Wednesday, December 29, 2010

Patterns of Success - Adrian Bowles

A long time ago Adrian and I both worked at Yourdon Inc. in various roles. We taught method seminars, consulted with clients, and eventually joined the ranks of management in the company. After leaving Yourdon, Adrian began a career as an industry analyst, working for and starting up a number of firms. Most recently, he founded the Sustainable Insights Group (SIG411).

John - Thanks for taking the time to speak with me today. Before we launch into the core questions around "Pattern of Success", could you tell us more about the kind of work you do and the areas you focus on?

Adrian - I advise end users on emerging technologies that will help them grow their business, and vendors on what the end users are looking for and are willing to accept. And occasionally I will advise investors on where I think the technology markets are going. Over the years the types of technologies have changed. I started in application development and enterprise systems, then I spent a number of years on regulatory compliance and risk management. Now I have combined those with my interest in sustainability. So I tend to look at technologies that reduce energy consumption, improve the carbon footprint, and general business technologies that make a business more sustainable. I look at sustainability as having three pillars:

1.  You have to be in the black. It does not matter how green you are if you are not in the black.
2.  You have to be sustainable in terms of ecology. If your business is the oil business, then at some point you have pieces of it that are not sustainable, yet if you look at your entire ecosystem including carbon credits you should be green.
3.  And the last part that I started on more recently is the relationship between security and counter terrorism and sustainability. It does not matter if you are making money on an effort good for the ecosystem if you get blown up.

John - As you were talking about the insights you offer to end users and vendors on emerging technologies I got the image of the Gartner Hype Cycle in my head. Do you have an opinion you could offer on the hype cycle?

2010 Gartner Hype Cycle

Adrian - The hype cycle... I tend to be working in the leading edge and the next big thing, so a lot of the time I am ahead of the market on things. For example, in the 1980's I was working on artificial intelligence and participated on the Air/Land Battle Management team from RCA, and everybody was saying that AI would solve this or solve that and Knowledge Systems blah blah blah and then everyone said it’s a failure. Well the fact is, by the time it is a success you are not talking about it anymore, it is just an accepted part of the fabric in the solution.
So in going green I have seen this as well. Recently on Twitter, I got into an exchange with someone from the New Jersey Tea Party, who said green jobs are a hoax and it is a good thing that the American public has woken up to that. So we are in that phase where people are discounting the impact of sustainable technologies.

John - I think in the last few days I saw an interrelated set of articles in the New York Times. One was about how China had dominated the world supply of rare earths and had put a export tariff on them. The second was about how rare earths were used in the creation of wind turbine generators. And the third was how China had brought in a Spanish wind turbine company to manufacture and sell to the Chinese  market, but required them to use local component suppliers,who in turn sold these components to Chinese manufactures who were now dominating the Chinese market and beginning to export to America. So it seems the Chinese government had a long term strategy to dominate the wind generation business. While in America we have an ineffective policy.

Adrian - There was a Republican from South Carolina beat out in the last election by a more conservative Republican. In one of his last speeches on the floor he said that even if Americans did not believe in the science of global warming, that they should see that there is an economic benefit to be competetive in a green market because the rest of the world does believe in global warming and will be buying sustainable technologies and products.

John - Lets look at some patterns of success. What have you seen in the last several years with your clients, where they have been successful in embracing an emerging technology?

Adrian - Probably the theme that has been most successful across technologies is where companies understand that only a small part of what they do is going to differentiate them and give them success in the market. You can model your business identifying strengths, and that’s what you want to own. You don't want to necessarily own that forever, because everything you do will have a half life of innovation where the competition will be able to copy it with or without IP protection. But I think that the people that have done well have focused on the differentiators and shared everything else. 
Back in 1994-95 when I was working on application development we all thought that Object Technology would be THE NEXT BIG THING, particularly the concept of reuse. The problem was that everybody wanted to build reusable components and nobody wanted to use them. But the concept of reusable components, I think led to a successful trend, the Open Source Movement.
I have spent many years working with clients and figuring out their value chain models looking for the percentage that they should own versus share. I have some friends who own one of the best marketing firms I know called Zoom Marketing and their whole business is to help clients find the point that matters... what’s going to differentiate you.
One of the best things I wrote was one of the things fewest people read over the years. When to share IP, which came out of a round table in 1993 with several banks participating. In financial services they learned it made sense to build systems  that could could work well together.

