The Saga of Eric the Red and the Anthropology of Innovation: A Parable

December 28, 2009
Eiríks saga rauða (Saga of Eric the Red) Icelandic manuscript (17th century)

Eiríks saga rauða (Saga of Eric the Red) Icelandic manuscript (17th century)

In Murder, Starvation and Catastrophe, I drew a line to connect the historical behavior of doomed societies with the business performance of large enterprises.  One of the most compelling of Jared Diamond’s stories is the saga of Eric the Red, the 10th Century Viking who founded Greenland.  The preposterously named colony was eventually home to 10,000 Norse settlers who were perhaps fooled by the name into thinking they were heading off to some sort of North Sea resort for Vikings. The story of Eric the Red is a parable for how the human factor in WWC  promotes or stifles innovation.

Eric was a scoundrel.  A suspected murderer, he fled Norway for Iceland around 980 AD.  It was short, but violent, stay.  He was ejected from Iceland, and, sailing west, discovered an island of fjords, glaciers and grasslands. He returned to Iceland long enough to kill a few people and recruit an expedition of 25 ships to build a settlement on Greenland. Despite their violent beginnings,  the Greenland settlers established a farming economy and a humane society, including a government that provided for the poor in times of scarce crop production.  The Viking settlers had sporadic wars with the Inuit natives, but apparently flourished for hundreds of years until sometime in the early 1400’s when they just disappeared.

It was one of the great anthropological mysteries of all time:   how could fierce competitors — apparently successful  in a new environment that was not much different than the one they left behind – suddenly fail so catastrophically that their entire society was wiped out in only a few years? When archaeologists excavated the Greenland settlements, they found the usual trash of human civilization:  tools, debris, the remains of livestock,  and garbage from cooking.  But they found no fish bones.  The Norse Greenlanders were expert seafarers who lived in the world’s richest fishing waters and inexplicably starved to death because they did not eat fish.

The Vikings brought with them the culture and preferences from home. They brought food:  pigs, cows, goats,  and sheep.  The Norse knew how to grow crops in cold climates, so they planted crops like barley, oats, wheat, rye, cabbage, onions and peas. They hunted seal for food and  traded  walrus ivory with Europe  for material not available on the island.

By 1400,  demand for ivory, polar bears, and other luxuries from Greenland fell. Black Plague had wiped out nearly half of Europe’s population.  The Crusades opened new sources of ivory and spices to the now smaller market in Europe. The early 1400’s also marked the beginning of the Little Ice Age, blocking natural water inlets and delaying the arrival of migratory seals.  Deforestation left Greenlanders short on lumber, fuel, and iron.  Climate change and poor crop rotation led to crop failure, so the settlers consumed pigs, cows, and sheep to the point of extinction.

They had cultural inhibitions.  They did not eat their pets, for example.  They could have learned to hunt fish from and traded with the Inuits, but the Norse regarded the natives as pagans. Greenlanders were Norse, and they thought of themselves as dairy farmers.  When Eric the Red founded Greenland, it was uncharacteristically temperate —  a special time when their cultural preferences led to success.  They relied on past behavior and — when the climate changed, relations with friends and enemies faltered, and their environment was damaged —  they starved to death.

15th Century Greenland has something in common with IBM  in 1980:  a belief that historically successful behavior will succeed in the future. The Norse preference for pigs and cows required them to dedicate more time and grazing land to those animals than to the heartier goats and sheep.  Their Euro-centrism prevented them from learning from and adopting the eating habits of “pagan savages.” The thinking appears to be that their lifestyle was successful in Norway, so there’s no reason it shouldn’t be successful in Greenland. On the other hand the Norse settlers were not great innovators.

Thomas Watson Sr, understood the role that innovation would play in the company’s future. He opened IBM’s  first dedicated research center next to Columbia University in 1945 and the result was immediate, spectacular innovations including time sharing and  magnetic core memories.  Thomas Watson, thinking it was too risky to continue having its research done in the relative open environment of a joint university lab, and using Bell Labs as a model, established dedicated corporate research labs in New York and Zurich. This ushered in a golden age for IBM.  By any measure of success—sales, market cap, profits, patents, R&D budget—IBM,  and  in many ways,  defined the industry.

Then came the 1980’s and its disruptive changes to the computer industry..  These  changes were not kind to IBM and in 1992 the company reported the single largest annual loss in U.S. corporate history to that point: $4.96 billion after taxes.

How did this happen?  Unlike the Greenlanders’ demise, this one isn’t a great mystery.  The Watsons believed fervently that doing the things that had made IBM a great corporation would make it successful in the future.  IBM knew how to profitably sell computers and to whom.  After all, they defined the industry.  There is a widely known internal 5-year forecast of worldwide PC sales that shows shipments peaking  at less than 80,000 units in 1983 before settling into a comfortable rate of 40,000 per year by 1987.  Less than 250,000 over the five year period.  5% to business customers who would continue to rely on IBM mainframes.  In fact, over a million PC’s were sold by 1985.  The industry was in the midst of explosive change and not only did IBM did not recognize it but they believed that past success was a predictor of future success.

But by 1982 it was all over. If IBM had recognized the value of the PC, they would have kept it proprietary and the computer industry would have developed very differently.  Without its IBM  licensing deal, Microsoft would have withered early.  Intel would be a niche player.

IBM, Xerox,  AT&T, and Nortel were all  innovative companies.  They hired the best and brightest – and there was low employer mobility since after all how many places were there for a computer science PhD to work?  The IBM Research Lab in Yorktown Heights developed and incubated products in the historically successful vertical way.  The barriers to entry for IBM’s  competitors (especially the small ones like Compaq and DEC) were huge. How could a small competitor build a direct sales network to rival the famed Xerox sales force?  What did an academic startup like Cisco  aimed at the tiny data network market have to do with the output Bell Labs or the market clout of Nortel?

This is how innovation looked at the end of the last century. It is too easy to draw conclusions about why old models stumble.  An apparently obvious lesson from the story of Erick the Red is that  the Little Ice Age caused the Vikings died off in Greenland. Current conventional wisdom is that the technology giants stumbled  because they were too old or rigid or bloated to compete smaller, nimbler competitors who were themselves innovating although in very different ways.  Actually neither is really true.

It is simply built into the fabric of innovation that the marketplace is an environment – you have to adapt to it to survive.  If people want low-cost computers then drive cost out of the manufacturing process and learn to prosper on thinner margins. There are occasionally companies that try to change the environment.  Hewlett-Packard grew for 60 years on a simple business model:  innovate to create a product category and ride market growth until the margins shrink.  Then exit.  The ink jet printer is such a product — and there is much discussion in HP about exit strategies for inkjet printing. So was the hand-held calculator.  Most companies cannot imitate those successes. HP eventually faltered when it tried large scale environmental engineering with its failed acquisition of PWC and the gut-wrenching merger with Compaq.

So if adjusting to the environment is the answer, why didn’t the Greenlanders just start eating fish?  The Greenlanders damaged their environment through poor livestock selection, clear-cutting forests and poor crop-rotation. There was significant climate change brought on by the Little Ice Age. The Inuit qualify as hostile neighbors.  They had friendly trade partners for many years, but eventually lost them.  But above all,  the Norse Greenlanders’ response to these factors was culturally based.  They didn’t eat fish  because it was not viewed as a reasonable option in their culture.

Innovation is frittered away because it is not viewed as a reasonable option in a company’s culture.  The structure of leadership accounts for a lot in determining the role that culture plays.   Distant, authoritarian, decision-making tends to rely excessively on the past as a predictor of the future.  Microsoft’s Steve Ballmer said as much  in a 2008 speech at the Stanford Graduate School of Business:

One of the biggest mistakes I’ve made over time…is not wanting to nurture innovations where I either didn’t get the business model or we didn’t have it.

