When innovation and execution collide
I reluctantly point out this article, the latest in a series of stunningly arrogant and mean-spirited rants at The Atlantic about American Universities. This one is especially worrisome to me, but I would be interested in hearing what you think about it.
via In the Basement of the Ivory Tower – Magazine – The Atlantic.
As I said in my October 14, 2009 post: “I got the point of Edupunk right away.” At first I was a little cautious about using their apocalyptic language with all the talk about irresponsibility and lethargy and the literal redefinition of what it means to be a university. That was before I started interviewing some of the revolutionaries for my book.
I started to see the difference between the expensive, closed, corporate systems that, as Jim Groom says, have been “foisted onto the American higher education system as a substitute for deep reflection about what universities should be evolving into,” and the open, democratic systems that need simply to be connected together by lightweight, easily programmable platforms.
If you need a touchstone to rely on, then think about blogging. A little PHP programming, a widget or two, and you’re ready to go. If you are very serious, maybe you can add a lightweight registration system to separate out the serious participants from noisy but ultimately uninteresting rabble who might stumble in after partying at the celebrity gossip site next door.
My colleague Mike Hunter and I ran an experiment this spring with our Introduction to Information Security Course. We wanted to encourage classroom discussion, but realized –or, rather, I have come to expect after forty years in front of computer science classrooms — that two thirds of the students simply would not raise their hands in class. Even if their grades depended on it. So we set up a blog.
The rules were simple. Participation counted for ten percent of the final grade. We would keep track of who spoke up in class, but we also let students create or join conversations online in lieu of actually speaking up.
We were just jaded enough to guess that near the end of the semester — particularly if we reminded them that their grades were at stake — there would be a spike in traffic and that some students would guess that padding the written record with valueless but copious comments was an easy enough path to improving their letter grades. So we stopped counting after final exams and put an upper limit on how may comments would actually affect their grades. This in effect rewarded students who made early, meaningful comments.
Two thirds of the class participated. Some didn’t like it very much, and they said so online. Others thought the organization of the blog was opaque and unhelpful. They were right, but in our defense, we did not aim very high. The best students were active in both the physical and virtual classroom. The most gratifying feedback was from the students who said they thought it was incredibly cool that there were discussions that spanned several weeks and included both faculty members, students, and guest lecturers.
I always thought that I was pushing it with my anti-factory rant about the lack of open systems in universities, but I quickly convinced myself that Georgia Tech’s multimillion-dollar course management software implementation of Sakai was not democratic. It did not permit public and private blogs to live together. Like all course management systems, it is designed to keep people out. Extending it in any useful way would have meant a major Java development project (enough said).
What happened at the end of the semester was an even bigger shock. Our teaching assistant finished entering the raw test and project scores, and then scampered out of town, leaving me to assign letter grades and close out the semester. How hard could that be? There was already a button for assigning letter grades. So I pushed the button. All hell broke loose.
It turns out that Sakai defaults to a standard weighting of grades, and the cleverly designed classroom/blogging participation scheme that Mike Hunter and I had devised threw that standard weighting out of kilter. When I pushed the button, I unwittingly assigned class participation grades that were ten time more important than we had thought they were going to be. It made a couple of students happy, but most were not.
When I finally reached our grader — a computer science PhD student — and asked him why he had not customized the grading scheme, he said he could not figure out how to do it. Grading is the most fluid and individualized component of university teaching, but we had been unwittingly trapped in a factory in which deviation from the standard grades required sweat and ingenuity. Anyone who wanted to use Sakai for anything more than an expensive grade book was out of luck.
I’ve been stewing over this experience all summer. When you set out to create the opposite of a factory and find yourself instead caught in the gears of an assembly line, it clarifies the the situation. I decided to write a short note on the experiment along with some suggestions for how to improve things, but today’s Faculty Focus stopped me in my WWC tracks with a story about an otherwise anonymous Professor Jones, whose experiment with classroom blogging led to this:
Thinking that others might want to add a blog to their class as well, [Jones] goes to IT and offers to lead workshops for faculty on blogging in higher education. A few weeks later he is informed by IT that they have not only rejected his proposal, but that he is in violation of university policy and must stop immediately. Professor Jones asks what university policy he has violated, and is told that the policy has not yet been created, but will be soon.
I’d better shelve my plans to make some modest suggestions about Sakai. I might be seen as an instigator. That sort of thing is like a red flag. It draws unnecessary attention in a factory, and I don’t see Paulette Goddard coming to my rescue.
Let’s imagine a pill. I’ll call it e-pill. It’s available to every young adult who wants it — probably a benefit of some program to link health care and education. E-pill has one effect: it permanently rewires brains to store, understand and effectively use knowledge equivalent to the general education requirements at a good American university. You know what courses I am talking about: science, math, history, philosophy, art, social science, writing, and literature. No side effects. It does not make you any smarter, but if you’ve taken e-pill, you have a lock on credit for English 101 and Intro to American History. No downside to the pill at all except for this: you have to forgo the classroom experience.