John - Is there an example of a client in sustainable energy who has demonstrated  this pattern of focusing on that which differentiates and share that which is common?

Adrian - Right now I don't have anything I can talk about... I have a wall full of NDA's here. I am tracking about 20 companies in the Energy and Carbon Management segment. It is still early enough that there are no clear winners or losers, but I would expect that at least 5-8 will not exist in their current corporate form in 3-5 years. There will be a shakeout. 

John - Because of the competition?

Adrian - Yes, and also because some were formed to provide solutions for pending government regulation that went away because of a change in the administration. And this is not just in  the US; it happened earlier in Australia. Right now anything that will require a significant government investment is not popular.

John - I am certainly not a geo/economic/political expert. But is this why the centrally managed economies like China are able to take a longer investment view on these technologies?

Adrian - It is no secret that democracy is messy. And our particular brand of democracy could be among the messiest in terms of long range planning. The fact that we have an Interstate highway system is amazing - it was done in a simpler time. I don't know of any President today or going forward who could put forward a program of that magnitude.

John - It seems to me that the political will to make that happen, or the Landing on the Moon program was because of the perceived external threat of the Soviet Union. Will we need such an obvious threat to get large infrastructure investments to be successful?

Adrian - At least within my lifetime, I think that will be the case. However, for innovations that require less significant investment, I think government still takes a proactive role. For example, the internet and GPS were both military programs that spawned commercial applications.

John - On the topic of Failures to Launch, have you seen examples of fall-on-your-face failures?

Adrian - The biggest failures I have seen over the last 5-10 years have been with companies that have tried to leverage the internet and become a completely on-line business, but with the assumption that the world will look like their own backyard. An executive from the mid-west leaves his high paying job to start-up an online exotic cheese business. Unfortunately, the broader US market does not share the passion for stinky cheeses.
OR the fact that with an internet business you need to still follow through on basic business processes. Just one example, one of my clients I started out with in 2010 will be off the books by the end of 2010. They thought that because they had a lot of cool ideas they would be successful. They were under capitalized and not able to execute an effective marketing campaign in a crowded market segment. 
Another issue is trying to offer too much. I recently attended a briefing from a futurist who said that Google does not have a strategy. I commented that a year or so ago I heard Steve Mills answer a question "What about Google?". He replied, "Google is like a blind dog in a meat house. If they get a sniff of something they are going to go after it". Google is a venture capitalist who makes its money on one investment and is looking for other places to invest.

John - So you think that Google's pattern of success is the genius to know what areas to experiment in and which experiments to cancel earlier then later?

Adrian – That’s a good point. Successful companies will try a number of things but know when to quit. I think a lot of companies go out of business because they try to keep things going too long.

John - What do you think will be THE NEXT BIG THING about three years from now?

Adrian - I think there will be three important things:

     Business Analytics
     High capacity energy storage
     Enterprise Energy and Carbon Management (EECM)

Adrian - I think that the top three businesses in any segment will have grown in their segment relative to competition because of their use of predictive analytics. 

John - And how will these companies grow because of analytics? What will they do differently?

Adrian - For example, a large data base company had looked at data from a very large number of patients with heart disease. They think that they have found indicators that would give you several hours early warning of a heart attack. This was done as a individual project because the wife of the Principal Investigator had a heart attack and he was looking for a way to understand what went on leading up-to, during, and after an attack. He found patterns in the data that his doctors had never considered. Unfortunately, the company he works for will not commercialize the solution because of liability.

John - What about the high capacity energy storage?

Adrian - One of the problems with sustainable energy is when the wind doesn’t blow or the sun doesn’t shine the generation capacity can not meet the demand. The Center for Autonomous Solar Power at Binghamton University is working on the next generation of super capacitors which could allow the Smart Grid to store energy for later use.

