ResearchGate and a repository for Intrapreneuring

As a result of an opportunity to talk to a historian's conference this next Friday--about how HP 'got into computers' and parenthetically, how Beckman failed to do so--I updated my ResaerchGate repository

The paper and the 'dataset' (which means the PowerPoint slides) are entered in my ResearchGate file at

http://www.researchgate.net/profile/Chuck_House/contributions/?ev=prf_act

If you don't know about ResearchGate, don't be surprised.  It is a fairly nice repository for papers and supporting documents (like PowerPoint Slides) 'over the years' for the 'bigger events;' like a conference or a publication.

With respect to Intrapreneuring, "HP--the Renewal Challenge" is a set of slides I used recently for a keynote address at the Stanford Graduate Business School for a largely HP audience of senior managers.  The key with respect to INTRAPRENEURING is the set of slides near the end that describe the three INTERNAL CHASMS that must be dealt with if you are an entrepreneur.

The repository also carries a small citation re the book, PERMISSION DENIED, for which I learned recently that we've virtually sold out the first 'print run' of 500... without advertising of any kind. What IF???

You might find some of this interesting.  Drop me a note of what matteres most to you

what makes a great company?

I had an opportunity for breakfast with Bill Sullivan, CEO of Agilent, this morning, a week after the announcement about Agilent's intention to split the company into two groups, one for Life Sciences and the other for Electronic Measurements.   I wrote a couple of days ago about the Market Capitalization issues here, but did not deal with the obviously key ingredients of why this makes sense for each of the groups after the split.

We spent a fair amount of time actually on the components of how you build value over time, which clearly has happened beautifully at Agilent over the past decade or so.

I used a slide (see below) that I have used in a number of talks about THE HP PHENOMENON.  Bill had some visceral reaction to it -- I have to say it felt a bit like talking to "the old Dave Packard" even though Bill is not nearly so tall as Dave was.  He espouses the very same values!

The point of this slide, especially when done as a PowerPoint "build" in a talk, where I move clockwise (can we still say 'clockwise' when no one remembers analog clock dials?) from the upper left corner:

1. REV, PROFITS, GROWTH are the metrics that every management team uses, faithfully

2. Share Price mostly, and ROI / ROE / ROA are Wall Street analysts metrics.  For some top managers, this is the manipulable set of numbers that drive their bonuses without creating any 'true value'.  This is where you see the "lay a bunch of folk off, outsource to some cheap locale, cut R and D, and drive your margins up' scenarios -- for awhile.

3. Ethics / Environment / Community role is the Reputation of the Company in YOUR TOWN.  Are you proud to say you work there?  Do the local community service groups look to your company for leadership in civic affairs?  Or does your company, like some, argue for years about whether their effluent is why the river caught on fire or killed all the fish.....  You've seen those "Best Company to Work For" surveys, right?  They're not just about the benefits and pay scales.

4. EMPLOYEES, which is what most managements say is "our best asset" -- what do they think about and worry about?  Most often, it is the quality of their job, the level of satisfaction, the challenge, and the learning that goes with it, plus the dignity with which they are treated that matters to them more than share price or corporate profits.  Now, this all folds together, as Packard used to say --- without profits, there are no jobs, and with no jobs it is hard to have job satisfaction.  But without high employee morale and loyalty and going that extra mile, there isn't much long-term satisfaction.

5. The CENTERPIECE here -- PRODUCTS and SERVICES -- is really what the CUSTOMER cares about.  Do they get value from buying your Products and Services?  If not, they won't be repeat buyers, and the whole thing goes to pot.  They could care less about your share price, ROA or revenue growth. Bill shared a wonderful story--he said he's multiple times had customers tell him that his competitors are all at the customer site when the sale is about to happen; but Agilent, and Bill specifically, are there afterward, making sure that it all works well.  That breeds long-term satisfaction.

6. INVENTING, REFINING, INNOVATING is what drives CONTRIBUTION in Products/Services, so this is the wellspring for all renewal efforts, and all long-term corporate survival tactics.  Shortchange INNOVATION, which seems to be the game at all too many large corporations, and the only thing left is to try to SAVE your way to SUCCESS, or try M&A, or a SALE.

