, where the company monitors almost 1,500 Facebook pages, 2,000 Twitter users, 500 blogs and 100 electronic journals. Such a portal could help with monitoring events like elections.

Meanwhile, in Lebanon, tech entrepreneur Mark Malkoun's citizen journalism mobile application, Completure has taken off recently under the tag of supplying "decentralized news." When people spot an event, they can upload a photo and create a "mini story" that is shared with others through the free app. The images are geotagged and users vote on the stories, creating a kind of top news feed that is an alternative to major media outlets. The service also runs live police scanners from 19 countries.

"We don't accept any texts; we only use images," Malkoun said. "We make sure that we verify the picture was taken by the phone itself."

Malkoun said the app now has a good user volume and ranking in the app store. As an vehicle for catching micro-incidents, reported on-the-ground from individuals, it could prove to be a useful device for observers monitoring large-scale elections, especially in terms of happenings that get left out of mainstream news coverage.

How all of these state-of-the-art tools will be used in forthcoming elections remains to be seen. But observers cite an exceptional opportunity for Arab countries to get into the game as post-revolution societies redefine electoral participation in the region.

Gulf Countries Navigate Billions into Mega Port Projects

Tue, 16 Apr 2013 12:00:00 EST

From Duqm in Oman to Boubyan island in Kuwait, Arab Gulf states are tapping oil revenues to expand and construct ports alongside mammoth industrial zones. Regionally, over US$35 billion is being spent on various port projects to drive trade, job and non-oil economic growth.

The need to economically diversify has spurred the strategy to become a hub for global logistics and non-oil exports, as geography puts the region between the trade flows of the West and the ever-burgeoning economies of the East. But the countries risk vying for the same cargo traffic, and ending up with overcapacity against a backdrop of slow global trade flow and anemic Western economies.

Gulf countries are counting on the increased trade links between them and Asia and their growing attraction as a gateway to Africa. Some Gulf ports are seeking a trans-shipment role to serve underserved markets of Iraq, Iran, Pakistan and other neighboring countries that do not have the economic or political ability to attract ships.

Last year, the wealthy emirate of Abu Dhabi lauched the mega port trend, by inaugurating the US$7.2 billion Khalifa Port, with an initial capacity of 2.5 million twenty-foot equivalent units (TEU), backed up by the Khalifa Industrial Zone Abu Dhabi (KIZAD), all built on a man-made island on the edges of the UAE capital two thirds the size of Singapore. The modern port replaces Mina Zayed, a 40-year old facility located inside the capital that was getting close to its 1 million TEU capacity.

``Forty years ago it was fantastic to have a downtown location," said Morten Lund, Commercial Manager of Khalifa Port Container Terminal. "Now ships are getting bigger, they are getting wider and they are getting deeper and they have a lot more cargo on board, which meant in the last many years it was impossible for the shipping lines to serve the Abu Dhabi market directly."

Bigger Ambitions

But Khalifa Port has bigger ambitions than just replacing an old facility. The port and industrial zone are forecast to create over 100,000 jobs and contribute 15% of Abu Dhabi's non-oil GDP by 2030, when capacity is set to reach 15 million TEU. Dubai's Jebel Ali port, the world's No. 9 container port that lies just 45 km from Khalifa Port, now has a 14 million TEU capacity that will reach 15 million TEU this year and increase to 19 million TEU by 2014.

``There is the existing Abu Dhabi business that we need to cater for in a way that allows Abu Dhabi businesses to grow and prosper,' said Lund.

Khalifa Port is seeking to serve the rising exports from Abu Dhabi firms like Emal, which is building the world's biggest aluminum smelter and petrochemical producer, Borouge, and also attract trans-shipment business, which is currently catered by Dubai's Jebel Ali port and to a lesser extent Khor Fakkan port. Khalifa Port is currently doing trans-shipment business for the Indian subcontinent for Italy's Messina Line, its first trans-shipment customer, said Lund.

``There will be some diminishing market share (for Dubai), but I am not seeing it as losing it in a big way or losing its leading position, as a whole,' said Shailesh Garg, a director at shipping consultant Drewry in India. ``Jebel Ali was ahead of its times in terms of infrastructure and these ports entered the market a bit late or they didn't have enough traffic to justify those developments. Jebel Ali had taken that early mover advantage and the biggest advantage is its free trade zone that keeps generating traffic in a big way. That's why you see a country like Oman, which has its own ports, still getting transit traffic from Jebel Ali.'

Jebel Ali has attracted most shipping business because it is a big market for Emirates-bound cargo and trans-shipment business to neighboring cities and countries. Khor Fakkan is mainly a small trans-shipment hub that benefits from its location outside the Strait of Hormuz, close to the East-West shipping route.

Khalifa Port, though, does not have Jebel Ali's strategic mix of vast local cargo and trans-shipment business nor an attractive location such as Khor Fakkan.

``There is a lot of growth in the export side for Abu Dhabi, when you look at Emal and you look at Borouge, volumes they will see this year and next year means the old port in Abu Dhabi could not handle it. So from an Abu Dhabi local perspective, it is very good,' said Lars Nielsen, managing director for the UAE, Qatar, Oman, and Iran for Maersk Line. ``On a regional level, at least in the foreseeable future, Abu Dhabi will remain a local port, so it is not going to be a direct competitor, for instance to Jebel Ali's trans-shipment aspect of the business.'

Jebel Ali, the biggest trans-shipment port in the region, is not sitting idle though. It is focusing on upgrading its port to cater to bigger ships, which are calling more often at its facilities as shipping lines rely on economies of scale to deliver cargo to save on cost. Jebel Ali is expanding even though volumes have faltered. DP World, the world's third largest port operator that manages Jebel Ali, handled 13.3 million TEU in 2012 in the UAE, almost unchanged from the 13 million TEU in 2011. Jebel Ali accounts for most of the container traffic for DP World in the UAE.

``I don't think there is a competition. There is a growth coming into this region and in the last 10 years there wasn't much development taking place in the port industry,' said Mohammed Al Muallem, senior vice-president and managing director, DP World UAE region. ``We are not purely trans-shipment, we are gateway and we have lots of cargo which belongs to the UAE. We are 50-50% and we are quite balanced, so we will continue to develop our facilities to meet future demand.'

Growing Competition

Transshipment rates tend to be much lower than gateway traffic rates, driving competition among ports trying to attract shipping firms.

Meanwhile, Qatar, with a population of 1.7 million, is investing $7.4 billion on a new port, zone and other facilities in Doha to help lift the strain on its old harbor, which cannot serve the economic needs of the world's No. 1 liquefied natural gas exporter and its vast infrastructure projects, especially for hosting football's World Cup in 2020.

Although the new Doha port will have an initial capacity of 2 million TEU when it opens in 2016, it is planned to reach 6 million TEU by 2030.

Saudi Arabia, the world's biggest oil exporter, is upgrading a number of ports from Jeddah on the Red Sea to Dammam in the Persian Gulf, which are facing congestion due to the kingdom's rising petrochemical and industrial exports, as well as imports.

