There is a saying that marketing wants the right sale, and sales want a sale right now. As a start-up grows that contradiction often leads to problems. The key is to align strategy with sales development through a bottoms-up approach to developing a strategic focus. Articulate the strategy clearly. Then the strategic planning process begins engaging every person and group in the company. This not only builds a sense of involvement and ownership but creates a positive corporate culture. As an example, Intel is famous for its strategic long-range plan (SLRP) that worked this way. However, this is not to suggest that there are no exceptions to the rule to be considered.
I want to more fully explain the concept of Strategic Inflection Points. I have referred to this topic in my Week 5 and Week 11 update videos. Former Intel CEO Andy Grove first described a strategic inflection point as a time in the life of a business when its fundamentals are about to change. That change can mean an opportunity to rise to new heights. But it may just as likely signal the beginning of the end. An inflection point can be the result of an action taken by a company or an action taken by another entity. An excellent recent example may be Facebook’s announced intention to enter the cryptocurrency market. The markets have already reacted sharply to Facebook’s move. Analysts have suggested that it may significantly alter the forecasts for cryptocurrencies. Change is inevitable and change is happening more rapidly than ever. Adaptation to change is imperative for corporate survival.
I want to more fully explain the concept of Strategic Inflection Points. I have referred to this topic in my Week 5 and Week 11 update videos. Former Intel CEO Andy Grove first described a strategic inflection point as a time in the life of a business when its fundamentals are about to change. That change can mean an opportunity to rise to new heights. But it may just as likely signal the beginning of the end. An inflection point can be the result of an action taken by a company or an action taken by another entity. An excellent recent example may be Facebook’s announced intention to enter the cryptocurrency market. The markets have already reacted sharply to Facebook’s move. Analysts have suggested that it may significantly alter the forecasts for cryptocurrencies. Change is inevitable and change is happening more rapidly than ever. Adaptation to change is imperative for corporate survival.
The concept of a Total Product or Complete Product is essential to product success, particularly in an emerging new company. This concept was pioneered by Harvard Business School professor Ted Levitt and later updated and adapted to the high technology industry by a group of us at Intel.
The concept of a Total Product or Complete Product is essential to product success, particularly in an emerging new company. This concept was pioneered by Harvard Business School professor Ted Levitt and later updated and adapted to the high technology industry by a group of us at Intel. Engineers commonly believe that when their product development is finished, the product is ready for market. Nothing could be further from the truth. The engineering “deliverable” is not a product. It must be surrounded by a number of other intangible value items before it is a Complete Product. In Levitt’s model, these items are the augmented product, the expected product, and the potential product. The Intel variant, shown here, is more detailed but essentially very similar.
Five years ago, I wrote a post on this blog disparaging the state of the Internet of Things/home automation market as a “Tower of Proprietary Babble.” Vendors of many different home and industrial product offerings were literally speaking different languages, making their products inoperable with other complementary products from other vendors. The market was being constrained by its immaturity and a failure to grasp the importance of open standards. A 2017 Verizon report concluded that “an absence of industry-wide standards…represented greater than 50% of executives concerns about IoT. Today I can report that finally, the solutions and technologies are beginning to come together, albeit still slowly.
The Evolution of These Technologies Is Clearer
The IoT Tower of Proprietary Babble Is Slowly Crumbling
The Rise of the Intelligent Assistant
Five years ago, I wrote a post on this blog disparaging the state of the Internet of Things/home automation market as a “Tower of Proprietary Babble.” Vendors of many different home and industrial product offerings were literally speaking different languages, making their products inoperable with other complementary products from other vendors. The market was being constrained by its immaturity and a failure to grasp the importance of open standards. A 2017 Verizon report concluded that “an absence of industry-wide standards…represented greater than 50% of executives concerns about IoT.” Today I can report that finally, the solutions and technologies are beginning to come together, albeit still slowly.
One of the most important factors influencing these positive developments has been the recognition of the importance of this technology area by major corporate players and a large number of entrepreneurial companies funded by venture investment, as shown in the infographic above. Amazon, for example, announced in October 2018 that it has shipped over 100 Million Echo devices, which effectively combine an intelligent assistant, smart hub, and a large-scale database of information. This does not take into account the dozens of other companies which have launched their own entries. I like to point to Philips Hue as such an example of corporate strategic focus perhaps changing the future corporate prospects of Philips, based in Eindhoven in the Netherlands. I have visited Philips HQ, a company trying to evolve from the incandescent lighting market. Two years ago my wife bought me a Philips Hue WiFi controlled smart lighting starter kit. My initial reaction was disbelief that it would succeed. I am eating crow on that point, as I now control my lighting using Amazon’s Alexa and the Philips Hue smart hub. The rise of the “intelligent assistant” seems to have been a catalyst for growth and convergence.
The situation with proprietary silos of offerings that do not work well or at all with other offerings is still frustrating, but slowly evolving. Amazon Firestick’s browser is its own awkward “Silk” or alternatively Firefox, but excluding Google’s Chrome for alleged competitive advantage. When I set up my Firestick, I had to ditch Chromecast because I only have so many HDMI ports. Alexa works with Spotify but only in one room as dictated by Spotify. Alexa can play music from Amazon Music or Sirius/XM on all Echo devices without the Spotify limitation. Which brings me to another point of aggravation: alleged Smart TV’s. Not only are they not truly “smart,” they are proprietary silos of their own, so “intelligent assistant” smart hubs do not work with “smart” TV’s. Samsung, for example, has its own competing intelligent assistant, Bixby, so of course, only Bixby can control a Samsung TV. I watched one of those YouTube DIY videos on how you could make your TV work with Alexa using third-party software and remotes. Trust me, you do not want to go there. But cracks are beginning to appear that may lead to a flood of openness. Samsung just announced at CES that beginning in 2019 its Smart TV’s will work with Amazon Echo and Google Home, and that a later software update will likely enable older Samsung TV’s to work with Echo and Home. However, Bixby will still control the remote. Other TV’s from manufacturers like Sony and LG have worked with intelligent assistants for some time.
