Posts Tagged ‘culture’

The Technology Committee

February 2, 2010

San Jose Mercury News (CA)

December 23, 2001
Section: Business
Edition: Morning Final
Page: 1F

VC LEGEND LEADS CHARGE FOR HP-COMPAQ
WITH TIES TO BOTH COMPANIES, PERKINS HAS UNIQUE PERSPECTIVE
MATT MARSHALL, Mercury News

Thirty-six stories above the placid blue waters framing Alcatraz Island and the Golden Gate Bridge, Thomas Perkins fidgets in his chair. If conversation lulls, his thumbs twiddle impatiently. He is a man driven by ambition. Perkins, 69, has turned his Silicon Valley venture capital firm, Kleiner Perkins Caufield & Byers, into the most successful VC firm in the world. Kleiner Perkins has returned around $20 billion to investors over its 30-year history. But Perkins‘ impatience comes from his latest, unexpected challenge: the bitter battle over the proposed merger of Compaq Computer with Hewlett-Packard. As a board member of Compaq — and former executive at HP, the Palo Alto computer firm where he cut his teeth more than four decades ago — he has become one of the most outspoken backers of the merger. But some HP heirs — sons and daughters of founders William Hewlett and David Packard — have signaled their intent to vote down the deal, saying a merger doesn’t make economic sense. They also say the layoffs likely in a merger threaten to ruin HP‘s vaunted tradition, the so-called HP Way, which they say emphasizes company loyalty…

…A merger will create a mammoth company that can take on giant IBM — and beat it. HP and Compaq, he explains, have better ties with Microsoft and Intel — two other key protagonists in the computer industry drama. Together, he says, the foursome create an industry standard that can easily outdo IBM. ”Microsoft will be the software department, Intel will be the hardware department, and HP-Compaq will be the marketing-customer delivery department,” he says. ”Wouldn’t you go for it?” In part, Perkins is fighting for Compaq. But he also is fighting for his right to interpret the legacy that Packard and Hewlett left for Silicon Valley..

I remember opening the paper a couple of days before Christmas, 2001 and feeling like I had just been kicked in the stomach.  It was not the best time to be an officer of HP. Bill Hewlett’s son and HP board member, Walter, had come out swinging against the HP-Compaq merger, and Carly Fiorina, my boss, was under incredible pressure to sell the deal despite howls from the local press, the Hewlett and Packard families, an active message board for HP employees, and now a fractious board of directors. And there it was in black and white in the morning paper:   Tom Perkins, a Compaq board member and a driving force behind the merger had a plan to turn HP — the company whose logo said “invent” — into the marketing department for Intel and Microsoft.  I had to think hard about how I was going to face my own Technology Council and reassure HP’s 12,000 engineers that — despite what Perkins said in the  interview –  the company was not backing away from its commitment to innovation.

Earlier in the month, Carly had invited us to her house for a very low-key holiday celebration — much more subdued and informal than the elegant holidays parties that were the custom when the company was doing better.  Carly had paid for much of it out of her own pocket.  It  turned out to be a  tense and not not very festive evening.  Carly was running on a few hours of sleep, and the rest of us were trying to tie down the ship’s rigging in the middle of a storm. There was an air of uncertainty. We sat around smaller tables with our spouses as dinner was served.  Carly and her husband Frank were at an adjacent table.   As much to break the tension as anything, the discussion at our table turned into a silly  guessing game over which actors would be cast to play which of us when the HP-Compaq Merger Movie was made (West Wing star Allison Janney was the consensus choice to play Carly).   We must have been loud, because I could see Carly stiffen.  Carly didn’t know who on her own staff she could trust, and it must have sounded like we were tossing off the seriously difficult times that would be coming for HP and its employees.  We weren’t.

I spent virtually all of my time that winter keeping our major technology initiatives on track, promoting strategic product directions with customers, and talking to our engineering teams around the world.  The outcome of the proxy fight was uncertain and there would have been antitrust repercussions if HP and Compaq had gotten too cozy, so Webb McKinney, who was in charge of HP’s side of the integration team and the clean room that allowed the companies to begin planning merger details without violating antitrust laws, kept most of us with day-to-day management  responsibilities in the dark about post-merger plans for technology and products.

Once shareholders approved — by a hair’s breadth — the merger, Perkins was named to the board of the new HP.  Compaq’s  Shane Robison was named to a new position that combined my old CTO role and a Chief Strategy Officer position that had not existed before. I was still concerned about the Perkins comments from his December interview.  My first encounters with the Compaq technologists were not encouraging. I got into a shouting match with one of Robison’s staff members about how much HP should be investing in security for its products.  This was less than a year after the 9/11 attacks, and I had been working closely with CTO’s of other Silicon Valley companies and federal agencies to forge a comprehensive strategy for information and communications security.  The official Compaq position was that this was a problem for Microsoft, not HP, and I was told to keep quiet about it.