Oman is increasing capacity at two ports, in the industrial zone cities of Sohar and Salalah, which is becoming a trans-shipment hub that benefits from its location outside the Strait of Hormuz. Salalah port, which currently has a capacity of 6 million TEU, could lift capacity to 9 million TEU in the coming years, depending on increase in demand.

Oman is also building an industrial city in Duqm that includes a port focusing on transit-trade, which could be an alternative way to transfer cargo by land or rail to neighboring countries, especially if ships call on the port, which lies outside the Strait of Hormuz and skirts regional tensions that have threatened its closure.

``Having a port outside the Strait in the eventuality the port is closed is obviously a benefit, but the potential threat of the Strait closing down, is not big enough to drive you away from the most efficient port, which today is inside the Strait,' said Maersk's Nielsen.

The region, though, already has teething port issues.

Bahrain's Khalifa Bin Salman Port, with a current capacity of 1.1 million TEU, handled around 332,000 TEU in 2011. The port, run by Denmark's A.P. Moller-Maersk A/S, caters to a local population of around 1.3 million and has tried to market itself as a trans-shipment hub for the upper Gulf, to serve nearby Qatar, Kuwait, and parts of Saudi Arabia, Iran and Iraq.

Not very far from Bahrain, two countries with a bloody history have sparred over port developments. Kuwait's plan to build the Mubarak Al-Kabeer port on Boubyan island a few kilometers away from Iraq's Grand Faw Terminal development created tension in 2011, which both countries have tried to smooth.

``The main threat is that of failing to carve out a niche in an increasingly crowded marketplace and ending up as just another white elephant,' said Jamie Ingram, Middle East Analyst at IHS Global Insight. ``A global economic downturn would be a significant threat to the ports if it led to a drop in oil price and led their markets to dry up.'

Through Perseverance and Frugality, a Path to Leadership in Egypt's High-Tech Industry

Tue, 16 Apr 2013 12:00:00 EST

A small caricature painted on glass hanging in Hanan Abdel Meguid's office features her garbed as a superhero, riding a surfboard above a big wave, her voluminous locks blowing out. Over two decades, Abdel Meguid, has lived out this spunky spirit as a tech entrepreneur in Egypt. She founded several high-performing firms and currently serves as CEO of the Cairo-based OTVentures, where she oversees 700 employees working in online and mobile technologies. A subsidiary of Orascom Telecom, the company has exclusive partnerships with MSN, Facebook and more than 90 content providers, as well as offices around the Middle East, North Africa, South Asia and North America. She previously was chief solution officer at LINKdotNET, one of the largest Internet service providers in the region, and CEO of its spinoff software development outfit, LINK Development.

At the opposite side of her office, a blue mural covers the whole wall. Interspersed are some 30 photos like one of Abdel Meguid and her team standing on a boat in the Nile, arms raised skyward, as well as sayings lifted from her blog ("iHope...I am an optimist"/"Fueled by Appetite.") At 41, she looks you straight in the eye through her rectangular-framed glasses, smiling often. Before college, she had "no clue" about computers, while growing up as one of four sisters. Abdel Meguid funded her first company with some 25,000 Egyptian pounds (US$3,600), an amount generated from years of saving up monetary gifts from family since childhood, a habit encouraged by her father, whose investment into her initial venture came in the form of a computer. She doesn't have a bossy exterior, but possesses measures of intellectual curiosity, strong work ethic and energy. Now mother of a son and daughter, she explores her early years, resiliency, leadership and entrepreneurship. She's involved in programs to encourage entrepreneurship, but notes the difficulties in creating companies and says more investment in technology is needed outside of cities. Still, she forecasts those creating their own enterprises will be the ones wearing the cape, coming to the rescue.

This is the first of two parts of this interview. An edited transcript of the conversation follows.

Arabic Knowledge@Wharton: How would you describe your upbringing?

Hanan Abdel Meguid: In the Middle East everybody kind of feels that the big day for any woman is the day she gets married. To my parents, the big day for me was the day I graduated and kind of the household that I grew in put a lot of emphasis on education, on reading, on this being kind of the top priority in life. Sometimes during my childhood, I found that a bit tough, that my parents are a bit tough, tougher than other parents… If I wake up and I have a cold or something, no, I have to go to school... But I appreciate this a lot now because this is kind of what I'm doing, because I wake every day, there is no easy excuse for me not to do the work, so this is something that I have learned since my childhood days.

It comes from their belief that this is the powerful thing that they can leave us, because I think in my family we've seen a lot of ups and downs, people have money and people then they lose all their money. There was a lot of turbulence in this part and I think it is rooted in their minds and my mind that the only sure thing is the human itself and the investment that you are doing with yourself and education. This plus the personality and being self-sufficient and proud of yourself, I think these are the kind of things that were always stressed in my household.

Arabic Knowledge@Wharton: You were very young, just out of college, when you started your first company. How did you know when you wanted to start your own venture?

Abdel Meguid: The moment, when I realized that I will do this, it was a very strange moment. I always remember it very clearly, when I was playing squash with a friend and we were in one of the trips of the universities. And we were sitting there. It was our graduation year and we were discussing the future and what does it hold. And during my academic years actually, I grew to love technology. I'm a computer science major and the fact that you can create things and make value out of no value, that's something that's fascinated me to a very large extent.

Arabic Knowledge@Wharton: In that early period, what were some of the hurdles that cropped up, and how did you push past them?

Abdel Meguid: The first challenge is to get people to believe that we're serious and we're worthy of their trust when we started the business. You know you go to these meetings and we look extremely young.

I think the starting point was for people to take us seriously. And actually, I personally saw it working to our advantage because the minute we started to talk-we use to prepare a lot for our meetings and know a lot of how can we add value-so when we started to talk, people at the end of the meeting are kind of in awe, how can you be so young and can give us this kind of useful information. Of course, it did not work in all cases, we had to knock on a lot of doors and we graduated from the American University in Cairo, so we were kind of like-I don't know how to say that-but we were kind of a bit spoiled in my book. And this is what I see sometimes as the barrier when you work, you have to work with everybody and you have to respect everybody.

Sometimes, and this is the mistake of a lot of youngsters, they rank people; for example, if you go to someone who works in the government and you start treating him with a bit of arrogance and talking as if you know more than he knows, while in reality he knows [more]. We approached the people with a lot of humility because it's again, in my belief-and this is something that I live by day in and day out-that technology coupled with the human expertise can get you amazing solutions.

So technology on its own is not the solution. So sometimes, this is the problem with some technical people or some computer scientists that they feel they can solve the problems of the world without mingling or understanding the world. So I think this is something that we tried, at all times, to approach the people with respect and sometimes it works and sometimes it did not. But we were very persistent. I think the challenge is for people to take you seriously when you're small and insignificant, let's say. But trust me, a persistence makes things happen.

