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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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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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Guess Who’s Coming to Dinner, Part 2

October 11, 2009

Dilbert.com

Being “technology driven” is often not the best path to real innovation.  Part 1 of this post was distilled from a conversation with George H. Heilmeier, former director of DARPA, CEO of Bellcore, inventor of the liquid crystal display and winner of the 2005 Kyoto prize. It was based in part on the “Heilmeier Catechism”, an approach to technology strategy that begins, not with the technology but with the business problem to be solved.  It was shared widely with the many younger managers who came under George’s influence over the years, and I have heard from a fair number of them in recent weeks.  All had their own stories to tell about why the approach of “selling to investment bankers” was exactly the right way to think about positioning R&D in a larger organization.  In all of our discussions, George has always been insistent about two things: the negative power of vested interests and the failure of  technology transfer by “throwing technology over the transom”.  Out of this came his notion of an “interdisciplinary team” with representation from R&D, product engineering and manufacturing, where leadership and balance shift as time goes on. This is the dinner table.   As important as these ideas are for day-to-day management of R&D, they are critical when it comes to initiating projects that are transformative, where commitment to change comes from handshakes at the top of the organization.

Shortly after the Regional Bell Operating Companies began divesting themselves of Bellcore, but before George stepped down as CEO, the appetite for applied research began to change.  To some extent, this was part of a natural evolution of the company from a captive R&D Lab to a stand-alone corporation whose owners – eventually the employee-owned defense systems integrator, Science Applications International or SAIC — demanded not only profitability but also growth in a market that was already growing at 15% per year.   The “30/30 Frontier” (30% revenue growth with 30% operating margins) was a wake-up call for all R&D managers in the company and it was a personal lesson for me in how to engage corporate management with initiatives that were tied to  bet-your-job objectives.

I was in charge of computing research at the time,  and three things were important to me.  First, was Heilmeier’s  commitment to funding forward-looking work at the corporate level, which meant that annual spending goals had to be set by reaching a consensus among product, research,  sales, and marketing teams.   Second was the freedom that Bob Lucky  — Bellcore’s senior VP of Research –  gave to his senior leaders to push the boundaries of the business. Third, was the collaborative but demanding relationship that I had with Chief Operating Officer Sanjiv Ajuha, who was himself a veteran software development manager.

Sanjiv was in turn looking for three business advantages that at first blush seem to be mutually contradictory.  The first two were obvious: near-term competitive advantage for the company’s large software systems and  game-changing inventions that would shake up the marketplace in the long run.  The third was revenue against which corporate R&D investments could be scored.  Near-term objectives were rolled up into product R&D costs while long-term objectives were used in 3-5 year investment planning.  Scoring R&D spending against revenue hardly seems like a competitive advantage but in my view it was the critical piece of the puzzle because it forced us to run a business.  It forced us to operate a business unit with profit and loss goals, not just another corporate cost center (which tend to develop unhealthy  entitlement cultures).   It also forced us to be very hard-nosed about tracking research contributions that led to revenue in existing product lines.  I would like to think this is a classical WWC strategy because it made us  focus externally on business objectives that affected the entire company.

I’ll have a lot more to say in later posts about some of the tools we used to do this, but the example that Heilmeier kept in front of us – because it took some convincing to make sure the lessons stuck – is for me the most compelling part of this story and the one I returned to time and again as I found myself inventing new frameworks in other organizations.

As DARPA Director, George reported to Nixon’s Secretary of Defense James Schlesinger.  Schlesinger himself had impressive academic and technology credentials.  He had served as head of the Atomic Energy Commission and Director Central Intelligence. Schlesinger’s DARPA operated like a technology incubator full of “technology entrepreneurs” as Heilmeier called his staff.  Under Heilmeier, DARPA settled on six over-arching themes, all of them aimed at somehow changing the nation’s military posture in ways that would be understandable not only to the Secretary but also to the staff and line officers who were frequently unhappy with DARPA’s “help”:

  • 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.

Each of these “silver bullets” was so directly tied to a military objective that it took only a single meeting with Schlesinger to get his buy-in on the entire agenda.  In my next post I will describe how these technology challenges were turned into military capabilities and why it’s an important lesson for today’s climate where innovation and execution often seem to be at odds.