John - And the EECM?

Adrian - This will be a product that allows companies to manage energy and carbon production and use just like they use an ERP system to manage production and use of products. Just like we know what exactly goes into the manufactured product in terms of a bill of materials, we will know the cost of energy or carbon emission associated with that product. This will allow companies to make informed trade-off decisions during design, manufacture, and transportation. 
With carbon, we have had a number of false starts, but now we are seeing the state of California putting in place carbon trading laws.
John - For this to work three years out in the US, would it require the passage of Cap-and-Trade?

Adrian - While Cap-and-Trade would accelerate it, I don’t think that is necessary.  More and more businesses are connected with companies overseas. So when those companies require green products or components, the US companies will need an EECM system to compete internationally, also while Cap-and-Trade may not be a federal law, the GSA may add green requirements to its procurement process.
There is an entity that has more power then the Federal government in regulating energy and carbon in consumer goods. Can you guess who I am thinking of?

John - No.

Adrian - Walmart. I call it the Walmart effect. If Walmart tells toaster companies that they will get more shelf space for their product if their supply chain is green,  then if you are Mr Toaster Manufacturer you will listen to that. I know of one appliance company I can't name, that was not at all interested in carbon and energy and rebuffed all the EECM solution providers. But when Walmart issued their guidelines, the company suddenly saw the light.

John - I am not an expert on Walmart's green guidelines but answer me this. One of Walmart's biggest suppliers is China Inc. And we both know that the companies in China are some of the biggest polluters in the world. Do they get an waiver to the guidelines?

Adrian - There is no waiver for made in China. Even with American companies much of there content is Chinese. I am talking to you on my iPhone4. It probably says designed in Cupertino, made in China.
The problem is that when you try to measure the entire scope of impact it gets very complicated. That’s why we need EECM systems.

John - Adrian, thanks for taking the time to share your insights.

Wednesday, December 22, 2010

Patterns of Success - Capers Jones

During my consulting years at Yourdon I had used Barry Boehm's COCOMO estimation model. I was always on the outlook for something that was independent of lines of code, so I grabbed onto "Applied Software Measurement" by Capers Jones. This was back in the early 1990's and I used Function Point analysis as common practice in estimating my projects for clients. 
While I have never worked directly with Capers, I have come to respect his objective analysis of software engineering. I believe he takes a very scientific approach to gathering as accurate a data set as possible,  and is always open to new measurements from other sources.

John - Thanks for taking the time to speak with me on the topic of Patterns of Success. You have done a lot of work in Software Engineering. Is there a particular focus area you would like to cover today?

Capers - Most of my clients ask me to help them improve software development and maintenance processes to improve development productivity and quality. I have worked with about 600 companies, government organizations like the US Army, Navy, Air Force, the IRS, NASA, even a couple of state governments.

John - So you've seen a few projects in your time? What have been some patterns of success?

Capers - The main weakness I have seen in companies, where they botch up and fail is:
Quality control for very large applications. They can do OK on small projects where programming is the main activity. But when the project is bigger and there are lots of requirements errors, or design errors, or architecture errors, they don't know how to deal with them. So the bigger the application, the more cost goes into bug removal, and more bugs move into front-end project artifacts. And there are some techniques to deal with this like formal inspection and quality functional deployment. But there is low penetration of these techniques in the industry.
Now there are other problems as well. Change control management is an issue. The rate at which change is introduced during a project is about one percent per month. So over a three year project, the final deliverable will have required changes of 36%. A lot of companies don't handle that very well and some contracts don't even include provisions for these kind of changes.

John - That is why on some projects Agile Development works well because of its ability to accommodate change.

Capers - Thats what Agile was designed for with embedded users and many iterations in a release. But if you are Microsoft trying to develop Windows7 with over a thousand developers and a million users, Agile has problems. It is hard to come up with a "user" to embed in a development team that represents the market accurately, and it is hard to coordinate a team of 1000 developers using face to face Agile techniques.