Arabic Knowledge@Wharton: Over the years, was there ever a setback that you had to deal with while your ventures grew in scale?

Abdel Meguid: Actually my first company, it was a success and then it was a failure. Because it was success, we won a lot of local contracts and our dream was to outsource to the U.S. and we merged with another company. We merged without fixing our papers and then two of our partners ended up kind of taking the company and the big contracts. When success comes, sometimes people behave in an unexpected way. So the big disappointment is that money changes people sometimes, and you should always have your papers and every agreement, it makes for a smoother life and it preserves relationships, I think, because you learn that people always have their way of translating reality to their advantage. So it was a very big disappointment because the first company it was practically stolen from me.

Arabic Knowledge@Wharton: This would have been around the mid-1990s. How did you bounce back?

Abdel Meguid: What I did, I took some time off, because I think my biggest thing is not that I lost my company, it's that the hit came from a very close partner and friend... and the shock that money can change people to that extent. I think in the six months that I took off, it helped me mature my thinking and take a lot of decisions regarding how do I approach work afterwards…

But I did not go back to the private industry, I went to work with the government, at this point in time, because before I traveled for this trip, I met a very nice guy in the government who was working part-time in the decision and support center for the prime minister's cabinet and they were doing something that was very strange. They had access to the Internet, they were the only place in Egypt that had access to the Internet, so he was showing me things and it was my curiosity that got me back. So when I came back from my trip, I found a lot of messages from him asking me to come and work for them. I said, 'Why not? I have nothing to do. I'll retire in the government for awhile.' And this was kind of the best decision that I've ever made, because I got the exposure to the Internet and I was lucky because this was a very kind of exclusive group working on unique projects.

Especially in our kind of business... cash is a very big problem in this region and finding investors is a very big problem in this region. And I think not having enough cash taught us how to be very creative, because it's not about how much money you have, it's about how much can you do with the money you have. Sometimes you find we were faced with competing companies that had a lot of money and we did even much more impact than them because this is what we had, but our dreams were much bigger that our cash.

A Kuwaiti Woman Leading Development Efforts in Yemen

Tue, 16 Apr 2013 12:00:00 EST

Having grown up in Kuwait, Maali Alasousi had the option to travel to the U.S. and Egypt to pursue her education, and then later start her own company. Up to that point in her life, her goal was to promote tourism in Kuwait. But she sold her company and refocused her career after a trip to Yemen in 2007.

A client wanted to donate to different Yemeni organizations that were training women to produce products that could reach an international market. Alasousi was skeptical that a proper review of the organizations could be done on the ground in a short time; the country's lawlessness also put travel limitations on her.

Still, she traveled to Yemen, and was forever changed by the trip. She saw heartbreaking scenes of poverty, such as women and children eating from garbage, and shocking treatment of young girls. When she returned to Kuwait, she returned the money her client had paid her. She then made the decision to move to Yemen and work on social development projects.

Alasousi has since worked on a range of social projects in Yemen, from turning farmers who grew the highly water intensive and mild narcotic khat into coffee growers, microfinance schemes, anti-blindness campaigns, and promoting cancer treatment and other health prevention programs. She works with over 35 partners and identifies good local partners by giving clothes and food to distribute and checking whether they steal. Alasousi says for both local and international partners, she doesn't work with agencies with political or religious agenda.

Adjusting to life in Yemen hasn't been an easy transition, she admits. There are constant power and water outages and it can be difficult to have access to gas. It can be normal to have to wait six hours to send e-mail because of electricity cuts. During the first year, she contemplated leaving but seeing the impact of her work motivated her to stay. Some examples that come to mind were girls who couldn't afford to study but dream of being in school for things like medicine or engineering.

"Families are so poor, they cannot afford the five dollars a month it costs to use a taxi or transportation to send their children to school," she says. Alasousi worked in rural areas convincing parents, brothers, tribal and religious leaders to let girls in the village study. It was a challenging task and often took months to persuade a handful of community leaders to let 10 girls study. She managed to persuade then by talking about the benefits of education. She also said that she would not give a donation to their communities unless they sent girls to school.

Her own educational experience prepared her, she said, to be independent. While attending university in the United States, Alasousi was under a government scholarship to study mass communications. After a few classes, she changed her major to tourism planning and management but ended up losing her government scholarship as a consequence. Her parents were unhappy with the news and told her she had to support herself. Alasousi stuck with her decision and got a campus job. Looking back she says having to find a job and support herself added to her skills building beyond what just attending classes could offer. "Working while in school made me more responsible at a young age," she says. Upon receiving straight A's, the Kuwaiti government decided to reinstate her scholarship.

Today the Yemen-based organization she founded "Tamkeen For Development Organization (T4D)" has supported over 120,000 families. She focuses on empowering women in education and developing SMEs (small and medium sized enterprises). Some of the projects of T4D include the "Craft Network Project" to support artisans who live below the poverty line and "Invest in Education Project" providing scholarships to over 400 girls who come from rural areas. She recently began to extend T4D's reach to Ethiopia to support projects for women and children in HIV affected families. Since 2007, Alasousi has been based in Yemen until recently when the security situation forced her to leave. She hopes to soon return and speaks on her experiences working there as well as her background and ways to run a successful development organization.

Alasousi admits that being Arab gives her a huge advantage when interacting with communities adding that most rural communities in Yemen are not going to accept Europeans or Americans. She recalls two doctors she knew from Holland who were shot because people suspected they were doing missionary work. "I'm 100% sure they didn't come for that," she says, explaining that they were there to educate midwives. "They were doing a great job but unfortunately word spread and they got killed."

Alasousi explains that just as you can't open a McDonalds in a Yemeni village because people don't know what it is and don't eat burgers, you can't open up an operation without understanding the local people and their needs. "You can't just come and copy something that worked somewhere else, it just doesn't work," she says. Alasousi takes her work a step further -- rather than depending on international, local or government studies, she always does her own research as well to ensure their accuracy. She has a steady stream of funding from friends, family and patrons across the Gulf region.

"Being socially aware and helping the poor and disadvantaged is something that's part of our religion and what we're obligated to do. It's not because your Muslim or non-Muslin, you find such teachings in the Bible as well," she says adding that giving and helping others goes beyond even religion, it's part of being human.

Her desire to do public service still raised suspicion; she was monitored for two years before being given a license. "I'm Kuwaiti and doing work in Yemen, I left a high standard of living to live in Yemen so I see why people would become suspicious but when they get to know, they start to help me," she says.

Despite the difficulty, Alasousi says there are beautiful things about life in Yemen. She describes Yemenis as a cooperative society untouched by the materialistic world. "I find societies like that not just Yemen but also in Kenya, Ethiopia and India, usually in rural areas. It's completely different than the way people behave in the city." For her part, Alasousi wants to use her methodology in different nations, believing it proves that with limited resources, one can make an impact. "I always tell people it's not money that matters, it's the passion and love," she says. "Don't be like others who just want to live, rather live and let others live."