Imagine my surprise when Perkins and Robison led an effort to form a Technology Committee for the HP board to oversee and track R&D the same way that Audit, Governance, and Compensation Committees oversee financial  and operational matters.  I didn’t always agree with the direction it took, but it seemed to breathe new life into a technology governance process that had been stalled for many months.  Prior to that, HP — like most companies — did not place much visible  faith in its board to integrate technology into corporate governance.   There were a few public boards that had technology committees. They had been prominently featured in the  magazines for directors that wrote about best board practices, but those articles were disappointing:  most existing technology committees were for  informal oversight of technology spending by CIO’s.  What Perkins was  proposing was something different — and so at odds with his public statements about the value of a merged HP and Compaq that it took me a little while to catch on.   The HP Technology Committee would not only monitor  technology developments, it would help educate the board about new trends and directions that would impact board-level decisions and provide informed advice on the technology implications of financial and personnel decisions, including how to maintain a workforce advantage.

A committee like this would have been helpful years before, because HP had a history of plunging into technology investments and acquisitions that, to most technology observers, made little sense.  HP’s  decision in 2000  to purchase a middleware/software company called Bluestone was one such decision.  A distant fourth in a crowded and fragmented marketplace, the idea behind the Bluestone acquisition was based on a faulty reading of HP’s current capabilities in the space, the ability of any small entrant to alter the dynamics of the marketplace and the needs of HP-UX customers who felt themselves always last to the trough when third-party software developers released new products.  After two years of chaos and the dismantling of HP’s web services organizations, Bluestone was dumped at a $400 million  loss.

HP’s decision to sell its considerable VLSI design assets to Intel was also  made for financial reasons, although it was widely known in HP’s technology community  that the success of its 32 and  64 bit  processors, including  Itanium,  depended on custom chipsets that HP had invested  in for many years.  The original architects of Itanium were on my staff,  and it was hard to peel them off the ceiling when the announcement was made, especially since they had virtually no voice in the decision-making process.

Officers were invited to sit in on the  entire HP  board meeting, except for the closing executive sessions.  Even so,  it took me awhile to realize how rare technology discussions actually were. After a particularly fiery Industry Analysts’ Meeting, during which I made a slash-and-burn  presentation on our competitive advantages over Sun Microsystems –  that made the analysts smile but our marketing folks queasy — Carly asked me to reprise the talk for the board.  Patty Dunn (who would later take over as Chairman  in a controversial  tenure after Carly’s dismissal in 2005) and others approached me to say how much they appreciated the competitive information and the willingness to be combative in defense of HP product strategy.  They claimed, incredibly, that it was the first time they had heard this kind of presentation.

The Perkins proposal would have given the board a lens to look at issues like these — necessary in  a company where financial forecasts are only as good as the underlying technology.  HP was not only one  moving in this direction.  Motorola and other technology companies  had — at about the same time — formed Perkins-style Technology Committees.  Ram Charan’s book  Boards That Deliver helps explain why technology companies need to take the Technology Committee seriously, more importantly, how they can help  a board move beyond the role of compliance to a deeper assessment of health and prospects:

Financial health, operating performance and risk each require separate attention.  A company can show good operating performance while financial health…is in decline. Dot-com companies, for example, were notorious for delighting their customers with fantastic (or fantasy) products and services while bleeding cash.  Similarly financial health can appear to be sound when in fact the guts of the business have been severely compromised.  Any risk can be underestimated, especially when it is assessed piecemeal, rather than in totality.

The reason that the Technology Committee is a good idea for  public technology companies is that the worlds of innovation and execution are going to collide, and a board cannot deliver value by simply checking off a box on a governance worksheet.   What do you know, for example, about the real performance of key technology executives  without a deep insight into how they would be evaluated by their peers  and competitors?  How do you know that an acquisition based on a couple of good financial quarters and self-congratulatory product  press releases has no market advantage over an in-house solution?   That’s not the kind of question that due diligence is going to ask. After I left the company, I watched the downsizing of research and heard often from former friends and colleagues who thought one decision or another was wrong-headed, and I often  wondered about how effectiveness the committee actually was.  And then I would see something preserved that made no short-term financial sense, although everyone knew how important the technology would be some day.

When I joined the board of RSA Security, I was definite about my plans.  “Look,” I told CEO Art Coviello, “RSA’s performance is a three-legged stool, and the board needs to be as informed about the technology and markets as it is about finance and operations.” Ram Charan would have said the three legs are Finance, Operating Performance and Risk. I said the risks are Technology, Markets and Organization. Both Art and Chairman Jim Simms were on board, but it was not an easy proposition to sell to the rest of  RSA’s board, although I did.  The RSA Technology Committee had a big impact on board dynamics and ultimately on the long-term health of the company.  It is one of the WWC success stories that I will tell in more detail in a later post.

