deal architect

Innovation is a game of fractions

As we get ready for the big game, I listened to Al Pacino’s speech in Any Given Sunday. And it occurred to me if Coach was talking about innovation, he would substitute fractions for inches. 

Think about it. Innovation is all about relativity – fractions.

a) If your customers think you are innovative, a large percentage of your revenues comes from your new products and services. 2/3rds of Apple revenues come from its iOS platform – iPads, iPhones etc - which did not exist 5 years ago.

b) While every company brags about being innovative in absolute terms, measure how much innovation they deliver for every $ 1 billion of revenue. So benchmark IBM or Verizon against Google or Facebook.  Total SAP and its hosting, SI, outsourcing partner charges – almost $ 100 billion  a year – and measure how much innovation it delivers along with its partners.

c)  Measure how many times a vendor’s products are mentioned on the New Florence innovation blog. At close to 2,500 posts over the last 6 years, it is a pretty wide database of infotech, healthtech, cleantech and other innovations. No single vendor, including Apple, Google and Amazon, accounts for more than 5% of the posts.  Even the most innovative vendors are dwarfed by the overall Renaissance we are living in.

As Coach Tony D’Amato would say “Because we know when we add up all those fractions, that's gonna make the fxxxing difference between winning and losing!”

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Resolutions – so far so good

One of my New Year’s resolutions was to post an average of 1.25 innovation posts a day on the New Florence blog. January has ended with 50 posts, so about 1.6 a day!

Nice going, with assists from guest posts by Michael Krigman about FujiFilm and Pilar Carnicero Marquez about iPad in her classroom in Spain, and thanks to my book publisher, John Wiley for letting me excerpt from my upcoming book.

Now, about my other resolutions for the year – not as good.

Wait, I did not share their specifics with my readers, so no need to disclose progress either :)

Burning Question: What makes an event memorable?

As I start to line up speaking later in the year around themes in my new book, I was reminiscing this weekend about the many industry events I have been fortunate to be part of.  Plenty of gorgeous resorts and rock bands came to mind, but the ones which really stuck out had interesting venues, formats or themes.

Here are some of my most memorable -

Long trip: Almost a whole week of travel for an hour’s presentation in Moscow – including a stop in London to get the Russian visa. Compared to that, a day’s visit to present in Tokyo and a 2 hour trip to Squaw Valley, California qualify as rapid implementations .

Unique format: Every speaker got 5 minutes to present 20 slides at the Ignite event in Toronto. It was at night in a comedy club setting with the audience sipping on their drinks, so made the event even more interesting.

Interesting location:   You would think it would be at a standout resort, but one that really stood out was presenting at the Keeneland Race Course in Lexington, KY on a stage where they auction horses :) Another was at a pub in a hotel close to Trinity College in Dublin, Ireland.

Unusual Panels: In New York, us panelists took over – the poor moderator barely got in 2 questions. We did not need no stinkin’ guidance. Years later the moderator still reminds me how we hijacked that session. In reverse, I moderated possibly the most boring panel ever at an event in Orlando. Three prep calls where I told them to use plenty of examples, provoke each other went to waste. They were all consulting types and fell back into their comfort zone on stage – methodology talk!

Complex set up: With innovations in lighting and acoustics, no presentation is simple any more, but I find presenting to a non-English audience a unique challenge. I am thinking particularly about presentations in Cannes, Tokyo and Milan, each with (multiple) translations being piped to the audience. The delayed feedback from the audience is difficult to adjust to. You have to pinch yourself that it is not your jetlag playing games:)

Readers, what makes an event memorable from your pov?

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The new benchmarks

I am helping review for a client competing proposals from several consortia of software vendors and systems integrators/outsourcing firms. The range of on-premise versus SaaS, onshore versus offshore talent, opex, capex, EBITDA calculations of license, hosting, maintenance, implementation etc. is mind-boggling. It shows the convergence of so many trends in the enterprise world.

As if that was not enough, I see this Good Technology report which shows rapidly growing iPhone and Android presence in the enterprise. Next week’s SuperBowl will accelerate a trend we saw last year – every major brand is looking at social marketing and integrating that with traditional media. No longer can enterprise vendors pretend that Apple, Google, Facebook, Amazon are just “consumer tech”, not major factors in the enterprise and that they should not be benchmarked against them.

In this new world, I thought this WSJ article about SAP focusing on Oracle was well – so 90s. If that is all SAP is focused on, it’s already in big trouble. Because the CIOs I deal with are working with a much broader portfolio of vendors than ever before, and every $1 for SAP has to be benchmarked against cloud storage, iPads, digital marketing and so much more.

It’s not SuperBowl time in the technology league – it is the start of the season, and it is a league with parity where last year’s weak teams have stronger draft picks. Time to broaden our competitive horizons.

Zach Nelson: A Decade in the Clouds

Zach Nelson is a really interesting tech executive. He has a wide rolodex (over 20 pages in my last book, The New Polymath came from interviews with Zach and several others he introduced me to), diverse interests (numerous relationships with the Oakland Athletics baseball team, part owner of the Omaha Nighthawks football team, golfer), and he is entering his tenth year as CEO of the cloud computing pioneer, NetSuite. 