Alasousi explains that with many wealthy families who donate, they know how to measure their personal investments but not their charitable donations. "My goal for 2012 is to focus on the MENA region and how we can take them from charity thinking to development thinking with the usage of money," she says. Committed to empowering people in society through education and health she points to the example of project she created in Yemen for HIV positive people. Her group spoke to religious leaders explaining that if we don't offer support, the disease will spread. "In Hollywood, all you see are women in the Middle East with a veil and covering their faces and living in tents. I laugh because that's not how we live, that was maybe 100 years ago," says Alasousi.

"They don't often share stories of successful women in the region and that's not acceptable," she says and recounts a story of an American teaching civil society at a Kuwaiti high school. The teacher was lecturing on Greg Mortenson, author of Three Cups of Tea. One interrupted the lecture, asking, "Why are you teaching us about this guy? There's a woman that doing better than him and she's Kuwaiti." Hearing about her work, the teacher said there's no way a Kuwaiti woman could do this. The teacher then looked up Alasousi and was shocked. He invited her to visit the school and speak to students. The first question she was asked was how they could donate. She told them she didn't want them to donate money but rather their time. "People want effort and human knowledge, if you have the knowledge and can deliver it to other people that's considered donation," says Alasousi. She adds that she wishes the West could see all the women in MENA who are doing work in human rights, civil society and business. "Women are taking over, I mentor many young leaders and they doing much more than just donating," she says.

The Economics of China's Pollution Problem

Tue, 16 Apr 2013 12:00:00 EST

On January 12, a Saturday earlier this year, residents of Beijing woke up to air so thick with pollution that pedestrians could barely see a few feet in front of them. Hourly readings of the city's Air Quality Index (AQI) being reported by the United States Embassy ran off the scale, which ends at 500, peaking at 755. The levels of particulates smaller than 2.5 micrometers -- fine air particulates that pose the biggest health risk, which are considered safe at readings of around 25 parts per million -- reached almost 900.

Following the pollution of the past winter, the pressure to clean up China's air has never been so acute. "The government has been left with no choice but to respond and take action," says Wei Huang, an air pollution specialist at Greenpeace in Beijing. The economics of environmental cleanup, however, are unclear. According to experts, a lasting policy would demand a shift in the types of industry that drive the country's economy and involves a potential slowdown in GDP growth. And, while the recipe for cleaner air could cause some industries to suffer, others are expecting a potential windfall with the rollout of new environmental measures.

The difficulty in putting a number on the economic costs and benefits of tackling China's air pollution comes from both sides of the issue -- the economic losses due to pollution and the cost of cleaning it up. "It's hard to pull out an exact number on the economic loss due to air pollution in China," notes Wei. "[The country] just started to publically publish [pollution] data in 2013 for all the major cities."

In a study released last year, Greenpeace pegged the cost of pollution in Beijing at around US$328 million, based on levels measured in 2010. In Shanghai, the cost was even higher, at US$420 million. This estimate, however, is based only on the number of premature deaths due to air pollution. Other costs -- such as those related to chronic illness, lost productivity and environmental degradation -- were so difficult to measure with existing data that Greenpeace left them out of its metric entirely. In a Massachusetts Institute of Technology study released the same year, researchers looked at labor and healthcare costs in 2005 and concluded that China had lost US$112 billion due to air pollution.

Although China has made efforts to calculate the cost of pollution in the past, with a "Green GDP" effort spearheaded by the country's Ministry of Environmental Protection, those numbers were never released. Without them, it is difficult to measure the economic gains and losses of a cleanup. At the moment, China spends US$91 billion a year on environmental protection, or about 1.3% of its GDP. Experts estimate a further investment is needed to really clean things up -- anywhere from 2% to 4% of GDP, or up to US$500 billion each year.

The Target Industries

Although pollution sources vary regionally, the 2012 Greenpeace report places a majority of the blame for China's air pollution on coal and automobile exhaust fumes. Any plan for a clean-up must take into account energy production and China's expanding population of automobile owners. In a report released by Deutsche Bank in March, experts encouraged an aggressive approach to tackling pollution in the next five years. China needs "big bang measures," wrote Jun Ma, Deutsche Bank's chief economist, in the report. "The public is now demanding immediate and material government actions to improve air quality."

Among the suggestions listed in the report was a reduction in average coal consumption growth by half from the years 2013 to 2017, lowering expectations from 4% annual growth to 2%. According to the report, this measure could be complimented with an increase in the annual growth rate of clean energy sources and a deployment of clean coal technologies that could help reduce emissions from coal-fired power plants by up to 70%.

In addition, the Deutsche Bank report suggests lowering expectations for future growth in the sales of passenger vehicles and regulations that increase fuel efficiency. At the same time, the report suggests increasing investment in public transportation options such as rail and subway lines.

The report predicts that this can all be done while maintaining an economic growth rate of 6.8% annually -- a slight reduction from China's current projections of a 7.5% growth rate for 2013. While this seems simple enough, it is predicated on China cutting its energy intensity per unit of economic output in half -- a move that would enable economic growth to continue while increases in energy use slow. But that would require a shift from energy-intensive manufacturing toward an increase in the high-tech and service industries. This process could lead to significant economic costs.

For example, China's steel industry is currently responsible for producing around 46% of the world's steel. Smelting steel is an energy-intensive, highly polluting business. Slimming down the industry would likely lead to factory closures and layoffs. Some experts hope that these costs would be offset by an increase in more environmentally-friendly jobs, such as healthcare or tourism, but the adjustment could still be painful.

Tackling China's Cars

China's ongoing efforts to increase the fuel efficiency of new cars are an example of the challenges regulators face in tackling the economic issues inherent in pollution cleanup. At first glance, increasing fuel efficiency is a much easier issue to tackle than overall energy consumption. In fact, many of these programs are paired with economic stimulus, offering money to consumers to trade in their older vehicles for new ones that meet higher fuel-efficiency standards.

This is already being done by municipalities and cities throughout China, says David Vance Wagner, a senior researcher at the International Council on Clean Transportation (ICCT). "China has moved aggressively on implementing new standards for vehicles,"Wagner notes. "Today, a vehicle that is five or 10 years old can emit as much as 40 times more pollution than a new vehicle. [Increasing the number of newer vehicles on the road is] a very efficient way to clean up the air."

The exchange--money for old cars--is typically called a "scrappage program" and has been carried out on a national and local level. Nationally, China offered $3,000 for old vehicles from 2009 to 2010 -- not enough, according to Wagner, to really incentivize people. Earlier this year, Hong Kong announced that it was dedicating around US$1.3 billion to removing 88,000 older vehicles from city streets, offering subsidies worth about 30% of the value of a new vehicle. Beijing has its own scrappage program aimed at getting rid of half a million older vehicles by the end of 2015. Doing scrappage at a local level, however, is not ideal. "A lot of those vehicles just get transferred to other parts of China,"Wagner points out. "To be really effective you have to have a national program."

