Archive for November, 2009

Murder, Starvation, Catastrophe

November 30, 2009

As I’ve gotten older, I’ve found myself reading more and more history. I am told that the way to appreciate history is not to “play it in reverse” – that is don’t look at history from today’s perspective where you already know what happened.  You have to “play it forward” – what was it like to live in that place and time and to have to make the big decisions of the day?  It occurred to me several years ago that we think of historical trends as big things.  Nations moving against nations.  The rise and fall of societies.  Then I realized:  Many of the big events took place in  familiar terrain  – collections of people organized around a more or less well defined set of goals and working toward a common purpose. And if you go back in history far enough – say 1,000 years or so — the numbers are also pretty familiar,  usually less than a million people.  In fact, nations and societies with 10,000 to 200,000 people were the norm.  In other words, they were in many ways like the modern business enterprise.

That’s worth saying again:  except for the details of time and place, there is really not a whole lot of difference between  modern enterprises and  societies of antiquity. The fate of large groups of people is determined as much by human aspirations and failings, reactions to threats, wise use of resources, and  the emergence of leaders as by anything else.

So with that as a backdrop I want to ask a couple of questions that seem to be completely unrelated to each other.

Question 1:  Why didn’t the 1940’s Western Electric  videophone make it?

Sure, the structure of the industry mattered, but it wasn’t lack of innovation that doomed the videophone.  After all. Video conferencing is ubiquitous today. So why didn’t that technology make it when today, for a hundred dollars,  you can stream high quality video to another hundred dollar device?  The culture of innovation is fundamentally different today than it was when the videophone was developed by Bell Labs in the 1940’s.  In fact the species of innovator that Bell Labs represents is today very nearly extinct.

My Second Question is:  What was the person who chopped down the last tree on Easter Island thinking about while he was doing it?

In truth, I can’t claim credit for the question. It was posed by Jared Diamond in Collapse:  How Societies Choose to Fail or Succeed, an historical and geographical tour-de-force that poses a framework for looking at decisions that societies make on their way to success or failure.  Those decisions invariably relate to:

  1. environmental damage
  2. climate change
  3. hostile neighbors
  4. friendly trade partners, and
  5. cultural response

Let’s take the similarities between ancient societies and  modern enterprises seriously – they involve similar numbers of people, they define their own value systems.  The historically successful route for both was a kind of vertical integration that made it reasonable to work and innovate in relative isolation. The way that 21st century companies innovate in the face of environmental damage, climate change, and hostile neighbors is very important in their long-term prospects for survival.  On the other hand, how they treat their friendly trading partners determines how much of the work for survival has to be carried on their shoulders alone.  And what about cultural barriers?  The whole point of WWC is to learn from companies that innovate around the right values but are culturally unable to execute effectively.  Diamond’s language is anthropology, not business – but we’ll see in upcoming posts that the difference between success and failure is often rooted in the same factors that led to  murder, starvation and catastrophe in the ancient world — and ultimately to the collapse of societies.

“the chase” — A Trip Report

November 24, 2009

It never fails. Someone from engineering joins the interdisciplinary team and the shoulder pad thumping begins:  tales of sales teams bartering local currency for booze in exotic locations or bailing customers out of jail for busting up a hotel lobby. Sometimes it’s that hilarious story about dressing up like a chicken, sacrificing dignity for a greater cause.  It usually has all the authenticity of  late-night, one-upmanship, “I can top that!”  fraternity bull sessions or maybe the battle scar competition between Quint, Brody and Hooper in Jaws.   I don’t remember that any of these stories had the dramatic impact of Ken Follett’s retelling of the rescue of Ross Perot’s  EDS employees from Iran [1]. But it sends a  WWC signal: “We business guys risk it all.  We’re dedicated. We live in a different — and way more exciting — world than you do.”  Maybe all the engineers need is a story like this one.

We were within hours of defaulting on the delivery schedule for an important contract.  My team was working around the clock to test and package software on a magnetic tape because those were the days when bits had to be sent from place to place in back of a truck. It was late Saturday afternoon and the only one who knew how to get to the Federal Express office in North Atlanta before it closed was our graduate student assistant, Walt, who, as we found out, was not only ingenious and loyal but had some experience in, umm,  navigating back roads.  Walt just wanted to be reimbursed for gas.  “Sure,” I said, “send me a short trip report.”