I can’t think of any reason that the board of directors of  a public company — especially a technology company — needs seven CFO’s, but that is the profile of far too many companies.  Even  on boards where the majority of the non-management directors are CEO’s, financial expertise overwhelms all other skills, and it is not healthy.  It’s hard to find a technology company that has failed in recent years where the  roots of failure were not widely known on that other planet outside the boardroom.  I emphasize public companies only because they are great targets.  Later stage privately held companies would also be wise to pay attention to board dynamics and find some way get a handle on the company’s technology.

Once I got over the stomach ache that Tom Perkins gave me, I realized why technology had a seat at the table of his boards.   Kleiner-Perkins got to be the world’s greatest venture capital firm by delving deeply into the  technology implications of business decisions.  Engineers have the impression that board rooms are filled with accountants who know very little about the details of the  business but are not shy when it comes to talking about it.  Enter the Technology Committee.

I always liked the scene in Annie Hall where Alvy Singer, the Woody Allen character,   is getting more and more annoyed by a guy standing behind him in a movie theater line who is carrying on about Marshall McCluhan, trying to impress his date:

Man in Theatre Line: It just so happens I teach a class at Columbia called “TV, Media and Culture.” So I think my insights into Mr. McLuhan, well, have a great deal of validity!
Alvy Singer: Oh, do ya? Well, that’s funny, because I happen to have Mr. McLuhan right here, so, so, yeah, just let me… [pulls McLuhan out from behind a nearby poster]… Come over here for a second… tell him!
Marshall McLuhan: I heard what you were saying! You know nothing of my work!…How you got to teach a course in anything is totally amazing!
Alvy Singer: Boy, if life were only like this!

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The “dy” Logo

January 18, 2010

I enjoyed reading  the new book about innovation at Hewlett-Packard  that Chuck House and Raymond Price just published[1]. It’s quirky and curiously researched, but, most of all, I was happy to read their account of Carly Fiorina’s tenure as CEO at HP.  History was in need of some fact-based revision.   If ever worlds collided, it was at HP when Carleton S.  Fiorina took over the reins after a stunning rise through the executive ranks at ATT/Lucent.  Chuck  points out that, although Carly was not well-liked by her employees (even her direct reports, many  of whom  ultimately undermined her), she sowed the seeds for Mark Hurd’s success.

The executive suite at HP Headquarters on Page Mill Road in Palo Alto was in those days a row of large cubicles, and, in keeping with  the HP culture, there were no doors and no outer offices.   Everyone’s office  – including Carly’s — was really just a cubicle. Carly insisted that I have two offices: one in HP Labs adjacent to the museum-like offices of Bill Hewlett and Dave Packard — these were not cubicles but were real offices,  impeccably maintained in their original 1960′s orange-and-brown Madmen decor —   and the other next to hers overlooking  a Japanese garden.    Carly’s executive council met nearly every week in a nearby conference room whose glass wall looked out over the same garden.

Several   council members had offices elsewhere, but those of us who had direct access were within a thirty-foot radius of her office.  These were the Gold Badge days at HP when a favored few retirees were granted the privilege of unrestricted, lifetime access to any building and any office suite in the company. The daily comings and goings telegraphed events that would not be visible outside the CEO’s office for days or weeks, even among business heads who had broad authority over multi-billion dollar enterprises.  This turned out to be an important vantage point from which to view sand being  thrown in the gears during HP’s acquisition of Compaq, but I will save these stories for later posts.

Chuck House had been gone from HP for some time when Carly arrived, so his account is based on interviews with a relatively narrow slice of insiders who were his colleagues — an impressive number of people, to be sure, but in a company with 80,000 employees not enough for a definitive portrait.  But House has never been shy about charging ahead when the terrain looks interesting, a personality trait that once earned him a medal from Dave Packard for “Extraordinary Contempt and Defiance Beyond the Call of Duty.”  It was awarded to commemorate a mutinous tour of customer sites to demonstrate a new display monitor after HP management in Colorado Springs had decided to shut it down.   Nevertheless, House’s account gets many things right.  One of the things he misses was what Fiorina brought to HP:  a WWC focus on the customer that was foreign to HP’s engineering culture before her arrival.

House and Price defer to old-guard HP employees in characterizing Carly as a marketer, a fiction that was rooted more in style than in substance.  Fiorina was unnervingly accurate in her assessment of general  market trends,  like the importance of the internet to HP’s mainline businesses,  but, in fact, she was a consummate saleswoman.   What she brought to the table was not the “let’s-see -what -they-think-about-this” arrogance of corporate marketing organizations,  it was the ability to listen to customers, sift through encyclopedic  knowledge of internal plans and projects, and  envision a solution.  Sometimes a  solution was forthcoming.  Sometimes it took a little while longer than customers were willing to wait.  But sometimes solutions were sabotaged.   To have an HP outsider from the East Coast — a telephone equipment salesman, not an engineer — propose a solution to customer problems was an unpardonable sin to some.   It was a WWC culture class that she was slow to recognize.