The challenge to implementing a national program, however, is fuel. Vehicles manufactured to meet more stringent emissions standards require a higher quality of fuel than is typically available at the Chinese pump. Low-quality fuel can ruin certain parts of the engine. Refining high-quality fuel, however, costs money. "Someone," says Wagner, "has to bear that cost."

In China, the price of fuel is set by the National Development and Reform Commission (NDRC), while the cost of refining is borne by large state-owned enterprises like PetroChina and Sinopec. The Ministry of Environmental Protection (MEP) has jurisdiction only over vehicle standards. And, without the ability to pass the cost of refining higher-quality fuel to customers, the state-owned enterprises have no incentive to improve their fuel. The MEP has spent the last decade trying to negotiate higher fuel quality with the oil companies, the NDRC and China's Ministry of Commerce.

In the United States, Wagner notes, fuel standards can be set by the Environmental Protection Agency. Fuel companies can then choose to change their gasoline prices and defer that cost to customers at the pump.

But in China, it took the notable January 12 pollution event, which attracted the attention of China's top leaders, to finally reach an agreement on setting standards. "In January 2013, this stalemate was finally ended by an unprecedented high pollution episode occurring in hundreds of major cities throughout the nation," according to an ICCT report on the matter. By the end of February, China's government released a time table, mandating that new fuel quality standards for diesel and gasoline be issued by the end of this year, in order to be implemented by the end of 2014 for the first phase of improvements, and 2017 for a second phase.

"Now we are waiting for the standards to come out," says Wagner.

The ICCT estimates these fuel improvements will end up increasing the cost of fuel by .10 RMB per liter of gasoline. "They haven't said how they're going to pay for it,"Wagner notes. One possible option is requiring that the NDRC change the price of fuel at the pump, allowing refineries to transfer the cost. "More likely, we'll see a tax adjustment," says Wagner. In this scenario PetroChina and Sinopec would be taxed at a lower rate for higher-quality fuel.

"The other big component of this is the actual vehicle standards,"Wagner notes. "They have a few key steps to take and then the fuel quality is going to be there. Then, they can move forward with vehicle standards." This, he adds, would pave the way for a larger scrappage program. "If you're going to scrap a few million vehicles, you wan to make sure they're replaced with the cleanest vehicles possible."

Alternative Energies

The resolution to China's fuel quality problems demonstrates the nation's preference for environmental measures that can be combined with economic stimulus or alleviated through tax breaks. There is no other industry so likely to benefit from this strategy as alternative energy.

In fact, the pollution of the last few months has already given a boost to China's lagging solar panel manufacturers. By the end of January, China had already announced plans to increase its 2015 targets for solar installation by 67%. In 2012, China's solar companies were suffering from an oversupply of panels and the price of bonds issued by the companies had plummeted. Panel prices were down by 25%. With the increase in pollution, however, more investors are convinced that China's government will continue to keep these companies prosperous. Bond prices have already started to respond.

China's commitments to increasing clean energy overall have shifted from a 36-gigawatt increase of installed capacity in 2012 to a 52-gigawatt uptick planned for this year.

While the mandated increases in solar capacity are good for domestic industry, growth in other areas is poised to benefit Western companies. "U.S. companies and European companies are quite happy about China moving on standards," says Wagner. "It will be a tougher push for Chinese domestic companies."

In a report released by the Pew Charitable Trusts earlier this month, U.S. suppliers of renewable energy and power management products had a US$1.63 billion trade surplus with China in the year 2011, out of a total US$8.5 billion in clean energy goods and services that were exchanged.

In addition, China's increasing investment in alternative energy sources is occurring at the same time other nations are drawing back on similar initiatives. While China excels in manufacturing wind turbine blades and solar panels, Western companies lead in the high tech and specialty equipment required to run those energy sources and connect them successfully to an energy grid.

While China's increasing commitment to cleanup will boost certain clean energy and environmentally-friendly industries, some experts worry that these measures alone will not be enough to improve air quality. "We hope that there will also be stricter regulations, from approving new coal-fired power plants to information disclosure from factories and punishment to those factories that violate the emission controls,"Wei notes. "It will be very difficult for China to clean up its air."

Philanthropy in India Is Taking Its Own Route

Tue, 16 Apr 2013 12:00:00 EST

Philanthropy is the flavor of the month in India: Wipro chairman Azim Premji recently became the first person in the country to sign up for the Giving Pledge, a commitment by the world's richest people to dedicate the majority of their wealth to charity. P.N.C. Menon, founder of the Sobha group, has promised to devote half of his fortune to philanthropic efforts. In Mumbai, the Philanthropic Week organized by Indian foundation Dasra brought together some key players to discuss the roadmap ahead for charitable giving in the nation. Among the key themes that emerged was the dawning realization that India must find its own path to encourage citizens and companies to donate their time and money toward social good.

Premji recently transferred 12.5% of his holding in Wipro -- worth US$2.2 billion -- to the Azim Premji Trust. He also joined the Giving Pledge campaign, which was started by Bill Gates and Warren Buffett in 2010 and now includes more than 100 individuals and families from all over the world.

Following Premji was Dubai-based Menon, who founded his company as an interior decoration firm in 1976 and grew it to a conglomerate that includes construction, engineering and information technology businesses. "I don't think you should keep all of [the wealth you have created] for your family," he said after making the pledge, according to Arabian Business. "A large portion of it should go to society. I have decided that 50% of my wealth should go to society."

In Menon's statement lies one reason for the different trends in philanthropy among different societies and nations. Some would say that though his wealth amounts to a comparatively smaller US$600 million, Menon's gesture means more than Buffett's because Menon could leave the entire amount to his family. Buffett can't: The estate tax in the U.S. has a top rate of 40%, while countries like India and China have no such provisions. (Estate duty was abolished in India in 1985, but current finance minister P. Chidambaram has been making noises about reintroducing it.)

Nearly sandwiched between the announcements by Premji and Menon was the Dasra Philanthropic Weekend (DPW). There were no big-ticket announcements at the DPW, but none was expected. "Through DPW, Dasra is building a [platform] for different stakeholders to come together and work on the most scalable and sustainable ways to improve the lives of people in India," says Radhika Nayar, head of the Indian Philanthropy Forum at Dasra. "The week brought together a broad range of stakeholders -- social entrepreneurs, family and corporate foundations, corporations, impact investors, government leaders and philanthropists -- to learn about the most effective ways to solve India's social challenges and begin the essential work of collaborating with each other."

Is Compulsory CSR the Way Forward?

Amid all this, a debate was going on about a government proposal to make it compulsory for companies to spend 2% of their net profits on corporate social responsibility (CSR). The proposal -- part of the Companies Bill that has cleared the lower house of Parliament and is awaiting the assent of the elders -- has been diluted somewhat to make it more acceptable to businesses.

