Monthly Archives: May 2014

Trend of Technology

Data and Sense

Big Data is one of the most frequently discussed topics in technology world today, among enterprises or startups, yet it’s also one of the most confusing ones. It’s all about data and sense. So far throughout the industry, there appears to have more data than the sense generated from it.

– Why do we need to worry about Big Data and more data?
– What kind of Big Data are we talking about?
– What sense are we trying to make out of processing large amount of the targeted data in business?
– Are we dealing with a human issue or a machine issue?

These would be the initial questions that we should ask ourselves before talking about the problems and solutions to Big Data. Lately each time TriStrategist listened to a talk about Big Data, it was always about a different problem space of the Big Data, and of course different technical approach by different companies. To understand the core issues, here is our simple process of making sense for ourselves on the subject:

What would these “Big Data” contain?

– Structured vs. unstructured data (Examples of unstructured data include those data from the social media, etc)
– Real time vs. offline (or time-lagged) data
– Dynamic vs. static data

What general senses can we expect from studying Big Data?

– Operation intelligence: Fast real time analysis and real-time responses(from milliseconds to seconds). For example, for high-speed trading, eCommerce, financial transactions, online auctions, online gaming, etc.
– Business intelligence: Data mining, trend analysis with more data and less time (minutes to days or longer)
– Machine learning for human intelligence: For many big crazy ideas through data that were not able to be done or tested before within reasonable efforts and time. This is about the predictive basics using Big Data.
– Advanced Artificial Intelligence: The new capabilities to simulate various human brain cognitive powers with Big Data processing will enable unprecedented development in AI, which in turn will shine new lights into robotic advancements.
– New discoveries: With imagination and originality to look into data and make new senses from the past unknowns.

What are the top technical areas of challenges with Big Data that people are trying to solve today?

1. Data Plumbing – Better system architecture and faster algorithms to handle and process the ever increasing amount of data from all sources, especially unstructured data where relational DB methods deemed unsuitable, into machine-understandable format that can be ready for fast analysis;
2. Processing time – Significantly reduced processing time or faster response time for business operations and intelligence, real-time or offline;
3. Real-time synchronization – Incorporate constant data updates in real-time processing, analysis and response;
4. Analytics- Better analysis design to yield more relevant and accurate business insights, to enable new business possibilities;
5. Data Communication – The accurate, fast, smooth, back and forth interactions and transfers of the data among end-users, devices and systems.

Apparently the field of Big Data is of business, operation, social and academic importance. From technical point of view, today’s solutions to Big Data are far and apart, and the best ones are yet to come. With hardware getting cheaper, many companies are using in-memory processing to compete on the time issues, but that might be a costly approach for gigantic datasets. From software side, parallel computation, Hadoop MapReduce is one of the examples, has resurfaced as a very useful thought (while differs in concept and approach from the past due the availability of cloud and cluster computing). Still current usable algorithms are sparse and limited in capabilities, many times difficult to use as well. New approach needs to be seriously investigated. Who knows, it may quite possibly result in some Google-style successful start-ups or business ventures if some brilliance and team work can land a few true breakthroughs, at the algorithm level, not at the hardware level.

On Leadership and Management

Innovation and Services Business

It is harder for a Services business to innovate. Product innovations are easier, at least in perceptions, because they are more tangible to the senses of the general mass. Beyond value-added new services, incremental upgrades and additions to the existing services are rarely considered as innovations. For example, people seldom feel the traditional Services business, like the utility companies, can innovate. There is a lot of truth to it simply because in general these businesses are very risk-averse. Because of the high requirements of ensuring “the continuity of the services”, they dare not to make quick changes and they are also subject to too many government regulations for the same reasons. Gradually it is the mindset of the people inside and the speed of change mark their business more like a days-in-days-out slow-moving train. Consulting Services companies talk more about “to adapt” than “to innovate”. Smaller and less regulated service sectors, on the other hand, innovate quite often and faster, but by the means of frequently launching embedded new and creative “products” (e.g. knowledge-based products, consumer products, etc)as they are called, not services. We can vaguely sense that a technology services business may fall somewhere in the middle.

