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| | 10/14/2005
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| | Scoop
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| | Briefly noted, by Ron May
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| | Briefly noted, by Ron May
* I have attended five events this week thus far and still have one to go. Unfortunately, John Gartner's talk was scheduled for Yom Kippur. I won't say that Nik Rokop was responsible for that ingenious move, and it was probably just as much Gartner's fault, but I will probably commit one more sin to atone for and go. I won't eat lunch though. Hey guys, that is bad, and John, especially since you are Jewish. But it was set up months ago, and I really want to hear his talk, especially since I was involved heavily in introducing his book to the Chicago tech community.
Today's Q&A with Jack Welch at the SAP Business Forum was classic Jack. No mincing of words, laying it out there right on the line. I would get along well with this guy. He talks about candor, about transparency, and a lot of other things that seem to be just that --- talk --- in most of American business. I sense that Jack means it.
Each attendee received a copy of his new book, Winning. I will have the whole thing for you by Friday morning. Jack said some things that may or may not have been published, probably have been given the coverage he gets, about politics and President Bush, about why there are not more women running major companies, and a slew of other topics that national press people may be interested in. But he also had some very good practical insight. Just a for instance, if your boss is getting a lot of calls from the field and helping the field to add value, you're job is probably somewhat secure, but if your boss is calling the field to get information for a power point that will impress higher ups, your security is questionable. Jack made it clear, if you are not able to be candid and open in your company, don't whine, get your butt out of there. He said the same for how he handled things at GE. He wanted to let people know where they stood and what kind of future they could expect. The worst thing is to pull the plug on a guy who has been there thirty years, he said. Let people know early how they stand and let them move on so that they have time to build their career elsewhere. He seemed rather skeptical about interviews because people tend to put on their best face.
Jack also said that private equity adds lots of jobs despite its reputation for the contrary. He cited a local firm, Nalco Chemical, which was taken over by a private equity firm, Blackstone, and apparently, according to one guy in IT who asked a question of Jack, this has been a breath of fresh air. BTW, the questions were pre-selected and the questioners came up to the microphone to ask the questions.
Jack also said that one should not try to sell to the CEO --- I gathered he thought it is a waste of time -- but rather sell to the level that just high enough to make a decision. I was a little confused by what he was saying but it appeared to me that he was saying something about an aggregator, that the company you're selling to will buy one of these and one of those. You know, even though the PA system was fine, and I had no problem understanding Bill Wohl and Bill McDermott before Jack, I did have a bit of hard time catching everything Jack said. He has a Boston accent, is that right?
Anyway, he said that the CEO has some value I the incremental close, if I got that right.
Another point that hit home was Jack's comment that you demonstrate your commitment to something by the personnel decisions you make with an initiative. If you want to make sure that something is seen as a high priority, don't put a guy in charge of it who is two years away from retirement. Put someone who is highly visible and one of your up-and-comers in charge of it. Jack is not afraid to speak his mind and he did say that companies have to be up-front with their employees about outsourcing. He noted that George Bush has had a very tough year so far, and we are only nine months into his second term. If it does not start to turn around soon, Jack said, it will be too late, noting that second presidential terms tend to fall apart, and this one sooner than most. He also said that the Katrina/FEMA problem can be partially traced back to the organizational decision to put FEMA under Homeland Security, so when you are worried about bombs, you are not worried about wind and rain, he said.
Women don't run big companies, and don't hold me to this, but I think he said that there are eight women running $2B plus companies, and the reason, he said, is biology. It is not that the schools don't graduate plenty of women executives. The ratio is pretty even on graduation, he said, but twenty years out, there is a huge divergence and he attributed that to the desire of women to leave the work force and come back. Jack, have you said this stuff before in public or did you just choose the SAP Business Forum to get these pearls?
Bill Wohl was uncomfortable enough with the topic that he insisted on changing the subject.
