A Toronto-based software development company has created what its CEO likens to an in-house business incubator for new commercial ideas that gives employees full control over personal innovations and projects.
Fusenet Inc., which develops products and brands for the creation, storage and delivery of digital media, allows entrepreneurial technical staff to spend every Friday in a special, supported lab to work on their own ideas.
The company was founded in 2007 under this very premise, chief executive officer Sanjay Singhal said. A single product created by an enterprising staffer at Mr. Singhal’s previous company, on his own time, eventually became Graboid, a video search and playback browser with more than three million users worldwide. The browser formed the basis of Fusenet’s initial creation and growth. Graboid was created by Ryan van Barneveld, who is now a partner of Fusenet and owns half the company. Graboid is a wholly owned subsidiary of Fusenet.
“And because of the way the company was formed we realized we wanted to give employees the right to [their work]and have it enshrined in their employment agreements, and not as a benevolent gesture of the CEO or the board,” Mr. Singhal said.
The Friday program – called Fusenet Labs – is not unique. Google is famous for what it calls “20-per-cent time” for staff conducting research and development. The difference is that Google retains full ownership of the work.
“We take that a step further,” Mr. Singhal said. “It’s not just that you get to work on a Fusenet project that may be in your direct line of responsibility right now, but whatever you choose to work on, you actually own it. We don’t.”
In return, the developer gives Fusenet right of refusal to invest in any resulting commercial venture.
Dr. Becky Reuber, professor of strategic management at the Rotman School of Management of the University of Toronto, called Fusenet Labs an innovative idea. “I think that with the publicity and recognition that some firms are doing well by this, one might expect the system to grow. But it’s not going to be for every firm,” she said.
She said Fusenet’s push toward narrow applications across diverse markets is what makes the approach more likely to succeed. Google, she added, thrives on a similar innovation pattern, calling it a broad “Swiss-army-knife approach,” which means the applications can mean different things and have a variety of uses to different people.
“They’re not going in with a stable base of customers and building that. What they’re doing is a more scattershot approach – they look for opportunities, they develop well, they develop quickly and they’re looking for niche opportunities to get in and provide a product.”
Dr. Reuber said product diversification and developments skills would come out of a program such as Fusenet Labs, and that it is an important strategy for a company such as Fusenet. “It would make a lot of sense to them. For another company that didn’t have that strategy, it might not make as much sense.”
But she also offered caution.
“[Mr. Singhal]has to be careful. … If the boss doesn’t want the idea that [the developer]loves then you have an unhappy developer on your hands. If you are going to do this, you need people who are so skilled that they can change on a dime, and go down the paths where the different opportunities are.”
Since 2007, Fusenet, which has 50 employees and generates $17-million in annual revenue, has developed or acquired brands including Graboid and Simply Audiobooks.
When employees think their ideas have commercial potential, they submit a proposal to Fusenet Labs, which leads to a personal pet project, or P3.
“If you have a P3 idea, for Fridays off, basically you submit the idea to the director of the lab, who then sits down and discusses it. It’s not an approval process so much as it is a process of asking, ‘Do you know what you’re getting yourself into?’” Mr. Singhal said.
“We give the person some feedback and ideas about the area they want to get into and on Fridays they are allowed to have the time to work on it.”
Those staff members wanting to join the labs must submit an application outlining their ideas, and once approved they meet with a lab adviser every two weeks to look at the project’s progress. Everyone involved is aware that projects can and do fail, but all agree that going through the process of exploring ideas is good for morale and for the company.
Scott McQuin is one of Mr. Singhal’s employees who developed a new business called Passprotex through the Fusenet Labs. Passprotex serves two functions, he said: It protects online passwords and it also aggregates online subscriptions to allow users to access them in a single file.
The company is just six weeks old and this week it began beta testing, the second phase of software development in which a sampling of the intended audience tries the product. Mr. McQuin said he remains an employee of Fusenet as he tries to get Passprotex off the ground. “It got to the stage where it was clear the business idea had potential and we sat down with the executive team and realized that 20 per cent of time wasn’t going to be enough, and we’d need more money,” he said. “We figured out a deal and … and I’ve been using the investment Fusenet gave me.”
He said in his case, he would likely remain an employee of Fusenet and sit on the future board of Passprotex.
“The real benefit of [the Fusenet Lab program]is that there is a real sense of security in my eyes. This isn’t something I’d be able to do without the support of Fusenet,” Mr. McQuin said.
Mr. Singhal said not every employee would have what he called “the risk profile” to take part and concentrate on the company’s core business. “There are people who only work for us because of Fusenet Labs. The feeling is that they will give us 80 per cent of their workweek, and we will get access to that talent, because they believe we will help them make themselves rich.”
About nine staff members are currently working in the Fusenet Labs scheme on six individual projects, he said. “Projects come and go. People come up with ideas all the time that seem brilliant and then six weeks later they’ll realize that it has already been done or there is no commercial opportunity. They’ll go back to being full time for a while and then start taking Fridays again for a different project.”
Mr. Singhal said similar companies, when told of the Fusenet Lab program, tell him that he is hard to compete with.
“They say ‘if you’re willing to give up the financial benefit of retaining control over the idea …’ it gives us a lot of power in terms of the volume of ideas and the quality of those ideas. We know full well that we hire some of the best software people around. They’ll already be working on things. There’s nothing you can do to stop a good technology entrepreneur from working,” he said.
“This lab gives them a safe environment in which they can tell us about it and they’ll know we won’t steal the idea. Nothing changes other than we can invest in it and we know we won’t lose the person a year down the road when it becomes commercial.”
Special to The Globe and Mail