John - Other projects you have seen which have been successful and how they did it. For example, I was looking at a chart you had produced comparing different software development techniques and one that stood out to me was the projects that had >85% reuse of components. Beat everyone on quality and productivity

Extracted from spreadsheet sent by Capers Jones

Capers - That is true, but there are only a restricted number of applications today where that level of reuse is possible, some are applications like compilers where in going from one language to another a lot can be reused. Similarly, in accounting packages where the functions remain consistent and are certified reusable.
You might be able to get 20-25% of reuse on a typical application
But since we are talking about reuse, a very successful story has been with ERP Vendors. In essence, they are replacing with a single package, several redundant departmental applications in an organization. This is a type of reuse. Unfortunately, most ERP packages have defects that depend on the vendor to fix, and most companies still need an IT shop to extend and integrate functionality into areas of the company that the ERP does not cover. But these packages have been a net benefit over custom development for most medium to large organizations.
While reuse today may be limited, I think it does hold a great promise for the future. Methods such as Agile and RUP are only minor improvements.  They are similar to applying first aid and stopping the bleeding.  To really make software cost effective and achieve consistent quality, we have to stop custom design and hand coding and switch to construction from certified components. Here is an excerpt from my upcoming book "The Economics of Software Quality" that shows what I mean.

...Let us leave software for a moment and consider automobiles.  If the automotive industry were at the same level of technology as the software industry, when a reader of this book wanted a new car, it would not be possible to visit a dealer and buy one.
Instead, a team of automotive designers and mechanics would be assembled and the reader's requirements would be recorded and analyzed.  Then the car would be custom-designed to match the user's needs. 
Once the design was finished, construction would commence.  However, instead of assembling the automobile from standard components, many of the parts would have to hand turned on metal lathes and other machine tools.  Thus instead of buying an automobile within a day or two, the customer would have to wait a period of months for construction.
Instead of spending perhaps $30,000 for a new automobile, custom design and custom construction would make the car about as expensive as a Formula 1 race car, or in the range of $750,000.
Although no doubt the automobile would have been tested prior to delivery, it probably would contain more than 100 defects, with 25 of them serious, that would need to be removed prior to safe long-distance driving by the owner.
(If the automobile were built under the same legal conditions as software end-user license agreements there would be no warranty, expressed or implied.  Also, ownership of the automobile would not be transferred but would remain with the company that built the automobile.  There would also be restrictions on the number of other drivers who could operate the automobile.  If there were more than three drivers, additional costs would be charged.)
Worse, if something breaks or goes seriously wrong after the car is delivered, there would probably not be neighborhood mechanics who could fix it.  Due to the custom hand-made parts, a repair center with a great deal of machinery would be needed.  Something as basic as replacing the brakes might cost more than $5,000 instead of $300.

With a large percentage of custom-designed hand made parts, maintenance would be an expensive proposition.  Worse, small variations in the hand-made parts would decrease reliability over time, which would lead to more breakdowns.  But due to the high replacement cost, the owner would be stuck with the unpleasant choice of paying ever higher annual maintenance costs, or spending close to another million and waiting another year for a new version, which might not be any better than the original.....

John - Where have you seen some companies and projects that have gotten everything right.

Capers - There are a lot of things that work. But if you look at an established company like an IBM or an HP or a Microsoft, you see thousands of developers scattered over dozens  of locations around the world. And these teams often have varying levels of software engineering sophistication.  There was a study done by IBM that should about one-third of its labs were using advanced techniques, a third was OK, and a third were below average. But if you look at the best locations in the best companies they tend to be very proactive in quality control, they are very proactive in change control, and they also have a very good system for tracking accumulated costs and accumulated problems so that management can immediately correct and issues.
The companies that have a significant number of teams doing things very well are:

  • IBM
  • HP
  • Microsoft
  • Raytheon
  • Sony
  • Northrop Grumman
  • parts of Boeing
  • Motorola
  • Google

Its probably the top tier of companies you've already heard of because they do other things very well.

John - All the companies you mention are large organizations that have been in business for a while. Does this mean that it takes time and money to get good at software engineering?