I am not quoting word for word here, and will get the precise quotes off the tape for you, but this is close enough for government work or for newspaper work. Jack said that government does not add one dime in value to the capitalist system. It facilitates, but it is the entrepreneurs and the business people who add value. Jack, while I would love to believe you, and the University of Chicago would love to believe you, how did the internet get developed? Aren't you going to give some credit to government spending on research?
Anyway, Jack did remind us of how bad things were in the time of malaise back in the days of Jimmy Carter with a 22% prime rate, and huge inflation and unemployment. Today, the economy by comparison is doing great, he said.
I interviewed about two dozen attendees and found out a lot of information informally about their experiences with SAP and just in general what their firms are doing. A very interesting conversation with one guy from Kellogg who explained how they had a tough decision to make when they bought Keebler which had SAP. Keebler was a $3B company and Kellogg was a $5B company, and they decided to take the Keebler footprint as a model and bring the whole company into the SAP fold. It was no easy task, he explained, and I will have that for you.
The amazing thing is the companies I meet at a conference like this that I have never heard of and they are right in our own back yard. How many of you have heard of a $3B privately held firm called OSI in Aurora. Meat packing biz, around for a century. Used to be called Otto and Sons. There is no question that SAP is targeting the under $100MM market and they are offering pre-packaged solutions that take as little as a month to implement. One system takes 16 weeks, according to two people I talked to from Bearing Point. More on the conference next time. How many of you have heard of an elevator company called Cona or something like that in the Quad Cities?
* This morning before the SAP conference I attended a breakfast meeting of the Jobs For Youth program at the 410 Club in the Wrigley Building. This organization is responsible for getting 23,700 kids between the ages of 17 and 24 jobs! I believe that all of their work is in Chicago. One thing I like about JFY is that they lay out the facts for all to see. They had 56 hires in FY'05 at Strategic Edge Solutions/RTA Travel Center; 32 hires at Data Prompt International; 25 hires at Airserv; 20 hires at The Gap and 20 hires at Marshall Field's. They also got placements for 115 out of 143 ex-offenders who started their workshop!
They work primarily with African American and Hispanic low income families and they also emphasize women in their work. The demographics are 88.8% African American; 8.2% Hispanic; 58.8% women and 41.2% men. They also have 79.7% high school diplomas and GEDs.
During FY'05 they placed 1,065 people with an average wage of $8.33 an hour which is more than minimum wage but not enough to support a family on. Layton Olson tells me that they have a lot of computers in their offices.
Their website is www.jfychicago.org
The speaker was the CEO of CareerBuilder.com, Matt Ferguson. Matt is a young guy, probably about 38 or 39 years old, and he spoke convincingly on the subject. I have had this conversation several times with Layton Olson, who was there, by the way. The point is that diversity is not a goal for moral and ethical or for social justice reasons. It is a goal for competitive business reasons. Businesses that preach and practice diversity in hiring and especially in the middle management and upper management ranks do better in business. It is that simple. I am not fully aware of the studies that suggest this, but Matt did say that firms that are run by women --- is that right? --- have a 35% higher return on equity. He had some interesting statistics. McDonald's is a poster child for diversity hiring. A huge percentage of management is diverse. What was missing from the talk, in my view, was hard info. on diversity and innovation. Tell me why companies that practice diversity are more creative, and more innovative. Do they have a better appeal in the marketplace and why?
Matt Ferguson touted a new book by some Harvard professors which follows along the lines of Tom Friedman's book, The World is Flat. The other book is called something like Dynamic Specialization and Productive Friction. I am sure you can find it on Amazon. He also recommended Malcolm Gladwell's The Tipping Point.