The different views were aired in January at a seminar in Mumbai a month before the DPW. Leading NGO (non-governmental organization) Child Rights and You [CRY] held a summit on corporate responsibility "to bring together key voices on the corporate responsibility debate in order to build greater convergence between stakeholders". CRY has only a peripheral role in the debate, which has recently acquired new dimensions.

But the debate on CSR has no easy solution. To start with is the question: What is CSR? "Various definitions of CSR have been making the rounds for much too long," notes Bhaskar Chatterjee, director general & CEO of the Indian Institute of Corporate Affairs, which has been mandated by the Ministry of Corporate Affairs to develop a clear definition. "The CSR provisions of the Companies Bill seek to create an enabling, catalytic environment wherein corporates can harness their core competencies and business acumen with the freedom to think through and decide their own CSR initiatives."

Chatterjee adds that the new policy "is likely to create a telling positive impact on the development sector landscape in the country in the years to come. [The Bill] will allow the CSR juggernaut that is imminent to acquire a decisive objective and purpose."

But so far, the government's initiative has left many unanswered questions. For example, the Tatas run Jamshedpur, which started as a corporate township 100 years ago and now has a population in excess of one million. It wasn't initially conceived as CSR, but it could be argued that running what is now the most populous city in the state of Jharkhand should qualify under a modern definition of the term.

Dileep Rangekar, co-CEO of the Azim Premji Foundation, supports the CSR provision with the proviso that "When organizations and individuals don't do something willingly, the State steps in. In the long run, a practice of setting aside a percentage of your profits to societal good would be useful as long as it does not come across as coercion."

But Rohini Nilekani, philanthropist and chairperson of Arghyam, a foundation she set up with a private endowment to work on water and sanitation issues in India, says she has been "against the 2% rule from the beginning" because "I don't think government should outsource its governance. And, secondly, making it mandatory is going to straightjacket [CSR] in a way that may not necessarily yield the best results. But now that it's been done, we just have to make the best of it."

"Philanthropy comes from the heart with its associated passion," adds Ajay Kela, president and CEO of Wadhwani Foundation. "I am skeptical that forced philanthropy will work. This forced CSR has the other downside of spending valuable corporate resources to document or game the CSR rule."

According to Nilekani, provisions should also be put in place to "ensure that the focus remains on the company's overall real responsibilities inside its fence. Companies get away with a lot of things, like pollution of water sources. There is no use doing charity outside if you cause some of the problems yourself. I would say that the media and public pressure has to remain on inside-the-fence corporate practice."

The CRY summit discussed the 2% solution and also featured a talk by John Elkington, an author, thinker and creator of the term "triple bottom line," or combining the three goals of a socially responsible organization -- financial, social and environmental. Elkington told India Knowledge@Wharton that the India picture is mixed "with some very sparkling companies doing great things." He emphasized the importance of environmental sustainability as part of CSR effortseakes a couple of points. First, most people tend to ignore family businesses. . "It's not just the financial, social and ethical aspects," he said. "CSR has also got a very strong environmental aspect. I think even the Tatas have tended to downplay the environmental aspect."

Corporate India had been waking up to environmental issues, but the growing number of protest groups, which had become more pronounced over the past few years thanks to crusading federal environment ministers, have been a rude awakening. Environmental concerns have throttled several major projects in the nation recently. The Times of India reports that Prime Minister Manmohan Singh has called environmental clearances the new "license-permit-quota raj." Meanwhile, the Supreme Court has banned mining in several parts o the country, including the entire state of Goa.

Lavasa, a huge township project being developed by the Hindustan Construction Company (HCC), is in trouble because of environmental concerns. Environmental activists have blocked South Korean firm Posco's US$12 billion steel project in Orissa. In the same state, U.K.-listed Vedanta Aluminum is in limbo because its allotted mines are said to be located on a tribal religious shrine. The government has offered a different source of aluminum but that has not stopped activists from protesting. In Mumbai, plans for a second airport have been ruled unlikely to disrupt the natural habitats of flamingos and other wildlife but the project is now being held up because of a few mangroves. The project was first proposed at least two decades ago.

A Closer Look at Giving

All of these developments are philanthropy related, but in many ways, they have very little in common, providing an example of how the issue is coming to a head on several fronts.

From a Western point of view, India is a parsimonious country. It has a World Giving Index rank of 133, the worst in the region and even below that of Bangladesh (109) and Nepal (115). Gates and Buffett recently visited India to promote the Giving Pledge and encourage wealthy Indians to give more. They were met with smiles, but little support. According to a Bain report on Indian philanthropy, private charity contributions as a percentage of GDP are only 0.4% in India, compared with 1.3% in the U.K. and 2.2% in the U.S. The report noted, however, that "India is recognized as a nation of givers. But we have a tradition of being quiet givers." A more recent Bain report, which was unveiled at the DPW, said that "achieving congruence on results-related issues can help increase the impact of philanthropy in India".

From an Indian point of view, giving is something that everyone does. Ashok Advani, publisher of Business India and a participant at the Dasra seminar, wrote in a signed editorial that "For centuries, the richest people in the country have given money to causes... Giving has been a way of life -- seva, daan, zakat, charity or philanthropy -- by whatever name in vogue."

Indians also give to religion. The richest temple in the world is the Tirupati temple in Andhra Pradesh, today run by the Tirumala Tirupati Devasthanams (TTD), a trust whose members are appointed by the government. Only the Vatican is ahead of it in wealth. Tirupati is the most visited religious site in the world; the number of pilgrims can reach 500,000 on special days. Many make donations of small gold items. In February 2011, the TTD deposited 1,175 kilograms of gold (worth US$64 million at current prices). This type of deposit is derived from the temple's collections of small donations by devotees. The bigger items -- such as the 3 kilograms of gold donated by liquor baron Vijay Mallya on his 57^th birthday recently -- are not included in this.

"Religion has been a big driver for philanthropy throughout history and across the planet," says Lynne Smitham of the U.K.-based Kiawah Trust, which partners with Dasra in its philanthropic endeavors. "Temples and churches have been thought of as trustworthy and benevolent." According to Nayar of Dasra: "Indians give significantly to temples, but this giving is ad-hoc, short-term and most significantly, does not prioritize impact."

"I do not agree with the premise that India does not have a strong culture of philanthropy," adds Poornima Dore, program officer at the Sir Dorabji Tata Trust. "Religious giving is probably the largest component, but there is a lot [taking place outside of that] as well. There are foundations such as ours that have been in this domain for over 75 years across the country and that is clear evidence of a strong culture that has been institutionalized." The Tatas have been deeply involved in philanthropy -- from hospitals to institutes of higher learning and sports to culture. The Tata philanthropic trusts control66% of the shares of Tata Sons, the holding company of the US$100 billion Tata group.

While the main debate centers on finding the right philanthropy model for India, other issues are also clamoring for face time. The net result is a certain amount of confusion as talk about CSR steps on the toes of impact giving or charity grapples with for-profit philanthropy. So what did the DPW, which is considered the most high-profile of the meetings on the topic, achieve? "DPW brought together over 500 stakeholders," notes Nayar. "Dasra disseminated knowledge, facilitated discussions and announced key partnerships with the aim of inspiring collaboration among participants."