The point is that each of these six perspectives are correct views to hold, and some fairly large constituency holds each of them to be TRUE.  HP historically, and AGILENT today believe strongly that these all need to be in BALANCE.  None of them are 'the long pole in the tent" -- they all are valid and they must all be done well.

Not exactly the way Wall Street views it, but Midwestern common sense would argue strongly for it

Comments?

Agilent "splitting"

The news late last week about Agilent didn't create much stir in the Valley.  Some said "who's Agilent?" but I wrote that off to short memories.

Agilent, for those of you who don't recall, is the "real HP"--the measurements company that made scads of money by producing really awesome Microwave test equipment for a communications hungry country (and world) back when radio and television were 'local' without national or international reach.

It also made a fair amount of money on all sorts of instrumentation for other engineers, scientists, and doctors, to mention just a few.  And because instruments have to measure things 'at the state of the art' they must be, in some respects, better than the state-of-the-art for whatever application they're on.  And that fuels INNOVATION to stay ahead of the curve.

That, more than any one thing, accounts in my view for why HP -- the 'real HP' -- was so innovative for so many years.  It HAD TO BE, to stay the leader in instruments, no choice.

I tried once to capture some of that with a personal memoir, one built around a decade of my life developing Logic Analyzers, which were tools that empowered the Computer Age as we know it.  The book includes some Take-Aways, for folk worried about 'large company innovation' today, and as such, it has gotten a modest reading.

It is Lulu Press available, just type "Permission Denied Lulu Press" into your browser, and you should see an order page with a bearded visage of me.

I mention this because it is interesting to compare the results in the stock market for Agilent, one of their competitors who play much like 'the old HP' today -- Danaher -- and today's HP.  Actually, it is fun to look at the "PC players" as well

Below, I show the chart for Market Capitalization (e.g. stock valuation) vs. Revenue for  seven companies.  Maybe these smaller innovative companies 'know womething'?  But maybe those investing in Intel and Microsoft (remember that they get 80%+ of their revenues from PCs) know something that says Dell and HP are underpriced.  Or is it the other way around?

The Music business at Apple

Faced with slow, flat sales of 'computers' and declining sales of peripherals, in 2000 Jobs noted the Napster attempts to 'free music' and he set Jon Rubenstein on a quest to look into 'what might we do?"

Napster, ruled illegal in summer 2001, gave Jobs an opening.  When the iPod launched at MacWorld in January 2002, Jobs confidently predicted that he'd sell 1 Million in a year.  Faced with a barrage of ciriticism, in fact only 339,000 machines sold.  Undaunted, and still in the aftermath of the dot.com meltdown, at MacWorld 2003 Jobs proclaimed this dismal sales record as a 'wild success' (never mind his prediction of the prior year), and he showed the next version, announcing that it would sell 2 million in 2003.

Alas, it did less than half of that, at 939,000 units.  Meanwhile, iMacs languished as well, and Apple continued with flat sales and virtually no profits.

At this point, Jobs intro'd yet a third iPod.  And voila, it worked, and when it hit, strangely, it gave a coat-tail ride to the iMac line, which was much higher priced, and profitable.  The corner was finally turning, circa Xmas 2004:

The stage was finaaly set -- in 2005, Jobs would find that the iPod lifted iMac sales, and it went viral itself.  They've never looked back.

But wow -- what tenacity, what perseverance, and what a gentle Board and shareholders to let him.

Two remarkable articles about Apple strategies from Haim Mendelson

I've been working with Haim Mendelson at Stanford's Graduate School of Business recently.  He shared two articles with me that should be of interest for our readers.

The first covers the iPod story, entitled "Apple and the Music Wars", published in August 2006.

The second covers the iPhone story, entitled, The iPhone: Apple's Third Act", published in February 2013.

Each support my contention that Steve Jobs would not have been able to 'exhibit his genius' at any other company because his track record was so ... spotty AFTER he returned to Apple, and after each of these imprimateur products launched and sold for two successive mediocre rounds

The mythology is that Jobs was perhaps the greatest genius of our age -- and I am not trying to dispel that fond belief.  But I would observe that the first SEVEN YEARS of his return to Apple in 1997 resulted in dramatically lower revenues (like, down by 40% and flat for 6 years) and profits that never recovered, and in fact for years 5, 6, and 7 were virtually non-existent.