Examples abound. The HP Jornada™ pocket PC could play MP3 music files before the  iPod™  hit the market.  But there was no HP music store. Running an online music store was not an HP competency.  There is a certain — sometimes irrational –  optimism that past success engenders in leaders at the precipice.  When Mike Zafirovsky took over as CEO of Nortel Networks in late 2005, it was a company on the brink of failure.  Massive layoffs had decimated the iconic Canadian company.  In early 2006, I was escorted for the last time through its cavernous Toronto facility — a building laid out as a city with streets and parks — just before it was shut down.  All you could hear was the click of heels reverberating down the empty faux boulevards. Mike Zafirovsky wanted to communicate his energy and sense of the future to the demoralized employees who remained.  His first email  in December 2005 to Nortel employees defined the tone of his administration and sent the company down a path that emphasized execution of a plan that emphasized ideas that had worked before:

To Nortel employees,

Last Friday night, as I was flying back from a very productive trip to Europe following several customer and employee visits, I came across a newspaper article entitled “Optimism Puts Rose-Colored Tint in Glasses of Top Execs.” Included in the article were quotes like:

“99% of CEOs thought they could lead their companies from crisis;”
“Optimism is all about possibilities, change, hope…without those qualities, how can any leader succeed?;” and,
· “By definition, leaders are slightly delusional.”

My first reaction was to take exception to the word “slightly” . . . .

Seriously, the question of our confidence in ourselves—and as members of Team Nortel—is something I will begin discussing today and a topic I will continue to raise in the coming weeks and months. Confidence in ourselves and each other will be critical factors in how far and how fast we take this 110-year-old company..

I discussed with you in a previous letter our plans for the BIG initiative (Business Transformation, Integrity Renewal and Growth Imperatives), our new leadership values, and our focus on people that will be rolled out as part of Session I in the first quarter. In my first few weeks, I have also spent time evaluating our relative strengths and weaknesses and pinpointing areas for improvement.

…My strong take-aways and beliefs are that our positives are significant and difficult to replicate. At the same time, our challenges are also significant but, I would argue, very fixable. I don’t believe I am looking through rose-colored glasses, but rather have adopted what I describe as an attitude of “forceful optimism.” This is a mindset, a belief and an attitude that I expect from everyone at Nortel—a combination of positive anticipation for the future combined with a determined approach to maximize positive impact.

Forceful optimism is one of the 30 action attributes supporting our recently-defined Nortel leadership values. And as promised in my last letter to you, I worked with select members of the Leadership Edge program and cabinet members to finalize these attributes before year-end.
[...]

As a positive heads-up to the many people who were hoping to be on the Business Transformation teams, we will be kicking off the Six Sigma Quality Program in the first quarter, and there will be opportunities for involvement and leadership. We will be looking for Six Sigma champions and master black belt, black belt, and green-belt candidates (much more on this early next year).

The combination of the Business Transformation initiative and the Six Sigma Quality Program will improve the basic equation of our business, including higher customer satisfaction, simplified processes, lower cost-of-rework, fewer quality issues and lower costs for our products and business structure. And we’ll see teamwork inside the company improving as a result. We will continue the focus on forceful optimism, leadership and our people agenda by launching our Session I program in the first quarter. The programs and initiatives we deliver as part of Session I will ensure we are building strong leadership capability and bench strength across Nortel.

Lastly, and arguably most important for the long-term health of the business, here are my thoughts on customers and the Growth Imperatives, which you will be hearing much more on throughout 2006. I am meeting and speaking with an increasing number of our customers (e.g. the four largest European customers last week) and our go-to-market and product management teams, and I can’t wait to attend our global sales conferences in January. In my straightforward view, good, profitable growth is to a business as air and water are to flowers. We have much to build on and also much work to do, including how we develop meaningful value propositions for our customers. To this end, I am excited to report that we will be introducing our new business mission at the sales meetings. It will guide much of our behavior externally and internally, and keep the focus where it belongs—on our customers.

Let me wrap it up by saying how privileged and proud I am to be leading Nortel and to be working with all of you. I wish you and your loved ones a relaxing holiday and warm wishes for a healthy, happy, and prosperous 2006.

Thank you for all you are doing for Nortel.

Mike Z

Mike Zafirovsky is a capable senior executive, an alumnus of Jack Welch’s CEO boot camp at GE.  He was part of a long string of strong leaders that Nortel recruited.   He could not have anticipated the Little Ice Age of late 2008, but by New Year 2006, Nortel was already hurtling toward disaster.  Its stock was delisted and the company was shrinking.   I asked Mike about industry changes, but he did not react.   There was no sense of urgency at Nortel. There was a sense that the telecom equipment market was not an environment and that what really mattered was the company’s belief that its current direction would take them back from the edge: “a combination of positive anticipation for the future combined with a determined approach to maximize positive impact.”

In January 2009, Nortel filed for protection from its creditors. Its main businesses are being sold. When that is complete,  it will cease operations. Zafirovsky stepped down as CEO in late 2009.

One of my first projects at Bellcore  was to redefine its core software business for the emerging ISP and Cable markets.  The climate was changing in the early 90’s.  Bellcore sold  operations support systems – a sort of ERP for telcos.  A typical sale was in the $25-30M range and $100M deals were not unheard of. So we rolled up all the functions that we could think of – customer acquisition, provisioning, engineering, support – and came up with a product that we thought we could sell for $15M.  When we showed the requirements to cable operators, they just shrugged.  They were using Excel spreadsheets which cost them essentially nothing.  Today, Bellcore — operating under the name Telcordia — leads in none of the operations support or business support markets that defined its core business in the 1990’s and is not even in the top ten in cable and ISP markets.  What they really wanted help with were the services that they could sell to their customers.  One of those services was search.  Another was customer aggregation.  Both were areas in which Bellcore had fundamental patents.  One for the “seed” that underlies virtually all search engines today.  The other for “recommender” technology that underlies all social networking. The search technology was given away to Excite.  The recommender technology was assigned to MIT’s Media Lab and eventually became part of Amazon’s recommendation engine.  We were not in the lightweight database business – although there were many smaller competitors who were.  We were not in the search engine or social networking  businesses, although we had friendly relations with companies that were and had many university collaborations.  We were in the software business.

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Climate Change, Ivory Towers and The Journal of Irreproducible Results

December 8, 2009

There’s a kerfuffle on the eve of the United Nations Climate Change Conference in Copenhagen. 1,700 email messages  that were supposed to be stored on a secure server somehow found their way to open servers and were rapidly picked up by bloggers and others, who jumped on the opportunity to use the sometimes embarrassing messages to discredit  the overwhelming consensus of climate scientists that the earth is warming at an alarming rate and that human activity is the most likely cause. Aside from the shocking coincidence of events — what are the chances that a massive, worldwide fraud would be exposed at the same time the conspirators are getting together to impose their new world order? — and the uproar among climate scientists — who are launching ad-hominem attacks at every skeptic who pokes his head above ground — are there other lessons to be drawn from this shameless bit of theater?  My Georgia Tech colleague, climate scientist Judith Curry, hit the nail on the head when she  pointed out that: (1) there is really nothing in the released messages that discredits published scientific results and (2) scientists are being incredibly counterproductive by retreating into their Ivory Towers and passing up the opportunity to educate and engage both skeptics and the public.  Her Open Letter to Graduate Students and Young Scientists should be required reading for everyone interested in how to keep worlds from colliding:

…even if the hacked emails from HADCRU end up to be much ado about nothing in the context of any actual misfeasance that impacts the climate data records, the damage to the public credibility of climate research is likely to be significant. In my opinion, there are two broader issues raised by these emails that are impeding the public credibility of climate research: lack of transparency in climate data, and “tribalism” in some segments of the climate research community that is impeding peer review and the assessment process.

For “climate science” you can substitute “innovation” and the message is the same. If you’ve circled the wagons and are shooting at anything that moves, the easy target is public understanding of not only science but innovation in general.  The American public is not interested in the long-term thinking required to make sense out of squabbles like this. There are simply not enough people like San Diego Florist Steve Boigon, who — according to the New York Times — downloads MIT physics lectures because he  finds that:

I walk with a new spring in my step and I look at life through physics-colored eyes.