"It is difficult to measure the success of an event and I am not going to try to do it since we could not be there for all of the days," adds Dore. "Dasra has definitely grown over the years as an organization. I think the turnout was good." Smitham says that "for me it was immensely successful. It was a week of extremely important, relevant and urgent meetings on Indian social issues and a chance to listen, learn and exchange ideas on effective solutions."

"Events like DPW are great platforms to raise awareness around philanthropy in India," notes Kela of the Wadhwani Foundation. "As we know, India does not have a strong culture of philanthropy outside of giving to the temples. So advocacy and raising awareness is a good thing. Also, India has thousands of non-performing and low-impact NGOs. A systemic approach to address the issue of impact is also very welcome."

Some believe that events like Dasra and CRY can lead to the development of a successful model of philanthropy. "India does not seem to have a culture or a model for philanthropy at a national level," says Kela. "I do believe that we should look at successful global models and adapt them to our needs and tax structures rather than reinvent the wheel. We should also learn from the mistakes of the others rather than repeat the same mistakes."

"All over the world, people will always keep doing charity," adds Nilekani. "That is based on empathy. You see someone in need and you reach out. And that is something to celebrate. But I think as societies become more globalized and modern, a new kind of wealth creation will evoke a new response, partly inspired by Western models. The newly wealthy are going to engage with new social issues and they are going to look more systematically at their resolution. So I am not at all surprised that we are following a new model now."

According to Dore, "Western models have their value and so do Indian ones. Rather than debating models, we should focus on how philanthropy can actually reach out to the most marginalized, or address the most pressing issues."

Amidst High Praise for Gulf Oil Economies, Caution that Serious Challenges Lie Ahead

Tue, 02 Apr 2013 12:00:00 EST

By avoiding the tumult of the Arab Spring revolutions, the Middle East's Gulf countries have become the region's economic winners, as they continually reap revenues from high oil prices, engage in mammoth social spending plans yet maintain surpluses, and enjoy a comparable stability that has attracted investment.

Yet such success is not infinite, and without increased job growth or private sector expansion, public deficits could quickly emerge. And with the expectation that the U.S. will soon become energy independent, there are real concerns about the economic impact such a shift will have on the region.

The positive but cautious assessment was among the observations made about the region's economic challenges and opportunities at a recent conference held in Abu Dhabi by the Higher Colleges of Technology, and the Philadelphia-based Global Interdependence Center.

"[The Middle East] is the most interesting place to me," said Richard Fisher, president of the Federal Reserve Bank of Dallas, and keynote speaker at the event. Fisher lauded the rapid development of the United Arab Emirates (UAE), noting it was his second visit to its capital -- his first being in 1979, when he met the country's founder, the late Sheikh Zayed, and the city was still largely desert. "The change is miraculous," he said.

Fisher, though, asked the audience to consider the near future. "The United States is on the road to becoming energy independent, and that changes our diplomacy in the Middle East… I ask what will happen to those countries here that do not advance technologically, that do not have the drive like you here. If that transformation is not made, then you run the risk of sliding backward, rather than moving forward."

Before the Arab Spring, investments were being made across the region, and countries in North Africa and the Levant, especially Egypt and Lebanon, benefitted. But now doing so has become difficult, said Samer Khalidi, executive director of NBK Capital.

The regional investment scene still is short on capital, he said, and its public markets still do not have the transparency and legal structure needed to satisfy more investors. "Private equity is still a fairly thin market in the region," he said.

The Middle East is one of the world's regions that now and in the future will have large population growth, Khalidi added. But he said it was a double-edged sword, as this demographic surge means increased demand but underlies the need for employment in the region -- the World Bank estimates MENA needs 80 million new jobs in the next two decades.

"Are we getting the policies to drive the right type of investment in the MENA region? The answer is mixed, it's not clear to us," Khalidi said, noting that it was private industry that would have to provide the jobs needed, not governments.

He noted that the region's opportunities lay in the fact that it now was at the center of a number of economic and trade flows, but "transparency and consistency are where we find our greatest challenges." He added the challenge for Gulf countries was how level an economic playing field could they foster. "We have to make sure everybody here, the nationals and the residents, are able to find their place in society, and to participate in this growth in an equitable manner."

But for the moment, natural resource-rich Gulf countries like the UAE and Qatar can do almost no wrong, as oil barrel prices hover near the US$100 mark, and even the massive social spending outlays intended to ward off Arab Spring-fueled discontent -- more than US$150 billion on social spending --- are driving growth.

"For the oil states, it is a magnificent, magnificent time, and I hope you are enjoying it, and making money, because really, it doesn't get much better," said Simon Williams, HSBC chief economist for MENA. "You are passing a phase of super-abundance, where governments can spend aggressively, and continue to add to their stocks of savings. Public spending has almost trebled in the last five or six years, a threefold increase in public sector outlays, at a time when the rest of the world is trying to pick a penny here and there to stave off a fiscal disaster."

Williams said in contrast to other emerging markets, the Middle East does not have any economic bubbles, as it had just gone through an extended economic downturn following the global economic and financial crisis. "Our bubbles have already burst," he said.

However, Williams said, the regional growth driven by public spending had an expiration date, requiring oil economies to continue diversifying. "When it bumps up against that revenue ceiling, when you start to see deficits emerge in our part of the world, spending growth will slow, economic growth will slow, and that's where the private sector will have to come in and take up the strain," he said.

The ongoing woes of the Eurozone, plagued by the latest depositor crisis out of Cyprus, repeatedly came up during discussions. The Middle Eastern perspective on Europe, said Paul O'Brien, head of fixed income strategy at the Abu Dhabi Investment Authority, is that real solutions are not being formulated because of ongoing squabbling. "The political process is dominating political and economic matters," he noted.

O'Brien added the regional sentiment of Europe was that it was losing its international outlook. "They are spending a lot of time talking about Cyprus, and not enough about Africa, Asia, and Latin America," he said. "It's a phase where Europe is very inward-looking, and not exactly keeping up with the dynamic and changing global economy."

Molded by Civil War, a Leading Lebanese Surgeon's Advice: Never Stop Trying, Never Be Afraid

Tue, 02 Apr 2013 12:00:00 EST

Nadey Hakim is a Lebanese-born transplant surgeon who has pioneered a number of special operations throughout Europe and elsewhere in the world, including the first hand transplant in the United Kingdom recently. Currently, he works in London with his own private practice on Harley Street as well as acting as Surgical Director of the West London Transplant Unite at Hammersmith Hospital, Imperial College Healthcare NHS Trust. He credits his surgical training in the United States as well as his war-torn childhood in the Middle East to make him the leader that he is today.

