deal architect

Are you better off than your parents were?

I asked my wife, Margaret that question recently. She rattled off an unqualified “yes” – we are more mobile, we have more occupational choices, we have way more choice in products and services, and one that really resounded – “we bounce back more easily”. I asked her to elaborate on that. She said way more of us recover from health problems, career setbacks, even bad personal actions like crime and bankruptcy. Our ancestors rarely recovered from such a hiccup.

Margaret was born humble – on a dairy farm in Ireland. She spent years in psychiatric nursing in London, and we have lived in Tampa, the last 25 years, where she has continued her healthcare, been a home school teacher and helped edit my books and with other functions in our corporation. Tampa is a middle class city in a middle class state. We have had a comfortable life, but not one which would have prompted the unqualified “yes” to my question comparing lifestyle with her parents. 

I then asked her how our two kids, both in their twenties would answer the question. I expected her to say they have had way more toys than we had. Again her answer surprised me. She said they have way more positive experiences than we did. While being home schooled she made sure our kids got a wide range of choice in extra curriculars – chess, fencing, jazz dancing, diving, rowing, soccer, taekwondo among others. I flew for the first time when I was 21. By that age my daughter had already been to 20 countries.

I have asked many other people the same question, and when they think about it for a bit, they come back with answers like “The diseases I saw as a child have long since been eradicated” “I had never heard of quinoa, sushi, hummus, and so many other global food items growing up”. “Did you know we have over 100 different SUV models on our streets today? My parents’ car was so basic in contrast” “International calling was so expensive we only called on birthdays and then were screamed at to get off the phone in a couple of minutes” and “I was born in a communist society. I am clearly better off than were parents were”

Warren Buffett, in his annual shareholder letter, observed earlier this year

“American GDP per capita is now about $56,000. As I mentioned last year that – in real terms – is a staggering six times the amount in 1930, the year I was born, a leap far beyond the wildest dreams of my parents or their contemporaries. U.S. citizens are not intrinsically more intelligent today, nor do they work harder than did Americans in 1930. Rather, they work far more efficiently and thereby produce far more.”

Yet, academic study after another tries to convince us we are worse off than our parents were. A year ago, I may have believed them. But in writing my recent book, Silicon Collar, I noticed a similar disconnect. Every practitioner I interviewed across 50+ work settings in a variety of industries was pragmatic about automation – how mature, how expensive, likely gradual impact on jobs. Every academic and analyst I talked to was, in contrast,  massively pessimistic that automation was about to lead to jobless societies. If I had not had the resounding pushback from the practitioners, I would have been as pessimistic as the academics.

I urge you to do the same. Ask yourself and your friends, neighbors and co-workers the same question I have been asking. I think you will find these “practitioners” of life are far more positive than the academics, in spite of all the challenges we all face, and that in balance, we are better off than the generation before. 

Cross-posted at Medium

Exciting manufacturing technologies–Jason Blessing, CEO of Plex

More from my conversation with Jason Blessing

What other trends excite you in terms of manufacturing technology?

I think the other interesting thing that is emerging in manufacturing from a technology perspective is 3D printing and how that's affecting how products are manufactured. GE has made a huge push on 3D printing. They’ve acquired 3D printing technology and they’re already making important components of their CFM Leap engines using the capability. What’s even more exciting is that they have a skunk works demonstrator jet engine operating with 35 percent of the parts made using 3D printing. Pratt & Whitney also put 3D printed engine parts into production in 2015.

I've seen some research that has shown that over the next ten years, the efficiency of 3D printers and the cost of printing is going to intersect with the cost of the more traditional manufacturing methods that are used today, with lathes and presses and again more typical approaches.

Some of the manufacturers in Asia, particularly those that are building electronics and even things like toys, have been very progressive in their adoption of 3D printing. It's going to be interesting to see how that bleeds over into printing metal products that go into cars, and whether that becomes an advantage for them over time or if the U.S. manufacturers are equally as aggressive. I think American manufacturers like the GE and Pratt & Whitney examples are showing that it can do some pretty sophisticated things, but it'll be interesting to see how quickly the transition from traditional methods to printing expands.

Other automation trends?

The one thing I would love to do with you next time you're in the Bay Area, if you give me a little advance notice, is take you to my friend's startup company, Zume Pizza.

I think a lot of people look at that business and they say, "Oh, this is cute. We're building and using robots to build pizzas." But I think what they miss about that business is it's like books were to Amazon. It's the first use case for how you automate food production, and ultimately delivery, that could then be extrapolated out into other areas. He just completed his series A round.

