Caution: Comfort Zone!

I had an article published in EE Times last week (see "EDA 3.0 - So you're an EDA startup").  It was one of the most popular articles of the EDA DesignLine publication.  I have received personally over 30 emails not only commenting on the article, but including a number of startup executives (friends, clients, etc.) asking me what they're doing "wrong"!

I won't steal the article's thunder (Read it on your own), but to build on the article, my response to these inquiries has been that it is only fear that we need to be afraid of.  In my opinion, surviving the recession requires conquering your fears and making the right choices.  Unfortunately many business owners won't do either.

In the EDA space, except for Synopsys, Cadence, possibly Mentor Graphics, and a few companies (startup and midsize) who are cash flow positive, all other companies are burning cash and don't have a strong market to see themselves raising future venture rounds.  So, want it or not, fear sets in: the fear of running out of cash and having to close doors.  With fear, most people turn back to their comfort zone.  So EDA companies go back to their comfort zone and focus their efforts on technology development.  And yes, they need to bring in dollars, so they focus the sales team on growing the pipeline.  As a results more features are being developed and more prospect are not happy with the state of the "product" -- in other words, the technology-to-product gap widens, accelerating the burn-rates.  [For difference between "technology" and "product, see the article.]

What's needed is conquering the fears, understanding that the only way to consistently close sales opportunities is to develop "products" (not technology).  To do this, as hard as it seems, startups should stay away from their comfort zone and develop less technology, and focus their investment on the technology-to-product transition, only working with a few key strategic customers.  Only this would provide the fastest possible way to get to a selling product and a movement towards positive cash flow.

Feature-driven product marketing: A sure way to get frog-leaped!

In 199_ (and I'm not mentioning which year) I got my first product marketing job.  It was all I wanted to do after I got my MBA -- I wanted to drive the definition and completion of products.  I was coming in from an applications (sales) engineering position right into product marketing, which I thought would give me a good view on what customers needed and what the product had to look like -- and it did.  I started right away defining a feature list, prioritizing them, cost-analyzing them, getting customer feedback, drive the schedules, etc.  I quickly found out that product marketing is a thankless job: there are too many people to make happy (customers, R&D, sales, executives, partners, etc.) and there's no way to make them all happy; and you're constantly trying to connect all of the dots and pick up the loose ends.

During my first months of product marketing, one of the company's more experienced marketers, pulled me aside, as he was leaving the company, and told me not to sweat the "small stuff" like features, etc. and instead focus my thoughts and work on positioning and the overall vision of how the product is changing the industry.  That "lecture" didn't make any sense at all!  I had a lot of respect for him, so I did take note of what he said, but it really didn't change the way I went about product marketing at the time.

As a few years have passed by and I moved up through the ranks and eventually became a  executive, his comments began to make more and more sense.  In fact, I have come to the conclusion than feature-driven product marketing only sets your product for long-term failure.  It makes you focus on incremental change.  It is very surprising that a lot of my colleagues and consultant, and some that I have the ultimate respect for (example), still predominantly push a feature-driven approach to marketing.  I do realize that pitching a feature-driven approach works much better with less experienced CEOs and it is a better "consulting sell", but I'm not convinced if it's what really creates differentiation for their client companies.  I'd go back to what my old colleague told me -- product marketing provides a lot more value if focused on the overall positioning (i.e. how differently the product is solving the customer problem) and the long term vision of how it's bringing non-incremental value to the customer (technically and financially).

One way to drive this point is to highlight that if someone in the car industry polled customers in 1900's about how a car should look like, the customers would have all said they'd want a carriage with a horse that eats less and craps less.  [Excuse the French!]

EDA & Semi: Time for Marketing 2.0!

The internet used to thought of as "cyberspace".  Being online simply meant being an anonymous consumer of information.  But that was then!  The internet of today is identity-centric and social.  Internet users create blogs, upload their information to social networking sites, share ideas and contents, and they do it from their computers, iPhones, cellphones, etc.  This is what I refer to as "worldwide web" moving to "social web".

There is a generational element to this as well: Web 2.0 (i.e. social web) is still hard to fathom for some baby boomers, but at the same time, there are larger and larger groups of baby boomers starting to post photos, opinions, etc. on the Facebook, for example.  They're beginning to see how social the internet can be.

People in (or using) Web 2.0 have already internalized what doesn't yet seem as a business practice by others.  Unfortunately maturing industries like EDA and semiconductor look at Web 2.0 as "social", and hence constantly raise the question "why do we want to socialize with our customers" or "why would our customers socialize amongst themselves?" -- They take the word "social" quite literally.

It's not necessarily common business wisdom to bring customer experience into aggregators (such as Digg, Yelp, Ning, Xuropa, even Facebook, etc.).  With these aggregators, even though things happen far away from a company's destination site, it's the engine of social discovery that generates astronomically more awareness than the destination site would ever create, and yes, it also generates huge volumes of traffic to the company's destination site.

A simple example: Netflix opened up their database through an API last October.  Through this API other companies (e.g. aggregators) can access titles, ratings, queues, etc. information from Netflix. By "socializing" the Netflix experience, Netflix now gets 20+M film ratings every single day.  Does it really matter where (which website) these titles are rated?!  It all benefits Netflix.

It's time for EDA and semiconductor companies to see how they can benefit from Business 2.0.  EDA and semiconductor technology is the most advanced ones and those industries solve the most difficult challenges on the technical side.  Yet, they have totally missed the boat on what other industries have already accepted as common business wisdom.  They need to "socialize" their user-experience, create awareness, and turn that into revenue.

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".

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.

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.