Thinking about e-pill clarifies something that has been on my mind a lot these days: ephemeralization of American colleges and universities. Ephemeralization is a term that Buckminster Fuller used to capture the economic concept of dematerialization. In effect, ephemeralization means doing more with less.
The National Conference of of State Legislatures just issued a report that makes it clear the extent to which public universities will have to do more with less over the next several years. According to State Higher Education Executive Officers:
Appropriations per student remained lower in FY 2009 (in constant dollars) than in most years
since FY 1980.
Tuition increases — which now average 37% of revenues — have made up for some of the shortfall, but as Delta Project data makes clear, although increased tuition may cover lost revenue, it does not necessarily find its way into instructional budgets. Public institutions have been using stimulus funds provided by the 2009 Federal American Recovery and Reinvestment Act (ARRA) to keep the wheels on. ARRA funds will disappear soon. All the while, students are pouring into dozens of campuses like the University of Central Florida where access is paramount.
The lead article in today’s Chronicle of Higher Education, was a jaw-dropping summary of the budget shortfalls awaiting the State University System of New York and other systems where state finances are so broken that higher education funding will be disastrously inadequate for years. Maybe decades. Short of rolling over and shedding both students and programs, dematerialization is the order of the day for most of us in public universities.
As I pointed out in last week’s post, there are swirling financial misconceptions that — if acted upon — could actually make matters worse. This is not the time, for example, for an aspiring public institution to undertake a large research commitment in the blind hope that research revenue would help the budget.
What does this have to do with e-pill? This is a time to take a serious look at the value proposition for American universities. If there is a way to get the unnecessary cost out of the general education requirements, it would have an enormous impact on the economics of running a public institution. Universities — particularly research universities — are under-reimbursed for the cost of offering courses that do not need to be taught in the traditional , expensive, bricks-and-mortar way. I mentioned the University of Central Florida above, because as the third largest university in the country, they have already shifted a substantial portion of their introductory load to online delivery — not exactly an e-pill, but the marginal cost per student in an online course is a tiny fraction of the cost for campus-based delivery.
If the marginal cost were actually zero (the e-pill scenario), then what would be the rationale for charging anything for the first two years of a university education? The argument that was made shortly after the American Civil War was that the social experience of attending a university was worth the price of admission. It was not a winning argument, and the structure of higher education in the U.S. was forever changed as a result.
The experiment should be easy enough to run. Let’s set two prices. The first price, a nominal fee, reflects the true cost of the general ed requirements when they are offered efficiently using modern technology — costs that are unburdened by subsidies to research, athletics, and bureaucratic offices that add little value to a student’s education. The second price — the deluxe treatment — reflects the true cost of the on-campus experience. Virtually all of the value for the high price on campus experience is from activity outside the classroom, and because there has been an effective dematerialization for English 101, the income from families who have the wherewithal to pay for first-class tickets can be applied to other institutional priorities. Maybe even the upper division courses where smaller class sizes and dedicated instructional budgets might have a beneficial impact on a student’s education.
Vendors of proprietary Unix™ servers had to face this same problem a decade ago. Why would a customer pay the high-margin premium prices for HP-UX™, Solaris™, or AIX™, when there was a “free” alternative? The answer, it turned out, was that customers paid for value. The smart companies figured out that the high-margin, high-expense proprietary Unix business was different from the low-margin open source business. Smart companies figured out how to make both businesses work.
This is the opportunity for ephemeralization. Since doing more with less is inevitable, why not turn our attention to it? We will never get an e-pill, but we might be able to squeeze half the cost out of the rapidly commoditizing general education requirements.
The question for public universities is what to do when the crossover point is reached – when the value to students exceeds the cost of delivery. I asked Arizona State president Michael Crow exactly this question, and, without skipping a beat, he told me he would like to do: “Let’s figure out what we are the best at, and make that available to as many students as possible. If ephemeralization is inevitable, what other value propositions change what universities will look like when we reach the crossover point?
The title of this post is a question.
My colleague Mark Guzdial recently asked whether it makes sense for colleges and universities to do research:
I’m wondering now why universities do research — how does it make economic sense? Is it because it’s their raison d’etre? I don’t buy that, because that wouldn’t explain why so many smaller colleges and universities are increasing their research portfolio. Is it because a “hit” cancels out all the losses? One good piece of IP makes up for all the research that didn’t bear fruit? Or is it because a research portfolio is necessary for reputation surveys?
It’s a question that I try to answer in my new book. Here are some of the facts.