From: walt@gatech.edu  Sat  Sep 26  16:58:15  1987

Message-Id: <8709262147.AA17782@gatech.edu>

To: rad

Subject: the chase

Status: R0

well, it is on its way — but not without some work!!

i flew to fedx, speeding, running lights, etc. i ran the light at northside in front of oga’s bbq in the turning lane at 60 mph. there was a cop just gettin out of his car at the trajik markup.  i lost him by cutting thru the kroger parking lot and slipping across i-75. then i cut the big star lot to collier. next i had to get passed  the police station on collier — which i did with no trouble but then i came to the light on defoors ferry an met one comming the other way. i bit my lip hoping the other one had not radioed ahead, but he didn’t bat an eye. finally i get down the road to fedx and the truck was waiting for me. did my business and started back out.  there was 4 or 5 blue boys crawling up and down collier and defoors! i hid behind a dumpster til the coast was clear and then slipped 200 ft up defoors to bohler — an old trick — thru the residential section up to moors mill onto 75 and gone!

anyway — if they come get me tonight you may have to contact cathy for any more developments. i really don’t think they got my number.

signing off

walt — in hiding

My Thanksgiving request to all of you who would like to share a story that our dramatically challenged engineering colleagues can haul out as proof of  physical courage and personal commitment is that it be true.  Or at least someone should assure you that a friend of theirs swears that the story is true.

Like the time we took sausages in trade for network hardware.

[1] Ken Follett, On Wings of Eagles, William Morrow & Co 1983

27,000 Alternatives

November 20, 2009

A few days ago, thanks to OpenStudy founder and colleague Ashwin Ram (follow @ashwinram on Twitter), I learned that abundance of choice in higher education is more than an abstract concept:

New Delhi, Nov 7 (IANS) More than 27,000 additional institutions of higher learning would be required to meet the targeted Gross Enrolment Ratio (GER) of 30 percent for 2020, Human Resource Development (HRD) Minister Kapil Sibal said here Saturday.

“This figure includes 14,000 colleges of general higher education, 12,775 additional technical and professional institutions and 269 additional universities,” Sibal said in a presentation during the meeting of the consultative committee for the HRD ministry here Saturday. [1]

27,000 is a very large number of new institutions, but it’s hard to say how much of the market will be served once they are operational.  Twelve percent of  Indian secondary school students go on to university studies compared with the thirty percent  goal of the new Indian government and the seventy percent ratio in many developed nations. That’s about 350 millions students.

The challenge for India is to create a system of higher education that breaks the bureaucratic licensing stranglehold that has led to widespread dissatisfaction with storefront operations.  It is clear that the new Indian system will combine the two features that I mentioned last week: value and cost.  Students will have the ability to choose both their institution and their course of study.  And because many graduates are today unemployable, the value of degrees from the new universities will have to be proved in the marketplace.  That’s good news for innovators who want to move India to a position of global leadership, and bad news for the old system that is in any event being dismantled.

The costs are staggering, so new business models are welcome.  The IT company Wipro has already started to co-brand degrees with top ranked technological universities like Birla Institute of Technology in Pilani and the Sipal has been very open about needing other creative forms of private investment to offset costs.

What does this have to do with American colleges and universities? Just as low-cost, high value service industries have migrated to India, the higher education market in the US will also start to buy more educational services there as well. India is already a destination of choice for some graduate students, and not only because of lowered costs, as Cambridge medical student James Gill reports in the Cambridge University Graduate Student Blog:

Doing a medical elective in India would in theory help me to better understand and relate to Indian patients as well as colleagues that I might work with in the future.[2]

“Well sure,” I hear you saying, “but that’s a medical student in the UK.   It’s not, say, a Nobel-prize-producing chemistry lab in the US.  That’s where the real value is.  Berkeley will never be vulnerable to a lower-priced operation.”  The University of California at Berkeley is the top ranked public university in the country, and so it was something of a jolt to read in today’s New York Times that a 32% increase in fees has over the past decade helped to triple the price tag for a degree from Cal and that

Among students and faculty alike there is a pervasive sense that the increases and the deep budget cuts are pushing the university into decline.[3]

The accompanying color picture is a chemistry lab at Berkeley.  Small wonder that the students who have protested the fee hike are questioning the University of California value proposition,  and especially whether their education can be obtained quicker and cheaper someplace else.  There will shortly be alternatives for some of them. 27,000 alternatives if everything goes according to plan for Mr. Sipal.