She was widely criticized for her lack of operational experience, but  the truth is that Carly delegated operational authority too widely and to managers with suspect motives (including past and future pretenders to the throne).  As a newcomer,  I tended to apologize for injecting long-range thoughts into the very operational discussions of the Executive Council, until one day Carly stopped me and said: “You don’t have to apologize for that.  It’s true that we’ll never get to the long-term without taking care of the short-term, but it’s the long-term that makes the short-term worth doing at all.”

Council chemistry changed in the months before the Compaq merger. Vyomesh Joshi took over as head of the imaging and printing business unit.  V.J. is not only a brilliant executive, he is a skilled engineer, whose technical  insights  were mainly responsible for transforming ink jet printing.

The other major additions were Pradeep Jotwani and Iain Morris.  Pradeep had control of worldwide consumer  sales.  He was fond of  long discourses —  sometimes literary, sometimes merely speculative — but their effect was always to slow down a speeding train and turn the discussion in a direction that was more productive.  Iain is a big, brash, Harley-riding  Scott  who Carly recruited from Motorola to carve out emerging businesses  like handheld computers and  entertainment.  Carly quickly transferred   the personal computer businesses to Iain from Duane Zitzner’s  computer business unit where they had languished as unprofitable also-rans.  Morris knew hardware, software and manufacturing from his days at Motorola, and he was also a great salesman.

At one of his first Council meetings, Iain walked in with an HP laptop and stopped everyone cold when he opened it up and bellowed: “What’s wrong here?”  When you  looked at an open HP laptop from the back, the “hp” logo was upside down. It read “dy”, and of course,  that was the way most people saw the laptop:  open and  from the back, inverted logo.  If anyone before had noticed this, it never made it to the upper reaches of management.  The order went out immediately to invert the logo and all of the millions of HP laptops produced since that time now display the logo right side up,  so that it reads “hp”.  It upset some of the industrial designers who argued that laptops were closed a lot of the time and that the orientation of the logo doesn’t matter when a laptop is closed.  It took a salesman’s eye to recognize that it was stupid to have millions customers staring at a “dy”  laptop.

This episode followed on the heels of two other quick-shifts.  One involved HP’s always painful  Federal sales performance.  I will talk about this more fully in a later post.  The other involved architectural consistency,  a concept that bridged customer issues and product design.

Shortly after VJ took over the imaging and printing business, he held an advanced projects review for me in San Diego.  I was struck but the ubiquity of infrared (IR) connectivity ports on HP printers and cameras, and mentioned it to VJ.  He had many compelling reasons for insisting on IR, but complained that Zitzner’s PC division had recently removed IR ports from HP laptops.

To Duane’s immense displeasure, I called  a meeting with some of his design engineers, ostensibly to review the component cost envelope for laptops.  At the end of the meeting, when everyone was worn out,  I asked about IR, and they had a string of good reasons to throw it out.  When I pointed out that HP printers, cameras, and PC’s no longer worked together, they just sat there blinking at me.  Carly overruled engineering objections and IR ports made  a miraculous (albeit short-lived) reappearance in HP laptops.

It would  not be apparent outside the CEO suite for months, but architectural consistency was a technology theme that would drive many R&D investment decisions, both near-term and long-term.   In an effort to jump-start a consumer-facing initiative, Carly had approached Sony about sharing some key technologies.  One of Sony’s success stories was the introduction of memory stick technology into a broad range of Sony products from hundred-dollar consumer entertainment devices to studio-quality video cameras that cost a half million dollars or more.  My counterpart at Sony was a CTO named Mario Tokoro, a computer scientist and engineer who had spent time at the famous computer science department at Carnegie-Mellon University.  Mario had been instrumental in arranging for memory stick technology across a staggering array of Sony’s consumer and business products. The idea of arranging product strategies around this kind of architectural unity would have sped up HP’s brief surge in Internet and Web technologies.  It was an idea that was undone by colliding worlds on a much different scale.

[1] Charles H. House and Raymond L. Price, The HP Phenomenon: Innovation and Business Transformation, Stanford Business Books, 2009

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A Letter to the Editor

January 11, 2010
Alan Perlis

Alan J. Perlis

I had planned to write a post later this spring on the collisions between what engineers sometimes perceive as practical and what turns out in practice to be useful.  It’s a complex issue and there are examples that cut both ways, suggesting that a deeper understanding of both the underlying technology and the social “soup” where innovators thrive are needed to avoid some famous traps.  I mentioned this briefly in my discussions of the impact of social fragmentation on innovation and the pitfalls of ignoring social contexts.