Big Services companies tend to stay the course, maintain their on-going services to the “satisfaction of the customers”, but customers rarely can point you to the right innovations. That’s why Steve Jobs intuitively pointed out that “A lot of times, people don’t know what they want until you show it to them.” Unless a Services company truly owns a unique and long-standing high-entry point apart from competitions, hardly the case most of the time, any new service, once turns into an existing offering, can lose the innovative edge immediately or be copied quickly by competitors. A Services companies can keep adding incremental changes to their services and putting a lot of resources into the upgrades and maintenance cycles, but these routine actions in fact divert resources and may only keep them further away from being truly innovative. A lot of times the routine mindset set in and makes it harder for a Services organization to change. Startups, however, usually have limited resources. They have to focus their people’s mindset and tight resources onto creating something new, unique, either a product or service, to hit the market quickly and stand apart from the herd. That’s why startups are in general more innovative than big companies.

An innovative company needs an innovative mindset throughout. Great innovations need out-of-the-box thinking, out-of-the-beaten-path risk-taking, maybe new skills and often a large degree of abandonment of the old routines in order to strike onto something new, exciting, creative and different. How a Services company can maintain its innovative edge? Besides the new services every once a while or adding new product mix, it has to focus more on the behind-the-scene: people innovation, process innovation and value innovation. Its goals should be the market-leading efficiency, the exceptional customer experience, the unique value proposition and/or the superior cost structure. To achieve these, it needs a deeply rooted innovative culture and it needs mindful leaders and talents. It is not easy.

Leaders need to take a long and hard look into an organization’s core strengths, the competitive edge, the culture needed to decide on its best line-ups and directions if they want to stay innovative. Today any big company needs to be willing to transform itself to stay relevant. A company can transform successfully for the money-making sense, but it may not guarantee its long-term innovative edge if the urgency and drive for innovations are not conscientiously put into its core visions, its leadership’s mindset and its daily practices. IBM is a great example. They can transform from a mainframe and PC business into a good Services business, but it didn’t make them an innovative market leader. Today they are still facing the same challenges and threats from the competitors who can innovate a lot faster. Profitability and stability are double-edged swords for a long-term business.

Steve Jobs once said (Apple is mainly a product company though), “Innovation distinguishes between a leader and a follower.” It applies to both a leader and a business or organization itself.

On Leadership and Management

Finance Play in the Business Transformation at Ford*

Every large-scale business reconstruction or transformation needs money. When a business faces the tough reality of either to transform or die, it’s usually cash-strapped. That’s exactly the situation with Ford Motor Company when the then-CEO Bill Ford named an outsider to replace him in 2006. Alan Mulally was a known turn-around executive at Boeing.

By then, US Auto Industry had already been on the decline for several decades, outpaced by global competitions. The giant region of the “Factory Belt” in the northeast and central states of the US had long become the “Rusty Belt”. Ford was in bad shape financially with $12.6B loss for the year 2006 on a revenue of $160.1B with its corporate bond status in Junk category. Well, during the 2008 Great Recession, Ford sustained itself by not taking the government bail-out money and subsequently emerged out of the crisis as the financially leanest, healthiest and strongest auto industry player in the US and in the global. The prescient and critical financial decisions and steps that Ford took before and during the recession demonstrated the exceptional financial acumen of the Ford leadership, including Bill Ford, Alan Mulally and its Finance Team.

This is a hard subject to explain succinctly, but TriStrategist will try to highlight a few key lessons learnt on the importance of finance play during the business transformation and crisis.

1. Know your numbers.
Balance sheet, cash and benchmark comparison numbers. For example, “Daily Cash Burn Rate” is an important measure for manufacture business – it indicates the standing urgency of the business; “Cost per Vehicle” number indicates the productivity measure against global competitions.

2. Improve cash flow and balance sheet as soon as you can.
Shedding non-essential assets into cash and reducing operation cost are usually the first steps for immediate improvement. Ford’s cost-cutting was already on its way when Mulally got on board, but he took some immediate steps to consolidate the overly complicated global brands(including production lines, supplier & dealer networks, regional dependencies, fuel-economy line-ups) and sold some of the non-core ones for cash. This allowed Ford to focus company’s limited resources on winning or strategic brands. Ford timely and successfully sold a few brands before the recession – they might get nothing if too late.

3. To prepare for the transformation, borrow (not spend) as much as possible while still can.
Ford’s timing to borrow money in 2006 to prepare the coming reconstruction couldn’t be better. Yes, they may have gone all the way (even used Ford logo as collaterals) to appeal to the bankers for the money, but they already sensed that the situation could be worse if they didn’t get it sooner. They also kept an additional revolving line of $10B open which proved to be a very smart move in the hindsight. It eventually provided them the backyard money to skip the drama of the government bail-out (still a very risky decision then; needed hunch and gut more than data!) and Ford thrived hugely from the public image campaign out of it – boldly different.

