“Europe still has homework to do in innovation policy”

In his 2007 book, The Global Business Leader, former INSEAD Dean J. Frank Brown warns that most business leaders cling to power far too long, becoming a source of stagnation for the organisations they run. True to his conviction, Brown limited his tenure at INSEAD to five years when he signed on as dean in 2006 – and in February he handed over management of the international business school right on schedule to the incoming dean Dipak Jain.

“Five years is about the right time to move on from a top management position. It’s better for innovation,” says Brown, who takes up a new post as managing director at General Atlantic, the US global equity group in June. “The longer you hang on, the greater the tendency to surround yourself with people who say yes. It’s not good for organisations.”

During one of his final interviews at INSEAD’s Fontainebleau campus, Brown spoke to Science|Business about leadership, innovation, his new position at General Atlantic and the shift from being the dean of an international business school to a partner at a global investment firm. The move brings Brown’s career full circle: General Atlantic was a client he advised over the course of a 26-year career at PricewaterhouseCoopers before joining INSEAD.

At General Atlantic, Brown will help seek out new investments and wield his extensive global network to support the group’s portfolio companies, in part by securing top-flight board members. “I’m looking forward to doing something different again. I’ve never been an investor, but I’ve led smart people with different backgrounds,” says Brown. “This is a network and relationship business. It’s what I’ve done forever and it’s what I like.”

From dean to global investor

Brown has spent a good deal of time inventing his own script. As the first dean appointed at INSEAD on the basis of business rather than academic experience, he introduced a business approach to running the management school. During his tenure, INSEAD established the Blue Ocean Strategy Institute with its focus on innovation, the Social Innovation Center and a third campus in Abu Dhabi. He also increased the participation of women students in the MBA programme by more then 50 per cent. 

“Just like INSEAD, General Atlantic is looking to me for a different perspective,” says Brown. General Atlantic adds only 8 to12 companies a year to its portfolio, and the investment review process is extensive. “They’ve got to be fast-growth companies. If you’re not changing the way things are done, you are stuck with slower growth in an existing paradigm,” he says. “I’m excited about taking an active role in the companies we invest in.”

During his years at INSEAD, Brown was a strong proponent of innovation and entrepreneurship education in Europe. In his role as a member of the Science|Business Innovation Board, Brown advised the European Commission on a more effective approach to R&D and innovation policy.

“The European Union is nowhere near where it needs to be,” says Brown, noting that innovation and entrepreneurship policies in Europe still tend to be local in focus. Policymakers need to think instead about having a couple of centres of excellence that are world leaders in their field, he argues.

“It’s obvious this is just not happening,” says Brown.  The University of Cambridge is the best example of a successful R&D cluster, he says, but European countries still see innovation as a nation-by-nation competition. “Until the EU attacks the problem as a 27-member region initiative, creating jobs and encouraging researchers to move more openly across EU borders, innovation will continue to face obstacles. The EU-wide patent issue is extremely important.”

Teachers don’t like innovation

Europe is also hamstrung by the lack of focus on innovation and entrepreneurship in pre-university education, Brown says. “Compared with Singapore, teachers in France, for example, are under-trained and don’t like innovation. They don’t want students to think outside the box. Students should be encouraged to think deeply about how many ways a problem could be solved. Europe faces a major need to continue education reform. It needs to help a younger generation focus on innovation.”

Finally, Europe needs to accept failure as a vital component of the equation that produces entrepreneurial success stories.  “It’s the way you are taught to think – the willingness to accept failure,” Brown says. “Yes there are fantastic angel networks in Europe now. But entrepreneurs still do not have the right level of legal support, general finance and accounting advice. And there is not enough growth capital.”

General Atlantic has $17 billion under management and typically takes a minority position. Investments range in value from $50 million to $500 million. However, General Atlantic’s approach is not that of a classic private equity group, Brown says. Instead of raising large funds, its 40 or so limited partners commit to an annual amount of capital. That capital remains in the hands of the partners – on call – until investments are found. “We don’t need to go out and raise funds. That allows us to be much more strategic and long-term,” Brown says, noting that the group uses very little leverage – a key advantage in the post-financial meltdown environment. “There’s a huge difference in the model. We are providing growth capital,” he says.

As an example, Brown points to General Atlantic’s announcement in January that it was to take a 20 per cent stake in Kaspersky Lab, the fast-growing 14-year-old Russian antivirus software company, for about $200 million. General Atlantic aims to help Kaspersky expand further before making a decision about next steps.

Admit mistakes

At General Atlantic, Brown will be involved in all facets of management, including investment decisions, portfolio management and human resources development. As managing director, Brown expects be touching down in Europe and Asia several times a year, and plans to continue serving on the Science|Business Innovation Board. “I’m looking forward to keeping up with all the global relationships I built during the years at INSEAD, and sharing my network with other smart people.”

As Brown sets out on a new path, he looks back on the five years at INSEAD as “a great opportunity to learn”.  “What am I walking away with? I know a lot more about the economy, marketing, and management as a science.”

One new bit of advice General Atlantic portfolio companies might get from Brown, especially if they crack open his book on leadership: If you make a mistake, admit it. “The world is an incredibly complex place. The problem is, good leaders sometimes make bad decisions, and sometimes they don’t react fast enough. If 80 per cent of a manager’s decisions are good, you are doing well. A leader should say in those 20 per cent of the cases, ‘I realise I made a mistake.’ We need to define success differently.”