Listen to this article
When Gavin Chen and Billy Xu founded G-Net in Beijing in 2000, China’s telecom market was still in its infancy.
Long-distance calls, particularly overseas, were prohibitively expensive and the company found a niche by being one of the few to sell the Internet Protocol telephone service for China Telecom. Business boomed and within a year, the company’s turnover was Rmb100m – a stunning figure for the two 28-year-old entrepreneurs.
“We had huge revenues, but because we were dealers, we only retained a tiny portion of that revenue,” says Mr Chen, chief executive.
The company expanded fast, moving from 10 to 160 employees in two years. By 2003, it was apparent that this had been badly timed – not only had revenues dropped, but G-Net was nearly bankrupt. The IP phone sector opened up and increased competition made G-Net’s income suffer.
“We were facing serious setbacks. The revenue was declining and we didn’t know what to do with the business,” says Mr Chen.
Mr Xu concurs: “In 2000, the market was closed and government regulation was very strict. But once the market changed in 2003, we had no competitive advantage and it was too late to take a new direction.”
Mr Chen decided it was time to take a step back. The only obvious choice was additional education – an approach that he hoped would give him a new perspective on the business. He applied to the China Europe International Business School (Ceibs) EMBA programme in Beijing, but was turned down “probably because I was too young and inexperienced”, he says.
Undeterred he reapplied the following year and enrolled in the entering class of 2004. The EMBA – a programme for working executives – allowed him both to study and to work at G-Net.
Mr Chen immediately found the education rewarding. “I had run the business intuitively without any strategy and at Ceibs I learnt how to process information, how to find the problem and then solve the problem.”
Mr Xu, in the meantime, saw the change in his business partner. “Gavin’s management style changed. He became more systemic in his thinking and took on more of a management framework.”
Initially, Mr Xu thought that he would be able to acquire management lessons by osmosis from Mr Chen. However, he found the change in his partner so inspiring that he too enrolled in Ceibs’ EMBA programme, albeit three years later.
One of the big attractions for both men was Ceibs’ international background. With many of the school’s faculty and students coming from the west, both Mr Chen and Mr Xu believed this international aspect would help to broaden their views and experience when connecting with overseas business.
It was while at Ceibs as an EMBA student that Mr Chen came up with the idea for changing the direction of G-Net. He started to ask his successful classmates what they valued most in their working lives.
“They all told me that they needed more time,” he says. Mr Chen realised that many of the busiest executives and entrepreneurs were spending hours travelling from one meeting to another, especially in Beijing.
“The traffic was terrible and 30 per cent of their time was spent in meetings.”
The pair reconfigured G-Net’s business model.
“We wanted our customers to use us any time, anywhere, using any device to teleconference,” says Mr Xu. In 2005 G-Net launched MeetMe, an audio conferencing service. However, the launch did not help generate immediate revenues and the same year, both men had to mortgage their homes to raise Rmb3m to pay the salaries of the 30 staff members.
Initially the two men found the concept of MeetMe a hard sell: “We sent people a free card and said, ‘Here’s a gift, you can use it to communicate with others and conference with them virtually using telephone and/or mobile phone’,” says Mr Chen. When they did win over clients, it was not based on the technology, but on the level of solicitous service they offered.
Yet Ceibs provided more than management solutions for G-Net. Mr Chen discovered that it was the best arena to find management talent for his company. First, they located their chief marketing officer, Jane Ding, who was in the enrolling class of 2004.
“Jane was the most popular person in our class. Everyone knew her at Ceibs so we knew she would be the right person to market our products,” says Mr Chen.
Ms Ding, who was working as the head sales manager for Belgian projector company, Barco, was not so quickly convinced.
“I took my time to join Billy and Gavin. I did join in June of 2008, but that meant a salary cut of 40 per cent,” says Ms Ding.
Mr Chen also found his technology expert at Ceibs in the same graduating class – Chen Yonghong, a graduate of Tsinghua University, who had worked for Motorola as a software engineer for eight years.
Mr Chen Yonghong first worked for G-Net as a casual consultant, but when his own start-up company failed in 2008, he decided to take the plunge and become the chief operating officer for G-Net.
With management insight from Ceibs and the injection of new personnel talent, the company started to move out of the red. In 2007, G-Net launched MeetMe Plus, a comprehensive online and audio conferencing service and also rebranded its product and service portfolio as Quanshi, when it discovered that mainland and international customers had a difficult time relating to G-Net as a name. Quanshi now serves 10,000 clients, including high-profile names such as HSBC, General Electric and Price Waterhouse Coopers.
G-Net sees its arena for expansion as involving the owners of small and medium-sized businesses. After all, points out Mr Chen of G-Net, there are 10m SMEs in China. The four top management executives believe that their Ceibs EMBA degree has given them a “shared” language to discuss problems and issues that arise as the company expands. However, different management styles are emerging:
“Billy and Yonghong are conservative and Gavin and I are very aggressive on growth,” says Ms Ding.
Mr Chen estimates that the teleconferencing service is one of the biggest in China.
“Globally, we’re probably fourth in size only next to Microsoft Lync, Cisco-WebEx, and Citrix Online.” In 2010, G-Net had Rmb200m ($30m) in revenue.
Ironically, the 2008 financial crisis had a positive effect on G-Net. As companies cut travel budgets, the need for G-Net’s services increased in mainland China as people wanted to hold conferences without travelling.
Still, the four graduates of Ceibs’ EMBA programme work long hours, take no holidays and drive each other to do better. They also have remained loyal to their alma mater by offering free conferencing and meeting services to Ceibs and its alumni, providing live broadcasts of large alumni events, for example, so that far-flung alumni can participate.
With four different Ceibs graduates, discussion is always lively at G-Net.
“We fight often. We fight about strategy and which direction is the best way to go,” says Mr Chen.
Get alerts on Executive MBA when a new story is published