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Another Seat at the Table: Grace Hopper and Diversity

September 30, 2009

George Heilmeier was a master  of getting a seat at the table for R&D (see “Guess Who’s Coming to Dinner“), but worlds can also collide when they expand, and as the 2009 Grace Murray Hopper Celebration of Women in Computing opens this week in Tuscon, I thought it would be a good time to mention the role that diversity plays in defining the role of innovation and innovators and to recall that Grace Hopper was a pioneer at the table.

Grace Hopper was already a legendary figure in computing when I met her as a graduate student in 1969.  Retired from the Navy but recalled to active duty (eventually with the rank of Admiral) she lectured widely on the history of computers and programming languages.  Her role in developing the first compiled programming languages for Harvard’s Mark I Computer and later with Eckert-Mauchley Computer Corporation inspired early computer scientists — including this one — to concentrate on programming languages.  Her lectures were always packed. She took her seat at the table in the days when there were only a handful of women in the computing industry and although she counseled young women entering the field, she did not talk about her role in expanding the boundaries of computing in any of the interactions I had with her. She preferred to concentrate on technology and where it was heading.

The celebration that carries her name is a series of conferences designed to highlight the contributions of women to the field of information technology.  It has special significance to me because I spent much my tenure as Dean of Computing at Georgia Tech expanding the boundaries of computing.

This idea of expanding boundaries was born  in 2002 when computing education was in a downward spiral after the dot-com bust.   This may not not sound like  colliding worlds, but in fact our solution to the problem of declining enrollments  was to remake undergraduate computing education with a new face that was more inclusive — more open to broader participation.  That meant lifelong, relevant education focused on combining student interests and real-world needs and impact. It meant ignoring disciplinary boundaries, which was something not all universities did.

It also meant, literally, “new faces” in classrooms — on both sides of the podium — and laboratories.  Shortly after I became dean, Beth Mynatt, now Director of Georgia Tech’s GVU Center, said to me, “You know, you can’t have a more diverse college without intellectual diversity.”  So our initiative  A New Face of Computing at Georgia Tech became defined in part by the New Faces who were brought into the field by an explosion of new programs and degrees.

As the Grace Hopper Celebration kicks off this week in Houston, it’s a good time to be reminded that there’s always room for more at the table.  It keeps worlds from colliding, expands social networks, and promotes innovation.  Let’s celebrate that.

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Social Fragmentation and the Economic Stagnation of Atlanta’s IT Cluser: Q&A with Danny Breznitz

September 28, 2009

Georgia Tech’s Danny Breznitz and Mollie Taylor just completed a study of how communal roots and a rich complex of social networks can impact the health of high tech clusters and entrepreneurial activity.  Entitled The Communal Roots of Entrepreneurial-Technological Growth? Social Fragmentation and the Economic Stagnation of Atlanta’s IT Cluster, the preprint of their report has, as you might expect from the title, already attracted some attention in Atlanta.

One conclusion of the Breznitz-Taylor report is that the effects of social networks often dominate the availability of other, more quantifiable resources in determining the long-term health of  industries in a region.  Since I devoted my first post to exploring the impact of fluid social mixing on the Silicon Valley culture, I thought it would be interesting to sit down with Danny Breznitz to get his thoughts on why he thinks this is so.

A former Fellow at MIT’s Industrial Performance Center, Danny’s book Innovation and the State won the 2008 Donald K. Price award for the Best Book in Science and Technology Politics.

Danny started out by telling me he had already thought about it in terms of colliding worlds: local economic development and technology entrepreneurs.

Q: My premise in “Proposition 13” is that social mixing is evidence of many other social networks that come into play when new companies are hatched in Silicon Valley.  Do you think that’s true?

A: Yes, we argue in our paper that these kinds of networking relationships increase social capital in a region and that a cluster rich with social capital actually binds key companies and individuals to the cluster. That not only makes it harder for them to leave the region, it increases the supply of specialized talent that startups need,  as well as the ability of disparate players to meet and come together with novel ideas across domains of knowledge.

Q: Your paper has an intriguing title.  What does it mean?