Capers -  Yes they have to invest $10-12K per person per year over a 5-6 year period to see the results that they have. They also have to put aside 5-7 days of training per year to achieve this.

John - If we take the other extreme in size and longevity... the stereotypical Silicon Valley start-up, don't they achieve phenomenal results with just a few people in a garage?

Capers - Well their productivity and quality are actually not very good. They have very bright people who are able to launch a product but the real success is in their innovation. The point is that really neat innovation has value that will attract customers.  The quality and productivity are based for new applications often depend upon smart individuals rather than methods

John - I am thinking of a U shaped curve of Success where we start with a startup having great innovation but as it gets bigger the innovation is stifled yet it is not big enough to have the investments in software engineering that the larger companies have.

Capers - Thats a good point. When you start small and up to 25 people you can do well just on the quality of your personnel. From 25-100 people you need to put in some formal processes. At 100-500 people with project teams of 10-20 you need to have rigorous quality control, instead of just testing, you need up-front inspections. And there is a gap with the mid sized companies that have not made the investment in software engineering improvements and are trying to deliver with brute force waterfall methods.

John - In the area of failures you have already mentioned some of the factors. It seems for every metric of success there is the negative measure for failure. But could you tell us about a specific project you were involved with that was a dramatic failure.... and why?

Capers - I was an expert witness on a trial between a state government and a vendor. The state was trying to consolidate applications used at the county level into a single state system. But the counties all did things differently. And for political reasons some counties did not like other counties and would not accept the state system requirements if they thought it was derived from a competing county. The vendor who was trying to develop the system did not quite understand the requirements in the first place, and was careless and did not do up-front inspections, or static analysis, and truncated the testing phase in order to meet the installation date. And when it was installed, it was hard to learn, so users did not like it. The performance was about 12% slower then the legacy systems, and the errors the users made because of the learning curve increased by about 30%. And there were a high number of defects in the software. One of the worst of these was an intermittent bug that caused the modifications being entered in someones billing record to be actually written onto someone else's record. This resulted in innocent people being accused of nonpayment, while the deadbeats were not pursued.

John - So what was the outcome of the trial?

Capers - The judge thought that the state had not given the vendor enough time to correct mistakes so the vendor was given an extension of one year on their contract.

John - What do you think THE NEXT BIG THING will be about three years from now.

Capers - There are a couple of areas where I think we will see something interesting. The first is what I am hearing in the press and scientific literature, true holographic displays will start to be used as computer interfaces. Today they are being prototyped in university labs and they are small and expensive, but that could change as the technology can be manufactured in volumes.

John - What would we use these displays for?

Capers - It would open up the door for 3D system models that could include the dynamics of current performance. You could see what happens when viruses enter the system. Things like that. I think that would improve the quality of system by five fold and double the productivity.

John - And what would another BIG THING be?

Capers - I think that development teams will take advantage of social networking tools like Wikis, and Facebook, and Twitter to integrate with current development platforms and allow distributed teams to achieve the same levels of productivity as face to face offices allow.

John - I want to thank you for sharing your insights with us.

Thursday, December 16, 2010

Patterns of Success - Debbie Baxley

I worked with Debbie Baxley while at IBM. She was the Partner in our Financial Sector team responsible for mobile payments and I had a team doing smart cards and then some work in near field communication. She is currently a Principal at CapGemini leading their National Retail Payments practice which includes mobile payments. In addition, Debbie has been a leader in the Smart Card Alliance Contact-less and Mobile Payments committee.

John - Debbie, thanks for taking the time to speak with me today. Before we get into the core interview questions I was wondering if you could explain a bit more about mobile payments.

Debbie - Well there are actually three uses of the mobile device for banking. The first is the way you can interact with your bank or financial services company to check your account, transfer money, etc. A growing number of financial services offered through applications or browser based solutions on your phone. The second, not so common in the United States,  is person-to-person payments. This is implemented using text messaging and is very common in emerging countries. For example, in Kenya there is the M-Pesa system that allows people to transfer money via SMS over the SafariCom network. Finally, one that I am very excited about, is the emerging use of near field communications. This is similar to the system used in Japan (FeliCa) where people use there phones for payments, coupons, tickets, opening locked doors, etc.

