Business ecosystems form around problems to solve and pain to soothe. More problems are beyond the frontier of our current business landscape than within it. Nurture new business ecosystems beyond the frontier. Get to know the people beyond the edge, whose opportunities are cut short by problems we may be able to solve. Survey and map problems, catalogue the pain that needs to be relieved, understand the roots of pain. Connect new customers with new partners to create new ecosystems in new places.
Dell, Xilinx, ARM Holdings, Nicole St. Claire Knobloch, Bill Gates
Bill Gates authored an opinion piece in the Wall Street Journal this January. His topic was metrics. His title was “My Plan to Fix the World’s Biggest Problems.”[i] He began by sharing an article on the development of steam power — a 19th century analogue to the semiconductor industry.
“We can learn a lot about improving the 21st-century world from an icon of the industrial era: the steam engine.
“Harnessing steam power required many innovations, as William Rosen chronicles in the book ‘The Most Powerful Idea in the World.’ Among the most important were a new way to measure the energy output of engines and a micrometer dubbed the “Lord Chancellor” that could gauge tiny distances.
“Such measuring tools, Mr. Rosen writes, allowed inventors to see if their incremental design changes led to the improvements — such as higher power and less coal consumption — needed to build better engines. There’s a larger lesson here: Without feedback from precise measurement, Mr. Rosen writes, invention is ‘doomed to be rare and erratic.’ With it, invention becomes ‘commonplace’.”
Gates went on to discuss the power of the UN Millennium Goals and their (to many) surprising effectiveness in guiding shared action on the world’s biggest problems. Goal number four, reducing childhood mortality worldwide, embodies a metric that is simple — how many children died this year? — and yet in order to move the needle requires a multitude of integrated contributions toward the shared goal.
Public health as a field has become skilled at focusing on specific strategic measures–witness the success of controlling most infectious diseases and eliminating smallpox and — almost — polio. Business ecosystems need the same focus on strategic, industry-wide objectives. Interestingly, recently the focus on reducing electric power in information technology has begun to take on characteristics of a broad shared goal that integrates a variety of contributions.
Childhood deaths have declined dramatically over the two decades of campaigns to address it.
Global under-five deaths, millions, 1990-2011
Source: Unicef http://www.childinfo.org/mortality_underfive.php
Shared goals move the world because they inspire us in addition to providing orientation. Technology in particular rewards dedication, persistence and creativity, as well as — usually — working for team credit and suppressing one’s ego. Big, well-considered goals motivate the best people; e.g. X Prizes, grand challenges, the campaign to eradicate smallpox, and the campaign to reduce child deaths.
A story from ARM Holdings begins many years ago when a major partner wanted chips for mobile phones. This company suggested ARM limit its processor to a 250-milliwatt budget for electrical power — tiny by computer standards — and asked that ARM learn how to double the processing capability of chips every 18 months while keeping power constant. Of course ARM could have rejected this technology strategy but, by embracing it, ARM learned how to do sophisticated power saving in advance of its competitors. This in turn helped the entire ecosystem to succeed with small devices of all kinds, and energy efficiency is today one of ARM’s most distinctive competencies.[ii]
The point is that co-evolving with a customer to tackle a difficult customer problem — and persisting at it — can be a surprisingly reliable, if patience-requiring, route to acquiring unique capabilities and entering new markets.
The theme of fixing on targets outside of our reach, of aiming at goals beyond the frontier of business as usual, is needed more and more today. Business ecosystems seem to work best when they are chartered and measured by broad important goals. And once these goals have been set, there is nothing like the field of practice for figuring out how to proceed.
