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Chinese Consumers Likely to Set Product Standards in Future, Cell Phone CEO Says

April 2006


Sarin

STANFORD GRADUATE SCHOOL OF BUSINESS—Talent and hard work obviously were important factors in Arun Sarin's rise to the helm of Vodafone, the world's leading mobile telecommunications company. As a young man, Sarin graduated near the top of his class at the Indian Institute of Technology and went on to earn a dual master's degree in engineering and MBA from the University of California at Berkeley. But as he told students at the Stanford Graduate School of Business April 21, there was another factor in his stunning career success: luck.

As the 52-year-old London-based CEO explained, in 1984 he and a colleague both were hired on the same day to work for the Pacific Telesis Group in San Francisco. The colleague was assigned to assess opportunities for expansion in the publishing business, while Sarin, sitting in the adjacent cubicle, was asked to analyze the emerging cellular phone industry. As it turned out, "the mobile business grew to be huge," he said, "and the publishing business didn't go anywhere. So luck plays a very important role in life."

At 35, Sarin became the youngest corporate officer at Pacific Telesis. Later he served as CEO of AirTouch before joining Vodafone in 1999. Today, Vodafone—known as Verizon Wireless in the United States—operates in 30 countries and has a total market capitalization of $150 billion, 60,000 employees, and 180 million customers. The company is so big, Sarin said, that it is a continuing challenge to keep it growing in a profitable way.

To that end, Vodafone recently was reorganized into three major units. The first focuses on reducing costs and introducing new mobile phone technologies in countries where the business already is well established, such as Germany, Italy, and the United Kingdom. The second unit works on grabbing market share in relatively stable but developing countries, such as South Africa, India, and Romania. The third unit focuses on the development of new mobile phone products and services.

On the whole, the global telecommunications industry is going through a "perfect storm" of upheaval, Sarin said, and "five or ten years from now all these companies are not going to look anything like the [ones] that you see before you today." One of the biggest trends is the increasing demand for "convergence," or mobile phones that also serve as hand-held television sets and personal computers. As Sarin noted, "More and more of us are getting tired of the fact that our phones don't sync with our computers, don't sync with our televisions."

Another source of frustration is the bewildering array of telecommunications companies that consumers have to deal with, including separate vendors for broadband, cell phones, cable television, and long distance. "We want to be in a business where you buy all your products from us," Sarin said, "and our view is that you only really need two products: a big broadband pipe to your office or home, and a mobile phone. With those two things you're essentially taken care of."

Turning to the subject of leadership, Sarin suggested that there are three traits that effective business executives have in common: a good strategic view of the institution and its future (or as he put it, "how the cookie's going to crumble"), the ability to execute plans flawlessly, and the ability to interact well with other people. "You could be the smartest person," he told the students, "but if you don't have good people leadership skills, that's going to stop your growth." The good news is that all of these traits can be learned. Leadership "is a completely practiced art," he said. "You work on it every day, and you get better as time goes on."

Now a U.S. citizen, Sarin made a particular point of urging future business leaders in the audience to travel widely and become comfortable with the idea of working in other parts of the world, especially China. Unlike Western Europe, which has a low-growth economy and slowly morphing institutions, China is changing at warp speed. "I personally find it fascinating to see the marked change that has occurred there," he said. "Three years ago, there were lots of bicycles going everywhere. Today there are hardly any bicycles, and cars are going everywhere."

The main thing to remember about China, he added, is the sheer size of its market: Vodafone has a strategic alliance with a company called China Mobile that alone has 300 million users. The Chinese market is so large, in fact, that someday the country will be "setting the die" for product standards in the rest of the world—just as the United States has doing for the past half-century.

Sarin, who also has served as a director for the Gap, Charles Schwab Corp., and Cisco Systems, was invited to speak in Bishop Auditorium as part of the school's View from the Top lecture series. Among the audience members was his daughter, Nina Sarin, a Stanford senior.

—Theresa Johnston

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