John - Lets compare Japan and the United States. Japan has had FaliCa for how long?

Debbie - About ten years.

John - And it was adopted very quickly. How come they have had it for so long and it is in common use while the US is still experimenting with NFC?

Debbie - A few reasons. First in Japan there is a dominate service provider (NTT-DoCoMo) who has over 50% of the market. Second, NTT-DoCoMo acquired a bank and could provide payments onto a credit cardl. Third, they heavily subsidized the merchant adoption of the POS readers. In the US none of these factors exist. We have to get device manufacturers, service providers, banks, credit card companies, and merchants to all agree on adoption. We have also obsessed on the revenue model instead of encouraging rapid adoption.

John - So in the area of mobile payments have you seen any patterns of success?

Debbie - In the United States there has not been a significant success yet. However, I would say that in each of the trials, there have been learnings which have helped shape the future deployments. For example, we learned that the interaction with the phone had to be straight forward and not take more then five minutes to install/configure a new app or service. 
I do think that in mobile payments the markets reach a tipping point where mass adoption takes place. In some situations like micro-payments in Kenya the technologies (SMS) were already established and in use and there was a real need for easy transfer of funds from one person to another that the banks were not fulfilling. This resulted in almost immediate adoption. In the case of NFC we need a critical mass of both merchants with readers and consumers with devices so that mobile payments become a regular part of daily financial transaction. If Apple were to release iPhones with an NFC chip that might be enough to be the tipping point in the US.

John - And have there been any real failures?

Debbie - Again, with mobile payments we are still to early in adoption to see dramatic failures. If we look at a complimentary technology, contact-less payments, that has failed to achieve the adoption rate we hoped for. It was initially promoted as easier to use because the transaction did not require a signature. Then the network guidelines were changed so that magstripes could be used without signature so the time savings advantage was eliminated and although there are better fraud prevention on the contact-less cards, the banks and credit card companies did not want to point out the weaknesses of the magstripe. Today there are approximately 80,000 contact-less readers in the US... about 2% of all readers.

John - Why will the NFC Phone succeed when contact-less cards failed?

Debbie - Because the phone will be able to interact with the user. It will be able to read information. For example, in a store you could tap your phone on a poster advertising an item and immediately get a coupon and/or go to a web site that contained more information about the product. Finally, the NFC Phone will be able to do more then just act as a credit card. As in Japan, we will use the phone for movie tickets, plane tickets, coupons, at some point even replace cash... cash has germs!

John - So what do you think THE NEXT BIG THING will be? About three years out?

Debbie - I do believe that we will see most smartphones with an NFC chip incorporated and that the major banks and credit card companies will be supporting mobile payments via NFC. I think that merchants will adopt this primarily for the fraud prevention and if they can get some direct benefit from the frequent use programs (instead of getting air miles, get a discount coupon to use in the merchant's store) that will be even better.
And three years from now I think that there will be an intersection of some social media marketing aspect to all of this. Did you know that currently a mobile advertisement has 10x the conversion to sales rate as an ad seen on TV or print?

John - Thanks again for sharing your insights with us.

Tuesday, December 7, 2010

Patterns of Success

One of the things I have discovered about emerging technologies is that while the technology may emerge and then become mature, and finally be retired, there are some practices of applying the technology that remain constant over time and between emergent technologies. These Patterns of Success are important lessons for developers to learn and for organizations to make part of their DNA.
Over the next several months I intend to explore these Patterns of Success. As a first step I am going to speak with some of the key thought leaders of the technical fields in which eTechSuccess participates. In each of the interviews I am going to ask:

  • What are the Patterns of Success you have seen?
  • Give some examples of Failures to Launch... where a customer/client has attempted one of the emerging technologies and failed... what were the root causes.
  • Finally, in your area of expertise, tell us the NEXT BIG THING... something that will be changing the market in about three years. 

I wanted to capture what these experts thought about both the success and the failures that they have seen because we do learn a lot from our mistakes and that is one of the Patterns of Success.