Speaking of management destroying value: EADS & BAE

Might be getting a little out of my wheelhouse today, but BAE and EADS are both unmanned aircraft manufacturers, if relatively small time players thus far.  News of their merger is HUGE in the defense world.  But take a look at what their stock prices are doing (EPA:EAD) and (LON:BA).

With almost a day to digest the announcement, it looks like BAE’s stock price has settled about 2-3% higher (or almost within the range of previous variation) after some initial shenanigans, but EADS’s stock is down about 15%.   The market does not look favorably on this merger.  This is a reasonably common pattern to see the acquiring company’s stock tank, but still I think that it provides a strong comment to those wringing their hands about America’s so-called decline in aerospace.

It appears that the A380 has been a commercial disaster and that being a Western defense contractor without reliable access to the U.S. market (however unjustified the tanker competition rules may be) is not a good idea.  I’m not sure that tying up with BAE will magically fix these problems–though if they really can eliminate €1B / year in overhead, there might be something to do.

However, it seems that the real shortage for creating value is management attention.  I’m not sure how becoming bigger and cutting more overhead is really going to change things at the new B/EADS.  Maybe if they focused on opening European airspace to unmanned aircraft faster than the U.S. is doing and came out with cheap and innovative products with broad military and commercial applicability…  nevermind.

Why American women are too smart to become robotics engineers

The lack of women in robotics is quite palpable.  I’m not going to quote statistics about the lack of women in robotics because the readers of this blog have been in robotics engineering shops and have eyes—it is that bad.  This is a loss for all of us.  Not only do the women in robotics often have a disproportionate impact, but also the missing women are indicative of a deeper cultural problem that hurts both male and female participants in our industry.

Beyond the issues of opportunity, fairness, and attracting the best and brightest in our field, a lack of women is an indicator of a deep seated cultural problem that is impairing our efforts to make the world a better place.  This insular culture, which robotics shares with many other engineering-centric industries, harms and alienates many men too.  The lack of women in robotics should be viewed as a flashing red warning light of a much deeper problem that affects everyone, rather than just a women’s problem.

Another Knowledge Industry Grapples With A Similar Challenge

While I was at Deloitte, the firm was endlessly bragging about its Women’s Initiate, they called WIN.  Before the turn of the millennium, the partners realized that they had a problem.  At all the ‘working’ ranks of the firm, Deloitte was doing a great job hiring and retaining talented people of both genders.  However, when it came to senior managers and partner level positions, the women all disappeared.

What Deloitte discovered when they looked into this problem was not discrimination.  The problem was that all the top women that the firm wanted to promote were leaving, even though they were being offered the same deal as the men.  Becoming a partner or principal at Deloitte today is arduous, but before WIN it was grueling and brutal.  Basically, becoming principal at Deloitte requires a huge commitment to have consulting be one’s life, but before WIN there was pretty much one way this commitment could look.  Women knew what was required and were more than capable, but they were saying, ‘Screw this, I don’t want to put up with your abuse just to sit at the top of the pyramid and perpetuate it, I want a family (or an impact in the world, or a life).’   So they were leaving the firm.

Deloitte took a hard look at the firm and decided that the path to becoming partner was counterproductively rigid.  They launched WIN and made the workplace much more humane for everyone.  The firm started retaining more talented women and they have thousands of women principals today.  But more interestingly, they also started retaining more of the talented men who had been leaving too, but ‘just weren’t cut out for consulting.’  Deloitte fervently believes—and their impressive growth in the last decade testifies—that they created a much more effective organization.

What had showed up as a women’s problem was actually a firm-wide culture problem.  It turned out that many more men were willing to compromise their performance and risk losing their marriages, families, and personal lives over the firm’s culture problem.   There was nothing ‘wrong’ with the women, nothing they needed to be taught or given to help them get ahead.  They were just not willing to put up with such an unnecessarily inhumane system, while many men were willing to live with it.  As a result, the firm got sub-optimal performance.

The question that Deloitte should have been asking was not, ‘What’s wrong with our women that they’re not making partner?’  Or even, ‘What’s wrong with our men that they don’t help the women make partner,’ it was really, ‘What’s wrong with our men that they’re willing to make partner under sweatshop working conditions?’   I fear that we’re at a similar impasse with respect to the engineering fields.