Then the January 2010 issue of Communications of the ACM crossed my desk.  As I skimmed the contents, I was surprised to see my name in the headline of the Editor’s  Letter, an attack by the Editor-in-Chief Moshe Vardi on a thirty-year-old paper [ Social Processes ] that I wrote with computing legend Alan J. Perlis and my colleague Richard J. Lipton (author of the popular Godel’s Lost Letter blog and subject of Dancing with the Stars ).  The paper itself was controversial in its day and addresses exactly the WWC questions that I plan to write about.  It is extraordinary for an Editor of a professional journal to use his position to make derogatory comments about articles, especially to  further his own views.  Mr.Vardi’s letter demanded a response.  Lipton and I will jointly publish a longer and more technical essay on this subject at some point in the future, but today we are jointly publishing the following Letter to the Editor. The letter will also be sent to the Communications of the ACM.

In his  Editor’s Letter in the January 2010 issue of CACM entitled “More Debate Please”,  Moshe Vardi makes a plea for controversial topics in these pages, citing a desire to “let truth emerge from vigorous debate.”  It is a sentiment that we support as well. But we question Mr. Vardi’s judgment in using his editorial position to mount an attack on colleagues who were neither forewarned nor given an opportunity to respond.  Mr.  Vardi’s target was  our 1979 critique of formal program verification entitled  “Social Processes and Proofs of Theorems and Programs,”  It was co-authored with the late Alan Perlis, one of the originators of the field and a lifelong advocate for the kind of open discussion that the Editor advocates.  We can only hope that future contributors have higher standards for debate than does the current Editor, because his out-of-context references to the 1979 debate over the practical efficacy of formal verification, his ex-cathedra determination that the article was “misguided” and his ill-informed view of the decision to publish it have no power to illuminate  a serious subject.

We do not care to respond to Mr. Vardi’s substantial mischaracterizations and misstatements at this time, but we do think it is fair to point out that  the publication of “Social Processes and Proofs of Theorems and Programs,” was not a singular event that might be classified as either misguided or not.  “Social Processes” was a refereed article.  A preliminary version was accepted  by a highly selective conference program committee in 1976 and its presentation was attended by virtually every living contributor to the field.  It was then submitted to this journal and reviewed by anonymous referees. Its publication was followed by many months of public presentations and workshops, letters to the Editor, written reinforcements and rebuttals, and — several years later — a special issue of this journal devoted to the topic.  Mr. Vardi faults the editorial board for not publishing an opposing “counterpoint” article, a suggestion that — although it has all the “fair and balanced” trappings — would have been hard to reconcile with the confidentiality usually accorded to contributed articles that are sent to referees for review. The irony is not be lost on us  that we were offered no such opportunity prior to publication of his letter.

The article itself has been reprinted dozens of times and has appeared in several anthologies in the philosophy of mathematics.  Its publication and the ensuing debate have been the subject of social science research (Donald MacKenzie’s 2001 book[1] “Mechanizing Proof” remains the definitive sociological and historical analysis of both the paper and its implications for the field). If our arguments seem off the mark to Mr. Vardi, then perhaps the right course of action is to resurrect the social process that led to the article’s publication in the first place and jump into the fray. Until that time, the correct editorial position for CACM and its Editor is to let both the paper and the written record that surrounds it speak for themselves.  It strikes us as inappropriate, after thirty years of silence,  to use the cover of an Editorship to  attack unsuspecting passersby, especially while touting the moral virtues of free and vigorous debate.

[1] Donald MacKenzie, Mechanizing Proof: Computing, Risk, and Trust, MIT Press 2001, The Massachusetts Institute of Technology, Cambridge, MA

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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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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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“Well, what kind of fraud is it?”

September 15, 2009

Business and engineering goals sometimes seem to be in perfect alignment when just the opposite is true.  When everyone seems to be making progress but the goal is not getting any closer, it might be time to ask whether worlds are colliding.  This happens more often in large organizations, but in fact everyone is vulnerable: if you misread your partner’s agenda there are very few ways to avoid a disastrous collision.

Here’s an example[1].  The project was high profile and complex, but not so complex that it could not be managed by a single project manager – let’s call her Alice — who reported in a line to senior executives.  The ultimate goal was to produce a working prototype based on new computing technology. A successful demonstration of the prototype would almost certainly lead to full-scale development of a new product, a spectacular win and probable promotion for Alice. There were a few nuts-and-bolts engineering goals but the overriding goal was a dramatic safety improvement, and this was how the project was sold internally: a public demonstration that the prototype would function safely under the most adverse conditions. There were many ways to achieve this goal, but Alice had been sold on a radical new technology that would not only leapfrog existing approaches but would be a platform for many future projects.