Curry did not go after the easy targets. Instead, she talked honestly to students about the importance of climbing down from the Ivory Tower. The interactive relationship between basic science, technological innovation and public policy — what Donald Stokes calls Pasteur’s Quandrant –  is a hot topic these days, because  so many important societal issues can only be resolved at their intersection.

There’s a veil that conceals the inner workings of creative science and engineering  from the lay public, and attempts to lift it sometimes produce  bizarre reactions.  I was once struck speechless  at an all-hands meeting when one of my engineers stood to scold  the  CEO for making product decisions because he knew “nothing about electronics.”  A prominent member of my Board of Advisers at the National Science Foundation once countered criticism of his particularly cumbersome approach to software development by angrily proclaiming,  “Programming is like playing a piano.  Only virtuosos should do it!”  A world-renowned engineer once responded to an essay critical of his methods by widely distributing a letter entitled “On a Political Pamphlet from the Middle Ages.”  I was one of the young authors who was at the receiving end of that one.  When  outsiders try to lift the veil, the best course is to repair to the upper reaches of the Ivory Tower, hope that the hubbub goes away, and shoot down if it doesn’t.

It is a world view that is somehow wired into university training. The Medieval regalia, semi-religious icons,  and murmured  incantations that convey special status on the conferees reinforce the impression at every college commencement that something mystical has taken place. Science textbooks are uniformly silent on how science is done, presenting instead the subject as a linear, completed work — orderly in progression and tidy in its use of knowledge.  Nearly every engineering textbook guides  readers through well-rehearsed exercises to successful completion of design tasks. Why would anyone want to learn how to build a bridge that falls down?

Insiders, of course, know differently. What takes place behind the curtain is as important as the finished product.  Some of the best technical books ever written lift the veil.  Proofs and Refutations by Imre Lakatos describes  the centuries-long frustration of mathematicians  trying — and repeatedly failing –  to precisely define polyhedra.  The process led some of  the greatest mathematical results of all time. Why Buildings Fall Down by Mario Salvatori and To Engineer is Human by Henry Petrosky are both compelling arguments that progress in  engineering is inextricably tied to understanding engineering failure.  Insiders know that failure is part of the package.  That’s exactly what makes the most outrageous of the climate change attacks so improbable.

There is a sub-genre of humor devoted to obvious, boundlessly incompetent scientific failure, real or imagined.  The Journal of Irreproducible Results is perhaps the defining publication that holds technical vanity up to ridicule. An article entitled Peaceful Use of Nuclear Explosives helpfully noted that

Development of hydro power in the desert of North Africa awaits only the introduction of water

My personal favorite medical discovery was an announcement entitled The Incidence and Treatment of Hyperacrosomia in the United States:

Some very famous Americans  have indeed been afflicted with Acute Hyperacrosomia, among them Abraham Lincoln, George Washington and Lyndon Johnson.  Their condition is readily apparent upon comparison with normal individuals such as Napoleon Bonaparte, Truman Capote  and Dick Cavett…..Since the male population does express the condition to a higher degree, it falls primarily to the female population to objectively consider the risks of involving themselves with hyperacrosomic males…

The jokes are so well-known that Henry R. Lewis apparently had not second thoughts when he wrote The Data Enrichment Metho d:

The following remarks are intended as a non-technical exposition of a method which has been promoted (not by the present author) to improve the quality of inference drawn from a set of experimentally obtained data.  The power of the method lies in its breadth of applicability and in the promise it holds in obtaining more reliable results without recourse to the expense and trouble of increasing the size of the sample of data.

I have a hazy understanding of the data manipulation charges that climate skeptics are leveling at researcher, but I am pretty sure that The Data Enrichment Method was not involved.  There is also the issue of transparency that is specific to climatologists, but Curry handles that well. And then there are the charges that editors of journals were unduly influenced by political considerations.  Like the Inspector in Casablanca, I would be shocked — truly shocked — to hear that hundreds, perhaps thousands, of smart, educated, and highly ambitious people make decisions based on self-interest. The secret that Curry reveals is that it may be regrettable, but  it doesn’t matter in the long run.  Science is not an orderly, axiomatic progression of knowledge. It is a social process.

Even a brief peek under the veil would be enough to convince many fair-minded skeptics that if there were another, compelling, contradictory analysis of the same data, it would have by now appeared in a reputable scientific journal.  Why?  Because it would be a career-making result.  The article would write itself.  What editorial board could long resist publishing an epochal article?  History teaches that political manipulation is much more likely to focus on who gets priority as multiple groups rush to publish simultaneously.  It’s a to maintain a conspiracy when everyone is looking out for himself.  None of this means that everything that has been published is correct. It just means that it’s very unlikely that the shrill cries of  systematic fraud have any validity.



So strong is the urge to seek out systematic scientific fraud, that there is a magazine devoted to the subject. The Skeptical Inquirer (SI) is a kind of companion to The Journal of Irreproducible Results. It specializes in debunking academic myths and scientific hoaxes.  It has over the years exposed magicians, perpetual motion charlatans, creationists, and hundreds of scientific frauds.  Who are these crusaders?  They are the very power brokers that would have to be co-opted if the climate change conspiracy theorists were right.  Here’s a partial list of SI Fellows:

If there is  a less easily manipulated group under one banner, I have not seen it.

Judy Curry’s Open Letter does not only apply to climate scientists. It applies to every boardroom that squashes the discussion of how innovation takes place and every executive suite where technologists are too busy innovating to engage seriously with corporate management.  Of course, it also applies to the easy targets — facile business leaders who confuse near term planning with technical progress and are too quick to jump to the “bottom line” — but that discussion will have to wait for another post.

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Murder, Starvation, Catastrophe

November 30, 2009

As I’ve gotten older, I’ve found myself reading more and more history. I am told that the way to appreciate history is not to “play it in reverse” – that is don’t look at history from today’s perspective where you already know what happened.  You have to “play it forward” – what was it like to live in that place and time and to have to make the big decisions of the day?  It occurred to me several years ago that we think of historical trends as big things.  Nations moving against nations.  The rise and fall of societies.  Then I realized:  Many of the big events took place in  familiar terrain  – collections of people organized around a more or less well defined set of goals and working toward a common purpose. And if you go back in history far enough – say 1,000 years or so — the numbers are also pretty familiar,  usually less than a million people.  In fact, nations and societies with 10,000 to 200,000 people were the norm.  In other words, they were in many ways like the modern business enterprise.

That’s worth saying again:  except for the details of time and place, there is really not a whole lot of difference between  modern enterprises and  societies of antiquity. The fate of large groups of people is determined as much by human aspirations and failings, reactions to threats, wise use of resources, and  the emergence of leaders as by anything else.

So with that as a backdrop I want to ask a couple of questions that seem to be completely unrelated to each other.

Question 1:  Why didn’t the 1940’s Western Electric  videophone make it?

Sure, the structure of the industry mattered, but it wasn’t lack of innovation that doomed the videophone.  After all. Video conferencing is ubiquitous today. So why didn’t that technology make it when today, for a hundred dollars,  you can stream high quality video to another hundred dollar device?  The culture of innovation is fundamentally different today than it was when the videophone was developed by Bell Labs in the 1940’s.  In fact the species of innovator that Bell Labs represents is today very nearly extinct.

My Second Question is:  What was the person who chopped down the last tree on Easter Island thinking about while he was doing it?

