News from the Rockwell Software TechEd Meeting

Our West Coast correspondent and senior technical editor, Dan Hebert, filed the following report about the Geoffrey Moore keynote at the Rockwell TechEd meeting. Noted author Geoffrey Moore gave the keynote address at Rockwell Automation's recent RSTechEd event, June 17-20 in Fla. The keynote summarized many of the innovation ideas detailed in Moore's books Crossing the Chasm and Dealing with Darwinism. The problem with many big-name keynote speakers at automation industry events is that they deal with manufacturing only peripherally, if at all. Not so in this case, as Moore consistently made points relevant to manufacturing. The theme of the presentation was innovation, a subject that has seemingly been beaten to death over the past decades. Moore managed to present a fresh, interesting and easy-to-understand take on the subject. The audience seemed generally interested both during and after the presentation, something that doesn't always happen during a typical automation industry keynote. Moore started by demonstrating the importance of innovation to firms in general and manufacturing enterprises in particular. Put simply, firms that don't introduce innovative products and services quickly become providers of commodities. Commodity providers don't enjoy high margins because they experience intense price competition. Because of globalization, the onset of commoditization is quicker than ever, and the intensity of price pressure is stronger than ever. Hence, the reference to Darwinism, as global competition quickly becomes a Darwinian competition for survival. Commoditization means low margins and innovation means high margins, at least until the innovative product or service is commoditized; hence, the need for constant innovation. Like all good authors and consultants, Moore is fond of four quadrant grids. Here is Moore's grid depicting the product lifecycle: Core                               Content Deploy                          Optimize Invent                          Outsource Moore's view, all products and services move from quadrant 1 to quadrant 2 to quadrant 3 to quadrant 4. Moore has two key insights with respect to the grid. First, the Core business of any firm should be products in the Invent and Deploy stages. What Moore calls Content, the Optimize and Outsource stages of a product, is what most firms erroneously label as their core businesses. For example, in the early 80s, IBM thought that its core business was mainframes because most of its revenues and profits were earned in this area. In reality, its core businesses were PC-based technologies, such as PC hardware, PC operating systems and PC application programs. These businesses were in the Invent and Deploy stages. IBM was pouring almost all of its technical and financial resources into its mainframe business. In reality, it should have been putting its best people and much of its money into PCs. Mainframes were still important; they just could have been supported with fewer people and less money. This is a problem that many in the audience, including your correspondent, immediately recognized from their past and present jobs. Companies tend to focus on the products bringing in most of the revenue. They ignore innovative products developed internally or externally. In IBM's case, the company could have bought externally developed PC technology from companies like Microsoft or Intel for a small fraction of the money it was pouring into the mature and rapidly commoditizing mainframe business. Moore gave another example of this phenomenon by relating how Xerox chose to focus on copiers while ignoring incredibly important and innovative products being developed in its own Palo Alto Research Center (PARC) lab. According to Wikipedia, PARC was founded in 1970 and is best known for inventing laser printing, Ethernet, the modern personal computer graphical user interface paradigm, object-oriented programming and ubiquitous computing. Moore's second key point: Innovation consists of more than inventing. It must be followed by deployment and optimization if revenue and profits are to be fully realized. Obviously, Xerox had the Invent stage of innovation down pat. It failed to commercialize its inventions because it would not commit resources to deployment. Moore contends that all products eventually move to the Outsource stage. This is a good thing for a company, as long as the human resources freed up by outsourcing are moved to deployment and optimization of new products.