* Tuesday night I attended the MIT-EF meeting on Technology Commercialization and innovation. I actually learned a lot despite having been to many of these panels before and in one way the discussion brought out some very significant issues that undergird the tech commercialization problem. You start with IP in a university. What happens to that IP? It can be licensed, patented, and it can become the basis for the creation of a company and presumably business. Dennis Serio of ILBIF, an angel group on the move these days, was there and he asked Mary Dicig, the moderator, why it is so hard for people in his group to get to the inside of a university and get access to the IP and possibly nurse it along. There are a variety of policy and legal reasons, from what I understood, why Mary will not just hand a list of companies to possible investors. They have to dig around on their own, she explained to Dennis. I was still confused by this conversation and asked for clarification. Is it IP or a company list that Dennis wants access to? Well, Mary understood it to be a company list. She said that if someone wants to come to her with a plan, a management team, etc., all laid out, she would be happy to talk, but no one is pounding at her door, she said.
Mary and Dennis, it turns out, were like two ships passing in the night. Dennis and his group does not have a plan all laid out. They want to look at the IP and get a feel for things; they want to get their arms around it and understand what possibilities there may be. As Dennis explained to me, IP out of a university is a crap shoot. And Bill Houston elaborated in a separate conversation after the meeting. He called it a pruning process, so that the investors or prospective investors can assess how serious the researchers/professors are about taking it to the next step, etc. As Dennis said to me, at Caterpillar you may be talking 18 to 30 months for development to a revenue producing product. Not so for universities, he believes.
Stanford, MIT and WARF at the University of Wisconsin, Madison have this issue resolved, it seems, while we still struggle with it. At Stanford and MIT, Bill Houston explained, they let the investors in early in the game, at a very early stage of development and they seed the soil with hundreds of possible and even actual firms. At WARF they have a screening process along the lines of what Dennis Serio seems to want here.
Much of this reminds me of what Neil Kane did with Advanced Diamond Technologies. He fished around, hung out, and got familiar with the lay of the land. He not only learned the technology, he got to know the professors and researchers behind the technology. He even had his scrapes with a few of them, most notably Dieter Gruen. The point is that it takes time to get to know the IP and the people. That access is not coming through Mary Dicig's office, most certainly. So, Dennis will have to do his own digging around if he wants to know what is what at UIC.
Mary did say that some people have come to her and asked for a zero-cost option for two years and she did not go for that. It is always a tricky business to figure out how far along the value creation continuum you want to be before you start bringing in investors. Bill Houston told me that Stanford and MIT and other major schools won't admit it, but companies are actually incubated in the school. It is wrong, he said and it is may not be legal even, but that is what happens in reality.
Dennis had the idea that some of his investors may want to hire grad students and pay for their work to move things along. That type of role makes sense to me. But Brenda Russell, a professor of cell biology, I believe, and a high up administrator at UIC, said that it is not all about money. It is about partnerships and teams and a lot of other things to get a company out of a research lab.
There may not be as big of a difference between Dennis' and Mary's Weltangschaaung (spelling?) which is German for "world view" as it seemed to me on Tuesday night, but one thing is certain: commercializing technology is not a linear Step One, Step Two, Step Three, process. It is fits and starts. Ask Tom Churchwell who has a coterie of CEOs on hand like Gary Conkright or a Bob Moss for the start-up of the day. It really requires a kind of assembly line of sorts with resources brought in at every stage. Mary at least appeared to me to want it all laid out, neat and pretty, business plan, management team, etc., in place. Dennis will not even attempt that. He just wants to get a look-see and feel comfortable. I am not looking to assign blame here. It is a complex process and what we need is more light than heat. We need to know and understand where each of us is coming from first. Mary appeared to be somewhat surprised that Dennis and his people may want to invest at the IP stage, before a company is even formed.
I like Mary Dicig because she is a live wire and she has enthusiasm for her job and for the jobs she has done over the years. She is also now afraid to say how and what she thinks. I have to reserve judgement until I know more, but on this one, Mary, I think we may differ. Viva la difference! That is what makes life interesting.
By the way, Dennis is a straight shooter who likes to mix it up a bit himself. He is not afraid to engage the debate and I like that. Michael Gruber, are you reading this? Ron Kirschner? And Dennis has heft, if you receive my meaning. He also tells me that seven of his group's investors went out to Motorola to look at IP as the result of the meeting they had.