[1] http://www.sindhtoday.net/news/1/68995.htm

 

[2] http://www.societies.cam.ac.uk/cgcm/ElectiveReports/JamesGillIndia.html

[3] The New York Times, Friday November 20, 2009, page 1

An Abundance of Choices

November 13, 2009

Kalinga Raipur

I have in recent years — and for many different reasons — become a fan of Daniel Pink’s book A Whole New Mind.[1] Pink has a compelling framework for thinking about value.  First, can what I am trying to do be done better (or cheaper or faster) by a computer?  Second, is what I am offering in demand in an age of abundance? Finally, can what I am trying to do be done more efficiently elsewhere?

As readers know by now, I am working on a WWC book about higher education, and  I have found that that the question of value is central to understanding where American higher education is going. Simply put, when there are abundant choices for university education, will traditional universities offer enough value to be able to withstand the coming pressure of a global marketplace?

Here’s why I am concerned.  In any market with growing demand and abundant choices, there are only three ways to win: have an unassailable brand, offer the lowest prices, or offer the most compelling value.  Even better is to be able to win with both price and value. There is really only a handful — 70 at most — of global brands in higher education, so for most of the 3,000 or so accredited colleges — let’s call this the Middle —  it’s a matter of finding the right balance between cost and value.  Universities are profligate consumers of resources, so it came as no surprise to read in last week’s Chronicle of Higher Education that 58 private colleges have now joined the $50,000 club.  Public universities are not far behind.  If I am right about winners and losers in global marketplaces, the institutions in the Middle who are at most risk had better get the value equation right.  The problem is that most of them don’t have a very clear idea of their value.

That’s significant because  half of the world’s population has joined the free market economies in the last fifteen years. For the most part, these are countries with rich educational heritage, that also understand the value of a well-educated labor force.  The market for higher education is bubbling as new and established players alike  scramble to figure out how to reach hundreds of millions of students:

But the demand for higher education is continuing to increase with more and more students wanting a higher education today than ever before. How can we bridge the gap between increasing demand and decreasing government funding for higher education? The only option is to tap the private sector to participate in the funding and provision of higher education. The process of increasing private participation in higher education has already begun with a few states like Chhattisgarh and Uttaranchal having passed legislation to permit the setting up of private universities in their states. Indeed the private sector has been funding higher education in India for a long time, albeit on a very limited scale. The Birla Institute of Technology and Science at Pilani in Rajasthan, which is funded and run by the Birla Group Trust, became an officially recognised university as far back as 1964. Other institutions like the Manipal Group in Manipal in Karnataka have been running private colleges since 1953 and the Manipal Academy of Higher Education became a deemed university in 1993. Many other self-financing colleges were set up in the early 1990s and a few of them have now become deemed universities.[2]

The problem for American universities is that, since  few of them understand their value to traditional students, the chances are slim that they will figure out what the millions of new students want. I can tell you that it’s not football. Nor is it finding ways to “dumb down” an American degree.

acceptedposter

In fact the emerging markets are moving aggressively to close down storefront diploma mills.

2007_05_21_Liberia_Informer

To the extent that most universities in the Middle concentrate on classroom instruction, the business model of higher education is under tremendous pressure.  Although university level training and an aging population will continue to drive demand for classroom instruction, the experience of students in large, multi-section introductory courses is much worse than well-conceived and executed performances by world-class experts who have a passion for communicating their love of subject.

So if few instructors are equipped to compete with the zip of a star from ItunesU™ (see my Dancing with the Stars post) then how does the 21st Century university make itself valuable?  Universities must reinvent themselves as creative entities– and they must do it in a way that is smart public policy and is also economically sustainable.

That brings me back to Daniel Pink and what he sees as the elements of creativity:

  1. Design – Moving beyond function to engage the sense.
  2. Story – Narrative added to products and services – not just argument.
  3. Symphony – Adding invention and big picture thinking (not just detail focus).
  4. Empathy – Going beyond logic and engaging emotion and intuition.
  5. Play – Bringing humor and light-heartedness to business and products.
  6. Meaning – Immaterial feelings and values of products.