The rise of an Internet of Everything Everywhere, the recognition of the need for greater data communication bandwidth, and battery-free wireless IoT sensors are heating up R&D labs everywhere. Keep in mind that I am focusing on the consumer side, and have not even mentioned the rising demands from industrial applications. Intel has estimated that autonomous vehicles will transmit up to 4 Terabytes of data daily. AR and VR applications will require similar throughput. Existing wireless data communication technologies, including 5G LTE, cannot address this need. In addition, an exploding need for IoT sensors not connected to an electrical power source will require more work in the area of “energy harvesting.” Energy harvesting began with passive RFID, and by using kinetic, pizeo, and thermoelectric energy and converting it into a battery-free electrical power source for sensors. EnOcean, an entrepreneurial spinoff of Siemens in Munich has pioneered this technology but it is not sufficient for future market requirements.
Fortunately, work has already begun on both higher throughput wireless data communication using mmWave spectrum, and energy harvesting using radio backscatter, reminiscent of Nikola Tesla’s dream of wireless electrical power distribution. The successful demonstration of these technologies holds the potential to open the door to new IEEE data communication standards that could potentially play a role in ending the Tower of Babble and accelerating the integration of AI, IoT, and Big Data. Bottom line is that the market and the technology landscape are improving.
My IEEE Talk from 2013 foreshadows the development of current emerging trends in advanced technology, as they appeared at the time. I proposed that in fact, they represent one huge integrated convergence trend that has morphed into something even bigger, and is already having a major impact on the way we live, work, and think. The 2012 Obama campaign’s sophisticated “Dashboard” application is referenced, integrating Big Data, The Cloud, and Smart Mobile was perhaps the most significant example at that time of the combined power of these trends blending into one big thing.
READ MORE: Blog Post on IoT from July 20, 2013
The term “Internet of Things” (IoT) is being loosely tossed around in the media. But what does it mean? It means simply that data communication, like Internet communication, but not necessarily Internet Protocol packets, is emerging for all manner of “things” in the home, in your car, everywhere: light switches, lighting devices, thermostats, door locks, window shades, kitchen appliances, washers & dryers, home audio and video equipment, even pet food dispensers. You get the idea. It has also been called home automation. All of this communication occurs autonomously, without human intervention. The communication can be between and among these devices, so-called machine to machine or M2M communication. The data communication can also terminate in a compute server where the information can be acted on automatically, or made available to the user to intervene remotely from their smart mobile phone or any other remote Internet-connected device.
Another key concept is the promise of automated energy efficiency, with the introduction of “smart meters” with data communication capability, and also achieved in large commercial structures via the Leadership in Energy & Environmental Design program or LEED. Some may recall that when Bill Gates built his multi-million dollar mansion on Lake Washington in Seattle, he had “remote control” of his home built into it. Now, years later, Gates’ original home automation is obsolete. The dream of home automation has been around for years, with numerous Silicon Valley conferences, and failed startups over the years, and needless to say, home automation went nowhere. But it is this concept of effortless home automation that has been the Holy Grail.
But this is also where the glowing promise of The Internet of Things (IoT) begins to morph into a giant “hairball.” The term “hairball” was former Sun Microsystems CEO, Scott McNealy‘s favorite term to describe a complicated mess. In hindsight, the early euphoric days of home automation were plagued by the lack of “convergence.” I use this term to describe the inability of available technology to meet the market opportunity. Without convergence, there can be no market opportunity beyond early adopter techno geeks. Today, the convergence problem has finally been eliminated. Moore’s Law and advances in data communication have swept away the convergence problem. But for many years the home automation market was stalled.
Also, as more Internet-connected devices emerged it became apparent that these devices and apps were a hacker’s paradise. The concept of IoT was being implemented in very naive and immature ways and lacking common industry standards on basic issues: the kinds of things that the IETF and IEEE are famous for. These vulnerabilities are only now very slowly being resolved, but still in a fragmented ad hoc manner. The central problem has not been addressed due to classic proprietary “not invented here” mindsets.
The problem that is currently the center of this hairball, and from all indications is not likely to be resolved anytime soon. It is the problem of multiple data communication protocols, many of them effectively proprietary, creating a huge incompatible Tower of Babbling Things. There is no meaningful industry and market wide consensus on how The Internet of Things should communicate with the rest of the Internet. Until this happens, there can be no fulfillment of the promise of The Internet of Things. I recently posted “Co-opetition: Open Standards Always Win,” which discusses the need for open standards in order for a market to scale up.
A recent ZDNet post explains that home automation currently requires that devices need to be able to connect with “multiple local- and wide-area connectivity options (ZigBee, Wi-Fi, Bluetooth, GSM/GPRS, RFID/NFC, GPS, Ethernet). Along with the ability to connect many different kinds of sensors, this allows devices to be configured for a range of vertical markets.” Huh? This is the problem in a nutshell. You do not need to be a data communication engineer to get the point. And this is not even close to a full discussion of the problem. There are also IoT vendors who believe that consumers should pay them for the ability to connect to their proprietary Cloud. So imagine paying a fee for every protocol or sensor we employ in our homes. That’s a non-starter.
The above laundry list of data communication protocols, does not include the Zigbee “smart meter” communications standards war. The Zigbee protocol has been around for years, and claims to be an open industry standard, but many do not agree. Zigbee still does not really work, and a new competing smart meter protocol has just entered the picture. The Bluetooth IEEE 802.15 standard now may be overtaken by a much more powerful 802.15 3a. Some are asking if 4G LTE, NFC or WiFi may eliminate Bluetooth altogether. A very cool new technology, energy harvesting, has begun to take off in the home automation market. The energy harvesting sensors (no batteries) can capture just enough kinetic, peizo or thermoelectric energy to transmit short data communication “telegrams” to an energy harvesting router or server. The EnOcean Alliance has been formed around a small German company spun off from Siemens, and has attracted many leading companies in building automation. But EnOcean itself has recently published an article in Electronic Design News, announcing that they have a created “middleware” (quote) “…to incorporate battery-less devices into networks based on several different communication standards such as Wi-Fi, GSM, Ethernet/IP, BACnet, LON, KNX or DALI.” (unquote). It is apparent that this space remains very confused, crowded and uncertain. A new Cambridge UK startup, Neul is proposing yet another new IoT approach using the radio spectrum known as “white space,” becoming available with the transition from analog to digital television. With this much contention on protocols, there will be nothing but market paralysis.
