Wednesday, March 2, 2011

Patterns of Success - Jim Stikeleather

One of the benefits of our modern social networking tools like LinkedIn is being able to meet people virtually. Jim reached out to me and invited me to join his network on LinkedIn. For people that I have not met before, I like to review their background a bit before hitting the accept button. In Jim's case, he had been a CTO at Perot Systems, MeadWestvaco and others. I asked him if he would be interested in participating in Patterns of Success and he said yes.

John - Thanks for spending some time with me on this interview. First off, how did you find out about me? What drove you to send me an invitation on LinkedIn?

Jim - The tool itself makes recommendations based on common connections. We had several people in our intersecting networks so I asked you to join my network.

John - By the way, have you played with the LinkedIn Social Map?

Jim - Yes! It is very interesting how it clusters individuals into different groupings that show the concentrations of your career over time. I got 6-7 clusters mainly associated with companies I had worked for .

John -  Tell me about what you do at Dell Services as the Chief Innovation Officer.

Jim - We are still forming the Innovation Group here at Dell Services, We have worked up the team’s initial charter, and our charter likely to be a constant work in progress – in fact, the role of an innovation office always should be a work in progress. In prior work at places like Perot Systems where I was CTO, I was looking over the horizon at emerging technologies and figuring out their impact on our business. That is sort of what I am doing at Dell, but at Dell the CTO is much more focused on products with an 18-24 month horizon. So, Innovation is the new title. As we were combining the acquired Perot Systems into the existing Dell Services, we decided to create this office that would be looking over the horizon farther and more broadly then the current CTO does. Initially we needed to get a good definition of what Innovation is at Dell. How to measure it, how to know when you are successful. We also needed to develop a repeatable innovation process. In most companies innovations occurs in an adhoc fashion, almost by accident.
We have defined the process and it starts with Visioning. What we do in Visioning is to look at environmental trends. Trends in laws or culture or business that could influence the adoption of technology. For example, there are more and more laws dealing with privacy on the internet. How will these laws impact current application portfolios or future development?
We don't look initially at trends in technology because we feel that the legal/cultural/business trends need to be in place first before a technology will take hold.
So we paint this picture of the direction that the world wants to move and then use techniques like Metcalfe's Law to understand the value of connections between the different trends. This helps us decide what technologies to focus on and understand what applications of the technologies could bring most value.
Next we go into an Innovating phase where we will pick a promising technology and do some trial applications to see how well it really works. Based on these results we will select a few to take into the final phase of Production.

John - So when you are doing these steps of innovation is this only for Dell Services OR are you creating a services offering to take to your clients?

Jim - Where we are taking this is in two paths. One is for Dell Services but the other is an offering for our customers. For example, a customer who has a particular problem and who wants to issue an innovation challenge to solve the problem. We can help the customer understand where innovation can be applied to both Products/Services but to also the Processes used to manufacture/sell those Products/Services. So a customer can issue the challenge to some community (inside the company, outside the company, or both) to feed ideas into the process that changes Products/Services/Processes.

John - A while back I had listened to a lecture on YouTube  by Douglas Merrill about Innovation at Google.

He described innovation as being a combination of transformational, incremental, and  incremental with a side effect. Do you see Innovation in similar shades?

Jim - Yes. We see innovations that if applied to existing Products/Services/Processes are almost six sigma continuous improvements. Then as you move farther away from existing Products/Services/Processes the changes are larger and require organizational change or new technologies. Finally, if it is a completely new business model with a completely new technology then it is a game changer... a disruptive innovation.

John - Is there a correlation between the high risk/reward of a game changer vs a low risk/reward of the incremental innovation?

Jim - That is where the practical and academic literature just falls on its face. I don't think there is a correlation. You can't predict the financial reward from the potential of the disruption. Jeffrey Moore talks about companies who focus on differentiating parts of their business falling into one of three categories. The first is if you are competing in a market that with all the other competitors then you need to be always optimizing to compete against them. The second is when the market shifts  and you need to innovate to keep up. Finally, there is the the opportunity to be in a new market. This is where I disagree with some of my colleagues who think you need to move your company to where that market is. I think you should try to move the market to where your company is already able to operate effectively. The problem is figuring out where the market is going to move. There is a famous quote by Henry Ford who said "If I had listened to all the market researchers I would have built a faster horse." 
I think the key is not to swing for home runs. Instead try out several innovative ideas at relatively low investment and see which ones gain market acceptance before investing significantly in those innovations.

John - That reminds me of what I had learned about McDonalds' innovation program. This was many years ago so it might have changed, but at the time they had an innovation program that would collect ideas on changes for the restaurants. Hundreds would enter an evaluation cycle and an initial short list would be based on analysis. Then the short list ideas would each be tried out in a test restaurant. Those that worked out well would be rolled out to the entire franchise. What I thought was really exciting was that McDonalds saw this as an on-going program of improvement and waited until an innovation was proven before heavy investment.