This is not a bad start for universities that want to redefine their value.   This was true in when the Medieval monk Peter Abelard  provoked his students to question orthodox thought, and it was true when Thomas Jefferson realized that a university education might result in peer groups that were specialized to the sciences.   Charles Vest realized that the value of an MIT education did not lie in the lectures and textbooks but in energy and intellect of the MIT community.   It is true that the most immediate way to experience a community is to live within it, but it is not the only way.   The technology of social networks and on line communities extends the reach of physical community beyond geographic boundaries.

To deliver on a vision like that American colleges and universities are going to need new leadership, because there doesn’t seem to be much  appetite for doing much more than nibbling around the edges.


[1] Daniel Pink, A Whole New Mind: Moving from the Information Age to the Conceptual Age, Riverhead Books, 2005

 

[2] Private Universities in India — Why? How? Education in India, http://prayatna.typepad.com/education/2005/06/private_univers.html

Great Meeting, Bob

November 9, 2009

It’s come up a few times  in  recent weeks.  Here’s the scenario:  I am meeting with Bob,  the CEO of a start-up who’s just returned from a two-week sales tour — three Fortune 100 companies, three mid-tier suppliers, two government agencies, another early-stage technology company, and a university research center.

“How did it go, Bob?

“Great, every meeting was a home run.  They liked the product.  They liked the technology.  They really liked the company.”

“How many orders did you sign?”

“None, yet.  But they all asked me to come back.  Except for the university guys, and they wanted copies of my presentation. Lots of excitement about this stuff!”

If you’re in the innovation business, the last thing you want to hear — even if you make the improbable assumption that everyone was telling the truth — after a meeting that doesn’t close a sale is “Great meeting, Bob!” It’s a sure sign of impending catastrophe as worlds collide.  I’ve talked in other posts about conflicting agendas and how the need for technical recognition can shape an innovator’s view of what is actually taking place. The great meeting phenomenon goes beyond that.

I was in the lobby of Netscape Communications a few days after its 1995 IPO, waiting for a former colleague who had promised to set up a series of technology exchange meetings between Bellcore and Netscape.   Bellcore  had just filed patent applications for two server technologies that we knew would be important to Netscape, and we were hoping to license them.  One was for buying and placing ads on web pages, and the other was for video streaming.  I had been in meetings like this before, and it was good to know that there would be a couple of familiar faces on the other side of the table.  So I sat there watching visitors file in and out.  There were a couple of guys dressed in three-piece suits, clearly bankers.  There was a Hollywood type with massive  gold chains around his neck — he and his two handlers had just rolled out of a black Town Car.  There were two kids in the corner —  complete with sandals and dirty tee shirts  — who looked like they had just crawled out of a basement.  Lots of khaki’s and blazers and  Madras shirts with pocket protectors.  I remember trying to guess who they were there to see and what they wanted from Netscape.  Except for the guys in the suits, who were quickly escorted  past security, we were all ushered in turn to small  conference rooms off the lobby. I realized in a moment of panic that I had no idea what Netscape wanted.

The meeting was awful.  The Netscape executive I really wanted to see was off doing other things (something about buying an Irish castle).  My contact was selling, not buying.   After about fifteen minutes of nervous chit-chat we agreed to keep in touch.  But not before I asked about the strange collection of visitors in the lobby.  “I’ve been in lots of technology companies,” I said, “and I’ve never seen anything like it.  I see why the financial people are here, but what do you think is going on with the others?”  What he said stunned me, and as soon as I left the building I wrote it down.  “We don’t know,” he said. ” The guys in suits are from a Russian software company, and we get a lot people who just want to stop in. It’s chaos.”

I’ll tell you in a later post what happened to our technologies, but Netscape did not figure prominently into Bellcore’s future.  They were not excited.  They told me almost nothing about their business.  They did not want to know about ours. It was not a great meeting.  It was the best thing that could have happened to us.  I want to use Bob’s great meetings to explain why.

The University Meeting

Let’s first dispense with the university meeting.  Universities are in the great meetings business.  Professors give great talks.  They are great listeners.  All it takes for a  great university meeting is a great story told well.  There are some possible positive outcomes.  For example, Bob could have heard about a new invention that would help the business, but that would have involved the university selling to Bob.

The Government Meeting

Government agencies do in fact buy from small companies, so it’s not hard to imagine a meeting with a good outcome.  It depends on who is in the room.  A meeting of technologists is all about learning what Bob knows, and they are inclined to lavish praise on anything they can use to sell ideas and programs internally.  That’s literally what they have to spend.  The outcome of almost every other meeting with a government customer is irrelevant to closing orders.  Bob may hear about proposal opportunities or new programs that the company is qualified for, but government employees never show up pen in hand ready to write a check.