Viewed through this lens, Guzdial’s questions are even more interesting. It frequently makes little economic sense for a university to conduct research. It may be part of the mission of a multiversity, but it is not the only mission — and there are plenty of examples to guide other choices. If the dream of IP commercialization success drives institutions to build their research programs, what about the data that predicts little chance of success? And if a university is concerned about reputational hierarchies, does building a research portfolio actually help? Among the many components of a modern multiversity, few could survive without the instructional programs. Academic programs, on the other hand, might do quite well without hospitals, theaters, or fancy football arenas. So, why should a university do research?
Let’s hear your thoughts.
It’s funny how the same reading of history leads to different conclusions. The young investor in the 1840s Punch cartoon above stands in a back alley outside the Capel Court stock exchange asking a purveyor of dubious scrip how to honestly make £10,000 in railways. It is the end of a technology hype cycle in which the modern-day equivalent of $2 trillion was pumped into an investment bubble. The picture on the right is a desolate and economically insignificant outpost connected by some of the 2,148 miles of railway capacity that entrepreneurs built during the British railway investment mania of the 1830s. The conclusion is that early investors in British railway companies were played for suckers.
The mania probably started with an announcement in the May 1, 1829 edition of the Liverpool Mercury:
“To engineers and iron founders
The directors of the Liverpool and Manchester Railway hereby offer a premium of £500 (over and above the cost price) for a locomotive engine which shall be a decided improvement on any hitherto constructed, subject to certain Stipulations and Conditions, a copy of which may be had at the Railway Office, or will be forwarded. As may be directed, on application for the same, if by letter or post paid.
HENRY BOOTH Treasurer Railway Office, 25 April 1829
The Liverpool and Manchester Railway was not the first railroad in England, but the competition drew enormous interest. Contestants used everything from “legacy technology” — horses on treadmills — to lightweight steam engines that could reach up-hill speeds of 24 miles per hour. The legacy technology defeated itself when a horse crashed through a wooden floorboard. It did not hurt that Queen Victoria declared herself “charmed” by the winning steam technology.
Business innovation — ticketing, first-class seating, and agreements allowing passengers to change carriers mid-trip — was rapid and fueled as much by intense competition as by a chaotic, frenzied stock market in which valuations soared beyond any seeming sense of proportion, causing John Francis in 1845 to despair: “The more worthless the article the greater the struggle to attain it.” When the market crashed during the week of October 17, 1847 — in no small measure due to to the 1845-6 crop failure and potato famine — and established companies failed, financiers like George Hudson were exposed as swindlers. Thomas Carlyle demanded public hanging.
The collapsing bubble is not the end of the story. Between 1845 and 1855 an additional 9,000 miles of track were constructed. By 1915 England’s rail capacity was 21,000 miles. British railways had entered a golden age. The lesson that observers like Carlotta Perez and others draw is that there is a pattern to technological revolutions:
This is a Schumpeterian analysis of innovation that is reflected everywhere, but particularly in the economics of the new technologies of the late twentieth century. The stamp of the the 1840s British railway mania can be seen in Gartner’s technology hype cycle and in nearly every discussion of the 2000 dot-com collapse. It is an analysis that is a special problem for angel and other early-stage investors because there is no real guide to tell you when the bubble will burst. Unless you are George Hudson, what investor will find the risk acceptable? A rational early investor will steer clear of technologies that radiate this kind of exuberance.
But what really happened to all that investment in the 1830s? I was amazed to see the recent article by my long-time colleague Andrew Odlyzko at the University of Minnesota who analyzes the British railway mania example and concludes that the early investments did quite well:
The standard literature in this area, starting from Juglar, and continuing through Schumpeter to more recent authors, almost uniformly ignores or misrepresents the large investment mania of the 1830s, whose nature does not fit the stereotypical pattern.
Andrew enjoys taking contrary — often cranky but always well-thought out– positions on conventional wisdom, so I approached his article with cautious interest. After all, I thought I knew a little about the railway mania episode. I had used it myself to illustrate innovation cycles. Like most people, I had focused on the disaster of the 1840′s, so I was drawn immediately into Odlyzko’s argument that during the mania of the 1830′s, “railways built during this period were viewed as triumphant successes in the end.”:
After the speculative excitement died down, there was a period of about half a dozen years during which investors kept pumping money into railway construction. This was done in the face of adverse, occasionally very adverse, monetary conditions, wide public skepticism, and a market that was consistently telling them through the years that they were wrong.
In other words, the end result of the wildly speculative exuberance of the 1830s was the “creation of a productive transportation system that had a deep and positive effect on the economy.” Investors saw great returns. A shareholder in London and South Western Railway (LSWR) who in 1834 paid a £2 deposit on a share worth £50 and who paid all subsequent calls (totaling £95.5) would have watched the investment grow to 2.31 shares valued at £200 by mid-1844 and would have received in 1843 alone £4.62 in dividends — a 9.68% annual return. This defied the more rational demand and cost forecasts:
at the start of the period…in June 1835, such investor would have paid £10, and seen the market value it at £5.5. In fact, over most of the next two and a half years, the market was telling this investor that the LSWR venture was a mistake, as prices were mostly below the paid-up values.