Alice invested well.  She funded a group of skilled and capable engineers and scientists.  In fact, she funded the team that invented the technology, so her investment was leveraged by several years of prior research, and  – refer to my last post “Loose Cannons, Volume 1” — this is the way managers are supposed to select promising technologies. The scientists were led by Edward, a senior technologist who had guided his R&D team to a string of patents, technical reports and publications that slowly and carefully put in place the building blocks for the prototype.

Under Edward’s supervision, the building blocks for careers were also being put in place.  A PhD dissertation here, a toolkit from a master engineer there, and senior R&D managers whose reputations were to some extent staked on the applicability of the technology to an important product just like this one.  At Alice’s direction, the engineering team focused on near-term milestones.  One was a technology demonstration for a critical component.  Another was the integration of key components.  A third was a real-time simulation of the prototype.  At each step, in careful technical prose, the engineering team reported constant and impressive progress,

But there were internal and external critics who thought that the technology was overly complex and that the claims needed to be more carefully examined.  Some critics, like Bob, were promoting competing technologies.  Others thought, like Charlie, that the underlying approach was flawed and should be discarded.  Others were seasoned but neutral scientists like Doris, who was skeptical of all sweeping claims but had no particular ax to grind.  Even the critics agreed, however, that the engineering team was first-rate and that if the approach could be made to work at all, this was the team that could pull it off. Alice was aware of the critics and to help her balance the technical risks, she invited Bob, Charlie and Doris to serve on her Advisory Board – to become her skeptical insiders for the project.

Quarter after quarter Alice reported both the steady progress and the risks to her management who asked the appropriate questions but gave her the green light to continue, largely on the growing reputation of Edward’s team.  As the project drew to a close, Alice was asked to prepare a balanced summary and recommendation.  Alice scheduled a final project review.  Bob, Charlie and Doris helped select a dozen additional reviewers while Edward began assembling the massive project documentation and preparing his team to brief the reviewers.  Alice’s direction to Edward was this: “We all understand your technology, so you don’t have to educate us about it.  We need to know exactly what was accomplished.”

It took several months to prepare for the review.  About two months before the review date, Alice and Edward scheduled a series of demonstrations at headquarters.  Charlie was there along with a group of a dozen executives including some of the review panelists, but the marketing nature of the meeting was unmistakable.  Sprinkled in the group were senior representatives from customer organizations, government agencies, most of Alice’s managers, and Edward’s boss.  Alice had staked her personal credibility on a successful outcome.  She was confident enough to preview the results and she wanted use that preview to build excitement as the product phase was launched. To the rest of the group – and especially to Edward — she was not Edward’s customer.  Alice was a partner in a new and exciting era that was being launched that day.

The day did not go as planned. The demonstration was a computer simulation of the prototype.  The group crowded around the color monitor (a big deal in those days) as the prototype was put through its paces.  Alice told the group she knew that a live demo was gutsy.  Then the image on the display began spinning and then froze.  Edward rebooted the simulation.  Still nothing.  Alice pushed on as if nothing had happened, inviting the group to a demo at the upcoming project review.  It is not clear that Alice and Edward understood the significance of this episode.

Couriers delivered large review packages to the reviewers’ offices as preparations for the meeting accelerated.  Charlie started receiving phone calls from Bob: “Charlie, I’ve been looking over the reports, and I have some problems with what Edward is claiming.”  “These are based on papers published in top journals,” Charlie said.  “It’s not the scientific claims,” Bob said, “It’s their application to the product.  I think they messed with the experiments to get the result they wanted.”

The review began on Tuesday morning in a large conference room.  Bob’s comments had spread quickly through the Advisory Board and there were perhaps a dozen back-channel conversations taking place about what it meant.  Edward’s team should have been on edge, but, although the atmosphere in the room was tense, the younger team members — buoyed by Alice’s collegial demeanor and Edward’s favorable report to the team of the outcome of the live demo — seemed unusually relaxed.

Over the next two days, every scientific claim was dissected. “Yes, we see what was claimed in this published report, but it looks like a purely mathematical result. What does it have to do with the prototype?”,  said one reviewer.   Several panelists wanted Edward to square published claims with the apparent inconsistency of the disastrous live demo.  Still another rushed to the blackboard and proceeded to find a counter-example to a published claim.  Bob wanted to know how Edward’s team could have pulled off what Bob’s competing team could not do.  This was hardball, but it was nothing that Alice had not expected.

Finally, at the end of day two, William – the youngest member of the Edward’s team  – moved to the podium and began a scientific summary that included his original research and the less technical summaries of it that had been prepared for popular consumption.  It was clear that William’s PhD dissertation had an enormous impact on the course of the project. .