4. Keep your own finance arm.
Unlike the other two automakers of the Big Three, Ford tried all it can during the toughest time to keep the ownership of Ford Credit Union, its own internal finance arm. When the credit was frozen and tight everywhere during the worldwide economic crisis, Ford could still use this arm to finance the customer purchases, its suppliers and dealers to maintain its sales and operations, more efficiently than the competitors.

5. Adjust the largest long-term cost items – Union contract and pension re-negotiation.
Ford has the tradition of fostering trust and good relationship with the Union – which made their negotiations with the Union easier. They worked out some of the key union worker contract terms right before the recession and also renegotiated the pension plan around the time. Both proved well-timed and critical to allow Ford to make necessary cuts when it needed desperately, move much lighter and faster to react to the market conditions compared to their US competitors.

6. Deep cuts to stay lean and towards profitability.
Mulally was determined to break the vicious cycles of over-production and deep discounts which had prevailed at the Big Three for years. He lead the leadership teams to seriously match production with demands during his tenure. Ford did deep cut while preserving the lean core, key innovations and global best leverage of the business, reduced the overall production in order to move to a healthy profitability state sooner. Different business philosophy and beliefs, different results.

7. Improve long-term debt status whenever opportunities allow.
Ford spared some needed cash through Union contract and pension renegotiations and immediately used it to buy back long-term debt at about 30 cents on a dollar (when the whole industry was on the brink of collapse). Benefiting from the pessimistic market views, they continued other de-risk, de-leverage debt-to-equity maneuvers to convert much of the unsecured debt into stocks. Such moves allowed them to quickly retire large amount of debt which saved them billions down the road and removed the risk of concession hankering by investors. Ford also paid off the renegotiated cash requirements for Union pension trust ahead of the schedule as its own cash status improved out of the recession. These moves relieved Ford some of the most onerous long-term financial burdens. It put itself on a healthy financial path to be able to fully focus on the future.

8. Keep a constant pulse of the market, the competitions and Government directions.
Be prescient and stay ahead of the game as a large corporation. In the time of crisis, it could mean influencing the policy directions and the sentiment of the market to your long-term advantage instead of merely reacting to the panics.

Reflecting on these stories and lessons learnt from the business transformations during the time of huge crisis, we should all remember Warren Buffett’s famous quote:

“It’s only when the tide goes out that you learn who has been swimming naked.”

* Note: This blog is to follow-up on May 3 post (on Alan Mulally and Ford) to elaborate more on Ford’s finance play during its transformation.

Trend of Technology

The Flood of “the Internet of Things”

Like watching a beautiful butterfly suddenly jumps out of a cocoon, isn’t it fun to be in the moment of watching a new and different picture of future unfolds right in front of our eyes? In fact we are in that moment today for many of the life-changing innovations.

No matter we like it or not, within or beyond our current imaginations, the massive flood of the Internet of Things(IoT, in much broader and expanded sense) are surely coming. The waves have already started. They are going to explode rapidly and display in gigantic scale in the business world and people’s daily life very soon. With the current speed of technology advancement, within a decade or less, we will all be living in the new world of ubiquitous connectivity and taking it as a norm.

The IoT flood will affect many areas of the enterprises and consumers. For an impacted traditional “terrestrial” business enterprise, how can it survive the new flood and the new world? The answer is likely as: not by building a Noah’s Ark, but by transforming the business into a swim-able creature, or an amphibian. Keep in mind it will be competitive in the water and finding a niche will be tough.

TriStrategist thinks a business can “swim” in these fashions in the IoT-flooded world:

– Infrastructure players (Including those private, public and hybrid cloud providers, but they need increasingly data-friendly platforms and network bandwidth.)

– IoT Technology stack providers (Foundation/common protocols, high-level adaptable programming languages and development tools, etc. Today’s existing platform-dependent technology stacks are not adaptable or friendly enough for quick IoT solution needs.)

– Smart IoT product/device providers and solution providers (There are many startups or existing businesses today in this area targeting specific enterprise or consumer needs. More will come.)

