Tuesday, January 20, 2009

Need to revive the economy? Shift your focus to disruptive innovation!

In case you haven't heard, one of the companies that did well in 2008 was Rolls-Royce.  Yes, they did!  And yes, the same company who wasn't doing so well not so long ago.  What did they do differently?

What Rolls-Royce did was to focus back on their core competency - pursuing technical advances and keeping close with their airline customers.  To quote Winston Churchill who said would like to see finance "less proud and industry more content", this is another reminder that a lot of Silicon Valley companies must refocus back on technology, and not just offering more attractive "deals" to their customers instead.

The thought of refocusing technology then translates into focusing on disruptive innovation.  In his book, Innovator's Dilemma, Clayton Christensen (Harvard Business School) writes that sustaining innovation (the opposite of disruptive innovation) ends up providing more technology to the high end users than what they are willing to pay for.  When the disruptive innovation comes, it provides a new set of less demanding users with less technology but at a state of the art.  There are lots of examples for this (PC vs. iPhones, etc.).  To combat the disruptive innovation, companies with sustaining innovation resort to financial packages to incentivize the less demanding users to stay with the incumbent (sustaining) technology.  

I get the feeling that this has been occurring a lot in Silicon Valley.  Instead of focusing on real (disruptive) innovation, the focus has been on ways to innovate the purchase process.  I saw that first hand at Cadence where a new number of deal structures were used on a regular basis.  In my last quarters there, the sales account review meetings had a different air about them.  In those meetings, the room was filled by finance and legal personnel, rather than field or solution engineers.  More than 75% of the discussion in those meetings was on contract restructuring and revenue recognition rules, than technology and sales (i.e. actually selling something) strategy.

As we have it, Cadence is now refocusing on technology and innovation.  That is the right move.  The key question is how to stay away from the temptations of "financial innovation".

Monday, January 19, 2009

Time to Think About a Stimulus Co-Package

Recently, everywhere I look there is news and more news on how about the economy is doing.  I constantly read about layoff, company closings, etc.  And I hear about it in all sectors.  If someone doesn't by now know about what's going on, he or she probably just doesn't want to know.

The press is treating the economy just as it does with any other sensational news.  And I understand sensationalism:  Many times in my career, press was going out of their way to hail my company and at times me, myself, and couldn't stop reporting the great subjects.  Nevertheless, as soon as a bit of market momentum was lost, press was all over how bad we were doing - often making it sound like we won't be in business for more than a couple of weeks.  Yes, I have see the quick turn with my own eyes many times.  Needs to say, these negative stories about the companies (even when we were doing much better than OK), leads to loss of key employees and more importantly key customers as they just believe what the read, or at least what they read significantly affects their purchase decisions.

Negative news is destructively self-fulfilling.  It's no surprise that the announcement of layoffs everywhere, doesn't help but encourage companies to invest less in workforce, which leads to lack of productivity, and eventually to more cuts.

I am a big proponent of free press.  I am also a huge proponent of free market (and less/no intervention of government in business).  Nevertheless, I very well see the point of having a stimulus package and how it could help re-vitalize the economy.  At the same time, I believe, if the government is to interfere with free market, it would behoove us all if it could also drive some sort of "management" (and I use that term very carefully) on press.  I do realize that this is very dangerous, but I strongly believe as long as the sensationalism of news is out there, making a recovery would take longer than it could.  Bad news always sells better than good news.

The stimulus package will help the economy.  We now need a disciplined, non-sensationalist press "package"to reinvigorate the recovery itself.  I'm not suggesting to lie or suppress the bad news, I'm just asking not to blow things out of proportions.

Monday, January 12, 2009

When resumes show up at work ....

A couple of weeks ago, Eric Mangini, was fired as the head coach of New York Jets.  He was the same person who up to only a few weeks before was referred to Man-genius, for his smarts and how those smarts translated to how his teams performed on the field.  Within a week of his firing, he was hired as the new head coach of Cleveland Browns, as the Browns management was looking for someone with previous head coaching experience.  I find it very interesting that someone can go from genius, to no-longer-genius, to smart-and-experienced in a matter weeks.

What does all that have to with Silicon Valley??  A lot.  I have seen many CEO appointment done in the same way head coaches are fired and hired in NFL.  A few months ago I got a call from an executive recruiter (who had previously placed me as a VP of marketing) checking unsolicitated references on a couple of CEO candidates whom I knew.  Both of those candidates had previous CEO experience, and to be honest, not good ones.  I gave my fair and honest feedback to the recruiter, and then asked him if I could throw my name in the hat (just to check his reaction).  His answer was simple: The board has instructed me to only look for ex-CEO's (regardless of how ineffective they have been).  The recruiter had no stock in the company otherwise he wouldn't have chased either one of those candidates.

It's always been obvious to me that companies hire resumes - they don't hire people.  In this example, if the board cared to see who they were hiring, they would have never hired any of those CEOs.

That explains why some CEOs spend more time producing PR for themselves while at the job, than they companies they work for or the products they market.  I have often see more news about a company's CEO than their technology or products.  If you notice the track records for those CEOs, they are the ones who consistently ride one company to the next (bigger and better).  On the other hand, the CEO's who focus on their companies and their employees, end up staying there for long periods of time (sometimes their entire life) and keep growing the company through technology and products.

The lesson: It's not about what you do, what you deliver, or what you enable.  It's about what you're thought of possibly doing, delivering, or enabling.

Monday, January 5, 2009

When the truth becomes self-evident

There have been many ground-breaking ideas in business that have taken a long time, and a great deal of resistance before they eventually prevailed.  It's really hard to predict them or know early on which idea would end up as the one standing last.

I personally have the pleasure (or the scars) of being involved with two of these fundamental changes.  One of them was at a company called Numerical Technologies which was changing the nature of semiconductor manufacturing and adding a strong element of software to the existing ecosystem.  The need for this change was due to a fundamental shift that was taking place in the center of silicon lithography - which of course then everyone opposed.   What Numerical introduced is now the standard in semiconductor manufacturing.

The other fundamental change I was involved with was OpenAccess, and I was leading the effort at Cadence.  OpenAccess was an industrywide initiative whereby Cadence opened up it design database to the entire industry (even its competitors) to integrate onto.  It was a bold strategic move to bridge the gap with its main competition, Synopsys, whose database, while proprietary and closed, had a market share lead over Cadence.  Today, OpenAccess is the standard database for EDA companies and EDA users.  Even Synopsys is using (and publicly promoting) OpenAccess.

At the very time of my involvement in those changes, I had no idea they would be such success - I just had a feeling that they were the right thing .... and was betting on that the "truth" would eventually prevail.

That takes me to a quote by the nineteenth century German philosopher, Arthur Schopenhauer, who said "All truth passes through three stages.  First, it is ridiculed.  Second, it is violently opposed.  Third, it is accepted as being self-evident."

Going back to my own experiences, we (and I personally, in the case of OpenAccess) was ridiculed at first.  Then we faced very strong opposition, not only by competitors, but also by customers and users (yes, change is always hard).  And then, all of the sudden, pieces fell into place, and in both cases, the change was just accepted.

What does that teach us?  Should we just get behind any idea that is being ridiculed?  Probably not.  But I think what Schopenhauer says - especially how he says it - is quite relevant.  My experience combined with Schopenhauer's quote tells me to look for ideas that are being ridiculed while are also being violently opposed.  I am not interested in ridiculous ideas that just face some opposition - there's a lot of those.  But I'll look for those that are under duress.  To me that's the sign where I start to smell someone or something is really being threatened -- and that's what tells me the change or idea might be real - eventually.

After all, love and hate are radically related emotions.