The Meeting with Another Early Stage Company

If a meeting concludes without an order being signed, it’s because they are the C-O-M-P-E-T-I-T-I-O-N. They are thrilled to hear what you’re doing.

The Meeting with a Bigger Company

Big company meetings are the most dangerous. Almost everyone is interested in what Bob knows.  Engineers run internal projects and Bob is the ideal guy to help educate them.  Marketing casts a wide net looking for trends and intelligence. Who better to help them out than the head of a company that has just acquired investors and is thinking day and night about what new customers want?  General management doesn’t have time to spend on a meeting (Irish castles, remember?) and mid-level managers, who are not inclined to spend money, know that, if you keep coming back, they are buying time in a possibly interesting market.  Bob could have snagged a meeting with someone who manages vendors, and it might have led to a sale, but it would not have been great.

What I said to Bob was “Great meetings lead nowhere.”  Every one of Bob’s  meetings was designed to transfer value away from his company.  Everyone he met with was so thrilled with this that they told him how much they liked him.  He educated companies with greater resources and provided fodder for PowerPoint™ presentations by technology managers.  All for the price of a sandwich and a bag of chips.  And they were willing to do it again.

My Netscape meeting was awful, but I learned that

  1. We were a small slice of a value chain that we didn’t understand;
  2. Innovation bubbled all around Netscape, and they did not need to get on a plane to New Jersey to get access to it;
  3. The market looked as chaotic to Netscape as it did to me.

A great meeting with Netscape would have felt good.  They could have said how important we were to their success or how much the Bellcore patent portfolio meant to them.  I could have come away feeling that the 1995 golden child had the market all figured out.   I could have been enticed to go back for a second or a third meeting.  None of those things happened.  Instead, Bellcore started its own e-commerce company and for a brief while was a smaller, dimmer but still exciting star.  The star eventually fizzled, but that is a different colliding worlds story.

I was once on the board of a start-up with new technology for analyzing transactions to determine probable future customer behavior.  It was in  the earliest days of CRM and almost no enterprise-ready products had hit the market.  Every  financial services company had internal projects in this area and wanted to have a meeting to hear what was up.  I made introductions within my own company, although I told the CEO to not waste his time, because we were engaged in ten simultaneous discussions with large software companies.  Every six weeks the board heard about a string of successful meetings — great meetings.  A lot of them were great, but not one led to a dollar of revenue.  The company was eventually sold at  a huge discount to a  much larger company where there had been a great meeting years before.  How much better off  everyone would  have been if, instead of a great meeting, there had been a little blood on the boardroom floor.

“Dear Mr. Watson, My employment with IBM has been terminated” (More Loose Cannons)

November 3, 2009

Dilbert.com

There was a birthday celebration of sorts last week.  From the October 29th edition of  ABC News Science & Technology:

While the actual date of the Internet’s birthday is somewhat debated, many say that the Internet was born 40 years ago today at the University of California, Los Angeles, when a computer to computer message was sent for the first time from the UCLA campus to Stanford.

At the time, Leonard Kleinrock and his colleagues were charged with developing the Advanced Research Projects Agency Network (or ARPANET), a government-funded research project in global computer communications that eventually grew into the Internet.

I thought it would be a good occasion to  reflect on how easy it is for Loose Cannons to get smashed by colliding worlds.

In the days before ARPANET, computer-to-computer communications were homogeneous, and computer manufacturers liked it that way. The very idea of not owning every aspect of a technology stack seemed to be ridiculous.  Where’s the value if you can get critical components from anywhere?  What if competitors start using the same suppliers?  Heads of business units hated the idea, but Loose Cannons kept proposing technical architectures that looked, well, open.  The idea was playing out in many ways in many companies.