Every conversation with him veers in many fascinating directions. I recently had a chance to listen to him reminisce about his decade at NetSuite.

Given your big company experience at Oracle and Sun, and the dot.com bust, was it not a very risky decision for you in 2002 to join a startup like NetSuite?

Actually my career has always been about doing startups, though within large companies. At Network Associates, I helped roll out both MyCIO.com and McAfee.com (which interestingly enough was actually the first Cloud IPO way back in 2000). At Oracle, I was there when we launched video on demand and Interactive TV. At Sun, I headed up marketing in the SunSoft/Solaris spin-off.

So, joining a young company was not much of a challenge, but I did have 5 criteria guiding my job search, and amazingly NetSuite (then called NetLedger) met them all. I wanted to be with a Web-based enterprise software company. The term SaaS had not been coined then, but my experience with McAfee.com and MyCIO.com taught me customers preferred software from vendors who not only wrote the code but also managed it, and that the web had to be an integral part of the deployment/delivery platform. NetSuite fit that bill.

I wanted a great development team. (Founder) Evan Goldberg had that in place.

Given the dot.com bust, I wanted to join a startup which had real customers, not just ideas. I also wanted to see a good funding plan. NetSuite already had thousands of small customers, and having Larry Ellison (Chairman and CEO of Oracle) as a major investor met my 3rd and 4th criteria.

My last criterion, looking back, was possibly the most unreasonable. I wanted a short commute. If you remember traffic during the dot.com boom in the Bay Area, we were all commuting for hours. NetSuite, amazingly, was just 3 miles from where we live.

So, in many ways, it was actually an easy decision for me to join NetSuite.

Over the last decade, the highs must have been really high, the lows really low. Can you share a few of each?

In many ways, it has been one long high, but the last couple of years have been particularly satisfying. Even though NetSuite continued to grow during the downturn, nobody can say he or she enjoyed the slowdown of 08 and 09. However, those years focused our investments in two areas that have really paid off for NetSuite and our customers: the verticalization of our product and our company, and the traction the OneWorld product has provided us in global customers.

Looking ahead, two things really excite me. One is our exposure to large enterprise customers shows us how poorly their current legacy systems work and what a huge opportunity we have there. The second is the emergence of new opportunities in the emerging eCommerce market. There really is no platform for easily extending your transactional processes to customers, partners and vendors via ecommerce, and I think we have a very differentiated approach there.

But bigger companies tend to prefer working with larger vendors like SAP, don’t they?

When you see how companies deploy applications like SAP, you quickly see that approach is dated. Any company that has a multi-year road map to deploy enterprise systems will be crushed by faster, more nimble competitors who are moving their operations to the Cloud using NetSuite.

I used to worry about SAP and Microsoft making a move to the Cloud. But after waiting year after year for them, I now believe whatever they do in Cloud Computing is superficial. SAP may throw marketing around for BusinessbyDesign or Microsoft Dynamics Great Plains, but fundamentally their DNA remains that of on-premise software companies. And smart customers know that those applications will not give them competitive advantage in the Internet Age.

NetSuite has been a risk-taker on many fronts. You used the auction method for your IPO. You expanded internationally in relatively risky markets like the Philippines. How do you sustain a risk taking culture?

These are calculated risks. In each of those decisions I have bet on an executive I felt comfortable with.

For the IPO, we bet on Bill Hambrecht and his firm’s auction model and philosophy. For our Philippines expansion or the Czech development effort, again I bet on strong executives to make us successful.  It is as much about the people you have to execute a strategy as it is about the strategy itself.

You seem remarkably compatible with (founder) Evan Goldberg, your CTO. Very few founders and professional executives who come in later co-exist as long as the two of you have.

Evan is one of the smartest people I know and could run sales or services or anything he chooses to tackle, but he loves and is focused on development. I came in wanting a solid development team in place. So our skillsets and interests are very complimentary. Quite often the founder and the professional executive don’t delineate their roles well enough, but with Evan and me, our roles were clearly articulated. And we both believe in what NetSuite does to help our customers fulfill their business visions.

Tell us about folks who inspire you

Larry Ellison is one for showing me how your vocation can also become your avocation. I was at Oracle when he turned billionaire, and I asked myself if I was that rich, would I not retire? After working at NetSuite, I figured out why he is still at it. I couldn’t imagine anything more enjoyable to do with my time. I have the best job in the world.

Well, I believed the last statement till I saw Brad Pitt play Billy Beane in Moneyball, and I figured out HE probably has the best job in the world! I am honored to have Billy’s guidance as a director and customer. As the movie shows, he saw the game of baseball from completely different eyes. On our board he brings the consumer mindset to the enterprise world. He forces us to think differently, as he did the baseball world.