Is everyone following all of these acronyms and data comm protocols? There will be a short quiz at the end of this post. (smile)
The advent of IP version 6, strongly supported by Intel and Cisco Systems has created another area of confusion. The problem with IPv6 in the world of The IoT is “too much information” as we say. Cisco and Intel want to see IPv6 as the one global protocol for every Internet connected device. This is utterly incompatible with energy harvesting, as the tiny amount of harvested energy cannot transmit the very long IPv6 packets. Hence, EnOcean’s middleware, without which their market is essentially constrained.
The Brave New World of Internet privacy issues relating to this tidal wave of Big Data are not even considered here, and deserve a separate post on the subject. A recent NBC Technology post has explored many of these issues, while some have suggested we simply need to get over it. We have no privacy.
Stakeholders in The Internet of Things seem not to have learned the repeated lesson of open standards and co-opetition, and are concentrating on proprietary advantage which ensures that this market will not effectively scale anytime in the foreseeable future. Intertwined with the Tower of Babbling Things are the problems of Internet privacy and consumer concerns about wireless communication health & safety issues. Taken together, this market is not ready for prime time.
Years ago I was invited to join a newly forming Intel marketing group comprised primarily of Ivy League MBA‘s, with a few of us Intel veterans thrown into the mix to create some cross-fertilization in the group. This was the famous period of Harvard MBA’s belief that they were all marketing gods, and needed only to be ruthless: greed was good. One of my Harvard educated Intel colleagues related a story of HBS students playing an allegedly “friendly” game of football on the green next to the Charles River. One player suffered a compound fracture of his leg. While waiting for an ambulance, a member of the other team came up and demanded to know when the game would resume. Everything was about competition and one-upmanship. To this day I remember fondly (believe it or not) that this was also the mantra of our Intel group. Who got the girl on Friday night: who got stuck with the bar tab. There was a big scoreboard in the sky tabulating the imaginary results. Perhaps against the odds, our group survived and succeeded famously. Many of us are still very close personal friends. One is the godfather of my son.
Ray Rund, one of my Intel colleagues, and Harvard MBA told me another story of HBS students eager to take John Kotter‘s leadership class, at the time called “Power & Influence.” They all thought that Kotter’s course would teach them how to become the meanest “sons-of-bitches in the valley.” Ray amusingly remembered that Kotter’s course taught them the exact opposite: managers must first learn to be humble, connect and gain the respect of their subordinates, before attempting to lead, or they would be doomed. The book version of Kotter’s course is now 30 years old, but is still as relevant as ever. It is filled with case studies of “hard asses” who failed miserably.
I have often explained Kotter’s point to others by using the example of an old WWII film clip of Lord Louis Mountbatten, leading the beleaguered British commandos in Burma against overwhelming Japanese forces. Mountbatten was standing on a pedestal in some godforsaken Burmese village, with his troops standing at attention in rank. The first thing Mountbatten did was to beckon his troops to break rank and come up near him. The old film clip speaks volumes about Mountbatten’s intuitive understanding of leadership.
Specialists in organizational behavior probably like to debate these points, pointing out the Peter Drucker “high task, low relationship” approach to change management. Basically, like the George S. Patton “school of management” in the film, kick ass and take names until the organization submitted to his will. As the film shows, this approach has its drawbacks.
Ironically, I had learned Kotter’s lesson in leadership in my first assignment at Intel, managing 250 people running a semiconductor manufacturing operation. On my first day, my manager introduced me to my people, half-jokingly saying to them, “Let’s see how long it takes you to break your new supervisor!” Clearly, I needed to get with their program. Just for the record, my manager, Dean Persona and I became fast friends. My employees had the knowledge of how to get the job done, and I did not. It is a valuable lesson I have never forgotten. I managed to get the respect of my people by respecting them. When an extra effort was required, I could ask for that extra effort, and it was given willingly. Others failed miserably in their jobs while I rapidly rose to bigger and better things.
When I noticed this HBR blog post on leadership, titled “Connect…Then Lead,” I thought of Kotter, who is still teaching at Harvard. I also see another potential case study of failure developing now. For all of the good intentions of this manager, he is failing to understand Kotter’s lesson about leadership. This manager professes openness. This manager made a point to take a very modest office and leave his door open. But despite these superficial moves, in reality, the substance of his management style is that of an austere, autocratic manager who isolates himself behind a wall of handlers who manage access to him, even reading all of his emails, which is offensive to many. It takes weeks to schedule a simple meeting with this manager if you can successfully maneuver the gauntlet of handlers. Then the meeting will typically start late, only to be ended by another handler interrupting the meeting, tapping on their watch, to extract the manager early from the meeting, because he is so “busy” he must move on. He demands that his schedule is cleared for his own priorities.
The rudeness and distant behavior of this manager is obviously having a serious impact on the manager’s effectiveness with his people, but the manager seems more interested in his own matters. It has been noted by some that it is not uncommon for autocrats to view themselves as being open and welcoming toward their people when in reality the manager’s true behavior exhibits an extreme distance, lack of sensitivity, and the subordinates are intimidated by his overbearing personal style. This is all laid out in Kotter’s books and in the following HBR Blog article. History seems to repeat itself.
Andrew Carnegie, a scion of the Gilded Age of Monopolists at the turn of the 20th Century, is noted for this quote about the importance of his employees…
“Take away my factories, my plants, take away my railroads, my ships, my transportation; take away my money, strip me of all these, but leave me my men and in two or three years, I will have them all again.” Despite Carnegie’s megalomaniacal tendencies, he nevertheless seemed to understand the importance of having a strong bond with his people.
Connect, Then Lead
Reblogged from the HRB Blog
by Amy J.C. Cuddy, Matthew Kohut, and John Neffinge
Niccolò Machiavelli pondered that timeless conundrum 500 years ago and hedged his bets. “It may be answered that one should wish to be both,” he acknowledged, “but because it is difficult to unite them in one person, it is much safer to be feared than loved.”