The Deeper Cultural Problem In Robotics Engineering

Isn’t it odd that we don’t need to make a special effort to interest women in law, accounting, medicine, or the like?  These fields have similar intellectual requirements and levels of drudgery to engineering.  Yet despite comparatively massive efforts to interest women in engineering, they are not entering the field in anything like the numbers we would expect.  And why are American students—including men—not enrolling in engineering fields at the rate that foreign students do?

There is strong social signaling in undergraduate schools that discourages most women and many men from even attempting the study of engineering.  Perhaps they realize that getting an engineering degree can be a long, unrewarding slog when compared to the experience that most undergraduates have.  Perhaps, they have a sense this narrow technical view is carried on beyond undergraduate.  I do not believe that being willing put up with this kind of experience is necessary, and is perhaps counterproductive, to being a great robotics engineer.

Engineering courses are used to screen out anyone who is not willing to devote long hours studying tough courses that do not reward students just for their interest in the subject.  Those who are considering law, business, or medicine as an alternative career may not want to risk their GPAs even trying engineering courses.   No one would bother becoming a robotics engineer unless she had an innate sense that she had a special calling in robotics.  This sense of calling is common among the engineering superstars, both male and female.  Though the current method of engineering education may be adequate for the superstars, this method of education likely alienates many people who could make great contributions to engineering.

We now realize that training medical residents more than 80 hours a week is not productive—engineering isn’t different.  Silicon Valley is starting to see sunlight, humane schedules, leadership opportunities, and pleasant workplaces that promote social interaction as the minimum conditions for engineering productivity.  Colleges such as Olin which have experimented with new (read more people centered) ways of teaching engineering have seen many women enroll.  These are all signs that there is another way to do engineering.  We are starting to see that engineering can be altered to treat engineers and students like social beings, without sacrificing technical rigor.

By attracting people to engineering who are sensitive to the way that others treat them, we will also attract people who are sensitive to their colleagues, customers, and business partners.  Without these engineers who understand their impact on others, engineering will forever be solving the wrong problem.  Engineering education and culture are far too important to all our futures to be left only to left-brained males.  If we let engineering be a secret club that no woman without an extreme commitment would want to join, we will fail to harness engineering’s full potential to improve our society.


Avenues for further investigation:

How can robotics companies accelerate the production of an inclusive engineer culture?

What benefits and employee flexibilities have measureable results on engineering output?

How concentrated among the ‘usual suspects’ schools is robotics engineering hiring?

Does hiring outside of the engineering department’s immediate network improve or degrade performance of the engineering organization?

Do robotics engineering organizations with more women tend to do better?  (Hypothesis:  There is positive correlation, but not to be confused with causation.)

If robotics aren’t inherently capital intensive, does management in robotics just suck? Yes. Here’s why…

Image: Fairchild Semiconductor Successor Companies
Source: Steve Blank’s Testimony to House Science Committee

I was harassing my asset management friends to get them to help me develop the synthetic short instrument I want to put into the robotic stock tracker and we started discussing capital use in robotics.    Their question, was, “Okay,  if robotics are not inherently capital intensive, why does it take more money to get a robotics company up and running?  Isn’t that initial expense an inherent characteristic of the robotics industry?”

In a word, no.  The fundamental problem with robotics companies is that management doesn’t have a well developed process for synchronizing customer and product development to use Steve Blank’s terminology.  Or put another way, a lot of robotics companies spend a fortune on unnecessary engineering when they frankly suck at discovering what customers want.  iRobot has a whole museum dedicated to their market failures.  I contend that much of this engineering effort is not necessary to development of viable robotic businesses–this same learning could be done with vastly less expense.

Much of this problem comes from the difficulty of porting over rapid-cycle software development best practices for discovery of true customer needs.  Most of our hardware development methodology comes from environments where customer needs are relatively well understood and engineering improvements require a lot of time.  Robotics companies still have engineering cycle times (the amount of time to go through the engineering build, test, analyze, decide cycle) that are much longer than pure software companies at least 3 times longer and often much more as best as I can estimate from anecdotal evidence.  Companies are very reluctant to reveal this information, so my estimate may be off by several factors, but it is clearly much longer for robotics companies.

