In mid-January this year eight general managers from overseas participated in D-Link's yearly employee year-end party for the first time ever. After a magnificent meal and brilliant entertainment program, the time came for giving out the special ten-year employee awards.

In the last two years the "digital home" has become a hot topic, but D-Link foresaw this trend as early as 1999. This year D-Link's product for the digital home, "Media Lounge," has seen sales going through the roof and looks set to generate over 12% of the company's total revenues.

Global brand, local management

Employees receiving awards this year included the general manager from the Swedish branch company, who received a commemorative medal and a gold pen. This Scandinavian gentlemen was almost moved to tears as he told his story. Ten years previously he was just one of D-Link's local distributors and now he was the vice-president for D-Link's Scandinavian division. That a Taiwan company could place such trust in a foreign national deeply moved him, and he pledged that next year he would do even more and take home another gold medal.

Many employees present were deeply affected by this thank-you speech, especially D-Link president, J.C. Liao, who was moved to tears. The 55 global regional general managers of D-Link are without exception local hires and almost all of them had worked for D-Link from the very beginning. Each one of them has at least seven to eight years of seniority. Their loyalty to the company in no way takes a second seat to that of Taiwan employees. Many of them have been the object of recruitment efforts but none has responded. They feel that in another company they would never find the kind of trust and respect they do at D-Link. "Global brand, local management" is D-Link's most important strategy. Although in the beginning when D-Link was going international it used the "home-grown" approach of the average small and medium enterprise: it first located foreign agents and relied on them to handle all the problems and establish a beachhead. Following this they sent out people from the Taiwan main office to set up the branch company and "snatch" back the power of agency. But different from the practice of the average company, Taiwan agents from D-Link played only an assisting role and allowed the local people to become the real managers.

"For most major Taiwan IT companies the domestic market is actually quite small, accounting for just 10-20% of sales. How can you lead other markets with your own limited experience, especially when only the local people really understand the local market? For this reason, from employee up to general manager, even policy decisions are completely localized. Only in this way can one avoid the head office interfering as an outsider in these insider's operations.

On the day of its 20-year anniversary celebration D-Link's global headquarters office in Neihu, Taipei, formally began operations and D-Link's worldwide employees came together to offer congratulations (right). C.J. Hsu (first left), chairman of the Taiwan External Trade and Development Council, Stan Shih, founder of the Acer Group (second right) and Chou Yun-tsai (first right), chairman of the Research, Development and Evaluation Commission that created "Taipei CyberCity" all attended the ceremony. Second on the left is D-Link's president, J.C. Liao and in the middle is chairman and CEO Ken Kao.

Trust and authority

To give full authority to employees and make them feel they are stakeholders in the company is the most obvious characteristic of D-Link. It is especially in the D-Link conference room where this can be felt. Here you will certainly never hear the boss arrogate to himself the final verdict on an issue or raise his voice in criticism of others. It is rather a place where employees discuss things calmly and patiently and persuasion is the name of the game. "At D-Link you never see the younger generation just blindly carrying out orders from their seniors," says J.C. Liao. There is, to be sure, a slight feeling that there's "no distinction between juniors and seniors," but isn't the core spirit of the new second-generation Web, "Web 2.0," aimed at equal, point-to-point communication? This jibes perfectly with D-Link's motto: Building Networks for People.

Of course delegating so much authority might expose D-Link to certain risks. For example, because business growth for one European region exceeded projections every year, the manager was able to insist on raising employee ceilings. In the fourth year of such growth, this ambitious manager was intent on doubling the workforce and going all out for results. Although the head office did not agree, it respected his decision. But who could have predicted the crisis brought on by the 2001 collapse of the dot-com bubble? The branch company was caught in the crisis and faced cutting its staff by half and paying out a great deal of severance pay. To avoid this manager, in whose training so much effort had been placed, leaving the job with lots of trouble behind him, the head office immediately sent over personnel to help get through the rough period. This general manager now has become vice president for D-Link operations in southern Europe.