Now behavioral science is weighing in with research showing that Machiavelli had it partly right: When we judge others—especially our leaders—we look first at two characteristics: how lovable they are (their warmth, communion, or trustworthiness) and how fearsome they are (their strength, agency, or competence). Although there is some disagreement about the proper labels for the traits, researchers agree that they are the two primary dimensions of social judgment.
Why are these traits so important? Because they answer two critical questions: “What are this person’s intentions toward me?” and “Is he or she capable of acting on those intentions?” Together, these assessments underlie our emotional and behavioral reactions to other people, groups, and even brands and companies. Research by one of us, Amy Cuddy, and colleagues Susan Fiske, of Princeton, and Peter Glick, of Lawrence University, shows that people judged to be competent but lacking in warmth often elicit envy in others, an emotion involving both respect and resentment that cuts both ways. When we respect someone, we want to cooperate or affiliate ourselves with him or her, but resentment can make that person vulnerable to harsh reprisal (think of disgraced Tyco CEO Dennis Kozlowski, whose extravagance made him an unsympathetic public figure). On the other hand, people judged as warm but incompetent tend to elicit pity, which also involves a mix of emotions: Compassion moves us to help those we pity, but our lack of respect leads us ultimately to neglect them (think of workers who become marginalized as they near retirement or of an employee with outmoded skills in a rapidly evolving industry).
To be sure, we notice plenty of other traits in people, but they’re nowhere near as influential as warmth and strength. Indeed, insights from the field of psychology show that these two dimensions account for more than 90% of the variance in our positive or negative impressions we form of the people around us.
So which is better, being lovable or being strong? Most leaders today tend to emphasize their strength, competence, and credentials in the workplace, but that is exactly the wrong approach. Leaders who project strength before establishing trust run the risk of eliciting fear, and along with it a host of dysfunctional behaviors. Fear can undermine cognitive potential, creativity, and problem solving, and cause employees to get stuck and even disengage. It’s a “hot” emotion, with long-lasting effects. It burns into our memory in a way that cooler emotions don’t. Research by Jack Zenger and Joseph Folkman drives this point home: In a study of 51,836 leaders, only 27 of them were rated in the bottom quartile in terms of likability and in the top quartile in terms of overall leadership effectiveness—in other words, the chances that a manager who is strongly disliked will be considered a good leader are only about one in 2,000.
A growing body of research suggests that the way to influence—and to lead—is to begin with warmth. Warmth is the conduit of influence: It facilitates trust and the communication and absorption of ideas. Even a few small nonverbal signals—a nod, a smile, an open gesture—can show people that you’re pleased to be in their company and attentive to their concerns. Prioritizing warmth helps you connect immediately with those around you, demonstrating that you hear them, understand them, and can be trusted by them.
When Strength Comes FirstMost of us work hard to demonstrate our competence. We want to see ourselves as strong—and want others to see us the same way. We focus on warding off challenges to our strength and providing abundant evidence of competence. We feel compelled to demonstrate that we’re up to the job, by striving to present the most innovative ideas in meetings, being the first to tackle a challenge, and working the longest hours. We’re sure of our own intentions and thus don’t feel the need to prove that we’re trustworthy—despite the fact that evidence of trustworthiness is the first thing we look for in others.
Amy J.C. Cuddy is an associate professor of business administration at Harvard Business School. Matthew Kohut and John Neffinger are the authors of Compelling People: The Hidden Qualities That Make Us Influential (Hudson Street Press, August 2013) and principals at KNP Communications.
Wikipedia defines Specsmanship as the inappropriate use of specifications or measurement results to establish the putative superiority of one entity over another, generally when no such superiority exists. It is commonly found in high fidelity audio equipment, automobiles and other apparatus where uneducated users identify some numerical value upon which to base their pride or derision, whether or not it is relevant to the actual use of the device. Smartphones and the early microprocessor market are also examples.
Two Specsmanship Case Studies
Most recently, we are seeing specsmanship in the smartphone market. As the smartphone market has matured into 7th, 8th, 9th generations of smartphones, the differentiation among products has been reduced to smaller and smaller differences in the products : resolution of the camera, display size or alleged brightness, etc.. In earlier generations, Apple, and the Android phone manufacturers created a highly effective intangible market need to possess their latest generation phone in which features were less important. I called this market need the smartphone “Star Wars” phenomenon causing people to line up around the block as if to see the latest Star Wars film. Most market analysts now agree that the smartphone market frenzy has run its course. Apple’s strategy to reinvigorate the market by creating a higher price point product has predictably fallen flat. Apple’s move surprised me because the marketers at Apple seemed to miss the consumer market sentiment. Water resistance in my view was the last major device feature with a market need to protect phones from the dreaded “toilet drop.” Samsung introduced water resistance in the 5th generation Galaxy, and permanently in the Galaxy 7. I have not been motivated to buy a new phone since the Galaxy 7.
In another, more dramatic and pivotal example, my first personal experience of the specsmanship phenomenon was at Intel, during the original first generation microprocessor war: the Intel 8086 versus the Motorola 68000. Without diving too deeply into the technical specifications, the Intel 8086 on its face was technically inferior to the Motorola 68000 at a critical time when microprocessors were very new, customers had doubts, and the market was just beginning to establish a foothold in electronics design. Facing this marketing challenge, Intel’s Vice President of Marketing at that time, Bill Davidow, made a momentous decision to “differentiate” Intel and the 8086 not its specifications, but on Intel’s long-term vision for its microprocessor family of products and to focus its marketing efforts on senior management executives of its customers, not the engineers. Davidow famously delivered a presentation to the Intel sales force, “How To Sell A Dog.” The message was to ignore the spec and concentrate on the customers higher level needs, and the security of an investment in Intel with its long-term vision to provide them with greater value and competitive advantage.