I believe that we in the robotics industry need to tailor the customer and product development methodologies to the peculiar challenges of robotics.  We will need to reduce cycle times of engineering teams down closer to software levels.  3D printing and continuing improvements in supply chain should make this feasible.  Management should make it a priority and a reality, and be willing to incur some expenses to do so.  Even more, management needs to do a lot of work to reduce market risk much earlier in the product development cycle.

iRobot’s museum show that it is proceeding to engineering while far too much of what is required to make a viable commercial product remains unknown.  This isn’t to pick on iRobot, they may be among the  best in the industry, but it is just to show that even the most advanced practitioners in our industry are not very good at understanding customers compared to other industries.  Yes, for some customers, such as the government, just doing research can be a viable business model, but this won’t grow the industry.  We need to develop ways to reduce market risk and we need to get good enough that we’re showing the software industry how they could learn about customers more and code less.

I don’t propose to give a complete answer on how to do this here, but it is clear that there is more than one path to reduce market risk in a product.  Both Intuitive Surgical and Liquid Robotics seem to have taken the approach of building a robot that is so awesome and widely applicable that it will find a use even if it isn’t in the application that management originally intended.  Other robotics companies, like Kiva Systems and RedZone (since Eric Close took over), seem to have taken a more traditional minimally viable product approach and iterated upon the original product.  Both strategies appear to win in certain circumstances and companies that took the opposite approach in the same markets failed.   How do we distinguish which set of market and technical circumstances we find ourselves in?

This interplay between technical and market risk and how it applies to robotics management is only beginning to be understood.  Few people have proposed measurable distinctions that would allow management to make decisions about what risks to accept and what risks to mitigate before committing capital to a project.  This area of research more than any other will unlock the potential for robotics to become the next tech boom.

Marketing 3.0: Puffery so extreme it is unreadable

I recently had the misfortune of reading a 20 page excerpt of Philip Kotler’s Marketing 3.0.   You’d have to pay me far more than my standard hourly rate to induce me to read more of it.

Kotler is one of the most famous marketing professors at any business school.  His text book Marketing Management is not only in the standard today (the 14th edition is on my shelf for instance), but was also the text book of many of today’s marketing professors when they first studied marketing.  If this man is the academic standard bearer for marketing, I’m starting to understand why people have such a low opinion of marketing.  Current thought about marketing, by marketing’s most famous experts, tends not to be rigorous or practical.

Apparently, this begins with a lack of understanding of what marketing is for.

In Part III, we share their thoughts on several key implementations of Marketing 3.0 for solving global issues such as wellness, poverty, and environmental sustainability and how corporations can contribute by implementing the human-centric business model.

I’m as much a believer that corporations can change the world as anyone, but marketing as a discipline discovers and stimulates demand.  Period, full stop.  Corporations can have a good effect on society and have done a great deal to improve the human condition.  I’m  glad that marketers slinging sugar water or floor wax can feel good about themselves, but for those of us in emerging industries that really will change the world, we need our marketers to have a laser focus.

The confusion continues when he discusses actual products.  Apart from shameless promotion of S.C. Johnson (Kotler is the S.C. Johnson and Son, Professor of Marketing) he seems to be quite confused about the real market drivers of products.  He goes on at length about Timberland’s social responsibility program.  I don’t know if this had any impact on Timberland–perhaps it did.  However, I’ve never heard anything about this, but I have seen tons of earned media for Timberland based on catering to gangters, rappers, and wannabes. Nary a word about this.  I’ve seen maybe 1-2 actual outdoorsmen wear Timberlands in my life, but hundreds if not thousands of wannabe toughs wearing them–admittedly not a scientific survey, but it is at least more than anecdote.   You know what would be useful in this discussion?  Data!  Kotler and his co-authors do not provide that though.

If you’re interested in creating demand for specific robotic products, please skip Kotler and his disciples.  You would be far better served to read someone who comes out of the start-up world and has a rigorous, measurement driven approach to marketing.   Steve Blank, Eric Ries, and Geoffrey Moore all tackle marketing challenges in a much more practical and implementable fashion.  They are also concerned primarily with keeping businesses that really do have the potential to change the world in business long enough for them to do that.  To them, marketing doesn’t need to be a special calling with magic thinking about how the discipline is going to change the world.  To them, marketing needs to fulfill its business function, discovering and creating demand, at a minimum of cost and as quickly as possible.

No finance or operations professional would tout finance or operations 3.0 as being fundamentally different from all that came before it.  These disciplines have highly measurable results in the world that they can easily explain to stakeholders outside the discipline that take the time to understand.  Marketing should be no different–be very wary of anyone who says that it is about the human spirit.