A: We studied the IT industry in the Atlanta metropolitan area to find out why so many apparently successful Atlanta companies leave the region for California or other states.  This is true even for companies that came out of places like Georgia Tech or were founded by Atlanta natives so you would think that the ties to the region were strong.  This is what we mean by stagnation.  The answer seems to be that without a a rich multiplex of social networks cluster development will stagnate.

Q: You say that Atlanta’s High Tech cluster is stagnant.  In what way?

A: Stagnation is a way of describing what happens to a region when there are no local clusters with sustained growth.  Atlanta is still a global leader because of the many technology initiatives that attract entrepreneurs, but over the past ten years or so many of the most promising companies have decided to leave the area altogether.  What is especially problematic is that the most promising high tech startups — the source of future grown — are the ones that are most prone to move away.

Q: Can you give examples?

A: Every data set we looked at told the same story: technology startups with consequence tend to leave Atlanta.  If you look at the Atlanta Business Chronicle’s list of “Top Venture Capital Deals” from 1999 to 2007, for example 42% have left Georgia. In fact, 40% leave within the first three years of getting their first round of VC investment, and hence we become a feeder cluster if you will.  We are in real danger of becoming one big technology incubation center whose successes are raided by other regions.

Q: In the same way that MASPAR left Boston for Silicon Valley?

A: Exactly.  In the case of MASPAR it was the ready availability of all the people, talent, money, and other resources that would be needed to grow a successful company. In the case of Atlanta companies that leave the region, California and the New York/New Jersey areas are by far the most frequent destinations:  California because it is the leading technological cluster and New York because it is the leading financial center. These are also two major sources   of venture capital for the Atlanta technology industry.

Q:  Atlanta touts Georgia Tech, GRA, the proximity of universities, transportation and infrastructure as reasons high tech companies should locate here.  Do you disagree that these are important factors?

A:  This is called “factor availability”. The availability of factors like universities is definitely important for technological entrepreneurial growth. So not only do I agree that these are important but I think that Atlanta and Georgia have been doing a great job in this regard. However, our research indicates that societal variables are just as important and maybe are even more important. There is a growing body of thought among researchers that supports this view from a theoretical standpoint as well. Our findings suggest that if we do not come up with new ideas and policies to change the societal environment of the technology center in Atlanta, we will not enjoy the fruits of our own investments.

Q:  It’s been over a decade since Analee Saxenian noted that flattened hierarchies helped explain the economic disparities between Route 101 in California and Route 128 in Massachusetts.  How does your study add to her insight?

A: Saxenian’s study concentrated on the structure of the high tech industry in Silicon Valley and Boston’s Route 128 and we agree that hierarchical companies make it more difficult to share knowledge and talent. We wanted to understand the situation in Atlanta and to bring all the tools of modern social research to bear on the problem.  In fact, you can argue that Saxenian’s book was talking about social capital, although she did not use that term.

Q: Do you think Atlanta economic development planners have taken those effects into account?

A: We think that the planners have done a good job at emphasizing factor availability which is important in beginning new companies, but corresponding attention has not been given to the health of the local community. Although the factors are necessary, they are not sufficient.  Without a better supply of social capital it will be difficult to sustain cluster growth. On the positive side, the initiatives and leadership of The Enterprise Innovation Institute suggest that Georgia Tech leadership has reached the same conclusions.

Q:  Why the gulf between Entrepreneurs and Economic Development Offices?

A:  I am not sure it’s a gulf. It’s a difficult question because policy planners can only do so much to help.  Economic Developers can influence variables through programs like GRA.  At some point, for example, the personal involvement of top executives from Atlanta’s leading companies needs to be promoted. We should also remember that companies are for profit organizations – if companies believe that they have better chances of maximizing profits or returns for their investors somewhere else they will be under immense pressure to leave. We must realize that and tailor our policies to ensure the these pressures are mitigated and that the perceived advantages of other regions do so not seem to be so high in the eyes of  the people who made relocation decisions: the founders, boards, investors and customers.

Q:  What are the three things that could be most helpful in reinvigorating Atlanta’s high tech cluster?