Andrew Odlyzko is a seasoned mathematician who knows better than try to prove a general principle by example. He says as much in his paper. On the other hand, railway mania has been used for years as an illustration of an innovation cycle, and Odlyzko has a very different reading of history. The conclusion that is usually drawn from the Railway Mania may lead markets and investors astray because it seriously misrepresents actual patterns. The whole point of a cycle — hype, innovation, or investment mania — is that it can be used as a risk-averse template for rejecting sales pitches that start with “This time is different“. But that does not mean that it is never different.
Abelard and Heloise surprised by Master Fulbert (Painting by Jean Vignaud)
I’ve been receiving email the last couple of weeks. “Where are the WWC posts?” “Are you still writing on WWC?” The short answer is “yes,” but I am taking a short sabbatical to finish my book Abelard to Apple: The Fate of American Colleges and Universities in the 21st Century. I like the idea of taking a sabbatical from writing to be able to write something, but it’s not an original idea. I noticed that when New York Times columnists like Tom Friedman and Maureen Dowd go silent for a few weeks to finish a book, they say that they are taking a sabbatical, and I thought that I would also take a sabbatical. Maybe some their marketplace magic will rub off on me.
What’s the book about? It’s a WWC story about the challenges that face American higher education as the sudden appearance of abundant choices in university education erode the value of traditional colleges and universities. I have written a little about this before. My colleague Dick Lipton has an excellent post on what he thinks is the doomsday scenario for American colleges.
The appearance of Peter Abelard’s name in the title of my book always draws curious looks. It is in part a metaphor for a long-lost approach to education in which the connection between students and teachers defined the learning experience. But it is also a real part of the story of where our universities are heading because it is the starting point of an historical arc that might well lead to Liptons’s extinction event.
Peter Abelard is known today mainly because of his disastrous love affair with Heloise, but
Few teachers ever held such sway as Abelard now did for a time. Distinguished in figure and manners, he was seen surrounded by crowds — it is said thousands — of students, drawn from all countries by the fame of his teaching, in which acuteness of thought was relieved by simplicity and grace of exposition. Enriched by the offerings of his pupils, and feasted with universal admiration, he came, as he says, to think himself the only philosopher standing the world…Great as was the influence exerted by Abelard in the minds of his contemporaries and the course of mediaeval thought, he has been little known in modern times but for his connection with Heloise[1].
Abelard to Apple will be published in 2011 by MIT Press. I will be back with new WWC posts in few weeks.
References
San Jose Mercury News (CA)
December 23, 2001
Section: Business
Edition: Morning Final
Page: 1FVC LEGEND LEADS CHARGE FOR HP-COMPAQ
WITH TIES TO BOTH COMPANIES, PERKINS HAS UNIQUE PERSPECTIVE
MATT MARSHALL, Mercury NewsThirty-six stories above the placid blue waters framing Alcatraz Island and the Golden Gate Bridge, Thomas Perkins fidgets in his chair. If conversation lulls, his thumbs twiddle impatiently. He is a man driven by ambition. Perkins, 69, has turned his Silicon Valley venture capital firm, Kleiner Perkins Caufield & Byers, into the most successful VC firm in the world. Kleiner Perkins has returned around $20 billion to investors over its 30-year history. But Perkins‘ impatience comes from his latest, unexpected challenge: the bitter battle over the proposed merger of Compaq Computer with Hewlett-Packard. As a board member of Compaq — and former executive at HP, the Palo Alto computer firm where he cut his teeth more than four decades ago — he has become one of the most outspoken backers of the merger. But some HP heirs — sons and daughters of founders William Hewlett and David Packard — have signaled their intent to vote down the deal, saying a merger doesn’t make economic sense. They also say the layoffs likely in a merger threaten to ruin HP‘s vaunted tradition, the so-called HP Way, which they say emphasizes company loyalty…
…A merger will create a mammoth company that can take on giant IBM — and beat it. HP and Compaq, he explains, have better ties with Microsoft and Intel — two other key protagonists in the computer industry drama. Together, he says, the foursome create an industry standard that can easily outdo IBM. ”Microsoft will be the software department, Intel will be the hardware department, and HP-Compaq will be the marketing-customer delivery department,” he says. ”Wouldn’t you go for it?” In part, Perkins is fighting for Compaq. But he also is fighting for his right to interpret the legacy that Packard and Hewlett left for Silicon Valley..
I remember opening the paper a couple of days before Christmas, 2001 and feeling like I had just been kicked in the stomach. It was not the best time to be an officer of HP. Bill Hewlett’s son and HP board member, Walter, had come out swinging against the HP-Compaq merger, and Carly Fiorina, my boss, was under incredible pressure to sell the deal despite howls from the local press, the Hewlett and Packard families, an active message board for HP employees, and now a fractious board of directors. And there it was in black and white in the morning paper: Tom Perkins, a Compaq board member and a driving force behind the merger had a plan to turn HP — the company whose logo said “invent” — into the marketing department for Intel and Microsoft. I had to think hard about how I was going to face my own Technology Council and reassure HP’s 12,000 engineers that — despite what Perkins said in the interview – the company was not backing away from its commitment to innovation.