Motorola fatefully decided to concentrate its marketing strategy entirely on the superior technical specifications of the 68000, poignantly winning a small skirmish but losing the war. Intel dominates the general purpose microprocessor market to this day. The Intel versus Motorola story is definitively detailed in Bill Davidow’s now famous book, Marketing High Technology: An Insider’s View. Davidow’s book also includes numerous gems of insight into marketing. Bill’s thoughts on the barriers to a new entrant into an existing market have stuck with me over the years.
If the smartphone market is ever to revive, it needs to learn from Davidow’s lesson, ignore the specs, and concentrate on creating a higher level marketing message that meets deep customer needs.
Bill Davidow, former Intel Marketing Vice President
HBS Professor Ted Levitt’s Total Product Concept And Its Influence On Davidow
Though I have met with Bill Davidow many times, spent time with him, and invited him to speak with executives of an emerging technology company, I have never directly asked him about the degree to which Harvard Professor Ted Levitt’s concept of a Total Product influenced him. It does seem highly likely that it is the case. By way of example, marketers often refer to “product differentiation.” Specsmanship is the lowest possible form of product differentiation. Creating a higher level of product value is the true essence of product differentiation. This is also the essence of Levitt’s now legendary Total Product. What is different in the Intel case is my memory of how Levitt’s Total Product model, was adapted at Intel. I will explain.
Levitt’s classic Total Product model is graphically displayed here:
In my personal view and recollection which I show here, I believe Davidow focused on the “Augmented Product,” “Expected Product” and the “Potential Product,” and avoided the “Generic Product” to win the specsmanship war with Motorola. I also distinctly remember a slightly different Intel model which is shown below.
The Intel Variation On The Ted Levitt Total Product Model
It is my recollection that we at Intel, and most likely Bill Davidow in particular, adapted the Ted Levitt model to Intel’s particular new market realities, and focused on the outer circle, “Corporate Vision” and “Product Roadmap” to win the microprocessor war. The “Engineering Deliverable” is not a product. It is only a naked engineering project deliverable. Specsmanship does not make it a product. The “Corporate Vision” and “Product Roadmap” offer greater long-term value to customers, and ultimately create a powerful brand image.
The term “Internet of Things” (IoT) is being loosely tossed around in the media. But what does it mean? It means simply that data communication, like Internet communication, but not necessarily Internet Protocol packets, is emerging for all manner of “things” in the home, in your car, everywhere: light switches, lighting devices, thermostats, door locks, window shades, kitchen appliances, washers & dryers, home audio and video equipment, even pet food dispensers. You get the idea. It has also been called home automation. All of this communication occurs autonomously, without human intervention. The communication can be between and among these devices, so called machine to machine or M2M communication. The data communication can also terminate in a compute server where the information can be acted on automatically, or made available to the user to intervene remotely from their smart mobile phone or any other remote Internet connected device.
Another key concept is the promise of automated energy efficiency, with the introduction of “smart meters” with data communication capability, and also achieved in large commercial structures via the Leadership in Energy & Environmental Design program or LEED. Some may recall that when Bill Gates built his multi-million dollar mansion on Lake Washington in Seattle, he had “remote control” of his home built into it. Now, years later, Gates’ original home automation is obsolete. The dream of home automation has been around for years, with numerous Silicon Valley conferences, and failed startups over the years, and needless to say, home automation went nowhere. But it is this concept of effortless home automation that has been the Holy Grail.
But this is also where the glowing promise of The Internet of Things (IoT) begins to morph into a giant “hairball.” The term “hairball” was former Sun Microsystems CEO, Scott McNealy‘s favorite term to describe a complicated mess. In hindsight, the early euphoric days of home automation were plagued by the lack of “convergence.” I use this term to describe the inability of available technology to meet the market opportunity. Without convergence there can be no market opportunity beyond early adopter techno geeks. Today, the convergence problem has finally been eliminated. Moore’s Law and advances in data communication have swept away the convergence problem. But for many years the home automation market was stalled.
Also, as more Internet-connected devices emerged it became apparent that these devices and apps were a hacker’s paradise. The concept of IoT was being implemented in very naive and immature ways and lacking common industry standards on basic issues: the kinds of things that the IETF and IEEE are famous for. These vulnerabilities are only now very slowly being resolved, but still in a fragmented ad hoc manner. The central problem has not been addressed due to classic proprietary “not invented here” mindsets.
The problem that is currently the center of this hairball, and from all indications is not likely to be resolved anytime soon. It is the problem of multiple data communication protocols, many of them effectively proprietary, creating a huge incompatible Tower of Babbling Things. There is no meaningful industry and market wide consensus on how The Internet of Things should communicate with the rest of the Internet. Until this happens, there can be no fulfillment of the promise of The Internet of Things. I recently posted “Co-opetition: Open Standards Always Win,” which discusses the need for open standards in order for a market to scale up.
A recent ZDNet post explains that home automation currently requires that devices need to be able to connect with “multiple local- and wide-area connectivity options (ZigBee, Wi-Fi, Bluetooth, GSM/GPRS, RFID/NFC, GPS, Ethernet). Along with the ability to connect many different kinds of sensors, this allows devices to be configured for a range of vertical markets.” Huh? This is the problem in a nutshell. You do not need to be a data communication engineer to get the point. And this is not even close to a full discussion of the problem. There are also IoT vendors who believe that consumers should pay them for the ability to connect to their proprietary Cloud. So imagine paying a fee for every protocol or sensor we employ in our homes. That’s a non-starter.
The above laundry list of data communication protocols, does not include the Zigbee “smart meter” communications standards war. The Zigbee protocol has been around for years, and claims to be an open industry standard, but many do not agree. Zigbee still does not really work, and a new competing smart meter protocol has just entered the picture. The Bluetooth IEEE 802.15 standard now may be overtaken by a much more powerful 802.15 3a. Some are asking if 4G LTE, NFC or WiFi may eliminate Bluetooth altogether. A very cool new technology, energy harvesting, has begun to take off in the home automation market. The energy harvesting sensors (no batteries) can capture just enough kinetic, peizo or thermoelectric energy to transmit short data communication “telegrams” to an energy harvesting router or server. The EnOcean Alliance has been formed around a small German company spun off from Siemens, and has attracted many leading companies in building automation. But EnOcean itself has recently published an article in Electronic Design News, announcing that they have a created “middleware” (quote) “…to incorporate battery-less devices into networks based on several different communication standards such as Wi-Fi, GSM, Ethernet/IP, BACnet, LON, KNX or DALI.” (unquote). It is apparent that this space remains very confused, crowded and uncertain. A new Cambridge UK startup, Neul is proposing yet another new IoT approach using the radio spectrum known as “white space,” becoming available with the transition from analog to digital television. With this much contention on protocols, there will be nothing but market paralysis.