At IBM, two architectural revolutions were simultaneously  underway. We now know that they were related. In the summer of  1980, IBM executive Bill Lowe prepared to brief  the company’s Management Committee on development plans  for a personal computer:

It was a dangerous place to be.  The Management Committee — or, given IBMers’ fondness for acronyms, the MC — ruled on issues that couldn’t be resolved at lower corporate levels, so going before the committee was, to IBMers, like going before the Supreme Court.  It was actually rougher because the top IBM executives who sat in judgment were known to be brutal, especially if they thought someone was wasting their time.[1]

Bill Lowe had been beaten up by the MC before, but this time Lowes’ plan to use outside suppliers drew polite questions from MC members who expressed some concern about turning over even partial control of any of their businesses to “outsiders.” What Lowe and the vast majority of IBM engineers didn’t know was that earlier in the year the MC had received a  forecast for global PC sales that showed a peak market of 80,000 units in that began to rapidly decline in 1984 as the specialized customer  need for computers was satiated:

IBM had already been embarrassed by early missteps in the PC market but the corporate culture was focused on mainframes and services.  Problems might be created by opening up the hardware and software architecture of personal computers, but

The general attitude…was that you don’t have big problems in small markets, and we thought the personal computer was a very small market.[1]

The MC might have been more inclined to turn its attention to a market that had real legs.  Like, say, networking.  Ed Hendricks was an engineer at IBM’s Federal Systems Division in San Diego.  Hendricks had helped design VNET, at that time the largest computer network in the world.  VNET was  IBM’s internal corporate network, linking IBM mainframes at scientific data centers.  By 1980, VNET was a global asset with hundreds of  hosts in North America, Europe and Asia.

Meanwhile, ARPANET was growing into the Internet, and Ed Hendricks was interested in how IBM’s technology would continue to prosper when the world started connecting IBM mainframes to large UNIVAC computers, HP mini-computers,  PC’s, and supercomputers from Cray or Control Data.  Hendricks became an industry player in this arena, collaborating with my colleague Larry Landweber at the University of Wisconsin as the expansion of the ARPANET began in earnest. Ed  Hendrick’s IBM Internet Gateway Project was aimed squarely at insuring that IBM mainframes would not be stranded in a world in which they could only talk to each other:

The objective of this project is to begin to bridge the gap between IBM computer systems and network technology predominant among government agencies, conractors and universities.  More specifically, we are working to develop according to DOD standards the technical capacity to interconect networks of IBM computers and systems to similar but different computer networks used by government agencies and their affiliates.

Hendrick’s website preserves the sometimes heated but  thoughtful and deep technical discussions — involving Hendricks,  the legendary Jim Gray, and MIT’s Jerry Saltzer, among others —  that took place througout 1980 about the relative merits of ARPANET and IBM’s networking strategy. For reasons that are still unclear, IBM decided to move the Internet Gateway Project to IBM Research in Yorktown Heights, New York, an effort that Hendricks calls “screwy.”   Hendricks along with team members Gerot “Mike” Engel and Dale Johnson planned to spend a week at Yorktown Heights, getting comfortable with IBM Research’s Systems Laboratory, their proposed  new home:

…the Systems Laboratory was created to focus more directly on perceived business needs. Consequently, Systems Laboratory projects are evaluated and prioritized on the basis “leverage” they exert on the software product line…by design, ninety-five percent of the work carried out in the Systems Laboratory is so closely related to strategic product development that it cannot be discussed outside IBM.

Shocked, the Internet Gateway team concluded:

…a project such as ours which is intended to establish internet communication compatible across differing systems…could not be carried out under such guidelines.  Our overall reaction…was that the ARPANet Internet Gateway project could not have been started within the Systems Laboratory.

They concluded that if the project was to have any chance at all of success, there would need to be a formal review of management decisions, what  IBM called the “Open Door” process.

March 14, 1981

John R. Opel, President IBM Corporation

Dear Mr. Opel,

This letter is intended to invoke the IBM Open Door Policy.  My purpose in requesting this Open Door is to seek clarification of the decisions which led to a situation where a project which is clearly critical to IBM’s future posture in the data communications industry cannot be pursued…Bureaucratic accomodation for only that which is in the strategic plan is a very dangerous posture to be in while the data processing and communication industry is rapidly evolving.

[My team and I] have been working to carry out a project to establish a capacity…to cooperate with the U.S. Government and University Computer Science departments in the evolution of techniques to interconnect dissimilar computer networks…There is essentially unanimous agreement that this activity promises important advances for IBM and for computer technology in general.

In September 0f 1980 we were notified by our management that this work could not be carried out…On each occasion when this qustion [of where the work could be carried out in IBM] was being escalated to the proper level, my management would insist that I leave the management issue to them and to concentrate my own efforts of the technical work.