Finally, from the back of the room, Doris spoke up, “I want you to explain this claim right here” pointing to a critical and widely reported result that apparently cleared the way to broad applicability of the technology.  Doris had been nearly silent to that point. The dramatic effect of her question brought everything to a stop.  Edward gave a nontechnical answer.  William jumped in with technical details.  Other members of the engineering team tried to help.  Doris wasn’t buying any of it and brushed aside all of the responses with well-reasoned arguments taken from their own published reports.

Doris said, “I certainly believe William’s claim, here.  It’s a groundbreaking result.  But what I don’t believe is the following report that it was used successfully in the prototype you are showing us today.”  The response was not planned, but William blurted: “It wasn’t.  We used a simplified version of the prototype.”  The room went silent.  “There’s no way we could have used the final version.  It would have been too complex.”  Alice stood up and stared at Edward:  “That’s not what you reported to me.”  At that moment, in Edward’s eyes, Alice, snapped back into focus as a customer, and Edward understood that Alice’s goals were not aligned with his. As the effect of Alice’s words sunk in, the more inexperienced William tried lighten the mood with a little humor: “Look.  Everything we said was true.  It’s not out and out fraud.”

Doris rose.  “Well, what kind of fraud is it?”

It took a long time for the panel’s report to appear. The project was buried, the product was never built and although Alice recovered successfully, Edward and his team were wounded, although William and some of the other engineers went on to careers in pure research, continuing their work on the underlying technology.

Edward’s team had been making progress on technology, and their primary loyalty was to the community of peers who would celebrate their continued success.  The prototype was an interesting but not essential piece of their research program – useful only to the extent it helped advance their research goals.  William’s work was the least tightly coupled to the prototype and in fact his primary interest in the project stemmed not from the prototype but from ideas born years before while he was still a graduate student.  They all interpreted Alice’s support over the years as not only endorsement of the underlying technology but also a kind of professional endorsement of career choices that were tied to scientific acceptance of the research.   Alice interpreted the acceptance of Edward’s team as a validation of her own credentials as a technology leader.

This was Edward’s R&D world that went crashing into Alice’s product world, a world where the prototype had value independent of whatever underlying technology it used.  Alice only too late understood that success in the R&D world had its own set of goals and rules for achieving them and that her support did not necessarily advance her own product goals. The Engineering team saw her as an ally in achieving their goals.  Alice saw Edward as a fellow traveler.  He was not.  Edward was imagining the many future projects that would regard his achievement as an enduring technological innovation.

[1] For reasons that will become obvious, I’ve disguised the names of the organizations and people involved, but I’ve been faithful to the conversations and the underlying message.

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Proposition 13 and Innovation

September 2, 2009

Innovation works best not when worlds collide, but when they are shared. Sometimes sharing takes place because there are no good alternatives.

At one time the public schools in California were among the best in the nation. No more. In 1978 two-thirds of the voters, in what has become a chaotic practice of bypassing normal legislative channels to amend the state constitution, approved a tax reform referendum known as Proposition 13. Championed by a politician named Howard Jarvis, Proposition 13 or “The People’s Initiative to Limit Property Taxation,” capped property tax rates and required a 2/3 supermajority in both houses of legislature for any future tax increases.  The immediate effect of Prop 13 was a 57% decline in property tax revenues. Despite strong evidence that it is a root cause of the current fiscal crisis in California, Proposition 13 remains a wildly popular measure among Californians.

Less controversial is the impact that Proposition 13 had on the state’s public schools, which on the average lost half of their tax revenue. Before Proposition 13 and a ballot initiative known as Proposition 98 (which had the unintended effect of capping overall school expenditures) California’s per-student annual expenditures were about $400 above the national average.  By 2000, per-student spending had dropped to $600 below the national average. That trend continues, and today a declining percentage of personal income in California is directed to K-12 education.  A 2005 study by the Rand Corporation concluded: “As recently as the 1970s, California’s public schools were considered to be among the nation’s best. Today, however, there is widespread recognition that the schools are no longer top performers. As a consequence, many Californians share a growing sense of alarm about the ineffectiveness of their public education system and the generation of children whose educational needs are not being met.”[1]

This is a dismal assessment. As a former California resident who experienced firsthand the inadequacies of K-12 education in the state I don’t want to appear to be endorsing the gutting of public schools, but the 30-year decline in quality of California’s K-12 public school system had one positive effect on innovation in Silicon Valley, because there was a consequence of Prop 13 that no one could have foreseen.  It helped to flatten what could have easily become an exceedingly hierarchical technology community into a more or less free-flowing social network.