Is everyone following all of these acronyms and data comm protocols? There will be a short quiz at the end of this post. (smile)
The advent of IP version 6, strongly supported by Intel and Cisco Systems has created another area of confusion. The problem with IPv6 in the world of The IoT is “too much information” as we say. Cisco and Intel want to see IPv6 as the one global protocol for every Internet connected device. This is utterly incompatible with energy harvesting, as the tiny amount of harvested energy cannot transmit the very long IPv6 packets. Hence, EnOcean’s middleware, without which their market is essentially constrained.
The Brave New World of Internet privacy issues relating to this tidal wave of Big Data are not even considered here, and deserve a separate post on the subject. A recent NBC Technology post has explored many of these issues, while some have suggested we simply need to get over it. We have no privacy.
Stakeholders in The Internet of Things seem not to have learned the repeated lesson of open standards and co-opetition, and are concentrating on proprietary advantage which ensures that this market will not effectively scale anytime in the foreseeable future. Intertwined with the Tower of Babbling Things are the problems of Internet privacy and consumer concerns about wireless communication health & safety issues. Taken together, this market is not ready for prime time.
After something of a long hiatus, we have an emerging epic World Chip War Three, which is being fought over “CODECS,” and related chips which power our smartphones. Not that the semiconductor industry hasn’t been innovating and evolving, but this is something much bigger. Today’s news about Broadcom’s bid for Qualcomm omits the other crucial player in this new War of Titans, Intel, which has risen from earlier ignominious failures to become the third player in WCW III.
Intel: The Missing Piece In The Epic New Global Microchip Battle
In the beginning, in the early 1970’s there were the original semiconductor companies like Intel, AMD, Motorola, and not far behind, the Japanese giants NEC, Fujitsu, and Mitsubishi. The first great Chip War was in memory chips, primarily as replacements for magnetic core memory and for the emerging new minicomputer industry. The Japanese fought World Chip War One as a nation, using the power and influence of its entire government to compete against the American companies. At the behest of the U.S. government itself, IBM bought a minority share in Intel to potentially defend Intel against any hostile bid from the Japanese. Not long afterward, the Great Microprocessor War, World Chip War Two exploded, primarily between Intel and Motorola. Intel was the victor of World Chip War Two, primarily due to the extraordinary marketing genius of Intel Marketing VP Bill Davidow’s “Crush” campaign, not superior Intel technology. It was a huge lesson of the importance of marketing over having the “coolest technology.” Now after something of a long hiatus, we have World Chip War Three, which is being fought over “CODECS,” and related chips which power our smartphones. Today’s news about Broadcom’s bid for Qualcomm omits the other crucial player in this new War of Titans, Intel, which has risen from earlier ignominious failures to become the third player in WCW III.
Broadcom’s Bid For Qualcomm Marks Upheaval in Chip Industry
The California-based chip maker offered made an unsolicited $105 billion takeover bid for Qualcomm
Broadcom proposed to acquire rival chip maker Qualcomm for $70 per share.PHOTO: MIKE BLAKE/REUTERS
By
Ted Greenwald
BroadcomLtd.AVGO 1.42% made an unsolicited $105 billion takeover bid for QualcommInc.,QCOM 1.15% the chip industry’s boldest bet yet that size will equal strength at a time of technological upheaval.
The approach, which would mark the biggest technology takeover ever, shows how tech companies are positioning themselves for a world where a range of chip-driven devices—from phones to cars to factory robots—are transmitting, receiving and processing evermore information. Broadcom Chief Executive Hock Tan already has used acquisitions to build the company into the fourth-biggest chip maker by market value, part of a wave of industry consolidation as profits on some chips, such as those used in personal computers, are squeezed by sluggish sales and rising costs.
A combination with Qualcomm would create a behemoth whose chips manage communications among consumer devices and appliances, phone service providers, and data centers that are becoming the workhorses in artificial intelligence.
The deal is far from certain. San Diego-based Qualcomm, which said it would consider the proposal, is expected ultimately to rebuff it on the grounds that the price isn’t high enough, especially given the significant risk that regulators would block it, according to some analysts. Under typical circumstances, unfriendly bids like this are difficult to pull off; given the sheer size and complexity of Qualcomm, this one could be especially challenging, analysts said Monday.
Broadcom’s preference is to strike a friendly deal, but if it fails to do so, it would consider nominating Qualcomm directors who may be more amenable to a transaction, a person familiar with the matter said. The nomination deadline is Dec. 8 and the annual meeting at which the director vote would take place is likely be around March.
Broadcom offered $70 a share for Qualcomm, representing a 28% premium from its closing price on Thursday—before news reports on the expected approach.
Qualcomm shares ended trading Monday up 1.2% to $62.52, while Broadcom shares were 1.4% higher at $277.52.
Mr. Tan said he has been talking with Qualcomm for over a year about a possible tie-up. “Our strategy has been consistent,” Mr. Tan said in an interview. “When a business is No. 1 in technology and No. 1 in market position, we acquire it and put it on our Broadcom platform and grow through that strategy. Qualcomm has a very large sustainable franchise that meets those criteria.”
Should the deal be completed, Broadcom would take on Qualcomm’s leadership in developing the next wave of cellular technology, known as 5G, which is expected to roll out over the coming two years. That could give Broadcom a new growth engine, as 5G is expected to dramatically accelerate the speed and responsiveness of cellular communications necessary for applications like self-driving cars.