In truth, I can’t claim credit for the question. It was posed by Jared Diamond in Collapse:  How Societies Choose to Fail or Succeed, an historical and geographical tour-de-force that poses a framework for looking at decisions that societies make on their way to success or failure.  Those decisions invariably relate to:

  1. environmental damage
  2. climate change
  3. hostile neighbors
  4. friendly trade partners, and
  5. cultural response

Let’s take the similarities between ancient societies and  modern enterprises seriously – they involve similar numbers of people, they define their own value systems.  The historically successful route for both was a kind of vertical integration that made it reasonable to work and innovate in relative isolation. The way that 21st century companies innovate in the face of environmental damage, climate change, and hostile neighbors is very important in their long-term prospects for survival.  On the other hand, how they treat their friendly trading partners determines how much of the work for survival has to be carried on their shoulders alone.  And what about cultural barriers?  The whole point of WWC is to learn from companies that innovate around the right values but are culturally unable to execute effectively.  Diamond’s language is anthropology, not business – but we’ll see in upcoming posts that the difference between success and failure is often rooted in the same factors that led to  murder, starvation and catastrophe in the ancient world — and ultimately to the collapse of societies.

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“the chase” — A Trip Report

November 24, 2009

It never fails. Someone from engineering joins the interdisciplinary team and the shoulder pad thumping begins:  tales of sales teams bartering local currency for booze in exotic locations or bailing customers out of jail for busting up a hotel lobby. Sometimes it’s that hilarious story about dressing up like a chicken, sacrificing dignity for a greater cause.  It usually has all the authenticity of  late-night, one-upmanship, “I can top that!”  fraternity bull sessions or maybe the battle scar competition between Quint, Brody and Hooper in Jaws.   I don’t remember that any of these stories had the dramatic impact of Ken Follett’s retelling of the rescue of Ross Perot’s  EDS employees from Iran [1]. But it sends a  WWC signal: “We business guys risk it all.  We’re dedicated. We live in a different — and way more exciting — world than you do.”  Maybe all the engineers need is a story like this one.

We were within hours of defaulting on the delivery schedule for an important contract.  My team was working around the clock to test and package software on a magnetic tape because those were the days when bits had to be sent from place to place in back of a truck. It was late Saturday afternoon and the only one who knew how to get to the Federal Express office in North Atlanta before it closed was our graduate student assistant, Walt, who, as we found out, was not only ingenious and loyal but had some experience in, umm,  navigating back roads.  Walt just wanted to be reimbursed for gas.  “Sure,” I said, “send me a short trip report.”

From: walt@gatech.edu  Sat  Sep 26  16:58:15  1987

Message-Id: <8709262147.AA17782@gatech.edu>

To: rad

Subject: the chase

Status: R0

well, it is on its way — but not without some work!!

i flew to fedx, speeding, running lights, etc. i ran the light at northside in front of oga’s bbq in the turning lane at 60 mph. there was a cop just gettin out of his car at the trajik markup.  i lost him by cutting thru the kroger parking lot and slipping across i-75. then i cut the big star lot to collier. next i had to get passed  the police station on collier — which i did with no trouble but then i came to the light on defoors ferry an met one comming the other way. i bit my lip hoping the other one had not radioed ahead, but he didn’t bat an eye. finally i get down the road to fedx and the truck was waiting for me. did my business and started back out.  there was 4 or 5 blue boys crawling up and down collier and defoors! i hid behind a dumpster til the coast was clear and then slipped 200 ft up defoors to bohler — an old trick — thru the residential section up to moors mill onto 75 and gone!

anyway — if they come get me tonight you may have to contact cathy for any more developments. i really don’t think they got my number.

signing off

walt — in hiding

My Thanksgiving request to all of you who would like to share a story that our dramatically challenged engineering colleagues can haul out as proof of  physical courage and personal commitment is that it be true.  Or at least someone should assure you that a friend of theirs swears that the story is true.

Like the time we took sausages in trade for network hardware.

[1] Ken Follett, On Wings of Eagles, William Morrow & Co 1983

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27,000 Alternatives

November 20, 2009

A few days ago, thanks to OpenStudy founder and colleague Ashwin Ram (follow @ashwinram on Twitter), I learned that abundance of choice in higher education is more than an abstract concept:

New Delhi, Nov 7 (IANS) More than 27,000 additional institutions of higher learning would be required to meet the targeted Gross Enrolment Ratio (GER) of 30 percent for 2020, Human Resource Development (HRD) Minister Kapil Sibal said here Saturday.

“This figure includes 14,000 colleges of general higher education, 12,775 additional technical and professional institutions and 269 additional universities,” Sibal said in a presentation during the meeting of the consultative committee for the HRD ministry here Saturday. [1]

27,000 is a very large number of new institutions, but it’s hard to say how much of the market will be served once they are operational.  Twelve percent of  Indian secondary school students go on to university studies compared with the thirty percent  goal of the new Indian government and the seventy percent ratio in many developed nations. That’s about 350 millions students.

The challenge for India is to create a system of higher education that breaks the bureaucratic licensing stranglehold that has led to widespread dissatisfaction with storefront operations.  It is clear that the new Indian system will combine the two features that I mentioned last week: value and cost.  Students will have the ability to choose both their institution and their course of study.  And because many graduates are today unemployable, the value of degrees from the new universities will have to be proved in the marketplace.  That’s good news for innovators who want to move India to a position of global leadership, and bad news for the old system that is in any event being dismantled.

The costs are staggering, so new business models are welcome.  The IT company Wipro has already started to co-brand degrees with top ranked technological universities like Birla Institute of Technology in Pilani and the Sipal has been very open about needing other creative forms of private investment to offset costs.

What does this have to do with American colleges and universities? Just as low-cost, high value service industries have migrated to India, the higher education market in the US will also start to buy more educational services there as well. India is already a destination of choice for some graduate students, and not only because of lowered costs, as Cambridge medical student James Gill reports in the Cambridge University Graduate Student Blog:

Doing a medical elective in India would in theory help me to better understand and relate to Indian patients as well as colleagues that I might work with in the future.[2]

“Well sure,” I hear you saying, “but that’s a medical student in the UK.   It’s not, say, a Nobel-prize-producing chemistry lab in the US.  That’s where the real value is.  Berkeley will never be vulnerable to a lower-priced operation.”  The University of California at Berkeley is the top ranked public university in the country, and so it was something of a jolt to read in today’s New York Times that a 32% increase in fees has over the past decade helped to triple the price tag for a degree from Cal and that

Among students and faculty alike there is a pervasive sense that the increases and the deep budget cuts are pushing the university into decline.[3]

The accompanying color picture is a chemistry lab at Berkeley.  Small wonder that the students who have protested the fee hike are questioning the University of California value proposition,  and especially whether their education can be obtained quicker and cheaper someplace else.  There will shortly be alternatives for some of them. 27,000 alternatives if everything goes according to plan for Mr. Sipal.

[1] http://www.sindhtoday.net/news/1/68995.htm

 

[2] http://www.societies.cam.ac.uk/cgcm/ElectiveReports/JamesGillIndia.html

[3] The New York Times, Friday November 20, 2009, page 1

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An Abundance of Choices

November 13, 2009

Kalinga Raipur

I have in recent years — and for many different reasons — become a fan of Daniel Pink’s book A Whole New Mind.[1] Pink has a compelling framework for thinking about value.  First, can what I am trying to do be done better (or cheaper or faster) by a computer?  Second, is what I am offering in demand in an age of abundance? Finally, can what I am trying to do be done more efficiently elsewhere?

As readers know by now, I am working on a WWC book about higher education, and  I have found that that the question of value is central to understanding where American higher education is going. Simply put, when there are abundant choices for university education, will traditional universities offer enough value to be able to withstand the coming pressure of a global marketplace?

Here’s why I am concerned.  In any market with growing demand and abundant choices, there are only three ways to win: have an unassailable brand, offer the lowest prices, or offer the most compelling value.  Even better is to be able to win with both price and value. There is really only a handful — 70 at most — of global brands in higher education, so for most of the 3,000 or so accredited colleges — let’s call this the Middle —  it’s a matter of finding the right balance between cost and value.  Universities are profligate consumers of resources, so it came as no surprise to read in last week’s Chronicle of Higher Education that 58 private colleges have now joined the $50,000 club.  Public universities are not far behind.  If I am right about winners and losers in global marketplaces, the institutions in the Middle who are at most risk had better get the value equation right.  The problem is that most of them don’t have a very clear idea of their value.