– BigData analytics and data intelligence providers (Certainly. )

Although all these fashions can be positioned for future revenue generations, upfront investment cost, margins and competitive landscapes can all differ in the long run. How strong, smart and versatile a business can be and can roam comfortably in the new world may well depend on the vision, strength and focus of the business in the current transformation process, and of course their pocket depth. The “Do-it-all Strategy” or the “Waterloo Strategy”*** can either lead to quick failures for smaller companies, or the failure to achieve economy-of-scale timely for larger enterprises, which can be equally dangerous in a very competitive and fast-changing world.

***[See our earlier blog on “6 Common Business Strategy Errors]

Trend of Technology

A Glance Through the Cloud War and Modern Datacenter Debates

Cloud Service is the most intense battle ground in today’s IT world. Cloud providers compete fiercely on scale, performance, manageability, security, and of course, the cost and price of the services. The prevailing concepts of cloud computing and cloud services have pushed so much re-thinking of the modern datacenter designs.

Google seems to have its own unique edge on both infrastructure and performance: its business has been running on “cloud” from the  very beginning – serving high quantity of queries on large-scale server farms. Many of their public cloud offerings came directly from the adaptations of their internal technologies. For example, software-defined storage (persistent disks) and compute clusters, BigQuery on data performance, open source-based AppEngine on Managed VM architecture for developer communities(See picture below), etc. Google proudly claimed that their cloud platform offers scale at 1 million QPS (query per second), 0-100 VMs cold-start in 38 sec, consistent performance in multi-tenant datacenters, etc. They also own greener datacenters with PUE (Power Usage Effectiveness) at 1.12 vs. 1.58 for industry average, which means 88% energy has been dedicated on core Compute. (MSFT’s PUE is about 1.13-1.2 ?)

A recent free seminar on Cloud Computing by multiple companies, including Google on its Next Gen Cloud Platform, piqued the interest of TriStrategist to take a surface glance into the underlying themes of the cloud competitions and modern datacenter debates. It seems the basic questions fall into these categories:

1. Enterprise Compute vs. End-user Compute(Consumer Compute), or the combination
Far from reaching maturity at present, different needs of the cloud users may eventually drive completely different designs and features on cloud service offerings.

2. Software-driven datacenter or not
Many current datacenters are using both hardware and software to drive cloud. Google is a big proponent of Software-defined Data Center (SDDC) concept. It uses software to enable advanced global networks for cloud, uses software code to load balance and schedule compute and storage requests for consistent high throughputs. Live runtime migrations to different physical media with no downtime and real-time collaborations for developers are all done through its software layers.

3. High-end hardware vs. commodity hardware
Google adopted commodity hardware approach to achieve massive scale at a lower cost. It also allowed easier abstraction for their software architecture. It avoids some of the high cost of hardware replacement/upgrades cycles.

4. Convergence of Compute + Storage +Network or distributed virtualization
The approach differs significantly in virtualization design and manageability. Companies are exploring diverse technologies in these areas.

5. Homogeneous building blocks vs. specialty & mixed technology stacks
Some companies start delivering the “containers” of pre-configured Compute+Storage+Network as building blocks with easy management tools for faster datacenter deployment. Many existing datacenters are far from benefiting from such an approach.

6. Modular distributed architecture vs. vertical stacks managed by specialty tools
In general, the more modular in design for underlying hardware layers, the easier to allow software abstraction to achieve consistent performance and low-cost manageability. It may still depend on the needs of the cloud users though.

There are apparently no easy answers to these questions. Common debating factors like time-to-market vs. scalability, flexibility vs. automation, Big Data vs. real-time can both be conflicting and co-existent. Performance, energy efficiency, security and total cost will be the driving forces for evaluating solution needs among all public/hybrid cloud providers and datacenter builders. We could also see in the future the needs for cloud services diverge drastically which may result in even more interesting playgrounds.

Google Cloud Managed VM Architecture

On Leadership and Management

Alan Mulally and His Magic at Ford

The name “FORD” used to be quoted by consumers as” Fix or Repair Daily”. Alan Mulally, an ex-Boeing Commercial Airplane chief, a disciplined, down-to-the-earth engineer by heart, a confident and skilled business and people leader, pulled Ford out of the Great Recession of 2008, saved Ford from downhill slide and transformed Ford from an inefficient, problem-festered, rusty, poorly mouthed automaker to one of the innovative, respected, most lean and profitable, strongest global player in auto industry within 8 years of his tenure. Ford’s annual profit jumped from a $12.6B loss (on revenue of $160.1B) in 2006 to $7.2B gain (out of $146.9B revenue) in 2013. Is this a true triumph or a struggle among the lesser fits in a declining industry?