A: We have to look in the mirror.  It’s easy to reflect on how well we’re doing, but it’s more difficult so say:  “Well, we need to add more attention in these other areas too because what we’re doing now is just not enough.” First, I think a new set initiatives anchored around Georgia Tech should be developed to focus on how current and future large Atlanta companies can maintain closer connections with Atlanta’s high tech industry.  Second, I would like to see renewed attention to stimulating a more local VC industry. VC’s are critical to shaping the social network of the companies in their portfolio and as long as those networks are located somewhere else, local companies will always be at risk for relocating closer to the networks.  Third, I would like to see Atlanta executives more involved at all levels of entrepreneurial activity.  Executives who have “made it” invest their own money in Atlanta, which is important, but that is not same as the many different kinds of social involvement that it would take to embed startups in the region. A leadership group that took on this challenge would be a very good thing for Atlanta.

Q: What should Atlanta business leaders be doing to take advantage of the city’s strengths?

A: In addition to the leadership group?  I think promoting the kind of social mixing that you were talking about in “Proposition 13” and has been so important in other healthy clusters would be a good first step.  The Enterprise Innovation Institute at Georgia Tech has funded us to continue this research, expand and update our databases, and provide more focused policy recommendations.  I hope Atlanta business leaders will also help as our study goes forward.

Q: Are there lessons learned from the situation in Atlanta that can be applied  in other cities?

A: Our findings are based on social networking theory and an approach to data analysis that synthesizes information from many sources.  We think there are lessons from studying the relationship between business-social structure and entrepreneurial growth.  Comparing the findings for Atlanta with other regions would help us understand, for example, whether there are geographic factors that come into play or whether the international environment is important.  I think the main lesson, not only for Atlanta, is that you have to go beyond the traditional view of what is crucial for  high tech growth and take a hard look at the health of your community.

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Guess Who’s Coming to Dinner

September 22, 2009

In the irreverent, satirical movie Brain Candy the scientist who is responsible for the eponymous drug that takes the world by storm and briefly turns an ailing pharmaceutical company into a global powerhouse is invited along with his team to the CEO’s house for a celebration.  While his nerdy team members are left at a dismal affair of chicken salad and soggy potato chips, the scientist is escorted to the real party, a sophisticated Bacchanalia complete with caviar, Champagne, celebrities, super models,and swimming pools.  Few Champagne-and-caviar parties in today’s corporate climate, but there is still a sense that when dinner is served for top decision-makers, R&D does not have a seat at the table or is – at best – a distraction.  R&D is a somewhat curious, uncomfortable, and frequently unwelcome guest.

There are obvious signals when the worlds of technology innovation and business execution are on collision courses.  There are early warnings that reverberate through organizations, but they tend to go unnoticed because corporations make  it  easy to set up effective filters.  Warnings can show up in the very language that R&D management uses to talk about the rest of the company.  In “Are R&D Customers Always Wrong?” I quote former GM research chief Robert Frosch talking about the

…ocean of corporate problems

as if they were the problems of some alien world into which the GM R&D Center had been dropped.  In “Well, what kind of fraud is it?” Edward clearly lived in a different world, and the many “Loose Cannons” who I still hear from were never able to bridge the gulf.  Everyone seems to be a helpless observer to a catastrophe over which they have no control.

My experience is that senior executives, starting in the boardroom, can too easily focus on events that are rushing at them — too fast for effective reaction — ignoring the events that are still far enough away to anticipate.   There is, for example, an overwhelming feeling  that, since the time of a chief executive  is so precious, every step should be taken to avoid diluting the CEO’s time with minutiae.  To be perfectly honest, technologists tend to do that – passion for a technology project can fill a briefing with flourishes that are meant to be savored and admired by peers, not convey actionable information to decision-makers.  But that doesn’t excuse what in my view has become the regrettable practice in large companies of filling virtually all executive time with managing cash, debt, and other financial indicators of performance.

Financial performance in a technology company rests on other factors, too. Market disruptors, for example, are rarely predicted by financial analysis.  Even annual strategic planning and investment is a barren exercise without the participation of an educated team to make sense of the alternatives.  In an industry with many acquisition targets the ones that should occupy the attention of senior management are not necessarily the ones that have the strongest near-term business cases because those may not be the ones that advance long term goals.  Intel chairman Andy Grove once said that a Board’s responsibility is to

…insure that company success is longer than the CEO, market opportunity, or product cycle.