That’s significant because  half of the world’s population has joined the free market economies in the last fifteen years. For the most part, these are countries with rich educational heritage, that also understand the value of a well-educated labor force.  The market for higher education is bubbling as new and established players alike  scramble to figure out how to reach hundreds of millions of students:

But the demand for higher education is continuing to increase with more and more students wanting a higher education today than ever before. How can we bridge the gap between increasing demand and decreasing government funding for higher education? The only option is to tap the private sector to participate in the funding and provision of higher education. The process of increasing private participation in higher education has already begun with a few states like Chhattisgarh and Uttaranchal having passed legislation to permit the setting up of private universities in their states. Indeed the private sector has been funding higher education in India for a long time, albeit on a very limited scale. The Birla Institute of Technology and Science at Pilani in Rajasthan, which is funded and run by the Birla Group Trust, became an officially recognised university as far back as 1964. Other institutions like the Manipal Group in Manipal in Karnataka have been running private colleges since 1953 and the Manipal Academy of Higher Education became a deemed university in 1993. Many other self-financing colleges were set up in the early 1990s and a few of them have now become deemed universities.[2]

The problem for American universities is that, since  few of them understand their value to traditional students, the chances are slim that they will figure out what the millions of new students want. I can tell you that it’s not football. Nor is it finding ways to “dumb down” an American degree.

acceptedposter

In fact the emerging markets are moving aggressively to close down storefront diploma mills.

2007_05_21_Liberia_Informer

To the extent that most universities in the Middle concentrate on classroom instruction, the business model of higher education is under tremendous pressure.  Although university level training and an aging population will continue to drive demand for classroom instruction, the experience of students in large, multi-section introductory courses is much worse than well-conceived and executed performances by world-class experts who have a passion for communicating their love of subject.

So if few instructors are equipped to compete with the zip of a star from ItunesU™ (see my Dancing with the Stars post) then how does the 21st Century university make itself valuable?  Universities must reinvent themselves as creative entities– and they must do it in a way that is smart public policy and is also economically sustainable.

That brings me back to Daniel Pink and what he sees as the elements of creativity:

  1. Design – Moving beyond function to engage the sense.
  2. Story – Narrative added to products and services – not just argument.
  3. Symphony – Adding invention and big picture thinking (not just detail focus).
  4. Empathy – Going beyond logic and engaging emotion and intuition.
  5. Play – Bringing humor and light-heartedness to business and products.
  6. Meaning – Immaterial feelings and values of products.

This is not a bad start for universities that want to redefine their value.   This was true in when the Medieval monk Peter Abelard  provoked his students to question orthodox thought, and it was true when Thomas Jefferson realized that a university education might result in peer groups that were specialized to the sciences.   Charles Vest realized that the value of an MIT education did not lie in the lectures and textbooks but in energy and intellect of the MIT community.   It is true that the most immediate way to experience a community is to live within it, but it is not the only way.   The technology of social networks and on line communities extends the reach of physical community beyond geographic boundaries.

To deliver on a vision like that American colleges and universities are going to need new leadership, because there doesn’t seem to be much  appetite for doing much more than nibbling around the edges.

[1] Daniel Pink, A Whole New Mind: Moving from the Information Age to the Conceptual Age, Riverhead Books, 2005

 

[2] Private Universities in India — Why? How? Education in India, http://prayatna.typepad.com/education/2005/06/private_univers.html

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Great Meeting, Bob

November 9, 2009

It’s come up a few times  in  recent weeks.  Here’s the scenario:  I am meeting with Bob,  the CEO of a start-up who’s just returned from a two-week sales tour — three Fortune 100 companies, three mid-tier suppliers, two government agencies, another early-stage technology company, and a university research center.

“How did it go, Bob?

“Great, every meeting was a home run.  They liked the product.  They liked the technology.  They really liked the company.”

“How many orders did you sign?”

“None, yet.  But they all asked me to come back.  Except for the university guys, and they wanted copies of my presentation. Lots of excitement about this stuff!”

If you’re in the innovation business, the last thing you want to hear — even if you make the improbable assumption that everyone was telling the truth — after a meeting that doesn’t close a sale is “Great meeting, Bob!” It’s a sure sign of impending catastrophe as worlds collide.  I’ve talked in other posts about conflicting agendas and how the need for technical recognition can shape an innovator’s view of what is actually taking place. The great meeting phenomenon goes beyond that.

I was in the lobby of Netscape Communications a few days after its 1995 IPO, waiting for a former colleague who had promised to set up a series of technology exchange meetings between Bellcore and Netscape.   Bellcore  had just filed patent applications for two server technologies that we knew would be important to Netscape, and we were hoping to license them.  One was for buying and placing ads on web pages, and the other was for video streaming.  I had been in meetings like this before, and it was good to know that there would be a couple of familiar faces on the other side of the table.  So I sat there watching visitors file in and out.  There were a couple of guys dressed in three-piece suits, clearly bankers.  There was a Hollywood type with massive  gold chains around his neck — he and his two handlers had just rolled out of a black Town Car.  There were two kids in the corner –  complete with sandals and dirty tee shirts  — who looked like they had just crawled out of a basement.  Lots of khaki’s and blazers and  Madras shirts with pocket protectors.  I remember trying to guess who they were there to see and what they wanted from Netscape.  Except for the guys in the suits, who were quickly escorted  past security, we were all ushered in turn to small  conference rooms off the lobby. I realized in a moment of panic that I had no idea what Netscape wanted.

The meeting was awful.  The Netscape executive I really wanted to see was off doing other things (something about buying an Irish castle).  My contact was selling, not buying.   After about fifteen minutes of nervous chit-chat we agreed to keep in touch.  But not before I asked about the strange collection of visitors in the lobby.  “I’ve been in lots of technology companies,” I said, “and I’ve never seen anything like it.  I see why the financial people are here, but what do you think is going on with the others?”  What he said stunned me, and as soon as I left the building I wrote it down.  “We don’t know,” he said. ” The guys in suits are from a Russian software company, and we get a lot people who just want to stop in. It’s chaos.”

I’ll tell you in a later post what happened to our technologies, but Netscape did not figure prominently into Bellcore’s future.  They were not excited.  They told me almost nothing about their business.  They did not want to know about ours. It was not a great meeting.  It was the best thing that could have happened to us.  I want to use Bob’s great meetings to explain why.

The University Meeting

Let’s first dispense with the university meeting.  Universities are in the great meetings business.  Professors give great talks.  They are great listeners.  All it takes for a  great university meeting is a great story told well.  There are some possible positive outcomes.  For example, Bob could have heard about a new invention that would help the business, but that would have involved the university selling to Bob.

The Government Meeting

Government agencies do in fact buy from small companies, so it’s not hard to imagine a meeting with a good outcome.  It depends on who is in the room.  A meeting of technologists is all about learning what Bob knows, and they are inclined to lavish praise on anything they can use to sell ideas and programs internally.  That’s literally what they have to spend.  The outcome of almost every other meeting with a government customer is irrelevant to closing orders.  Bob may hear about proposal opportunities or new programs that the company is qualified for, but government employees never show up pen in hand ready to write a check.

The Meeting with Another Early Stage Company

If a meeting concludes without an order being signed, it’s because they are the C-O-M-P-E-T-I-T-I-O-N. They are thrilled to hear what you’re doing.