The pizza is so good. It's way better than any of the chains that get delivered today. The savings from automation go right back into better ingredients.

His ultimate vision for it is to go all the way back to the beginning of the delivery chain and help source with local farmers, help them adopt technology that makes their practices better so that their cost and profitability increase, while they continue to produce great products that end up in his pizzas, or whatever is next. The long term vision is a very big idea and very disruptive. It's also capital intensive and hard to get people to understand what he's trying to do. It's an important one to watch.

More on manufacturing trends with Jason Blessing, CEO of Plex

Part 2 of my conversation with Jason Blessing

Jason, there are three myths that I have seen in the last year, which I call toxic, because they dampen the national mood. One is the myth that automation is leading to all kinds of jobless futures. The second is the middle class is dead. Then the third one is something you personally confront quite a bit, Jason, which is this myth that the US doesn't have any manufacturing. I don't know where those three myths have taken hold, but you hear it so often, it just want to pull your hair out.

I agree. I think about certain geographic regions of the U.S. Obviously the Midwest, a little bit of the Northeast, the Carolinas, Tennessee, Texas, the Pacific Northwest. All of those geographic areas are anchored by very robust manufacturing economies that are building everything from cars to planes to appliances, and those are American workers that are building them, and building those products, and have a great standard of living as a result of it.

Talk a little bit about some of the more impressive factories you've been to recently . You travel quite a bit to your customers.

I think for me the crown jewel of any factory that I've been to is the Caterpillar chain of facilities that are down in Seguin, Texas. They are another Plex customer, and I think what stands out to me there is the incredible amount of automation that's used to drive customer loyalty as well as product quality. To be a little more specific about that, every single engine that's built in this plant is made to order, and it is made to a very rigid specification for that customer. That customer could be Caterpillar. It could be an engine that's going into a big dump truck that's going to get shipped off to a mine somewhere, or it could be the New York Fire Department, and it could be a replacement powerplant going into one of their fire engines The level of customization is incredible, down to the exact color of the engine block, and how it's going to be painted, the components on the engine that factor into performance requirements.

There are 24,000 different configurations. The line is about a mile long, and it starts with just an engine block, and as it goes through 15-20 different work stations, every single employee has technology around them that informs them of what products or which parts to install on this engine, based on the spec. Again, fulfilling that value proposition at Caterpillar, they’ll build your engine any way you want.

The other thing that is, I think, very impressive in this particular case is the focus on quality. Whether an engine is going into a tank that's going to end up on a battlefield, a fire engine that's going to be a first responder in an emergency, or a dump truck that's going to be in a remote mine in the middle of nowhere, they just have have to work. These engines just have to be able to thrive in difficult environments.

So at Caterpillar one of the ways that they deliver that focus on quality is almost every single tool that's used to install a part on a machine, the settings on it, and the measurements to make sure it's installed properly, are all automated, and plugged into the Plex backbone. All of the different measurements and tolerances to make sure that the engine was fitted and built properly is all measured and recorded, so at the end of the line, after almost a mile of workers working on these engines, they know two things. First, they know the specific engine is built exactly to the specification of that customer, and second, they know it's going to be high quality because they tracked every tool, part and operation on the line.

I think, again, Caterpillar's just that great mix of technology coming together to fulfill a customer value proposition and drive better quality.

The other one that also stands out to me is Accuride. Their CIO, Paul Wright, has done a great job using technology to drive increased automation that's allowed them to reduce their customer response time significantly. I think when they started, pre-Plex, it would take them roughly 15-20 days to fulfill an order. Now they're down closer to 10 days, with a goal of getting to mid to high single digits.

That's important for two reasons. It means their customer can carry less inventory because they can get a just-in-time order. For Accuride, their biggest expense is actually steel coils, so they can get much more nimble in the amount of inventory they're carrying. They've been able to drive a lot of value for their customers, and for their business, by optimizing supply and demand.

An ancillary benefit of these improvements is that Accuride has opened up tens of thousands of square feet in their factory, where they used to just store finished product and steel coils. That space is now open and available to them to put new lines in, staff them with new employees, and get into new product lines So they're just far more efficient in their use of the square footage and the equipment in their factory through use of a better technology and automation.

Accuride has now been recognized on multiple occasions by the Association for Manufacturing Excellence for their implementation of lean systems and practices. They’re a great example of both business achievement and U.S. manufacturing leadership.