Jim - We tell people that innovation is not R&D. R&D is about taking capital and turning that into knowledge. Innovation is about taking knowledge and turning it into capital. The key with innovation is to discover how to modify what I already know into something that is better. One of the neat things that is starting to happen is that with cloud computing platforms a start-up can try out a new innovation at very low cost. I think you will see more and more of the innovation taking place in small start-ups because the cost to fail is so low. Then if they reach a point of sustainability they will be acquired by a larger company.

John - I did an interview with Ed Yourdon a few weeks back and we were on a similar point of view. He thought that with the advances with mobile technology and cloud computing we would see new apps and businesses created by high school students.Quickly creating apps that go into app stores and some of them becoming wildly popular.

Jim - Right. As the technology has advanced, as the costs have come down, the cost to fail has reduced so people are more willing to try something out. 

John - Over the last few years, as you were dealing with these waves of technology, what have been the things customers have done in innovation to be successful?

Jim - Thats an extremely interesting question. I do suspect that going forward the patterns might be different then they were in the past. In the past, innovations were driven largely to satisfy the business world. What you are seeing now is a lot of innovation being driven from the consumer side. Mobile devices, converged communications, social networks like Facebook. All of these game changers were initially developed to satisfy a consumer need. Business innovations often followed from them. On the consumer side of innovation there is less concern about being perfect. If it is good enough and can offer the opportunity for follow-on improvements then the rate of innovation goes up.

John - Well lets use Facebook as an example of a success. We even have a movie we can use as a reference

We have the initial game changing idea launched after several weeks of furious work, then the business becomes almost self sustaining, because all the real value is in the content created by the users. And the more users you have the more people want to join. There is a critical mass of success driven by the participation of the consumer.

Jim - The value proposition on the social media side really follows Metcalfe's Law. The more connections you have the more you value the network. And with Wikipedia, it is a source of information that is good enough. It is not as authorative as a refereed research paper but it is your first source of information, and because it has a network of authors for each article you can be sure of its currency.
So the real value of a product/service is no longer its stand alone value, but its value in the context of its ecosystem.
So one of the predictors of success will be a companies ability to create a network, an ecosystem, around their product/service.

John - It is always easy in retrospect to highlight one of the big winners of today and talk about how innovative they were starting out. But I do believe that a lot of the success is a matter of luck. Having the right product/service available when the market is ready for it.

Jim - In management theory there is this thing called superstitious learning. We were successful, we did the right things, we followed our strategy. When in fact, we were lucky. The lessons you take away from these successes, you need to maintain the context.
The key to long term success is that once you get lucky and have an initial success, can you execute as a business to grow the success?
I think a very common pattern of failure is a company that is initially successful, cash starving themselves and not able to meet market demand.

John - The flip side to success is failure. I call it a Failure to Launch. You have mentioned a few patterns of failure. Any other examples?

Jim - Oh wow! Its funny because you tend to forget the failures, but those are the ones you should remember the best. One of the ones I always felt bad about was Convergent Technologies. They built AT&T's first unix servers, they also built computers for Unisys and Burroughs. They were brilliant engineers. They built a tablet computer called the Workslate that had a word processor, a spread sheet, a voice recorder. A very early iPad. It was ahead of its time and the market ecosystem was not ready for it.
Along the same branch of technology we have the Apple Newton. The device itself had remarkable stand alone technology, but because it predated wireless connectivity, it could not link its user to the wider world. In general, while PDAs were not a dramatic failure, they did not take off nearly like the smartphones of today.

John - Final topic is THE NEXT BIG THING. What do you think will be a game changing innovation that we will be talking about three years from now?

Jim - I think that the big game changer, is that we will be thinking of software applications in a radically different way. In Anderson's Long Tail model 
there is a market of very specialized applications in the tail that have been difficult to create and market because of the traditional costs have been too high. But with Cloud Computing development and hosting capability and app stores and internet marketplaces for distribution, the costs go way down. So we will see 1-2 person companies developing very unique solutions for mini-markets. So the NEXT BIG THING will be the opposite of what we have seen from vendors like Microsoft with broad functionality, shallow domain depth, swiss army knife  Office products. 

John - As a consumer, will I go to a trusted brand like a Microsoft and through configuration get the special app I want OR will I be searching in an app store and finding the unique app that fits my needs developed by a high school student?

Jim - That is the question of the broker. It might provide some life to traditional systems integration firms to assemble the solution for you. It is very difficult to predict the ecosystem of companies that will provide these unique solutions.
More on the 10 year horizon we will see a lot more meta-data and semantics being associated with data and applications functionality so that the searching and assembling can be done automatically. So that based on our query to the computer a one-time, ephemeral application and data will be assembled by the system to solve our need.

John - Thank you very much for sharing your insights with us.

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