The Meeting with a Bigger Company

Big company meetings are the most dangerous. Almost everyone is interested in what Bob knows.  Engineers run internal projects and Bob is the ideal guy to help educate them.  Marketing casts a wide net looking for trends and intelligence. Who better to help them out than the head of a company that has just acquired investors and is thinking day and night about what new customers want?  General management doesn’t have time to spend on a meeting (Irish castles, remember?) and mid-level managers, who are not inclined to spend money, know that, if you keep coming back, they are buying time in a possibly interesting market.  Bob could have snagged a meeting with someone who manages vendors, and it might have led to a sale, but it would not have been great.

What I said to Bob was “Great meetings lead nowhere.”  Every one of Bob’s  meetings was designed to transfer value away from his company.  Everyone he met with was so thrilled with this that they told him how much they liked him.  He educated companies with greater resources and provided fodder for PowerPoint™ presentations by technology managers.  All for the price of a sandwich and a bag of chips.  And they were willing to do it again.

My Netscape meeting was awful, but I learned that

  1. We were a small slice of a value chain that we didn’t understand;
  2. Innovation bubbled all around Netscape, and they did not need to get on a plane to New Jersey to get access to it;
  3. The market looked as chaotic to Netscape as it did to me.

A great meeting with Netscape would have felt good.  They could have said how important we were to their success or how much the Bellcore patent portfolio meant to them.  I could have come away feeling that the 1995 golden child had the market all figured out.   I could have been enticed to go back for a second or a third meeting.  None of those things happened.  Instead, Bellcore started its own e-commerce company and for a brief while was a smaller, dimmer but still exciting star.  The star eventually fizzled, but that is a different colliding worlds story.

I was once on the board of a start-up with new technology for analyzing transactions to determine probable future customer behavior.  It was in  the earliest days of CRM and almost no enterprise-ready products had hit the market.  Every  financial services company had internal projects in this area and wanted to have a meeting to hear what was up.  I made introductions within my own company, although I told the CEO to not waste his time, because we were engaged in ten simultaneous discussions with large software companies.  Every six weeks the board heard about a string of successful meetings — great meetings.  A lot of them were great, but not one led to a dollar of revenue.  The company was eventually sold at  a huge discount to a  much larger company where there had been a great meeting years before.  How much better off  everyone would  have been if, instead of a great meeting, there had been a little blood on the boardroom floor.

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“Dear Mr. Watson, My employment with IBM has been terminated” (More Loose Cannons)

November 3, 2009

Dilbert.com

There was a birthday celebration of sorts last week.  From the October 29th edition of  ABC News Science & Technology:

While the actual date of the Internet’s birthday is somewhat debated, many say that the Internet was born 40 years ago today at the University of California, Los Angeles, when a computer to computer message was sent for the first time from the UCLA campus to Stanford.

At the time, Leonard Kleinrock and his colleagues were charged with developing the Advanced Research Projects Agency Network (or ARPANET), a government-funded research project in global computer communications that eventually grew into the Internet.

I thought it would be a good occasion to  reflect on how easy it is for Loose Cannons to get smashed by colliding worlds.

In the days before ARPANET, computer-to-computer communications were homogeneous, and computer manufacturers liked it that way. The very idea of not owning every aspect of a technology stack seemed to be ridiculous.  Where’s the value if you can get critical components from anywhere?  What if competitors start using the same suppliers?  Heads of business units hated the idea, but Loose Cannons kept proposing technical architectures that looked, well, open.  The idea was playing out in many ways in many companies.

At IBM, two architectural revolutions were simultaneously  underway. We now know that they were related. In the summer of  1980, IBM executive Bill Lowe prepared to brief  the company’s Management Committee on development plans  for a personal computer:

It was a dangerous place to be.  The Management Committee — or, given IBMers’ fondness for acronyms, the MC — ruled on issues that couldn’t be resolved at lower corporate levels, so going before the committee was, to IBMers, like going before the Supreme Court.  It was actually rougher because the top IBM executives who sat in judgment were known to be brutal, especially if they thought someone was wasting their time.[1]

Bill Lowe had been beaten up by the MC before, but this time Lowes’ plan to use outside suppliers drew polite questions from MC members who expressed some concern about turning over even partial control of any of their businesses to “outsiders.” What Lowe and the vast majority of IBM engineers didn’t know was that earlier in the year the MC had received a  forecast for global PC sales that showed a peak market of 80,000 units in that began to rapidly decline in 1984 as the specialized customer  need for computers was satiated:


IBM had already been embarrassed by early missteps in the PC market but the corporate culture was focused on mainframes and services.  Problems might be created by opening up the hardware and software architecture of personal computers, but

The general attitude…was that you don’t have big problems in small markets, and we thought the personal computer was a very small market.[1]

The MC might have been more inclined to turn its attention to a market that had real legs.  Like, say, networking.  Ed Hendricks was an engineer at IBM’s Federal Systems Division in San Diego.  Hendricks had helped design VNET, at that time the largest computer network in the world.  VNET was  IBM’s internal corporate network, linking IBM mainframes at scientific data centers.  By 1980, VNET was a global asset with hundreds of  hosts in North America, Europe and Asia.

Meanwhile, ARPANET was growing into the Internet, and Ed Hendricks was interested in how IBM’s technology would continue to prosper when the world started connecting IBM mainframes to large UNIVAC computers, HP mini-computers,  PC’s, and supercomputers from Cray or Control Data.  Hendricks became an industry player in this arena, collaborating with my colleague Larry Landweber at the University of Wisconsin as the expansion of the ARPANET began in earnest. Ed  Hendrick’s IBM Internet Gateway Project was aimed squarely at insuring that IBM mainframes would not be stranded in a world in which they could only talk to each other:

The objective of this project is to begin to bridge the gap between IBM computer systems and network technology predominant among government agencies, conractors and universities.  More specifically, we are working to develop according to DOD standards the technical capacity to interconect networks of IBM computers and systems to similar but different computer networks used by government agencies and their affiliates.

Hendrick’s website preserves the sometimes heated but  thoughtful and deep technical discussions — involving Hendricks,  the legendary Jim Gray, and MIT’s Jerry Saltzer, among others –  that took place througout 1980 about the relative merits of ARPANET and IBM’s networking strategy. For reasons that are still unclear, IBM decided to move the Internet Gateway Project to IBM Research in Yorktown Heights, New York, an effort that Hendricks calls “screwy.”   Hendricks along with team members Gerot “Mike” Engel and Dale Johnson planned to spend a week at Yorktown Heights, getting comfortable with IBM Research’s Systems Laboratory, their proposed  new home:

…the Systems Laboratory was created to focus more directly on perceived business needs. Consequently, Systems Laboratory projects are evaluated and prioritized on the basis “leverage” they exert on the software product line…by design, ninety-five percent of the work carried out in the Systems Laboratory is so closely related to strategic product development that it cannot be discussed outside IBM.

Shocked, the Internet Gateway team concluded:

…a project such as ours which is intended to establish internet communication compatible across differing systems…could not be carried out under such guidelines.  Our overall reaction…was that the ARPANet Internet Gateway project could not have been started within the Systems Laboratory.

They concluded that if the project was to have any chance at all of success, there would need to be a formal review of management decisions, what  IBM called the “Open Door” process.

March 14, 1981

John R. Opel, President IBM Corporation

Dear Mr. Opel,

This letter is intended to invoke the IBM Open Door Policy.  My purpose in requesting this Open Door is to seek clarification of the decisions which led to a situation where a project which is clearly critical to IBM’s future posture in the data communications industry cannot be pursued…Bureaucratic accomodation for only that which is in the strategic plan is a very dangerous posture to be in while the data processing and communication industry is rapidly evolving.

[My team and I] have been working to carry out a project to establish a capacity…to cooperate with the U.S. Government and University Computer Science departments in the evolution of techniques to interconnect dissimilar computer networks…There is essentially unanimous agreement that this activity promises important advances for IBM and for computer technology in general.

In September 0f 1980 we were notified by our management that this work could not be carried out…On each occasion when this qustion [of where the work could be carried out in IBM] was being escalated to the proper level, my management would insist that I leave the management issue to them and to concentrate my own efforts of the technical work.