Additionally, Hakim was the past World President of the International College of Surgeons. His interests vary outside of medicine as well -- he speaks nine languages, sculpted a bust for Queen Elizabeth and released a CD of his clarinet recordings. He spoke to Arabic Knowledge@Wharton about leadership, entrepreneurship, and the life perspective that gives him the courage to take risks, and compels him to never waste time.

An edited transcript of the conversation follows.

Arabic Knowledge@Wharton: What motivates you to be a surgeon?

Nadey Hakim: You can't believe the pleasure you get from making someone better. If you have the gift and the training and the will and the time to improve someone else's life by simply operating on them, it's such a timeless gift to have. I've had the good fortune to have this skill as a surgeon. Every day I operate, it's like the pleasure of doing it for the first time, unlike some other surgeons I know who get bored from surgery. This is why I operate on a daily basis. The more you operate, the better surgeon you are and the better results you get, the more respect you get.

Arabic Knowledge@Wharton: In the surgical theater, what qualities are important to lead a successful team?

Hakim: First I think is competence and you can't be scared about what other people may be afraid of doing. This is how I look at things. I'll give you an example.

Two months ago, I was invited to go to Nigeria to perform the first kidney transplant. They hadn't done one before. I landed there and I was shown the hospital, apparently brand new. It turned out to be a tiny two-story house with a bedroom and a bathroom, which was supposed to be the operating theater. I decided I had to be courageous.

I had the kidney, which belonged to the brother of the boy who was there. Other surgeons might've said, "No way, I can't do it." I said, "I'm going to do it." Within five hours, I finished the whole thing. The next day, it was a huge success.

The most important thing is to be courageous when you think no one else will dare to do it. There's a French saying that goes, "If you don't risk anything, you will have nothing."

The first thing is competence. You have to rely on yourself first. If you are well prepared, you know that things will go well. If you're hesitant and allow people to put doubt in your mind, it will not work. That's how I look at it.

Arabic Knowledge@Wharton: I'm wondering if the experience of growing up in the war and leaving Lebanon to finish school has made you feel this way.

Hakim: Maybe. During the war, I still remember at the age of 13 and 14 years old, hearing shooting and bombs all around the buildings where we used to live. We were Christians living in Lebanon and we were being bombarded with bombs and rockets. I did not take part in fighting. The thing I used to do was put my headphones on and listen to music because I played the clarinet. Schools were closed. Instead of wasting my time, I was playing my clarinet, reading my books and learning languages. You still have the urge to learn and progress, despite everything happening around you is a complete disaster.

At that time, I just wanted to survive this hell. When you see what's happening in Syria is exactly what was happening in Lebanon. There was burning all over the place. Everything was burning all around us. We didn't think we would survive. You achieve things against all predictions. We were surviving. There were bombs, rockets hitting buildings where we used to live. Still we managed to survive it and leave the country and achieve things people would've never thought of doing.

Arabic Knowledge@Wharton: Any advice for would-be entrepreneurs in juggling the many facets of life? You're a sculptor who has sent your work to Queen Elizabeth. You speak 9 languages. And you're a clarinetist who has released a recording.

Hakim: The advice I would give is don't waste any second on doing things which are completely useless. When we talk about the Middle East, I walk the streets of Lebanon and see people sitting in a café and smoking that shisha and sitting in a bar all day long, playing cards. I find this to be a complete waste of time. This is number one.

Number two is when people ask me how do you finish all these things, my simple answer is I am not too sure when I'm going to die so I have to finish my projects. It could be tomorrow, it could be tonight. I have to finish what I'm doing. It sounds like a joke but it's true. You don't know when you're going to die, god forbid. You have to finish what you're doing now, quickly and well. That way, you'll have more time to do more things, if you're given the chance to live longer to do more things. The way I look at it is why I'm in a hurry now is because I don't know when I'm going to die. It helps if you think about it all the time.

Arabic Knowledge@Wharton: Do you think it's because you're a surgeon and you've seen people die? Also, growing up in the middle of war, it might've affected your outlook in life.

Hakim: This is a very good point. Maybe it's a reflex to be avid in keeping life in human beings. I've seen many examples of people dying before my very eyes, not just in the operating room. It sometimes takes one second to reverse that trend of death.

Arabic Knowledge @Wharton: Did you know you wanted to be a surgeon even when you were a child in Lebanon?

Hakim: I did. My name "Hakim" means wise man in Arabic. And it means "doctor." If you ask to see the doctor in Lebanon, you ask to see the "hakim." The doctor is supposed to be a wise man. This has influenced me in my life in wanting to be a doctor.

I like to work with my hands. And this has translated in my work in sculpting. Every time I do an operation, I believe I'm doing a sculpture. You're sculpting even when you're looking at their kidneys, their heart, you are sculpting their anatomy with your fingers. This is the beauty about human nature. You heal yourself. You operate, you stitch it together and the body heals itself within a week. It has already healed and sealed. It's almost simpler than sculpting clay because in clay, you have to do it properly because it doesn't heal by itself. That's how I look at it.

Hakim: You have to have someone to look at and what they do, to try to at least be as successful as this person or that person. But then you become independent in what you're doing and try to exceed [expectations] in what you're trying to do.

I think hard work is the secret. Nothing else. You don't have to be very intelligent but if you're hard-working, you'll beat any intelligent person. There's no secret. It's just hard work. There are people who are very intelligent, very clever, but they do nothing. They fail.

I don't consider myself to be very intelligent, maybe average, but I'm very hard working. And no one is exempt from failure. Everyone fails once or twice, or three, four, five times. It doesn't matter. What's important is to start again and retake that test again and again until you pass.

I will never take a "no" for an answer. Never. This is how I work. I will fail again and again until I succeed. I will never give up. This is the second [facet] about the way I work. We talked about competence but the second thing is never give up. Persist again and again and again until it works. You can say, "I've tried two or three times, I'm going to give up." I say, "Fine. If you stop, then someone from wherever will carry on and they will beat you."

Arabic Knowledge@Wharton: How do you prepare for your record-breaking feats? When you do something like the first hand transplant or the first kidney transplant or the first pancreas transplant, what do you do to get ready?

Hakim: I think the first thing is to do is to be very secretive. You should not tell the whole world what you're doing. This is human nature. People do not want you to succeed because they want to be the one to do it. So be very secretive. I never tell anyone what I'm doing until I do it.

Until I have it in my hand and nobody can take it away from me, I will not tell anyone that I'm doing it. People will find a way to stop you or find a way to discourage you. It takes very little for someone to discourage somebody else. They'll say, 'It's not going to work."

For instance, the hand transplant. If I had to tell anybody about it, they might say, "You're stupid, you're mad. How can you do it?" It was done. It was a success. And then you announce to the world. The same thing happened with the pancreas transplant, and the same thing with the sculpture of the Queen. I did it without telling anyone. And then the Queen wrote to me to say, "I like it." I never told anybody.

Even your closest friends will be wishing you luck and happiness as much as yourself. I prefer to keep to myself and when it's a success, I tell people.

I've tried it before. When you start telling people before you finish, it never works.