Ed Bachner, by the way, is close to closing on a funding deal for Rosetta and he was in California recently. It was confirmed in the meeting that the $2MM from the ATP program has been spent at this point and then some. BTW, I found out that Gary Shorter went out of biz shortly after he got the $13K from Chicago Community Ventures after he won the business plan competition they held in March.
The most underappreciated wit in Chicago high tech is none other than Brenda Russell. Some audience member was questioning her on how many innovators there are out of the 25,000 students and professors at UIC. Brenda was great and very funny. She said, "if you want an exact number, it is 137." Brenda, you're brilliant and fast on your feet. That was so good I am still laughing. It was entirely tongue in cheek but we need more people who can engage in that kind of reparte. Ah, the advantages of being British!
The talk by Jim O'Connor of Motorola was quite enlightening. Motorola has adopted a Silicon Valley like financial model for accelerating the adoption of new technology and innovation. They fund projects, not for years, but for 6 months with traunches of $100K each. The idea is to take 100 ideas, whittle them down to ten to twenty five that they invest in and graduate between five and fifteen. The idea is short spurt cycles and then you double down. This reminds me of what Jack Welch was talking about. He said that managers refuse to place their bets affirmatively on one thing, the one differentiator. They sprinkle here and there, he said. iRadio is one example he gave of technology that was developed through this system at Motorola. O'Connor reports to Padmasree Warrior and my info. is that he does about half of her job.
Jack Curley who has now been promoted to run the NICC, or NASA Illinois Commercialization Center in DuPage County at the airport, otherwise known as a Hastert pork project --- but hey, why not?, everyone else has it too --- and he went through the stats on what NICC has done. I did not know these numbers until Jack went over them. They have given $2.3MM direct to 28 local companies and $1.3MM indirect to the same for a total of $4MM. They have also been involved in getting many firms funds from other sources. They work directly with the ten NASA research centers, but they work most closely with NASA Glenn in Ohio.
Some of the firms they work with include Firefly, Questek, EPIR, Cognitek, Advanced Thin Films, Net Guru (?), and a few others that I could not write down fast enough. We have said this before but it bears repeating. Questek is close to a deal with NASA Glenn. Their materials can be used by Bell Helicopters and the tests are showing that Questek does better than the status quo. Results should be known by mid-November, Jack said. Way to go, Ray Genellie of Questek! Hey, Tom Churchwell, that is a positive story, isn't it? Are you invested in Questek?
There is more, but let me call it quits today. The Navy guy who told us about dental research in the Navy had a few zingers of his own. They have a substance that can help teeth and it turns white to fit in. He said that they had a CO from Tennessee who wanted to have it colored orange. That guy knows how to give the one-two punch before you even know you have been hit.
BTW, Brenda Russell just formed a form with three colleagues from all over in June called Cell Habitats. She stressed joint mentoring and cross fertilization heavily. And Mary talked about doing patent mapping and citation analysis as a valuable tool in identifying the uses of research that has been done in the university. It has yielded some surprises, she explained. Patent mapping is finding references to a patent in other patents or inventions and citation analysis involves finding what references have been made to research articles. This has been around a long time, but the use in identifying possible applications is interesting. Brenda also said that when it comes to innovation, disruptive can be a problem. Incremental is better, she said. Disruptive and people don't get it and there is a lot of change required. Hey, that is reality. Jack Welch mentioned a company that went from zero employees in 2002 to $113MM last year, I think he said, doing of all things, de-icing of airplanes! Innovation takes place everywhere.
Monday night was the MEF and three good presentations by Patty Callahan, Debra Kurtz and Juli Bohm. These women all seem to know their stuff. Juli said do what Peter Drucker gets $50K a day to suggest: Use your own products.
It is 5:55pm and out of respect and observance of the holiday, I will quit now. And I will also not run ads today because I just don't feel right about that on Yom Kippur. Friday morning. |
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