My adopted hometown of Concord, Massachusetts is the sort of place where strangers strike up conversations, and often the result is surprisingly relevant. On my way back to my writing office from dinner (bean salad and strong coffee at a little French cafe near the train station), I stopped in the local bookstore, thinking I might get some ideas. I found a book and struck up a conversation with a person working behind the counter named Nicole St. Claire Knobloch.[iii]
We started talking about business leadership and the environment and she seemed quite plugged in. Turns out she is a global warming expert and activist who has worked for major environmental groups in Washington, for think tanks, and for Ford Motor Company. Frustrated with both lack of progress and (in her view) the lack of effectiveness of the environmental movement, she is temporarily holed up near Concord writing a magazine article on a theory of change for the environmental movement. There is local Concord precedent for writing about social change and the environment. Henry David Thoreau’s Walden is the swimming pond most frequented by local kids, Ralph Waldo Emerson’s house is right around the corner from Main Street.
I asked if she could summarize her theory of change. She demurred, but when encouraged a bit more explained that the large systems that need changing in relation to global warming — such as energy and transportation — have systemic trigger points for change. These (my words) pain points identify places where new technologies and new operating and business models are needed.
I quickly asked her if she had a map of these trigger points. Yes — but unfortunately only a partial map. She recognizes that she needs help in mapping and analysis, and in part her writing is aimed at syndicating her method.
I mentioned that I had been on the phone earlier that day with two executives from a company who were talking about growing their business ecosystem. Their leadership model includes mapping “pain points” across a target territory in a systematic and comprehensive way. Once the pattern of pain has been identified, the company helps attract in partners that may have solutions. Often the solution comes from small, specialist companies, and the larger company may need to invest in or otherwise assist the company in bringing its solution to maturity and integrating it into the ecosystem. I did not mention it to her, but the company is Xilinx and the ecosystem surrounds their Smarter Vision Initiative. I was speaking with Steve Glaser and Dave Tokic, to be returned to in a later chapter.[iv]
Across the connected community, leaders from CEOs, to segment marketing leaders, to heads of ecosystem development are focused on identifying systems of pain points facing their customers and their customers’ customers — who might include big vertical players like an auto company — or could be a large cloud service provider like Baidu or a telecom company like China Mobile.
One way to think about this is as a process of sensing, amplifying and organizing to be responsive to customer pull. Authors John Hagel, John Seely Brown and Lang Davison in the excellent book The Power of Pull highlight the vitality and longevity of businesses that create and respond to pull, over those who primarily push. [v] In a world of fast-changing customer and market conditions, with a diversity that makes a single solution hard to sell, pull comes out ahead. The connected community before us is designed to amplify market pull from a multitude of sources. In particular, a great deal of management time and attention is invested in proactively seeking out pull from beyond the edges of its comfort zone, from markets and customers beyond its current frontiers. A constant, core-of-the-business effort to find pain points and turn them into pull and response is at the foundation of how the community expands.
Perhaps even more interesting, there seems to be a community of — for lack of a better word-explorers beyond the frontier, that spans companies and enables ad hoc conversations, working groups and small ecosystems to be assembled in response to pain and customer pull.
I like the story of how in 2007 Robert Hormuth of Dell made a breakthrough in understanding the customer pain about the electricity consumption of server farms and data centers. It was common knowledge that usage was rising fast. But how, he asked, could he get under the problem and get a handle on addressing it?
He suspected that much server power might be wasted running big chips at idle. After all, a good bit of the storage load that servers access is so-called “cold storage” of “cold data” — seldom needed but important to keep accessible. It did not seem possible that this class of computing, at least, needed powerful chips. He commissioned a study.
“The results were surprising and shocking,” said Hormuth. “They don’t need all the horsepower being thrown at them. They were just sitting there using up watts.”[vi]
He began to wonder if cell phone chips, obviously power misers, could be made into web servers. Robert had formerly been at Intel, and Ian Drew, a colleague and friend of his from Intel, was now head of marketing at ARM in the UK. Robert called him, which led quickly to plans for a meeting with Robert, Ian Drew and Ian Ferguson of ARM. Ian Ferguson’s job at the time was to live out beyond the edge, on the frontier among the big server users, and find pain, make friends and look for opportunity. At the time Ian Ferguson displayed the following self-description on the ARM directory web site:
Ian Ferguson… has spent years fighting from the corner of the underdog. Most of those scars are healing nicely. Ian is particularly passionate about taking ARM technology into new types of applications that do not exist or are at the very formative stages. Consequently, he is driving ARM’s server program with a view to reinvent the way the server function is implemented in networks as opposed to simply replacing incumbent platforms.[vii]
Late in 2007 Robert flew to Los Angeles to make a meeting happen among the three of them, and a small but very serious initiative was born.[viii] Chip design, development, licensing manufacturing is a multi-year process. The first thing that needed to be ascertained was when the capability of ARM-based chips would cross the threshold needed for servers. Second, what if any special features might need to be added to the basic chip design. For this second task, a server was set up running an obviously inadequate processor, but enough to identify any key limitations and suggest design tweaks. Third, what was the plan for an ecosystem? Dell does not make its chips, and it preferred more than one vendor.