Last week I was informed verbally that no sponsorship for this project could be found.  My manager asked where hie should look to find me a job. My position was…that inability to find organizational sponsorship for the project is not equivalent to a decision that IBM should not be involved in developing the capacity to interconnect IBM networks to government and university networks…to look for other professional opportunities now and give up attempts to pursue this technology…would be to let the company down….

Sincerely yours,

Gernot Engel

19 March 1981

Mr. Thomas J. Watson, Jr., Chairman Emeritus

Dear Mr. Watson,

My employment with IBM has been terminated as a consequence of recent management decision which are incompatible with my professional goals…I believe I am justified in requesting more thorough and explicit responses to the following questions:

  1. What “business needs required the termination of our ARPANET Interconnection Gatweway Project and the abandonment of the…professionals we had been dealing with?
  2. What factors prevented alternative organizational arrangements that would have allowed our group to continue its work within IBM?
  3. What is IBM’s posture regarding professional cooperation with the computer scientists working in association with DARPA…to establish mutual techniques for interconnection of dissimilar computer networks?…

Sincerely yours,

Gernot Engel

May 15, 1981

John R. Opel, President IBM Corp.

Dear Mr. Opel,

On March 4, 1981 I sent a letter to your office requesting clarification of a decision which cancelled the internet gateway project…Your office’s attempt to analyze the internet decision appears to be stalled because it was handed back to middle management….I can only conclude in this instance the Open Door Policy has failed. My recommendation to salvage the situation is that you give fifteen minutes of your time to receive a presentation on the internet project and attempt to evaluation for yourself the value of this project to IBM’s future.”

Sincerely yours,

Gernot Engel

May 19, 1981

Dear Mr. Engel,

I have reviewed the results of [the] investigation into your concerns.  Your disappointment with the decision to terminate the VNET/ARPANET project is understandable; however, I conclude the decision was properly based on the need to fund other Ad Tech projects with greater business potential…

I understand you are currently considering a return to IBM, and I hope you choose to do so.

Siuncerely,

John R. Opel

Number 1-81: September 11, 1981 MANAGEMENT BRIEFING

TO ALL IBM MANAGERS:

Organizations seem to have an irresistable tendency to codify successful practices in rules, instructions and controls which soon begin to take the place of judgement. When that happens, the result is bureaucracy.

IBM is not immune.  Earlier this year, reports from many sources indicated to me that a growing bureaucracy is affecting the performance of our business…corporate staff heads, group executives, and the division presidents are exploring ways to reduce unnecessary controls, rules and approvals in their areas of responsibility…We will succeed in that effort only if you managers, at every level of the business,k are willing to stand up and fight bureaucracy wherever you find it…If you have all the information to make a decision, make it…

[signed by John Opel, president]

John Opel stepped down as IBM president in January 1985 and chairman in May 1986.  He was succeed by John Akers, and he was succeeded by Lou Gerstner in 1993. Gerstner, the former CEO of RJR Nabisco, described his transformation of IBM in “Who Says Elephants Can’t Dance?”[2].  Most observers agree that critical to IBM’s turnaround that took it from a free fall in the early 1980’s to unquestioned market  leadership in computers, software and services was the dismantling of a remote, hierarchical management culture that squeezed innovation in political pincers.  By the time I took over the computing research directorship at the National Science Foundation in the late 1980’s, IBM had become a major player in the growth of the Internet [3]:

In the mid-1980s, NSF decided the time was right to try to link its regional university networks and its supercomputer centers together. This initial effort was called NSFNET.
By 1987, participation in the new NSFNET project grew so rapidly that NSF knew it had to expand the capacity of this new network. In November of that year, it awarded a grant to a consortium of IBM, MCI, and a center at the University of Michigan called Merit to create a network of networks—or inter-net—capable of carrying data at speeds up to 56 kilobits a second. By July, 1987, this new system was up and running. The modern Internet was born.

REFERENCES

1. Paul Carroll, Big Blues: The Unmaking of IBM, Crown Trade Paperbacks, 1994

2. Louis V. Gerstner, Who Says Elephants Can’t Dance? Inside IBM’s Historic Turnaround, Collins, 2002

3. National Science Foundation, NSF and the Birth of the Internet, http://www.nsf.gov/news/special_reports/nsf-net/textonly/index.jsp

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Beware Sharp Edges!

October 23, 2009

BewareSharpEdges

I am sometimes chastised for saying it out loud, but engineers have a hard time with context.  Every physics homework problem that advises, “ignore the effects of gravity and friction” adds another brick to the wall that separates solutions to technical problems from solutions that are meaningful to customers.  I am not making a value judgment.  In fact, we would never make technical progress at all if every possible real-world variable had to be taken into account at the outset of a project.  An engineer once worked for me who insisted on starting every engagement with “What do we mean by reliability?”  before listing all of the possible ways that a system – any system, not necessarily just the one we were supposed to be talking about – could be unreliable.  None of those discussions ever came to a satisfactory conclusion.

However, as we saw in “Well, what kind of fraud is it?“, worlds collide when there is confusion about context. The collisions are damaging to business and sometimes it is impossible to recover from them.  It may be a technical feat to hone the edges of a warning sign to lethal sharpness, but it is not the purpose the sign.

Corporate culture can make it hard to blend context, and it is especially hard for companies with strong engineering roots to draw the line between valued technical advice and technical value that can be delivered to customers.  There was an internal joke at HP:

How can you tell where the sales meeting is?  Look for a dozen white Ford Tauruses in the  visitor parking lot.

The typical HP company car was a white Taurus, and it was common to hold customer meetings in which HP engineers outnumbered customers by five to one or more.

There is one sure-fire way you can tell that engineering culture is driving the business operations to a destructive collision.  I call it the catalog rule.  Imagine a sales meeting with N salesmen and M customer representatives.  One of the salesmen should be able to arrive with all of the sales material and, regardless of how large N is, there should be only M sales packets on the table — one for each of customers.  It happens so often that there are M times N catalogs on the the table that you sometimes scarcely notice it.  A customer wants to buy a solution to a complex problem. At the first customer engagement, glossy specifications for all of the carefully engineered component parts are dumped on the table.  This is the point in the meeting where the customer is supposed to have a flash of insight, leap to his feet and start congratulating the engineers.  In the real world, however, the reaction is a little different.   Very few customers want to be their own system integrators. My former Telcordia Applied Research colleague Dennis Egan puts it this way: “Our engineers just want to see their stuff used.”  It seems like a simple thing to ask for, but sometimes this urge for appreciation trumps all other concerns.   In particular, it can confuse the true business context, although you might have to look hard to find it.

It wasn’t that long ago that choosing a data communications service was a confusing and expensive task.  Many telecom customers chose the safe path and called their traditional voice telephony service providers, although it was frequently a big mistake to do that.  Data services in 1995 were a jumble of  software and hardware standards,  confusing pricing models, and regulatory inconsistencies.  A phone call to Bell Atlantic in 1995 inquiring about ISDN service inevitably led to questions that few commercial customers and almost no residential customers could answer.  The question “How far are you from the Central Office?” would usually be met with: “What’s a Central Office?” Because maps and engineering diagrams were frequently inconsistent, an ISDN customer would sit patiently through explanations of loads and coils and why the service probably would not perform as advertised anyway.  A thick reference book titled Engineering and Operations in the Bell System, published by Bell Labs, was given to every engineer in the company. Later, after the 1984 divestiture of the regional phone companies put the physical plant in the hands of seven independent regional operators, Bellcore maintained Engineering and Operations as the network engineering manual for all telephone infrastructure in the country.  By the time DSL service became widely available in 1997, Engineering and Operations specified a work flow diagram for providing DLS service to a single customer with steps that could only be completed after a hundred other independent steps all were completed.