Engineers of all stripes who want quality education for their kids have only two alternatives. They can either fork over a lot of money to a private school or move into a more affluent community where parent associations can raise extra dollars to supplement inadequate public funding.  In both cases, engineers find themselves elbow-to-elbow with industry executives, entrepreneurs, venture capitalists, and professors.  This is one way worlds are prevented from colliding in Silicon Valley.  It’s hard to maintain a strict hierarchy when – as they were in our local elementary school — CFO’s and programmers are working together on the PTA’s next silent auction.  Technologists and business leaders attend the same football games and school plays.  They mingle at holiday programs and parties and first-day-of-school orientations.

Of course, it’s not just schools that flatten the hierarchies of the Northern California technology community.  A young VLSI designer with a newly minted degree from Michigan might find himself seated behind former Sun CEO Scott McNealy at a San Jose Sharks hockey game because McNealy’s seats are in the stands, not a glassed-in corporate box. Sand Hill Road runs for four miles behind the Stanford University campus, so it is not unusual to see a partner in a legendary venture firm wandering the halls of the Gates Building and striking up a discussion with whatever graduate student happens by.  Technology innovators and business leaders serve together on boards of the Tech Museum and the Computer History Museum and the Exploratorium.  The excellent cafeteria at Google’s main Mountain View campus is a virtual soup of corporate leaders, academic celebrities, and undergraduate interns.  There are legendary meeting places.  Il Fornaio in Palo Alto serves breakfast, and sometimes a chance meeting at 9AM can turn into scribbles on napkin that in turn catch the attention of a retired Intel executive at the next table who is happy to spend a few minutes coaching the founders of a new startup.

The definitive answer to why this open culture is a competitive advantage can be found in Annalee Saxenian’s 1995 study of innovation Regional Advantage.[2] Everyone who is serious about building a culture of success should read it, and I am constantly amazed at the number of people leading strategic regional initiatives who are unaware of its existence.  In comparing the economic performance of Silicon Valley on the one hand and Boston’s Route 128 corridor on the other hand, Saxenian notes that social mixing is just one part of an open system of exchange that has not been successfully duplicated in business cultures where vertical integration and clear boundaries are common.  Decade after decade, the blurring of boundaries in Silicon Valley has given it an advantage in the rate of new start-ups and the speed with which new products can be brought to market.

Bill Hewlett and Dave Packard were to some extent responsible for an open corporate culture that welcomed startups even from within the company’s ranks.  While rummaging through some files one day at HP, I came across a series of memos from Apple co-founder Steve Wozniak.  On April 28, 1976, Wozniak wrote: ”I am seeking a written release from HP to market a product based on circuits I designed over the last year.  The circuits were originally designed on my personal time for personal use (hobby)…I “lobbied” for a similar product idea within HP management…without success…I have no objection to licensing the circuits to HP if necessary for any reason.”

A few days later, HP’s General Counsel, replied: “We are happy to release this invention to you subject to a worldwide royalty-free license to Hewlett-Packard Company and its present licensees…”

Wozniak and Steve Jobs set up camp nearby and became part of an innovative explosion that benefited HP and the entire industry.

Digital Equipment Corporation was the closest thing to HP that existed on Route 128, but like many other local businesses its corporate culture was far less open to sharing intellectual property, information, and skills. When Jeffrey Kalb left Digital in 1987 to found a new computer company called MasPar, it was a blow to DEC.  Kalb moved from Boston to Silicon Valley and by implication away from Digital.

Even at this late date, it is still a subject of considerable interest in northern New Jersey, Atlanta, Austin, Raleigh, and Minneapolis how to recreate the innovative environment of California’s Route 101. These are all regions with great universities, access to capital and a track record of building successful businesses.  Atlanta leads in many of the traditional measures of innovation but today lacks even one major source of venture capital. New Jersey was the intellectual center of the telecommunications industry, but there is a wide social gulf between the remaining scientists at the central research labs and the gated mansions of Bedminster.  Like Route 128, Austin, Raleigh and Minneapolis grew around companies with hierarchical cultures. A lesson of looking at things through the WWC lens is that innovation works better when worlds are shared.  Easy social mixing – whether spurred by a common concern for local schools or simply blurred horizontal and vertical boundaries – builds trust and collaborative networks.

In case you think all this talk about culture is some sort of gauzy way to paint contrasts where none really exist, Jeffrey Kalb pointed out one of the enduring business advantages of shared worlds: “There are a large number of experienced people [in Silicon Valley] who have retired but are still active in the industry and are available as consultants, members of boards or directors or venture capitalists…There’s just about anything you want in this infrastructure.”

To the extent that large corporations mimic entire societies, there are sociological reasons why sharing worlds is important for innovation.  Open innovation helps, too.  More about these ideas in later posts.

[1] California’s K–12 Public Schools: How Are They Doing? By Stephen J. Carroll, Cathy Krop, Jeremy Arkes, Peter A. Morrison, Ann Flanagan, RAND Corporation, 2005.

[2] Regional Advantage by Analee Saxenian, Harvard University Press, 1994 (Revised 1995)

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