Earlier in the month, Carly had invited us to her house for a very low-key holiday celebration — much more subdued and informal than the elegant holidays parties that were the custom when the company was doing better. Carly had paid for much of it out of her own pocket. It turned out to be a tense and not not very festive evening. Carly was running on a few hours of sleep, and the rest of us were trying to tie down the ship’s rigging in the middle of a storm. There was an air of uncertainty. We sat around smaller tables with our spouses as dinner was served. Carly and her husband Frank were at an adjacent table. As much to break the tension as anything, the discussion at our table turned into a silly guessing game over which actors would be cast to play which of us when the HP-Compaq Merger Movie was made (West Wing star Allison Janney was the consensus choice to play Carly). We must have been loud, because I could see Carly stiffen. Carly didn’t know who on her own staff she could trust, and it must have sounded like we were tossing off the seriously difficult times that would be coming for HP and its employees. We weren’t.
I spent virtually all of my time that winter keeping our major technology initiatives on track, promoting strategic product directions with customers, and talking to our engineering teams around the world. The outcome of the proxy fight was uncertain and there would have been antitrust repercussions if HP and Compaq had gotten too cozy, so Webb McKinney, who was in charge of HP’s side of the integration team and the clean room that allowed the companies to begin planning merger details without violating antitrust laws, kept most of us with day-to-day management responsibilities in the dark about post-merger plans for technology and products.
Once shareholders approved — by a hair’s breadth — the merger, Perkins was named to the board of the new HP. Compaq’s Shane Robison was named to a new position that combined my old CTO role and a Chief Strategy Officer position that had not existed before. I was still concerned about the Perkins comments from his December interview. My first encounters with the Compaq technologists were not encouraging. I got into a shouting match with one of Robison’s staff members about how much HP should be investing in security for its products. This was less than a year after the 9/11 attacks, and I had been working closely with CTO’s of other Silicon Valley companies and federal agencies to forge a comprehensive strategy for information and communications security. The official Compaq position was that this was a problem for Microsoft, not HP, and I was told to keep quiet about it.
Imagine my surprise when Perkins and Robison led an effort to form a Technology Committee for the HP board to oversee and track R&D the same way that Audit, Governance, and Compensation Committees oversee financial and operational matters. I didn’t always agree with the direction it took, but it seemed to breathe new life into a technology governance process that had been stalled for many months. Prior to that, HP — like most companies — did not place much visible faith in its board to integrate technology into corporate governance. There were a few public boards that had technology committees. They had been prominently featured in the magazines for directors that wrote about best board practices, but those articles were disappointing: most existing technology committees were for informal oversight of technology spending by CIO’s. What Perkins was proposing was something different — and so at odds with his public statements about the value of a merged HP and Compaq that it took me a little while to catch on. The HP Technology Committee would not only monitor technology developments, it would help educate the board about new trends and directions that would impact board-level decisions and provide informed advice on the technology implications of financial and personnel decisions, including how to maintain a workforce advantage.
A committee like this would have been helpful years before, because HP had a history of plunging into technology investments and acquisitions that, to most technology observers, made little sense. HP’s decision in 2000 to purchase a middleware/software company called Bluestone was one such decision. A distant fourth in a crowded and fragmented marketplace, the idea behind the Bluestone acquisition was based on a faulty reading of HP’s current capabilities in the space, the ability of any small entrant to alter the dynamics of the marketplace and the needs of HP-UX customers who felt themselves always last to the trough when third-party software developers released new products. After two years of chaos and the dismantling of HP’s web services organizations, Bluestone was dumped at a $400 million loss.
HP’s decision to sell its considerable VLSI design assets to Intel was also made for financial reasons, although it was widely known in HP’s technology community that the success of its 32 and 64 bit processors, including Itanium, depended on custom chipsets that HP had invested in for many years. The original architects of Itanium were on my staff, and it was hard to peel them off the ceiling when the announcement was made, especially since they had virtually no voice in the decision-making process.
Officers were invited to sit in on the entire HP board meeting, except for the closing executive sessions. Even so, it took me awhile to realize how rare technology discussions actually were. After a particularly fiery Industry Analysts’ Meeting, during which I made a slash-and-burn presentation on our competitive advantages over Sun Microsystems – that made the analysts smile but our marketing folks queasy — Carly asked me to reprise the talk for the board. Patty Dunn (who would later take over as Chairman in a controversial tenure after Carly’s dismissal in 2005) and others approached me to say how much they appreciated the competitive information and the willingness to be combative in defense of HP product strategy. They claimed, incredibly, that it was the first time they had heard this kind of presentation.