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The technology news supply chain

My friend Brian Sommer recently pointed out “On 5/14/2012, SAP, NetSuite, Plex Online, Host Analytics and other vendors(?) are all having their user conferences.” Clearly, that will be a busy news week. But it made me think about the news supply chain and how it mirrors the volatile technology supply chain.

In an interview for my upcoming book with Tony Prophet, a senior vice president, overseeing hardware purchasing and logistics for HP, discussed the complexity of demand and supply chain planning. It is a massive operation -  HP churns out two personal computers a second, two printers a second, and a data center server every 15 seconds.  While there are thousands of wrinkles, broadly he talked about:

a) Long term shifts

Absorbing the various acquisitions HP has made – removing redundancies that Compaq, 3 Com and others brought. Adjusting to product transitions – PCs to laptops to tablets. Buy versus build transitions and global manufacturing shifts

b) Short term blimps

Increased demand around back-to-school campaigns, Black Friday
promotions, or regional holidays like the Chinese New Year

c) Unplanned events

He described the acrobatics HP had to go through after the Eyjafjallajokull
volcano explosion and the Japanese tsunami.

Now about the technology news supply chain and how I see it feed content for my books, blogs, consulting and speeches and how it has similar long term and short term patterns.

a) Long term shifts

As Intel rolls out its Sandy Bridge, Ivy Bridge, and Haswell processor families over the next couple of years, as Microsoft rolls out its Windows 8, and manufacturers like HP and others roll out various thin and light form/factors we are about to witness an epic battle between Ultrabooks and Tablets. That story will, however, take years to develop. As I read Dr. Michio Kaku’s Physics of the Future, he lays out a roadmap for countless technologies all the way through 2100. There are countless long term stories to explore.

b) Short term blimps

Beyond the week Brian talks about above, there are so many more year round. Every January, the Consumer Electronics Show and the President’s State of the Union bring plenty of science and technology news. February brings the Super Bowl and the Oscars, which year after year become  richer in technology application and content. This year’s Presidential race is bringing focus on polling and forecasting technologies, growing influence of social media, and the candidates’ positions on science and technology issues.

c) Unplanned events

In updating edits of my last two books, I have been amazed at how many major and minor technology news items break on an everyday basis. Some are major like Steve Jobs’ passing, others are more localized -  people I had profiled who changed jobs, companies made acquisitions, lawsuits were filed, and countless other events most of us would not notice on a routine basis.

A challenge for technology marketers

Companies spend marketing dollars heavily at their events, analyst tours, and product launches. Most, however, rarely consider the other news they are competing with. It may sound like noise, but it often drowns out what they are trying to present. In many cases they would be better off with a more constant stream of news rather than heavily concentrated bursts in the form of their events or tours.

Apple and US labor

Steve Jobs supposedly told President Obama ““Those (iPhone) jobs aren’t coming back,” according to this article in the New York Times.  Apple’s labor in China is also showing up in much hand-wringing in the Presidential race.

Let’s explore a few other dimensions of the issue:

The Chinese labor is a small part of the iPhone

It is mostly assembly of components that come from Japan, Korea, Germany and other countries. The China value add in the iPhone is less than 10% by many accounts. Frankly, I would rather see US companies compete for the higher value components that go into iPhones, iPads and other Apple products.

China today, Brazil tomorrow, gone day after?

Foxconn, Apple’s contract manufacturer which employs the Chinese labor, has looked at a shift of at least some of the jobs to Brazil. It has also looked at robots to replace some of the jobs. Do we want those jobs to come back to the US, then watch them move out again?

Who could take over for Foxconn in the US?

It’s’ not just the economics. Foxconn has delivered to Apple unbelievable flexibility across so many product releases and security given the intense scrutiny Apple products get. If Apple brought it back to the US, could an IBM or an Accenture or another outsourcer deliver that level of performance?  And most US outsourcers also have significant non-US labor forces in India, E. Europe and elsewhere. So, unlikely jobs would remain in the US.  Also, there is little reason for Apple to insource the function and run it on its own given it went through a disruptive buy versus build transition in the late 90s.

What about the App Store, retail and other jobs?

700,000 apps and counting have created plenty of entrepreneurial opportunities for thousands of small businesses in the US. From the case study on Taubman malls in my upcoming book, many of which have Apple stores, I also know they have become more of anchor stores than the Macys and other traditional stores. That has meant vibrant customer traffic and jobs in many retail locations. Then there are Fedex and other logistics jobs from the massive global supply chain around Apple products.

Where are the AT&T and Verizon jobs around the iPhone?

AT&T and Verizon in particular (Sprint more recently) have earned at least $ 50 billion in voice and data plans around the iPhone. Given the network issues AT&T has had, and the data limitations both have put on iPhone customers, it does not appear either has invested much in network expansion even with that much revenue.  Those are construction and telecom jobs that by definition are much more difficult to offshore – they would stay in the US.

Whether Apple likes it or not, there will be plenty of this discussion given the elections this year. I hope the discussion is a bit more nuanced than just focusing on the assembly jobs in China.