Robert explains that as Dell and ARM got deeper into discussions they both put an emphasis on
“enabling more interest in an ecosystem — a fast paced ecosystem that provided our customers and us more choice.”[ix]
Dell and ARM began to work as a system to convert loud sounds of pain on the part of customers into a plan. The heart of the plan was to specify — and amplify — problems clearly so they could be understood by a cross-company, cross-department ad hoc ecosystem. Many partners would be involved: the ARM architecture group, the fabs and tool community, and the fabless semiconductor companies that would ultimately oversee designing and making the server chips.
There is method to this madness beyond the frontier. In China, for example, ARM has a team whose only job is to make connections among entrepreneurs in the tech space, accelerating commerce. Of course in the process it develops a comprehensive and nuanced understanding of local pain, players and priorities.
Ian Ferguson has now moved up a level and oversees a dozen teams like his former group in servers, all working beyond one frontier or another.
“ARM’s role in the chemical reaction is to be the catalyst. So, you’d sprinkle a little bit of magic pixie dust, and … then … it’s really the rest of the ecosystem.”[x]
He tries to sprinkle pixie dust evenly, and then get out of the scene. He tries not to influence the outcome. Only by doing this can he maintain the trust of ARM partners, and that of the prospective customer.
He described a recent situation where two of ARM’s server partners were introduced to a prospective customer, but only one would win. He stepped back and let the competition run. One won and one lost. I asked him if there were hard feelings and he said,
“No, because both know that I’m even handed, and they know this is just one of many introductions and competitions, and they expect to win their share.”[xi]
The lesson here is that growth can be achieved by systematic work beyond the edge. That work requires patience and tends to have a very long, multi-year gestation time. And the story of Robert Hormuth and Dell does not stand alone. At any given time any number of nascent ecosystems are being nurtured. Having a process of pioneering is essential to successfully bringing together group after group of lead customers, helpful allies, experts within and outside of the connected community, and entrepreneurs.
Finally, the connected community has a variety of members and ecosystems it can introduce potential partner to, each providing something different. In the next section we will emphasize customers whose needs can be met — at least in part — out of the enormous range of pre-existing technology available from partners. This is particularly true in the microcontroller and small device market, where flexibility, low cost and immediate delivery rule.
Overall, the connected community is designed to produce choice for customers and differentiation for producers, as we will examine in the next chapter.
[i] “My Plan to Fix The World’s Biggest Problems,” Bill Gates, The Wall Street Journal, January 25, 2013
[ii] Ian Thornton, ARM Holdings, personal communication, November 2012
[iii] Nicole St. Claire Knobloch, personal communication, April 2013
[iv] Steve Glaser and Dave Tokic, Xilinx, April 2013
[vi] Robert Hormuth, Dell, quoted in “ARM Muscles in on Intel’s Dominance in Datacenters.” HPCWire High Performance Computing, January 28, 2013
[vii] Ian Ferguson profile, ARM Community Network, 2012-2013 http://forums.arm.com/index.php?/user/104715-ian-ferguson/
[viii] Robert Hormuth, Dell, personal communication, April 2013
[x] Ian Ferguson, personal communication, April 2013
[xi] Ian Ferguson profile, ARM Community Network, 2012-2013 http://forums.arm.com/index.php?/user/104715-ian-ferguson/