The Perkins proposal would have given the board a lens to look at issues like these — necessary in a company where financial forecasts are only as good as the underlying technology. HP was not only one moving in this direction. Motorola and other technology companies had — at about the same time — formed Perkins-style Technology Committees. Ram Charan’s book Boards That Deliver helps explain why technology companies need to take the Technology Committee seriously, more importantly, how they can help a board move beyond the role of compliance to a deeper assessment of health and prospects:
Financial health, operating performance and risk each require separate attention. A company can show good operating performance while financial health…is in decline. Dot-com companies, for example, were notorious for delighting their customers with fantastic (or fantasy) products and services while bleeding cash. Similarly financial health can appear to be sound when in fact the guts of the business have been severely compromised. Any risk can be underestimated, especially when it is assessed piecemeal, rather than in totality.
The reason that the Technology Committee is a good idea for public technology companies is that the worlds of innovation and execution are going to collide, and a board cannot deliver value by simply checking off a box on a governance worksheet. What do you know, for example, about the real performance of key technology executives without a deep insight into how they would be evaluated by their peers and competitors? How do you know that an acquisition based on a couple of good financial quarters and self-congratulatory product press releases has no market advantage over an in-house solution? That’s not the kind of question that due diligence is going to ask. After I left the company, I watched the downsizing of research and heard often from former friends and colleagues who thought one decision or another was wrong-headed, and I often wondered about how effectiveness the committee actually was. And then I would see something preserved that made no short-term financial sense, although everyone knew how important the technology would be some day.
When I joined the board of RSA Security, I was definite about my plans. “Look,” I told CEO Art Coviello, “RSA’s performance is a three-legged stool, and the board needs to be as informed about the technology and markets as it is about finance and operations.” Ram Charan would have said the three legs are Finance, Operating Performance and Risk. I said the risks are Technology, Markets and Organization. Both Art and Chairman Jim Simms were on board, but it was not an easy proposition to sell to the rest of RSA’s board, although I did. The RSA Technology Committee had a big impact on board dynamics and ultimately on the long-term health of the company. It is one of the WWC success stories that I will tell in more detail in a later post.
I can’t think of any reason that the board of directors of a public company — especially a technology company — needs seven CFO’s, but that is the profile of far too many companies. Even on boards where the majority of the non-management directors are CEO’s, financial expertise overwhelms all other skills, and it is not healthy. It’s hard to find a technology company that has failed in recent years where the roots of failure were not widely known on that other planet outside the boardroom. I emphasize public companies only because they are great targets. Later stage privately held companies would also be wise to pay attention to board dynamics and find some way get a handle on the company’s technology.
Once I got over the stomach ache that Tom Perkins gave me, I realized why technology had a seat at the table of his boards. Kleiner-Perkins got to be the world’s greatest venture capital firm by delving deeply into the technology implications of business decisions. Engineers have the impression that board rooms are filled with accountants who know very little about the details of the business but are not shy when it comes to talking about it. Enter the Technology Committee.
I always liked the scene in Annie Hall where Alvy Singer, the Woody Allen character, is getting more and more annoyed by a guy standing behind him in a movie theater line who is carrying on about Marshall McCluhan, trying to impress his date:
- Man in Theatre Line: It just so happens I teach a class at Columbia called “TV, Media and Culture.” So I think my insights into Mr. McLuhan, well, have a great deal of validity!
- Alvy Singer: Oh, do ya? Well, that’s funny, because I happen to have Mr. McLuhan right here, so, so, yeah, just let me… [pulls McLuhan out from behind a nearby poster]… Come over here for a second… tell him!
- Marshall McLuhan: I heard what you were saying! You know nothing of my work!…How you got to teach a course in anything is totally amazing!
- Alvy Singer: Boy, if life were only like this!
I enjoyed reading the new book about innovation at Hewlett-Packard that Chuck House and Raymond Price just published[1]. It’s quirky and curiously researched, but, most of all, I was happy to read their account of Carly Fiorina’s tenure as CEO at HP. History was in need of some fact-based revision. If ever worlds collided, it was at HP when Carleton S. Fiorina took over the reins after a stunning rise through the executive ranks at ATT/Lucent. Chuck points out that, although Carly was not well-liked by her employees (even her direct reports, many of whom ultimately undermined her), she sowed the seeds for Mark Hurd’s success.
The executive suite at HP Headquarters on Page Mill Road in Palo Alto was in those days a row of large cubicles, and, in keeping with the HP culture, there were no doors and no outer offices. Everyone’s office – including Carly’s — was really just a cubicle. Carly insisted that I have two offices: one in HP Labs adjacent to the museum-like offices of Bill Hewlett and Dave Packard — these were not cubicles but were real offices, impeccably maintained in their original 1960′s orange-and-brown Madmen decor — and the other next to hers overlooking a Japanese garden. Carly’s executive council met nearly every week in a nearby conference room whose glass wall looked out over the same garden.