Broadcom was formed when Avago Technologies Ltd. bought the former Broadcom in 2015 for $39 billion and kept the name, and Mr. Tan has continued growing by acquisition. The company sells a diverse line of equipment for networking and communications. Its products include chips for Wi-Fi and Bluetooth technology that connect devices that are closer together—technologies that some analysts say are likely to grow less quickly than 5G.
“People will continue to use short-proximity wireless like Wi-Fi and Bluetooth, but the growth and money is clearly in 5G,” said analyst Patrick Moorhead of Moor Insights & Strategy.
Overall, Broadcom and Qualcomm have largely complementary product lines. But the possible Broadcom takeover is likely to face intense regulatory scrutiny, given the companies’ combined scale and the fact that they are both leaders in Wi-Fi and Bluetooth technology. The companies share customers including AppleInc., whose iPhones and iPads include components from both Qualcomm and Broadcom.
Qualcomm already has been under pressure from antitrust agencies in several jurisdictions, including the U.S. The company has paid hefty regulatory fines in China, South Korea and Taiwan.
Qualcomm was riding high as recently as a year ago after unveiling the chip industry’s largest-ever acquisition: a $39 billion proposed deal for NXP Semiconductors NV. The deal hasn’t closed yet, and Broadcom said Monday that its proposal would stand regardless of whether Qualcomm’s proposed acquisition of NXP is consummated under the current terms.
Since then, a string of hits by regulators, competitors, and customers including Apple has left the industry titan in a vulnerable position. Qualcomm’s profit in the fiscal year that ended Sept. 24 plummeted 57%, and its share price declined 18% in the 12 months through Thursday’s close compared with a 58% rise in the PHLX Semiconductor Sector Index. That was before news of Broadcom’s interest sent Qualcomm shares up nearly 13% on Friday.
Funding for the deal would come in the form of loans from a gaggle of banks, with additional cash from Silver Lake Management LLC. The private-equity firm, which already owns a stake in Broadcom, provided a commitment letter for $5 billion in convertible debt. Silver Lake said a substantial portion of that capital would come in the form of an equity investment from its Silver Lake Partners fund, with the remainder from other sources.
The equity contribution would be the single largest in the history of the firm, exceeding the roughly $1 billion it invested in the merger of Dell Inc. and EMC Corp.
Broadcom’s bid came days after the Singapore-based company announced plans to relocate its headquarters to the U.S., a move that could make it easier to pursue acquisitions of U.S. targets.
Broadcom’s earlier $5.5 billion offer to buy Brocade Communication Systems, based in San Jose, Calif., has been delayed due to a review by the Committee on Foreign Investment in the United States, which reviews international deals that raise concerns about national security.
Any deal to acquire Qualcomm would also receive close scrutiny, experts say. “Anything that has the word semiconductor in it gets rapt attention from CFIUS,” said James Lewis of the Center for Strategic and International Studies, a policy think tank. “The move to the U.S. is an effort to tamp down CFIUS concerns.”
The genius of Steve Jobs lies in his hippie period and with his time at Reed College, the pre-eminent Liberal Arts college in North America. To his understanding of technology, Jobs brought an immersion in popular culture. In his 20s, he dated Joan Baez; Ella Fitzgerald sang at his 30th birthday party. His worldview was shaped by the ’60s counterculture in the San Francisco Bay Area, where he had grown up, the adopted son of a Silicon Valley machinist. When he graduated from high school in Cupertino in 1972, he said, “the very strong scent of the 1960s was still there. After dropping out of Reed College, a stronghold of liberal thought in Portland, Ore., in 1972, Mr. Jobs led a countercultural lifestyle himself. He told a reporter that taking LSD was one of the two or three most important things he had done in his life. He said there were things about him that people who had not tried psychedelics — even people who knew him well, including his wife — could never understand.
Deep Down We All Know Silicon Valley Needs The Humanitarian Vision of Steve Jobs
The genius of Steve Jobs lies in his hippie period and with his time at Reed College. With the deep ethical problems facing technology now, we need Jobs vision more than ever.
To his understanding of technology, Jobs brought an immersion in popular culture. In his 20s, he dated Joan Baez; Ella Fitzgerald sang at his 30th birthday party. His worldview was shaped by the ’60s counterculture in the San Francisco Bay Area, where he had grown up, the adopted son of a Silicon Valley machinist. When he graduated from high school in Cupertino in 1972, he said, “the very strong scent of the 1960s was still there. After dropping out of Reed College, a stronghold of liberal thought in Portland, Ore., in 1972, Mr. Jobs led a countercultural lifestyle himself. He told a reporter that taking LSD was one of the two or three most important things he had done in his life. He said there were things about him that people who had not tried psychedelics — even people who knew him well, including his wife — could never understand.
Decades later Jobs flew around the world in his own corporate jet, but he maintained emotional ties to the period in which he grew up. He often felt like an outsider in the corporate world, he said. When discussing Silicon Valley’s lasting contributions to humanity, he mentioned in the same breath the invention of the microchip and “The Whole Earth Catalog,” a 1960s counterculture publication. Jobs’ experience rings with my own experience in the Santa Clara Valley at that time. Jobs and I were both deeply affected by Stewart Brand, the visionary behind The Whole Earth Catalog. Stanford professor Fred Turner has documented this period in his book “From the Counterculture to Cyberculture, Stewart Brand, the Whole Earth Network, and the Rise of Digital Utopianism.
For me this journey also began with the extraordinary vision of Marshall McLuhan, the Canadian professor of communications, who literally predicted the emergence of the World Wide Web and “The Global Village,” like some kind of modern day Nostradamus.
Stewart Brand is also featured in Tom Wolfe‘s book, “The Electric Kool-Aid Acid Test,” along with Ken Kesey’s Merry Pranksters and The Grateful Dead. I had the great good fortune to formally meet Brand at a COMDEX Microsoft event in a hangar at McCarren Airport in Las Vegas and was immediately impressed by him, as was Jobs. Not surprisingly, Brand was an invited guest at the Microsoft event, having already seized on the importance of the personal computer and the prospect of a networked World. Recently, in another anecdote on that time, Tim Bajarin shared a wonderful story about Job’s counterculture friend and organic gardener who remains the manager of the landscape at the new Apple campus, retaining the feeling of the original Santa Clara Valley orchard economy, that some of us can still remember.
