A Seedbed for High Technology : County Gaining Renown for Its Diversity, Innovations : ROBERT P. KELLEY
When Robert P. Kelley first came to Orange County in 1974 as marketing director of Knott’s Berry Farm, his job was to sell the theme park to the outside world.
Today, Orange County may still be best known as the nation’s amusement park mecca. Kelley, in his current job as head of the Southern California High Technology Executives Network, hopes to revise that image.
“I’m increasingly excited about Southern California in general--and Orange County in particular--becoming the country’s leading high-tech center,” says the 46-year-old president and chief executive of the Irvine-based nonprofit group known as So/Cal/Ten.
Founded in 1983, So/Cal/Ten is an exclusive group of 215 chief executives and division general managers of technology companies from San Luis Obispo to San Diego. About one-third of the group’s members are from Orange County companies. Eight of the group’s 18 board members represent Orange County firms.
“The primary purpose of the group is to help chief executives better deal with the rapid changes that are taking place in their companies,” Kelley says.
So/Cal/Ten traces its origins to a 1983 research project conducted by the group’s founders, Jeffrey A. Weiss and Steven M. Panzer, who were studying the impact of rapid change in the high-tech industry and on the management of technology companies. Their study found that many executives were having difficulty adapting to the fast-changing nature of their business.
So/Cal/Ten members pay $4,000 a year to belong to the organization. At the heart of the program are monthly “CEO round tables” in which small groups of executives meet to discuss their mutual business problems. In the past year, the round-table discussions have included such topics as “Crisis Financing,” “Developing a Road Show to Create Investor Interest” and “Managing Your Board, Investors and Corporate Partners.”
The association also provides information to members about sources of financing, professional services and educational opportunities.
Kelley’s wife, Mimi Grant, is chief operating officer of So/Cal/Ten. They live in Tustin with their four children.
In his five years with So/Cal/Ten, Kelley has had a close-up view of Orange County’s growing high-tech community. In a recent interview with Times staff writer David Olmos, Kelley talks about the county’s technology industry and about how So/Cal/Ten operates.
Q. How does Orange County rank among the various high-technology centers in the nation?
A. One of the great strengths of Orange County--and one of the reasons I believe that it’s going to preempt Silicon Valley as the center of high technology in the United States--is its very diverse group of entrepreneurial technology people that know how to get small companies up and running.
Q. How has Orange County’s high-tech industry changed since you became involved with it in 1984?
A. It has continued to become more diverse, particularly in contrast to Silicon Valley, which is primarily a derivative of semiconductor technology. Orange County has a significant number of biomedical companies. It also has world-class computer companies and computer peripheral, material sciences, telecommunications and software companies. In Silicon Valley, when there are problems in the semiconductor industry, they have a major downturn because they’re so dependent on it. We have all of these various industries, so when one of them gets into a slump--and they all get into slumps--the area continues to grow. We also have an increasingly strong manufacturing base here and a growing manufacturing infrastructure. If you’re looking to manufacture something, one of the key things that you have to have is readily available supplies, and it’s very hard to launch a new business if there isn’t a group of people that can provide you with what you need. That’s one of the big risks that Silicon Valley has had because (many companies in the area) moved production offshore. That drove out many of the smaller infrastructure people--the printed circuit board companies and the small sub-assembly houses. In addition, we have a growing financial and professional community here.
Q. Can you describe why the presence of financial services is important to technology companies?
A. It’s the real key to the financing of technology. It takes venture capital and public capital to grow the more promising companies.
Q. How has the availability of venture capital in Orange County changed over the past several years?
A. When I first came here (in 1984), we had two venture capital companies with offices in Orange County. Today we’ve got at least 10 (that are involved with financing technology companies).
Q. It has been said that one thing Orange County lacks is the recognition enjoyed by some of the nation’s high-tech centers such as Silicon Valley, Route 128 near Boston or North Carolina’s Research Triangle Park. Do you think Orange County’s technology establishment lacks an identity in other parts of the country?
A. If you’re outside of Orange County and you ask people where the high-technology centers are, they will usually name Orange County in the top three along with Silicon Valley and Route 128. People also will talk about Austin, Tex., or the Research Triangle in North Carolina. New York City is also a center of a lot of high technology because of IBM (which has its headquarters and several major facilities in New York state).