Those are the two that really stick out for me. I also like to visit our candy manufacturers and our beer bottling lines. Those are always fun. Probably a little more because of the products they produce, but it is amazing to stand on the plant floor of some of these big industrial operations, witnessing how they're using technology, and how sophisticated the workers and the manufacturing process are.

More tomorrow

The State of Manufacturing: A conversation with Jason Blessing, CEO of Plex Systems

I enjoy spending time with Jason Blessing, CEO of Plex. We share a passion for automation and other manufacturing technology and we enjoy sharing notes on outstanding plants and facilities we get to visit.  With a new President about to move into the White House, I recently had a wide ranging conversation with Jason. Here is Part 1 of our 3 part series.

Jason, as the leader of a cloud company serving manufacturers you have a unique perspective on the state of multiple industries as well as the broader economy. I’d love to know what you’re thinking about and planning for as we head into 2017.

I think one of the first interesting things to talk about is our new president and the effect he could potentially have on the manufacturing economy. There are two things that we've been paying attention to where President-Elect Trump has has expressed pretty strong opinions. One is bringing manufacturing back to America, and the second is potentially backing out of NAFTA and getting more restrictive on our trade policies. I'll talk a little bit about each one.

The first one, bringing more manufacturing jobs back to America, I think if I listen to some of the messaging in the election, and even post-election, I don't know that I heard a lot of specifics. I think some of the infrastructure projects that he wants to accomplish are manufacturing intensive, requiring both equipment and materials that need to be produced, so I could definitely see that being a stimulus, but beyond that, I think we still need to wait and see.

And the incoming administration made a point of direct involvement in jobs through the recent announcement with Carrier, the HVAC company. They’re keeping a significant amount of jobs in Indiana instead of moving them to Mexico. My sense is we're going to see a few of those high profile things to allow the President-Elect to demonstrate some succes on manufacturing jobs in America, but I think absent any real specific programs on this it remains to be seen how successful they will be.

Reforming trade agreements, and specifically NAFTA, is a concept that sounds great to many people in principle, but I actually think it could be an absolute disaster, specifically for one of our constituents, the automotive industry. I think that a lot of people don't realize that many of the cars that are bought in the US are assembled here, but not necessarily all made in the US.

Take the European automobile brands sold in the U.S. as an example. A lot of the big, heavy parts of those cars—like the body and the axles—are very expensive to ship so they’re all made and even designed in the U.S. Some of the more deeply embedded parts, such as wiring harnesses and a lot of the little plastic pieces that go into cars, those are made in Mexico. A lot of the engines are actually still made in Germany, or elsewhere in Europe, and shipped over here, then final assembly happens in the United States. The supply chains are well evolved to efficiently support specific regional markets with a combination of local and imported parts.

There was actually an article on the front page of The Wall Street Journal a few weeks ago about how backing out of NAFTA and getting more restrictive on trade would actually be devastating to the auto industry, because of how the supply chain works, and where things are built and final assembly happens. It actually featured two Plex customers in the cover story. One is Batesville Tool and Die, and another one called Mursix Corp., and they both make parts and components that go into cars assembled in the U.S., and they also export a lot of parts that go into cars assembled in Mexico, as an example. Getting more restrictive could have pretty dramatic effects on their businesses.

Again, I think some of these headlines that people talk about are a little attention grabbing, but when you get under the covers the policies can actually be punitive to great small businesses that are producing jobs in the U.S. So I think it's going to be hard, frankly, to back out of NAFTA with the auto lobby weighing in heavily. I think that's one area where the new administration will have to find some ways to maintain a tough posture on fair trade and U.S. job creation, while backing off some of the things said in the campaign.

I would personally love, as a part of this discussion of manufacturing and jobs growth, for people to understand how much product is still built in the US. It's still the largest manufacturing economy in the world. I think a lot of people don't really realize that. Hopefully this focus that Trump is bringing on manufacturing will actually help educate people on all of the innovation and job creation that is happening.

Jason, as you mentioned, very few people realize we manufactured two trillion dollars worth of stuff in the US last year. The myth is that manufacturing has left the US. Between the auto industry that you talk about, chemicals, aerospace, we have some pretty strong industries. The narrative, the political narrative, is a little different from the reality.

While advanced manufacturing is not going to create a whole bunch of new jobs, if companies like Carrier continue to be successful they will create jobs in their ecosystem: the companies who come and install in our neighborhood new air conditioning and so on. Even if Carrier makes it in Mexico, those jobs stay here. You look at Ford. Look at the dealers. Look at all the jobs they create right here in that ecosystem.

