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Hughes: The Internet's Ultimate Enabler

Hughes Communications (HUGH), the country's leading satellite broadband provider, was recently ranked No. 1 on Deloitte's 2010 Technology Fast 500 list. (The ranking is based on percentage growth of fiscal-year revenue from 2005 to 2009.) The irony of the award is that in that period, Hughes has grown like a successful high-tech startup, but it is far from a new company. Hughes has been at the forefront of satellite communications since 1983, when it invented VSAT (very small aperture antenna) satellite networking, with Wal-Mart (WMT) as its first customer. This innovation ushered in the commercialization of satellite communications and has grown to a $4 billion global industry that Hughes has consistently led in both technology development and service delivery.

Innovation is territory that Pradman Kaul, Hughes' chief executive since 2000, knows well. An engineer with numerous patents and honors, Kaul began his career at Comsat Labs, where he worked on communications technology, including some of the original technologies in the field of satellite communications. In 1973, his younger brother, Pradeep Kaul, also an engineer, urged Pradman to join him at a startup company operating out of a garage in Maryland. Pradman did, and the business was subsequently acquired by Hughes. He rose through Hughes as it created and popularized VSAT technology. Today, the company provides broadband connections to retailers and fast-food outlets, links huge corporate networks, delivers pay-as-you-go Internet services across rural India, and connects schools and government offices in the Amazon. In North America, it brings high-speed Internet access to 550,000 consumers and small businesses in rural and exurban areas where DSL (digital subscriber line) and cable modem service are unavailable.

Bloomberg BusinessWeek Management Editor Patricia O'Connell recently asked Kaul how he has kept Hughes on the leading edge of technology over the long term. Edited excerpts of their conversation follow.

Hughes is a multifaceted company, with its origins under Howard Hughes in the aviation industry. Can you give a quick view of Hughes today and its innovations in the satellite industry?

Hughes has more than 250 patents in technologies and systems related to satellite and data communications. In the mid-90s, our technology was applied to help launch DirecTV, giving birth to the direct-to-home satellite TV industry. Many would never have thought it possible to displace the virtual monopoly cable had in the U.S. at the time.

Earlier in this decade, we were first to launch a high-speed satellite Internet service business for consumers and small businesses in North America, which many thought would fail, but is now the fastest-growing part of Hughes. In 2008, Hughes won the Satellite Industry Innovators Award for our Spaceway 3, the world's first commercial satellite with onboard switching and routing. In 2012, we will launch Jupiter, our next-generation high-throughput satellite, with capacity more than 100 times that of conventional satellites. Jupiter will enable us to offer Internet access by satellite at fiber-like speeds to consumers in North America.

Recently, we developed technologies that enable mobile broadband services on planes, boats, and trains. Hughes today is the world's largest broadband satellite service provider, with a global footprint exceeding 1 million sites on five continents, including a recently announced joint venture in China.

What does Hughes do to maintain technology innovation?

The key is talented and happy people. We are always in the market to hire good people, many of whom are new engineering and technology graduates, to ensure that we keep refreshing our talent pool with innovative ideas. Today, we employ approximately 2,000 people, of whom more than 60 percent are engineers. Good talent is hard to find and comes from all over the U.S. and abroad, so we are constantly on the hunt.

But just about every company says people are its most important asset.

Of course. When a business is based on innovation, talented people are the key asset. Retaining top people means providing a creative environment with a healthy work-life balance. The most important thing we do to keep our talented engineers motivated is to give them new and difficult projects important to the future of the company. We have no shortage of difficult challenges, so we turn our people loose on them. We make sure they know they are doing important work, and we mentor them by pairing each with a senior engineer. We want them to feel essential to the business.

How has Hughes made innovation part of its corporate culture?

An open, unselfish culture is essential to yield innovative products and services. Hughes has many examples to draw from, but perhaps the best is HughesNet, our broadband satellite Internet service for consumers and small businesses. It was born of novel thinking by a handful of dedicated people 10 years ago, when few believed it could be a viable business. It survived numerous technology iterations and critical moments when only the belief and commitment of the team kept it going. The results today speak for themselves. We are the No. 1 consumer satellite service in North America, with more than 550,000 subscribers and a greater than 17 percent compounded annual growth rate over the past five years. HughesNet is the main engine driving Hughes profitability, despite the economic downturn.

You say only the team had faith in the technology. Did the team face objections from management to keep pursuing the project?

Part of our innovation process is that project teams must persuade management of the commercial viability of technology under development. Management is skeptical but open to a good business case. The best way to validate a new technology idea is to challenge its proponents sufficiently to show their commitment to, and belief in, the idea. Once everyone is convinced, they get the company's full support.

How do you train talent to innovate?

It's impossible to schedule innovation. But we seem to get the best results by ensuring the right mix and amount of talent for every project. A true adage in all high-tech companies, including ours, is that adding more people may make innovation come slower. Often many skill sets are involved, and the project leadership must be hands-on to ensure the balance is optimal during the life of a project, which may take several years. I'm personally involved with our senior technology and business managers in all key program decisions, because in technology companies, success depends on placing the right bets and meeting market opportunity windows.

How does Hughes anticipate the market when it considers innovations?

Listening to customers is key. Hughes has a program called HUG [Hughes User Group], where we annually meet with top customers, many of whom are high-level technology or marketing and sales heads. We share information about new products and services and hear about what would help them be more competitive and successful. Customers themselves elect their representative leadership to set their agenda, and we respond accordingly. It's a give-and-take environment that influences our investment in new products and services each year.

How do you define success?

Success is best measured by how well people achieve their goals. Innovation is at the root of our success at Hughes. Unlocking it calls for everyone to buy into a culture of open communication and mutual respect, encouraging teamwork and novel thinking and taking calculated risks—and with high incentives and rewards for winning results. That has proven to work for us, as Hughes has always been the technology and market leader in satellite networks and services since our inception more than 30 years ago.

What is a common mistake CEOs make in expanding a business?

Not delegating enough. It's the surest route to failure, because assuming responsibility and accountability is what motivates people to grow and succeed. Without sufficient challenges to grow their careers, inevitably the better ones leave, and organizations slip into mediocrity.

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