Q. Is it a problem that Orange County doesn’t have a catchy nickname like Silicon Valley or Oregon’s “Silicon Forest?”
A. No. It’s actually just known as Orange County. Orange County has been developing a reputation as a major financial area in the United States for probably the last four to five years, so you have that going. There’s a recognition that it’s a center of business innovation. Because of the diversity of the technology, we’ve got more of a reputation as a business center in the technology world rather than as a center for large companies. The typical business press tracks fast-growing, large public companies, and we don’t have a lot of those kind of companies. But Orange County is a place that people want to locate to. Orange County is recognized by everybody but Southern Californians.
Q. Another thing Orange County doesn’t have is a major technology company whose name is easily recognizable--an Apple Computer or IBM, for example.
A. There was a time that you could look at an analysis of an industry, and you’d have three players account for 80% of sales. But that isn’t the case today. One of the key characteristics the last four to five years has been the explosive fragmentation of markets. Think of the personal computer companies. IBM is a big player and so are Apple and Compaq. But we’ve got AST Research (an Irvine personal computer products company) and Toshiba (America, an Irvine manufacturer of portable computers and other products). More importantly, we’ve got an incredible number of clone companies (manufacturers of IBM-compatible personal computers) here that are part of our manufacturing operation. You have to be a student of statistics to appreciate the quantitative significance of what’s going on. You can’t do it in the traditional way of looking for concentration of industry leaders. We don’t have that many of the industry leaders, but we’ve got an incredible number of other companies that are going after niche markets.
Q. Is Orange County likely to develop some big-name companies in the future?
A. Yes. One of the things that’s occurring with the Western Digitals, ASTs and the Toshibas is that the county is attracting the kind of executives that can really leverage companies up into the billion-dollar category. If you think back, most of the Silicon Valley companies attracted management from other parts of the country--the John Sculleys--to really grow their larger companies. (Sculley, Apple Computer’s chairman and chief executive, was lured away from his job with New York-based Pepsico by the Cupertino personal computer maker).
Q. Orange County has attracted quite a few Japanese companies that have set up manufacturing facilities, regional headquarters or offices here. What is the outlook for future foreign investment in the high-tech area in Orange County?
A. I think the county definitely will attract more foreign companies, particularly Pacific Rim countries. The Pacific Rim is clearly more the technology center of the world than the European Economic Community sphere. I think we’re going to continue to see other Pacific Rim companies set up offices here and also look at buying companies. They will look to make the capital investments to grow companies.
Q. Can you describe some specific examples of the kind of situations in which So/Cal/Ten has helped its members?
A. Sure. You’ve got situations where chief executives are looking to bring in a new chief operating officer, a new No. 2 guy. Another situation is preparing for a board meeting where there has been several new people added to the board. Another one is determining how to best launch a new product that’s going to be serving a different market than the company has been serving. There have been other individuals who have used the round table to determine that they’re better served getting out of the company. We’ve got a person that started a company and then sold it. He started another company in another technology industry and worked with a round-table group in tuning up his business plan and presentation for (prospective investors). Then he wrestled with a round-table group on who should really run the company. Should it be him or should it be somebody that had more expertise in the new industry? Eventually, he came to the conclusion that he needed to turn the reins over to an individual who really knew the industry.
Q. Has there ever been an instance where the round-table discussions helped save a company?
A. Yes. We had one of our members who sold two-thirds of his company and kept the remaining third. And shortly after he did that, this company’s largest customer was acquired by a competitor. The CEO told the group that he was looking at several long-range cost-reduction programs and that the company had just lost a major customer. The group really got him to see that he had to make a number of short-range cost reductions in order to survive. They got him to see that if he didn’t fire several people and scrap several programs, the company wouldn’t be in existence in another six months.
Q. The executives who are members of SO/CAL/TEN sometimes work for competing companies. Why would companies that are in competition with each other want to help each other?
A. Well, we don’t put competitors in the same round table. In Orange County, we’ve got six of our 14 round tables. With that number of round tables, we’re able to accommodate competitive problems fairly easily.
Q. What assurances are the companies given that the information that is exchanged in the meeting remains confidential?
A. We ask them to sign a confidentiality agreement. One of the things that the agreement says is that they won’t share anything in the round table that would be inappropriate, particularly if they’re a publicly held company.