The other interesting discussion topic, and I know you've touched on this in your most recent book, is the effect that technology has had on manufacturing, and the effect it's had on the labor force, and frankly the economy.

Automation has definitely eliminated some of the more menial, rote, manual tasks on a factory floor, but there have been at least two really positive outcomes, at least in my opinion.

The first is the fact that we’re creating great new jobs with long-term career potential. I get to visit a lot of factories, because they're Plex customers, and the jobs that they're hiring for are definitely more high-end jobs that require more computer skills; jobs that handle some of the automation and more technical aspects of their manufacturing operations. There are a lot of unfilled jobs out there and new opportunities. The fact that there aren't people to take on those opportunities is, I think, quite remarkable. There's just not the skill set out there.

I think the other important and positive impact of technology and some of the tasks that have been automated on the shop floor is that we’ve innovated our way into an era where our products are higher quality, safer and more affordable than they have ever been before.

Cars, for example, are safer and include modern safety features from the high-end all the way to entry level. Quality and reliability is unprecedented, and that frankly benefits every one of us. Features that started in very expensive automobiles are now standard in even basic models. I think, again, people kind of forget the depth and breadth of the benefits we get from more technologically advanced, higher quality manufacturing processes.

I grew up in a town of 1,200 people in the middle of nowhere in Michigan, and we had a lot of these family run businesses around us. 25 years later, when I go back, they are still absolutely thriving. They're using technology to be competitive on the global landscape. Their workers have a fantastic job. They've got great middle class, or above, lifestyles, with good housing, their kids go to good schools. They've got fun toys that they use in the great state of Michigan. To me, that is an inspiring, patriotic story, but it is not the story that people seem to gravitate towards on the national and global stage.

To be continued tomorrow.

Oracle-NetSuite win-win?

After 15 years and countless deals, you would think integrating acquisitions would be an Oracle core competence. It’s inconsistently so if you talk to many “refugees” who have left after an Oracle acquisition.

After listening yesterday (replay here) to Oracle and NetSuite executives (finally after a prolonged stock tender and regulatory review process) present their initial thoughts on integration, I am optimistic about this one. I see several scenarios where the combination will make sense if executed well

Two-tier ERP

Large customers have long tried out two-tier strategies on their own– an Oracle or SAP ERP at HQ and a much simpler solution at global subsidiaries. Oracle and NetSuite could make a formidable bundle if NetSuite is allowed to expand its global footprint – both in functionality and in leveraging Oracle’s reach. As Jim McGeever, who will head the new GBU, joked going from the NetSuite’s presence in 14 mostly English speaking countries to get to Oracle’s significantly greater presence would have taken them till 2020 on their own.  If Oracle can provide a more seamless bundle and price it attractively, many global companies would be willing to consider it as against deciding on the Tier 2 solution on their own and then owing the on-going integration.

Vertical ERP

As I have written before NetSuite has done a good job verticalizing its products. I wrote from the last SuiteWorld “NetSuite’s specific industry strengths were sharply in focus on day two of the event where they had 5 parallel sessions for Software/Internet, Retail/Commerce, Wholesale Distribution and Manufacturing, Services and Nonprofit sectors. I attended the Software track and it was very well done. Product functionality and customer executives showed NetSuite’s appeal across the lifecycle from start-ups to “growth at scale” to public companies.” NetSuite can now aim higher in its existing verticals – the reality today is it is strong with smaller enterprises. 30,000+ organizations today contribute to its $ 750m in revenues.

Oracle’s own cloud applications are much stronger on horizontal lines – financials, HR, CRM (much stronger if you see Steve Miranda’s slides starting around 32.15 in the replay). Oracle has wide vertical reach across its products but it is a mixed bag of legacy, on-premise solutions for many. NetSuite could actually provide a blue print for Oracle to redefine its cloud solutions for other industries.

Test bed for PaaS and IaaS

As I wrote earlier this week while watching AWS re:Invent, we are moving to a new arms race where Amazon, Microsoft, Oracle, Salesforce and many other vendors are trying to recruit ISVs to their cloud platforms and infrastructures. With the NetSuite GBU, Oracle gets a showcase opportunity to show off its own ability to support a decent sized vendor with a large customer base (which as founder Evan Goldberg points out is already used to its SLA of “4 nines”) on its PaaS and IaaS.

Having said all this, listen to the q&a starting around 42.15 – lots of details around channels, geographies, product footprints will need fleshing out. No different than other complex acquisitions, so look forward to the pace of execution on this one.