I will have more to say in later posts about the collision between decisions that really advance long term goals and those that are simply chosen from a list of predetermined alternatives.  What starts in the boardroom is inevitably replicated at other levels.  To deal with all of the important factors that determine success of a technology company  technology leaders must have a seat at the table.  Avoid collisions by inviting them to dinner.

I’ve worked with many senior executives who have set a technology place at the table with oftentimes-spectacular results, but today I want to focus on my Bellcore mentor CEO George Heilmeier, winner of the 2005 Kyoto Prize for his invention of the liquid crystal display.  George, along with Bellcore research chief Bob Lucky and head of the software business Sanjiv Ahuja led the remarkable transformation of Bellcore from an inward looking R&D consortium to the profitable stand-alone supplier of telecom software and services that was divested by the Bell Operating Companies and acquired by systems integrator SAIC in 1997.   Bellcore generated enough cash in the first quarter after being acquired to pay back the entire purchase price. George took particular delight in his mentor role.  Even during his busiest days at Bellcore, he would wander into my office, put his feet up on the coffee table, and ask what was going on in the labs, a conversation that often went on long into the evening.

One of George’s most enduring contributions to the R&D culture at Bellcore (and, as I later found out, to Texas Instruments, Compaq, and DARPA) was the Catechism.  I tried many times to get him to call it something else because I really believed that some in our multicultural environment would be offended by the term, but he always ignored my suggestion and in the end nobody seemed to mind very much.  The Catechism was George’s way of framing every strategic discussion, but he took particular care to make sure it was used to manage technology.  I later found out that others, including former Intel research head David Tennenhouse, who had also been swept into George’s wide path, had also carried the Catechism tradition forward.  According to the Catechism every strategic proposal in the company had to answer the following six questions:

  1. What are you trying to do? (No Jargon)
  2. How is it done today and what are the limitations of current practice?
  3. What is new in your approach and why do you think it will succeed?
  4. Assuming success, what does in mean to customers and the company?  This is the quantitative value proposition.
  5. What are the risks and the risk reduction plan?
  6. How long will it take?  How much will it cost? What are the mid term and final exams?

At Bellcore, George personally ran a Quarterly CEO Technology Council Review, where R&D managers from around the company would present their best ideas – always using the Catechism — for innovations to heads of the strategic business units, sales, and marketing.  Sometimes to the consternation of both the CFO and  the head of sales, George would reward skunk works projects that had terrific answers with additional resources to continue their work.  I wondered many times about the metaphor mixing in Question Six, but again it didn’t seem to both others.  There was no complicated process.  If you answered the questions well and the value proposition made sense, you got enough to get you going.  If the project was a little further along, you needed business unit heads to also buy in, and so on until it made sense to tie cost and revenue goals to the project. By that time the balance of the authority for the project was in a product group so the Technology Council could disengage. Amazing ideas came out of this process including the word’s first e-commerce products and an amazing quality transformation among the company’s more than 6,000 software engineers.

George Heilmeier’s Catechism was the inspiration for my Loose Cannon escalation process at HP.  HP was about 50 times larger than Bellcore so the idea of a quarterly CEO review was not feasible.  However my Technology Council was a direct pathway to the Executive Council so the effect was the same.

I sat down with George last spring for a wide-ranging conversation.  Much of what he had to say about both the Catechism and seats at the table has also appeared elsewhere – most notably in his five public speeches in conjunction with the Kyoto Prize.[1] The work that won him the Kytoto Prize was done in the 1960’s at RCA’s Sarnoff Laboratories in Princeton, where he had recently completed his PhD.   This included the discovery of electro-optic effects in certain kinds of liquid crystals that would be used to build  the first liquid crystal displays.   George always claims that he just “stumbled upon it” but he quotes Vladimir Zworykin, a television pioneer  with commenting:

“Stumbled, perhaps, but to stumble you must be moving.”

Heilmeier became disillusioned with the slow pace of change at RCA and left to spend a year as a White House Fellow, an assignment that turned into an appointment as Special Assistant to Secretary of Defense James Schlesinger and later to his appointment as head of DARPA.  Schlesinger and other White House mentors gave George a seat in senior policy discussions from the earliest day, and his growing comfort with proximity to important decision-making shaped his outlook on the value of a seat at the table. Two lessons stuck with him.  First was the negative power of vested interests:  in times of change those with the most to lose will fight tooth and nail to undermine it and those with the most to gain do not yet realize how much they have to gain.   Second was the negative aspect of “technology transfer”.  George was never a fan of throwing technology “over the transom”.  His commitment to providing an equal voice for innovation grew out of his experience that it was much better to form what he calls an “interdisciplinary team” with representation from R&D, product engineering and manufacturing  (he still believes that marketing is best done organically with all members of the team interacting with customers).   The leadership and balance of this team shifts as time goes on.  This is the dinner table.