Last week I was informed verbally that no sponsorship for this project could be found.  My manager asked where hie should look to find me a job. My position was…that inability to find organizational sponsorship for the project is not equivalent to a decision that IBM should not be involved in developing the capacity to interconnect IBM networks to government and university networks…to look for other professional opportunities now and give up attempts to pursue this technology…would be to let the company down….

Sincerely yours,

Gernot Engel

19 March 1981

Mr. Thomas J. Watson, Jr., Chairman Emeritus

Dear Mr. Watson,

My employment with IBM has been terminated as a consequence of recent management decision which are incompatible with my professional goals…I believe I am justified in requesting more thorough and explicit responses to the following questions:

  1. What “business needs required the termination of our ARPANET Interconnection Gatweway Project and the abandonment of the…professionals we had been dealing with?
  2. What factors prevented alternative organizational arrangements that would have allowed our group to continue its work within IBM?
  3. What is IBM’s posture regarding professional cooperation with the computer scientists working in association with DARPA…to establish mutual techniques for interconnection of dissimilar computer networks?…

Sincerely yours,

Gernot Engel

May 15, 1981

John R. Opel, President IBM Corp.

Dear Mr. Opel,

On March 4, 1981 I sent a letter to your office requesting clarification of a decision which cancelled the internet gateway project…Your office’s attempt to analyze the internet decision appears to be stalled because it was handed back to middle management….I can only conclude in this instance the Open Door Policy has failed. My recommendation to salvage the situation is that you give fifteen minutes of your time to receive a presentation on the internet project and attempt to evaluation for yourself the value of this project to IBM’s future.”

Sincerely yours,

Gernot Engel

May 19, 1981

Dear Mr. Engel,

I have reviewed the results of [the] investigation into your concerns.  Your disappointment with the decision to terminate the VNET/ARPANET project is understandable; however, I conclude the decision was properly based on the need to fund other Ad Tech projects with greater business potential…

I understand you are currently considering a return to IBM, and I hope you choose to do so.

Siuncerely,

John R. Opel

Number 1-81: September 11, 1981 MANAGEMENT BRIEFING

TO ALL IBM MANAGERS:

Organizations seem to have an irresistable tendency to codify successful practices in rules, instructions and controls which soon begin to take the place of judgement. When that happens, the result is bureaucracy.

IBM is not immune.  Earlier this year, reports from many sources indicated to me that a growing bureaucracy is affecting the performance of our business…corporate staff heads, group executives, and the division presidents are exploring ways to reduce unnecessary controls, rules and approvals in their areas of responsibility…We will succeed in that effort only if you managers, at every level of the business,k are willing to stand up and fight bureaucracy wherever you find it…If you have all the information to make a decision, make it…

[signed by John Opel, president]

John Opel stepped down as IBM president in January 1985 and chairman in May 1986.  He was succeed by John Akers, and he was succeeded by Lou Gerstner in 1993. Gerstner, the former CEO of RJR Nabisco, described his transformation of IBM in “Who Says Elephants Can’t Dance?”[2].  Most observers agree that critical to IBM’s turnaround that took it from a free fall in the early 1980’s to unquestioned market  leadership in computers, software and services was the dismantling of a remote, hierarchical management culture that squeezed innovation in political pincers.  By the time I took over the computing research directorship at the National Science Foundation in the late 1980’s, IBM had become a major player in the growth of the Internet [3]:

In the mid-1980s, NSF decided the time was right to try to link its regional university networks and its supercomputer centers together. This initial effort was called NSFNET.
By 1987, participation in the new NSFNET project grew so rapidly that NSF knew it had to expand the capacity of this new network. In November of that year, it awarded a grant to a consortium of IBM, MCI, and a center at the University of Michigan called Merit to create a network of networks—or inter-net—capable of carrying data at speeds up to 56 kilobits a second. By July, 1987, this new system was up and running. The modern Internet was born.

REFERENCES

1. Paul Carroll, Big Blues: The Unmaking of IBM, Crown Trade Paperbacks, 1994

2. Louis V. Gerstner, Who Says Elephants Can’t Dance? Inside IBM’s Historic Turnaround, Collins, 2002

3. National Science Foundation, NSF and the Birth of the Internet, http://www.nsf.gov/news/special_reports/nsf-net/textonly/index.jsp