On April 21, Ford announced a long-time insider Mark Fields (53) to replace the famous Alan Mulally (68) as the next CEO from May this year. Much has already been reported throughout the media on Mulally’s legacy at Ford, but TriStrategist wants to highlight below our own understanding of Alan Mulally’s top three “magic” from his CEO tool chest:

1. Fundamental culture transformation through consistent, simple, common-sense steps and principles.

a.) Motivate people by clear shared visions, not by structure or incentives.
From Alan Mulally’s own words:
“What I have learned is the power of a compelling vision, a comprehensive strategy, a relentless implementation process, and talented people working together based on those commitments.” [From the book “American Icon – Alan Mulally and the fight to save Ford Motor Company” by Bryce G. Hoffman)
“You’ve got to trust the process. You need to trust and nurture your emotional resilience. Do you have a point of view about the future? Check. Is it still the right vision today? Check. Do you have a comprehensive plan to deliver that? Check. If you get skilled and motivated people working together through the process, you are going to figure it out. But you’ve got to trust it.”

b.) Flatten the organization from top-down, effectively use weekly BPR (Business Plan Review) and SAR (Special Attention Review) meetings to enforce the basic principles of management: honesty, transparency, inclusiveness, accountability, discipline, quick decision-making, keeping all areas of the business leaders informed at the same time and all time, emphasizing interdependencies among all business areas, using goal-oriented openness and peer-pressure to foster business focus instead of individual focus or turf focus, encouraging everyone to work together as one team at all time, bringing out the best traits and best behaviors in talents and people. Following top-level example, because it was straightforward, worked effectively and was accepted emotionally, all business leaders would in turn use the same approach throughout the company – resulting in a flat, more transparent organization. All ideas/voices can be heard. People at all levels are informed of company situation and decisions. Everyone feels included and respected as part of the organization. In this way, everyone can think strategically and align their daily jobs to the company’s vision and strategic goals. Therefore the company can march as one entity – “One Ford”. All common sense, but very powerful.

c.) A calm, confident leader with relentless drive on results based on reality (no matter how harsh it is) and data, at the same time always with keen eyes to the future. It could mean tough negotiations and sacrifices, but a relentless leader and his team will focus on goals and results. “The data sets you free” – it fosters honesty, transparency, fairness and reality-facing, especially for this type of manufacture business. Constantly invest on the new products for the future even if in the middle of very tough realities – it is the only way to create a better, more successful future and outsmart the competitions. Opportunities are only for the prepared minds.

d.) Bring talented people to work together. Talented people working together will help a leader figure out ways to realize the vision and overcome any difficulty. As an outsider CEO, Mulally didn’t bring his own confidants (except he did bring in the HR Head from his Boeing Commercial Airplane department). He used most of the talents right at Ford. It needs courage and skills, but it builds trust and respect a lot faster as a true leader.

2. Prescient, timely, prudent and brilliant finance plays.

Timing played a big part in Mulally’s effectiveness and Ford’s survival and turnaround. Ford’s extremely well-timed, almost super lucky financial dealings at the critical junctions of events saved Ford from one of the largest tsunamis of the auto industry and world economy, enabled it to leapfrog the competitions by a large margin immediately out of the recession. Without these finance plays as one of the core implementation strategies, no matter how visionary and motivating a leader can be, Ford would not be able to survive as it did. The wisdom, prescience and brilliance of Bill Ford, Alan Mulally and Ford’s Finance Team provided us an excellent playbook on the importance of finance plays for any large enterprise that is going through business transformation or dealing with large-scale crisis. We’ll elaborate more on this point in another blog article later.

3. One Globe approach – true global inclusive views and implementations on business.

a.) Mulally and Ford did smart, comprehensive global leverage on talents, assets, brands, production platforms, technologies, best practices and markets. They provided some of the best illustrations on the success of such global plays which are valid to all types of businesses.
b.) Truly make “World is my oyster” and one will win in today’s business. All business strategies, hiring, operations, and future investments need to be put on a flattened global playground. A leader needs to constantly think that he is standing on One Globe.

Ford’s turnaround is a triumph in today’s world. There are so much to learn from the leadership lessons of its stories. It is a traditional manufacture business which was forced to fight for survival by the destructive tidal waves of the industry. Albeit different, many industries are facing the tidal waves nowadays, but a leader’s value can never be underestimated. Timeless principles will always stand.