As a major international company that is taking the global market by storm, D-Link takes great pains to have its cooperating partners "be more of a local company than the local companies." J.C. Liao, who was sent to Europe for more than seven years just after he joined D-Link ten years ago, says that D-Link hopes to unearth people from among distributors who have the entrepreneurial spirit, who can solve problems on their own and who can take control of a crisis.

"To find the right people we would rather wait patiently and slowly make inquiries in the industry rather than get over-anxious or use an international headhunter to pass us recommendations."

Because the "front line" is a global one, trust between the head office and the branch companies around the world spells the difference between success and failure.

"For a good partner, aside from a similarity in culture and thinking, integrity is the key to cooperation over the long haul." When the company first began, D-Link would keep costs hidden from its distributors, but later it felt this approach only led to chaotic pricing by distributors and an unsettling of the market. D-Link then changed its strategy and made all costs and financial matters transparent, and before entering a new market they would find the best local accountants and lawyers to oversee the branch company's operations. At the very beginning they would set up systems to avoid any inflated reporting of figures or misuse of company funds.

On the day of its 20-year anniversary celebration D-Link's global headquarters office in Neihu, Taipei, formally began operations and D-Link's worldwide employees came together to offer congratulations (right). C.J. Hsu (first left), chairman of the Taiwan External Trade and Development Council, Stan Shih, founder of the Acer Group (second right) and Chou Yun-tsai (first right), chairman of the Research, Development and Evaluation Commission that created "Taipei CyberCity" all attended the ceremony. Second on the left is D-Link's president, J.C. Liao and in the middle is chairman and CEO Ken Kao.

Whirlwind

Twenty years ago when Ken Kao first caught wind of the PC wave, he left RPTI International, a state-run enterprise that focused on large-scale computers, and with six of his co-workers founded D-Link with NT$2 million, investing in network communications, something that was still in its very formative stages.

D-Link began about the same time as Cisco and so reviewing the company's development is like reading the history of global network communications itself.

The success of Ethernet at the time led to its gradual rise as the lead element in local area network technology for telecommunications and industry. Transmission speeds constantly increased, from 1 Mbps to the current 10 Gbps, and network utilization went from the local area network (LAN) to the Internet. At the turn of the century in 2000 the dot-com bubble suddenly burst, the market representing telecommunications and major corporations was glutted and sellers of global network equipment turned to the consumer market, the chief customer now being medium and small enterprises and the individual household. For D-Link, this meant big profits. All this has been a stroke of good luck for D-Link, bringing unexpected success and turning general misfortune into individual good fortune for the company.

When it began, D-Link had the same aspirations as Cisco--to break into the major corporate market. This market, however, had long since been monopolized by major US manufacturers. Unlike the average electronic product, this market of network communication products required a whole pallet of professional services--certification, installation, maintenance. Once an enterprise selected the products of a certain company, it was difficult to change manufacturers. D-Link, with its developmental limitations, could only turn to medium and small enterprises, people with small home offices, and the home market, and it decided to do this first in Europe and the newly emerging markets.

After it decided to move into the consumer market, D-Link had to make a change in character, a change in the former need to rely on the services of professional technical people for network communication equipment. To get into superstores and the retail market and get in touch with the consumer, network communications products had to transform themselves into products with fair and reasonable pricing and ease of handling--and high quality standards had to be maintained.

In the last two years the "digital home" has become a hot topic, but D-Link foresaw this trend as early as 1999. This year D-Link's product for the digital home, "Media Lounge," has seen sales going through the roof and looks set to generate over 12% of the company's total revenues.

Up or down?

J.C. Liao points out a unique feature of networking products. Because the predominant strategies of each area differ one from the other, there are different product demands. For example, Europe emphasizes the telecommunications market, the US focuses on the "digital home" and Asia stresses a comprehensive market. Other, newly emerging markets like Latin America and Eastern Europe remain stuck with traditional products. After gathering market information, D-Link did the front-end design in Taiwan and then did the back-end design adjustments in India, the US and China in order to meet the needs of the market.