Several council members had offices elsewhere, but those of us who had direct access were within a thirty-foot radius of her office. These were the Gold Badge days at HP when a favored few retirees were granted the privilege of unrestricted, lifetime access to any building and any office suite in the company. The daily comings and goings telegraphed events that would not be visible outside the CEO’s office for days or weeks, even among business heads who had broad authority over multi-billion dollar enterprises. This turned out to be an important vantage point from which to view sand being thrown in the gears during HP’s acquisition of Compaq, but I will save these stories for later posts.
Chuck House had been gone from HP for some time when Carly arrived, so his account is based on interviews with a relatively narrow slice of insiders who were his colleagues — an impressive number of people, to be sure, but in a company with 80,000 employees not enough for a definitive portrait. But House has never been shy about charging ahead when the terrain looks interesting, a personality trait that once earned him a medal from Dave Packard for “Extraordinary Contempt and Defiance Beyond the Call of Duty.” It was awarded to commemorate a mutinous tour of customer sites to demonstrate a new display monitor after HP management in Colorado Springs had decided to shut it down. Nevertheless, House’s account gets many things right. One of the things he misses was what Fiorina brought to HP: a WWC focus on the customer that was foreign to HP’s engineering culture before her arrival.
House and Price defer to old-guard HP employees in characterizing Carly as a marketer, a fiction that was rooted more in style than in substance. Fiorina was unnervingly accurate in her assessment of general market trends, like the importance of the internet to HP’s mainline businesses, but, in fact, she was a consummate saleswoman. What she brought to the table was not the “let’s-see -what -they-think-about-this” arrogance of corporate marketing organizations, it was the ability to listen to customers, sift through encyclopedic knowledge of internal plans and projects, and envision a solution. Sometimes a solution was forthcoming. Sometimes it took a little while longer than customers were willing to wait. But sometimes solutions were sabotaged. To have an HP outsider from the East Coast — a telephone equipment salesman, not an engineer — propose a solution to customer problems was an unpardonable sin to some. It was a WWC culture class that she was slow to recognize.
She was widely criticized for her lack of operational experience, but the truth is that Carly delegated operational authority too widely and to managers with suspect motives (including past and future pretenders to the throne). As a newcomer, I tended to apologize for injecting long-range thoughts into the very operational discussions of the Executive Council, until one day Carly stopped me and said: “You don’t have to apologize for that. It’s true that we’ll never get to the long-term without taking care of the short-term, but it’s the long-term that makes the short-term worth doing at all.”
Council chemistry changed in the months before the Compaq merger. Vyomesh Joshi took over as head of the imaging and printing business unit. V.J. is not only a brilliant executive, he is a skilled engineer, whose technical insights were mainly responsible for transforming ink jet printing.
The other major additions were Pradeep Jotwani and Iain Morris. Pradeep had control of worldwide consumer sales. He was fond of long discourses — sometimes literary, sometimes merely speculative — but their effect was always to slow down a speeding train and turn the discussion in a direction that was more productive. Iain is a big, brash, Harley-riding Scott who Carly recruited from Motorola to carve out emerging businesses like handheld computers and entertainment. Carly quickly transferred the personal computer businesses to Iain from Duane Zitzner’s computer business unit where they had languished as unprofitable also-rans. Morris knew hardware, software and manufacturing from his days at Motorola, and he was also a great salesman.
At one of his first Council meetings, Iain walked in with an HP laptop and stopped everyone cold when he opened it up and bellowed: “What’s wrong here?” When you looked at an open HP laptop from the back, the “hp” logo was upside down. It read “dy”, and of course, that was the way most people saw the laptop: open and from the back, inverted logo. If anyone before had noticed this, it never made it to the upper reaches of management. The order went out immediately to invert the logo and all of the millions of HP laptops produced since that time now display the logo right side up, so that it reads “hp”. It upset some of the industrial designers who argued that laptops were closed a lot of the time and that the orientation of the logo doesn’t matter when a laptop is closed. It took a salesman’s eye to recognize that it was stupid to have millions customers staring at a “dy” laptop.
This episode followed on the heels of two other quick-shifts. One involved HP’s always painful Federal sales performance. I will talk about this more fully in a later post. The other involved architectural consistency, a concept that bridged customer issues and product design.
Shortly after VJ took over the imaging and printing business, he held an advanced projects review for me in San Diego. I was struck but the ubiquity of infrared (IR) connectivity ports on HP printers and cameras, and mentioned it to VJ. He had many compelling reasons for insisting on IR, but complained that Zitzner’s PC division had recently removed IR ports from HP laptops.
To Duane’s immense displeasure, I called a meeting with some of his design engineers, ostensibly to review the component cost envelope for laptops. At the end of the meeting, when everyone was worn out, I asked about IR, and they had a string of good reasons to throw it out. When I pointed out that HP printers, cameras, and PC’s no longer worked together, they just sat there blinking at me. Carly overruled engineering objections and IR ports made a miraculous (albeit short-lived) reappearance in HP laptops.