Here's the revenue picture:

And here's the profits picture:

So, the question you might ask, is: "How did he keep his job?  Where were the activist shareholder dissidents?"

To request a copy or get permission to quote from Mendelson's two papers, email your request to Mendelson.Haim@gsb.stanford.edu

Unscientific journalism

Remember the guy who blew the cover on the HP TouchPad, going to Best Buy expecting "lines of customers" only to find that the store personnel didn't know whether they even carried the device?

Well, 'front lines' sometimes tell the story.  If they do in the case reported yesterday in the Silicon Valley Business Journal as follows, "Houston, we have a problem" at Apple.  Maybe the pundits, and not the Wired observer, have it right?

Sep 11, 2013, 11:56am PDT

Apple's new iPhone doesn't impress in Beijing

Vincent Lara-Cinisomo, Web contributor

Apple's iPhone 5C and 5S were unveiled to much fanfare in the States. But what about in China, where the Cupertino company is hoping to make inroads? Eh.

Bloomberg reporter Christina Larson made the rounds in Beijing, asking a cross-section of folks what they thought of the new phones.

Larson said the 5C is mocked as "not attractive;" Zhang Ao, a cameraman for Beijing Television and iPhone 4S owner, told Larson that the bright-colored 5C looked "like a cartoon," said the Apple "wow factor" had long worn off.

A colleague of Zhang, Angel Kang, said Apple releasing the phones in the U.S. and China around the same time was a "nice friendship gesture," but doesn't plan to buy one.

It's hardly a scientific study, Larson admits. But at a time when Apple greatly desires to penetrate the market, China's lukewarm reaction to the new devices, plus the higher-than-expected price, could put a crimp into the plans.

The POINT of the last four posts

The previous four posts, noting the 'significant' enhancements embodied in Apple's new iPhones, illustrate in several ways the theme that I find difficult for many people to appreciate about corporate, as opposed to individual, innovation.  Corporate innovation, for all the reasons we discuss in this blog, struggles -- top managers stifle it, middle managers fear it, developers get frustrated and leave, etc.

And granted, these ideas were all spawned by individuals, most at tiny start-ups, some of which were researched and followed by Apple researchers, enough to get excited to buy the company.

But they couldn't result in a game-changer until a large company built 'the contribution' into a mainstream product.  Take the fingerprint recognition idea.  This has been around 'forever' along with retinal scan.  Microsoft's "Home of the Future" featured retinal scan more than a decade ago at the 'front door' (one small difficulty there, they mounted it high, by the doorbell, so a kid coming home from school would have to buy a pogo stick {know what that is?} to get high enough for the retinal scan to see their eye).

Fingerprints are pretty foolproof, a clever design if there ever was one, and they also are pretty simple--we never forget to carry them around, we cannot misplace them (unlike keys, or iPhones for that matter), they cannot be easily phished... wow, what a natural.  How come it has taken so long might be the right question, instead of snarky comments like, "Wow, BIG DEAL, what a gimmick" as I heard yesterday in too many Silicon Valley contexts.

So, too, the color and image appeal of the iPhone 5C.  Henry Ford stuck with black cars, GM trumped him by putting in a paint spray booth.  He was incensed, but he also was beaten.  GM introduced the annual model update, and color.  Wow, so innovative.  It worked.  It worked well enough for fifty years that they perennially beat Ford, once the largest car company by an order of magnitude.

So will the iPhone 5C work?  Remember the Swatch watch craze?  The purists are all sniffing, humff -- it lets the riff-raff in, meaning 'the kids'    Well, the kids are the market, let's face it.

Guess who made the Apple II and the Mac successful -- it was the kids.  What they learned in the process, especially with the Apple II, was how to be comfortable in a new gagdet age, and incidentally, how to put and keep America ahead in the SW-writing age (never mentioned in Walt Isaacson's book about Steve Jobs, becuase Walt didn't understand this HUGE contribution -- I know, I asked him).

We might ask, why couldn't HP have come up with all of these ideas in order to enter the phone business as CEO Meg addressed a year ago.  She said, "we're looking at how to do this without copying and we're having trouble."  Somehow, Apple was able to do it -- and while the pundits laugh, the changes are stunning in their insight, their potential contribution, and their inclusion.

Thank you, Apple