The four R&D centers D-Link has set up in Taiwan, India, the US and China employ more than 600 researchers specializing in chip and software development and system integration. This complete line of network communication products allowing consumers to have many different choices has been responsible for D-Link gradually getting a solid footing in the SME and home markets, and has earned the company the world's No. 1 spot in that area.

J.C. Liao recalls that in fact the year before the collapse of the Internet bubble, at a routine meeting of D-Link worldwide staff, they had discussed whether to move in the direction of higher stage industrial network communications equipment or to move in the direction of consumer products. Moving to the higher stage meant an extremely high technology and capital threshold and fierce competition, and it would probably take 20 years to get to the world's No. 1 position. As for aiming lower, although profits were relatively slim, and management more complex and arduous, it would only take five years to become the world leader. Ultimately they reluctantly reached the conclusion to "lower their sights" never thinking that this decision would allow them to dodge the bullet when the Internet bubble burst and would let them score a touchdown within five years.

Aiming low and getting close to consumers was an enormous test for unknown Taiwan manufacturers. When initially breaking into the US market, unknown D-Link couldn't even get into the superstores, and was forced constantly to create product identification through positive publicity in periodicals and magazines and word of mouth by customers who had used their products, gradually developing a market for itself. Once the D-Link corporate image was recognized, major distributors came on their own accord looking to cooperate and sales gradually got on track. But in 2003 after Cisco purchased Linksys, it also entered the SME and home market, threatening D-Link's operations.

Win-win

Another important test was that D-Link had a dual strategy of "branding" and "subcontracting." Not only did this regularly create internal conflict with regard to the allocation of R&D resources, it worried ordering customers and slowed down growth. Twelve years ago D-Link received more than ten ODM orders from Matsushita Electric Works, Ltd. in Japan. To meet customer demands, almost the entire R&D team threw themselves into the work with the result that for the next two years D-Link did not put out any new products of its own and its image suffered. Employee morale was also very low and many top-flight employees left the company as a result.

For the sake of their brand, three years ago D-Link dropped their subcontracting business. In addition, they set up Alpha Networks, Inc. to exclusively handle R&D and manufacturing, leaving D-Link to exclusively focus on brand management. They also set up D-Link Taiwan Information, Inc. to be D-Link's general agent for Taiwan and pulled together other brands of network security products to offer their buyers the most comprehensive choice in products.

D-Link, whose scale of business has now made it No. 3 in the world of network communications products, has thoughts on brand management that differ from those of the No. 1 company, Cisco. D-Link does not adopt a strategy of mergers and acquisitions as a way to achieve rapid growth but moves ahead at a firm and steady pace as it draws close to its customers and grows along with them--in a small village of 50,000 in the bleakness of Siberia sits a branch D-Link company, and in Italy an outlet initially run by just three people has been able to move along with D-Link and in the short space of ten years grow to an operation of over 1,000 employees. This seemingly mundane strategy was nevertheless able, bit by bit, to produce solid, sure and diverse business success for D-Link and, with an average yearly growth rate of 30%, has enabled the company to grow to almost 300 times its original size of 20 years ago.

D-Link 2.0

This year D-Link is focusing on Apple's iPod+iTunes as its challenge goal and is working with Live365, the world's leader in Internet music broadcasting, to put out a "wireless network music player" enabling listeners to directly hear Internet broadcasts without turning their computer on. In the future D-Link will go further and put out a mobile version of the player and make a bid to take the lead in the mobile entertainment market.

At the 20-year celebration, D-Link formally inaugurated its global operational headquarters in the Neihu Technology Park in Taipei. At the same time with their vision for the future, called "D-Link 2.0," D-Link hopes to move from a network communications hardware supplier to integrate software and services and create an innovative operational model. The next 20 years for D-Link will be worth watching.l