It would not be apparent outside the CEO suite for months, but architectural consistency was a technology theme that would drive many R&D investment decisions, both near-term and long-term. In an effort to jump-start a consumer-facing initiative, Carly had approached Sony about sharing some key technologies. One of Sony’s success stories was the introduction of memory stick technology into a broad range of Sony products from hundred-dollar consumer entertainment devices to studio-quality video cameras that cost a half million dollars or more. My counterpart at Sony was a CTO named Mario Tokoro, a computer scientist and engineer who had spent time at the famous computer science department at Carnegie-Mellon University. Mario had been instrumental in arranging for memory stick technology across a staggering array of Sony’s consumer and business products. The idea of arranging product strategies around this kind of architectural unity would have sped up HP’s brief surge in Internet and Web technologies. It was an idea that was undone by colliding worlds on a much different scale.
There are many ways for Chief Technology Officers to be undone. Appropriately enough — in light of Friday’s college football bowl fest — being an effective CTO is like being a college football coach. You don’t actually do the blocking and tackling yourself, but you’ll fail if the fundamentals are not done right — even if your game plan is perfectly constructed. I will have more to say in an upcoming post about game plans, but today I want to recognize the arrival of the New Year with a short note about the fundamentals.
George Heilmeier, former DARPA Director, Bellcore CEO, and the inspiration for my” Guess Who’s Coming to Dinner?” series[1][2][3] was a mentor to me and to many other technology leaders . One day I asked him for a bit of career advice, and he hauled out a Heilmeier list — twelve rules for CTO’s to follow if they have any hope of navigating the many dangers of the colliding worlds of innovation and execution. I quickly found out that, true to form, George had reduced best practices to a few rules of the road because dozens of others had asked for the same advice. They are fascinating and valuable bits of advice, and they range in scope from broad business fundamentals to technology and culture. I haven’t come across anyone who thinks that they are not important lessons — not to tuck away for future use, but to internalize and use as a platform for technology management in any setting. It was December , so I turned George’s list into New Year’s resolutions.
- For each “client” establish/conceive a list of technologies and initiatives that drive his business and a list of technologies and initiatives that could change his business.
- Use the Catechism to get people to focus on the real “care-abouts” when making investment decisions and establishing priorities.
- Establish the physical, economic, and manufacturing limits of the technologies and capabilities that drive the business today.
- Establish a good working relationship with your peers
- Establish what [insert name(s) of your CEO and Chairman] real priorities are.
- Establish the metrics for success in their eyes.
- Don’t shy away from doing some near term problem solving. It builds credibility and respect.
- Never have your peers or clients come to your office for meetings with you. Go to theirs.
- Any display of arrogance will cost you. Don’t do it.
- Compile a list of “innovations yet to be made”
- Make sure that each program or initiative is output oriented not activity oriented.
- Learn the [insert your company name here] culture. It is unique.
Have a happy and safe New Year, and, by all means, don’t get caught when worlds collide.
[2] http://wwc.demillo.com/2009/10/11/guess-whos-coming-to-dinner-part-2/
[3] http://wwc.demillo.com/2009/10/19/guess-whos-coming-to-dinner-part-3/
(Click Image for Details) Welcome to my blog about the interesting things that happen when technology innovation and business execution are on a collision course. These collisions are not always pretty, but sometimes they have useful outcomes and in my experience they are almost always instructive.
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A Letter to the Editor
January 11, 2010Alan J. Perlis
I had planned to write a post later this spring on the collisions between what engineers sometimes perceive as practical and what turns out in practice to be useful. It’s a complex issue and there are examples that cut both ways, suggesting that a deeper understanding of both the underlying technology and the social “soup” where innovators thrive are needed to avoid some famous traps. I mentioned this briefly in my discussions of the impact of social fragmentation on innovation and the pitfalls of ignoring social contexts.
Then the January 2010 issue of Communications of the ACM crossed my desk. As I skimmed the contents, I was surprised to see my name in the headline of the Editor’s Letter, an attack by the Editor-in-Chief Moshe Vardi on a thirty-year-old paper [ Social Processes ] that I wrote with computing legend Alan J. Perlis and my colleague Richard J. Lipton (author of the popular Godel’s Lost Letter blog and subject of Dancing with the Stars ). The paper itself was controversial in its day and addresses exactly the WWC questions that I plan to write about. It is extraordinary for an Editor of a professional journal to use his position to make derogatory comments about articles, especially to further his own views. Mr.Vardi’s letter demanded a response. Lipton and I will jointly publish a longer and more technical essay on this subject at some point in the future, but today we are jointly publishing the following Letter to the Editor. The letter will also be sent to the Communications of the ACM.
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Tags: culture, Dick Lipton