It is important to think back to that time in the Bay Area and the euphoria of the vision of “digital utopianism.” It grounds me and helps me to understand where we have gone so terribly wrong.
Digital utopianism is now dead. I have written about its sad demise on this blog. The wonderful vision of digital utopianism and the Web has been perverted by numerous authoritarian governments, now including our own, resulting in a Balkanized Web and a dark Web pandering all kinds of evil. This is the problem we face and the urgent need for greater emphasis on ethics. What about human life, culture, and values? So many areas of technology are on the verge of deep philosophical questions. Uber has become the poster child for everything that is wrong with Silicon Valley. I ask myself, “What would Steve Jobs have said about Travis Kalanick and Uber?” I think we know the answer. Ironically, Silicon Valley has a center for research and study in ethics, the Markkula Center for Applied Ethics at Santa Clara University. Mike Markkula was an Intel marketing guy who quit Intel to join with two crazy long-haired guys in Cupertino.
I am a Liberal Arts & Humanities graduate myself, including graduate study at Oxford University. When I returned from England I asked the obvious question: Now how do I make a living? As it happened, I very improbably landed my first real job at Intel Corporation. When I asked why I was hired, the answer was that I was judged to have the requisite talent and aptitude if not the technical knowledge. I later developed a reputation for being very “technical” by the process of “osmosis,” by simply living in a highly rarified technical culture and receiving whiteboard tutorials from friendly engineers. I was thrown into a group of Ivy League MBA’s. We wistfully shared a desire to have the others’ educations, but simply working together made us all more effective. Amazingly my career grew almost exponentially and I attribute my success to that cross-fertilization.
While with Intel in Hillsboro Oregon, someone approached me to represent Intel at a talk with Reed students. I was cautioned that few if any Reed students would be interested in working for Intel, but they would be very intellectually engaging. That proved to be a significant understatement. In the end, I believe that perhaps two dozen “Reedies,” as they are known, joined Intel, one of whom went on to a stellar career as a Silicon Valley venture capitalist. A significant part of my later career has been devoted to using my Humanities education background to assess and translate deep technology in human terms for the benefit of both management and potential customers.
Today, nothing of my story would ever happen, but the influence of the Humanities and Arts in business seems more sorely needed than ever.
UPDATE:It is worth noting that this 2012 case study on a company in British Columbia, Mobile Data International, and its CEO Barclay Isherwood, attracted the ire of followers of Werner Erhard, prominent San Francisco New Age cult leader, with similarities to L. Ron Hubbard, founder of Scientology. It is a lens into New Age cults at that time. In the same way that Scientology reacts to attacks on itself. Erhard’s followers attacked this post in a frenzy of irrational hatred.
I can only hope that this is a serious effort to reverse this national problem of short-term thinking.
I have seen the problems with Canadian investors first hand, and have the following case study to share here.
Many light years ago, I worked for a pioneering wireless data company, Mobile Data International, in Richmond, BC. I thought this company was so promising, I came from the UK to join it. Regrettably, the Board of Directors and the Canadian investors were more interested in making a quick profit than in building the company to potentially be the company that established itself as a global leader in wireless data. The CEO of MDI, Barclay Isherwood, was an avid follower of California new-age guru, Werner Erhard aka Jack Rosenberg, of erhard seminars training, better known as “est”. Erhard’s career has been marked by allegations, controversy, and legal disputes. Leading academics have raised serious questions about Erhard’s qualifications, his businesses, and the highly authoritarian style of his organizations.
Finding that MDI was influenced by Erhard was a supreme irony. Years before, while in university, my housemate was also infatuated with Erhard. My housemate eventually quit university and joined “est” as one of Erhard’s trusted senior lieutenants. I got to see “est” up close and very personally. I was brow beaten by my friend, who tried to convince me how important it was to take “the training” as they called it, at a price I could not afford. I was disturbed enough from what I saw from outside the cult, that nothing altered my view that est was extremely dangerous. Since that time, Erhard has run from his critics, and reincarnated himself and “est” into a new group called “The Forum” and another group called “Landmark.”
Isherwood was spending company money to have Erhard’s people “hang out” at MDI, and he kept his girlfriend, Evi Truu on the payroll, supposedly reporting to me, but via “pillow talk” apparently also reporting to Isherwood himself. The Board took no action, employees were asking questions among themselves, and morale was suffering. I brought Intel’s legendary Marketing VP, Bill Davidow to MDI for a speaking engagement. I was flabbergasted to be told that no one liked Davidow, as he was too “arrogant.” Ironically, they got their assessment backwards: they were too arrogant to get Davidow. The company was floated on the Toronto exchange much too early, and as a consequence, MDI was eventually sold for a relative pittance to Motorola Canada in a hostile takeover. Isherwood has tried to take credit for selling out to Motorola, but the truth is otherwise.
The investors made a modest return, but Canadian investors don’t seem to think like Silicon Valley. In a strikingly similar startup situation in Silicon Valley, the CEO, actually an Intel sales organization alumni, had become infatuated with the alleged “supernatural powers of crystals” and his belief system became part of the company culture. The investors quickly became deeply concerned about their investment and their fiduciary duty. The question was, “How could this have happened?” and “We need to move to fix this immediately or face consequences.” My former Intel boss, Barry Cox, was brought in by the Board of Directors to fire the CEO, take drastic action and turn the company around. Obviously, nothing like this happened with MDI.
In the years since, I have seen offers in California in the hundreds of millions turned down flat, and million dollar cheques thrown back across the table. The MDI employees were mostly laid off and MDI’s doors were eventually shuttered. The MDI building, an excessively elegant structure that would have raised eyebrows in California, sat idle in Richmond for 20 years, until it was finally leased again as the security headquarters, ringed in barbed wire, for the 2010 Olympics.
Let’s hope that this new realization of the need to build innovation in Canada strikes a chord, and that Canada doesn’t repeat the mistakes that occurred at Mobile Data International.
mayo615 