These were the early days of e-commerce, and a clever group of entrepreneurs formed a company with the wonderful name Simplexity to simplify the life of telecom customers in the new age of data.  They had been buoyed by Michael Dell’s brilliantly simple business plan for the company that was to be Dell Computer™:  four pages that said in plain language that it was a hassle to buy computers and that virtually every potential buyer would choose to make a single phone call directly to a manufacturer if it would cut the hassle.  Buying data service was a hassle, too.  Simplexity’s founders reasoned that the 1997 equivalent of Dell’s single phone call for telecom services was this simple website:

Simplexityloginscreen

By negotiating with service providers for a percentage of all subscription fees – a process that was well understood in the industry because resellers of voice and data services were common – Simplexity was able to project a steady growth in revenue as data customers chose the Dell direct-sales shopping model.  Their first few customers apparently verified the market hypothesis, and Simplexity was one of the start-up successes of 1997, raising substantial venture funding and positioning itself for a successful IPO.

The engineering was flawless.  Simplexity’s Virginia-based development lab looked a lot like silicon valley start ups: an open floor plan with ping pong tables, bean bag chairs and board games scattered everywhere.  Java programmers seemingly fresh out of high school chattered excitedly about the next generation of services that would be marketed through Simplexity.com.

Then Simplexity’s revenue growth stalled.  The large number of smaller contracts that investors had anticipated did not follow the small number of large, early contracts.  In fact, new revenue began to decline even as data services began to explode.  Surprisingly, reseller revenue continued to rise as new customers shopped around and additional data service contracts were added to existing customer accounts in record numbers.  Simplexity began cutting its technical staff and adding traditional sales staff to compete head-to-head with the resellers.  This undercut the cost savings as Simplexity found itself paying more in commissions to order-book-carrying salesmen.  By early 2000, Simplexity had run out of cash, and, shortly after that, the company ceased operations.

In my discussions with company executives it was clear that they understood only too late that Michael Dell’s model did not work in telecom.  Customers had been purchasing voice and data services from human salesmen for years and the inherent inefficiency in doing that was more than offset by the personal relationships that drove sales.  A website – no matter how efficient – could not replace the long-standing social ties between buyers and sellers.  Simplexity was a great technology in a marketplace that did not need it.   The Dell model was a red herring.  Dell worked in the PC marketplace because there was no longstanding and trusted way of buying computers that had to be displaced.

Why didn’t Simplexity’s market research expose such a basic flaw in their business model?  I attended Simplexity’s early customer briefings – meetings for engineers aimed at selling their technical advantages.  They went out of their way to avoid positioning themselves as just another vendor.  Meanwhile their bricks-and-mortar competitors were fighting it out over who would get the next order.  It was “just another vendor” who got the order.

This is the message that I give to new start ups:  if it’s a choice between an exciting technology meeting and a boring sales meeting at which you are just another vendor, choose boring.   Your customer may not understand it, but if your product is really that good it will outshine the competition anyway.   And, if you are in a vendor meeting, chances are someone  is interested in buying.   It may be more exciting to warn everyone about your sign’s incredibly sharp edges, but that’s not the real reason it’s there.

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Guess Who’s Coming to Dinner, Part 3

October 19, 2009

Note: This is a continuation of my Guess Who’s Coming to Dinner posts about the power of including innovators in strategic decision-making.

It took George Heilmeier an afternoon to convince Secretary of Defense James Schlesinger of the value of DARPA’s six “silver bullets”, capability-changing technologies that could guide system designers for the next decade:

  • Create an “invisible aircraft”.
  • Make the oceans “transparent”.
  • Create an agile, lightweight tank armed with a tank killer “machine gun”.
  • Develop new space based surveillance and warning systems based on infrared focal plane arrays.
  • Create command and control systems that adapted to the commander instead of forcing the commander to adapt to them.
  • Increase the reliability of our vehicles by creating onboard diagnostics and prognostics.

“Invisible aircraft” refers to the stealth technology that led directly to the F-111A Nighthawk and is good illustration of how innovators can influence events by focusing on business objectives.  In those days, half of the aircraft in a strike mission were there, not to fire weapons, but to detect and disrupt enemy radar.  Reducing aircraft radar cross-sections by a factor of 10,000 would lead to a ten-fold reduction in radar detection range and a corresponding increase in mission effectiveness.  Classified research in stealth technologies – mainly materials science – had been under way since the 1950’s, but DARPA’s idea was to use stealth as the primary criterion for aircraft design.  Performance and stability are the first casualties in this kind of design, so George knew that, not only would he have to integrate all of the component technologies it would take to produce a flyable, battle-worthy airplane, he would also have to convince the Air Force – run by and for pilots – of the usefulness of this way of designing an airplane.  Pilots understandably wanted to think that aerodynamics would be uppermost in the minds of designers, but DARPA wanted to turn that principle upside down.

The world changed after that.  By the 1980’s many high-performance military planes operated so close to the their performance envelopes that they were difficult or impossible to control without computerized assistance.  There was, in fact, a sort of dark  murmur among military pilots who understood both avionics and computers.  I was directing software test and evaluation oversight projects for the Director of Defense Test and Evaluation at that time.  One of our systems was an advanced fighter aircraft that was being retrofitted with computerized flight controls.  Some of the test pilots had done graduate work in computer science, and were clearly comfortable shifting between flying jet fighters and thinking about computer software.  One of them had a poster taped to the wall of his cubicle.  It showed a mocked-up  pilot’s eye view from the cockpit of a military  airplane that was clearly spiraling into the ground.  On the heads-up display was a graphic that looked something like this:

>>ATTENTION. FATAL ABORT.

>>GENERAL EXCEPTION FAULT 1080XX.

>>PROGRAM ABEND AT LOCATION 001001010111011.

>>RESTART PROGRAM? Y/N

We were talking about an operational test that he would be flying the next day, but all I could do was stare at the poster. I was a software tester.  I knew that fatal error messages like this were common. They came bundled with the price of the software. Most graduate students knew it, too. I thought to myself “This is the bravest guy I have ever met.”

In approving the silver bullets Schlesinger had promised to keep Pentagon staff off  Heilmeier’s back, but the Air Force resisted DARPA every step of the way:

During this period, the Air Force was not at all supportive of DARPA designing and building aircraft and would not cooperate with us.  We needed their help but received none.  As a last resort, I went to see AF Chief of Staff, Gen. David Jones to plead the case. When I entered his office, I was shocked to see that the general, who had refused to help us in no uncertain terms, was present.  I thought that the program was dead and me with it.[1]

Jones listened to George’s pitch, turned to his reluctant General and said, “We’re going to help these guys.” It was not a question.  Whether this was a directive from Schlesinger or a result George’s powerful presentation is not really important.  The Air Force cooperated from that point on, and on the morning of December 1, 1977, George watched from the end of a runway at Edward Air Force Base as the first prototype of a stealth aircraft took off.

Tying a technology agenda to business goals empowers both sides, and it puts both the passive and active resistors in an organization in a bind.   The cost of resisting change is to put their own goals at risk, often with unpleasant career consequences.  It also allows technology leaders to form new agendas that bypass an unmovable bureaucracy.  Here is how Heilmeier summarizes these lessons:

  1. When you really believe in a concept and the people involved, practice “no excuses” management.  The meaning of this is that you must remove all of the bureaucratic impediments to success.
  2. “Breaking glass” and going around the bureaucracy can be done if you believe in your cause and refuse to quit.
  3. In a game changing initiative, a small group must take on a larger group who won’t always “play fair”.

The danger in this approach is  that success depends almost entirely upon personal commitments, and those commitments can easily be undermined by a change in leadership.  When that happens — as I know from personal experience –  entrenched interests  come roaring back, hell-bent on toppling whatever was achieved.  The time frame for achieving goals has to fit within the tenure of the “small group” because worlds will inevitably come crashing together.

I will have more about this is a later post.

[1]George H. Heilmeier,  “A Moveable Feast – Kyoto Prize Lecture (SD Version)” 2005

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