In my next post, I’ll give you an example of these principles in action: a transformational event that could only have been successful with a seat at the table and that would have been killed by a distant CEO, undiluted with the minutiae of technological disruption.

[1] A Moveable Feast: Kyoto Prize Lecture (SD Version), 2005

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Are R&D Customers are Always Wrong?

September 17, 2009

One of the reasons that the world of R&D collides with product worlds is that their agendas don’t quite line up the way you might think they should.  There are of course the questions of culture, incentives and time.  I will return to these questions in later posts, but today I want point out something more fundamental that I think helps explain why Alice and Edward in “Well, kind of fraud is it?” lived in worlds that were on a collision course from the beginning: many R&D managers are not even in the same business as their counterparts in product management and sales.

The Industrial Research Institute is an association of 200 R&D-intensive companies and is one of the most important forums for sharing data and best practices.  Among its members are recognizable brand names in consumer products, manufacturing, electronics and pharmaceuticals.  Alcoa, Xerox, and General Motors are members.  It is fair to say that the IRI represents traditional, orthodox R&D management thought.  Microsoft, Google, and Intel are not members.   It is interesting that innovation models based on the Internet, software, nanotechnology and other industries where startups often lead the way and product development cycles are compressed are notably absent from IRI.

The IRI Medal is awarded for impact on R&D in some of the largest corporations in the world, and in 1996 it was awarded to Robert A. Frosch, who for ten years led the General Motors Research and Development Center.  He anticipated by a generation the importance of industrial ecological impact. Frosch is a true visionary.  His Medalist’s Address to IRI was entitled “The Customer for R&D is Always Wrong!”.  It was a fascinating and very influential piece, but, because the IRI membership is not open to individuals, it is hard to find.

My first thought on hearing the address was that Frosch was talking about something like the “future value of research” (see “Loose Cannons”) until I read the published version of the speech[1]:

I have seldom, if ever, met a customer for an application who correctly stated the problem that was to be solved.

Frosch went on to describe many approaches to establishing and maintaining an effective R&D organization, and that’s what I remembered from the address until GM started its public foundering last year.

I started to wonder, “Did the GM R&D Center fail General Motors?”  I don’t think that’s a fair assessment. After all GM had for many years made vast research investments in efficient engine technology, telematics, and safety – many of the component technologies that we now know are important to the automobile industry,   I think the fault lies elsewhere: traditional R&D management often does not know who the customer is.  R&D managers talk mainly to each other, and senior management enables this behavior.  They worry – necessarily so I’m afraid – about sources of funding from the product divisions.  According to Frosch:

The R&D people must swim in an ocean of corporate problems, present and future.

To Frosch and many organizations charged with innovation, the customer is the one paying the bills for R&D not the one buying the products.  This is a bigger deal than you might imagine, because it shifts your perspective.   It helps explain why R&D organizations have been historically ineffective in resolving Clayton Christensen’s Innovators Dilemma[2], and it helps explain why Alice and Edward had such a hard time aligning their goals.

Frosch says that R&D performance should be measured by:

  • Past performance, not promises/predictions
  • Summing the value of the successes and comparing with the total cost of the research lab, not individual projects.
  • Projecting the value of successes ove their product or process life – the internal rate of return can be surprisingly high

These are internal measures, and there are many examples of R&D organizations that continued to be successful even as their parent companies spiraled into the ground. The IRI membership list is impressive but there are also members who make up  a veritable Who’s Who of companies that were stunningly wrong in their assessment of their markets, and had their R&D laboratories been focused on the real customers they might have avoided disaster.

[1] Robert A. Frosch, “The Customer for R&D is Always Wrong!”, Research Technology Management, November-December 1996: 22-27

[2] Clayton Christensen, The Innovator’s Dilemma, Harvard Business School Press, 1997

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