The Great Debate: Innovation Is In the Eye of The Beholder, and Other Metaphors

The question of who innovates in our industry and whether customers are getting enough to justify their maintenance fees is the story that just won’t die. Fellow EI Dennis Howlett took his knowledge of baseball on the road with a scorecard approach to the debate that has been rolling about the EI crowd, including Vinnie Mirchandani, Bob Warfield, and, Paul Greenberg, as well as Larry Dignan from ZDNet.

I just posted a reply to Dennis’ last post, which I have expanded on here:

Tormented sports analogies aside, there are actually multiple threads going on here at once, all of which could crave some more data and/or definition.

1) What do we mean by innovation? One person’s innovation is another person’s waste of time. I think in general we haven’t really arrived at a common definition of the term, and may never do so. And customers’ appetite for innovation varies tremendously: keeping the lights on is often the main priority, especially if IT is not seen as a strategic differentiator.

2) What do we mean by innovation spend? There are lots of early stage companies that can and do produce truly innovative products for next to nothing (as they should) and there are companies, like Microsoft, that spend zillions on products like Vista, and, after my week spent fixing my wife’s computer, have clearly wasted every penny they spent (slight exaggeration, but — did you know fixing bad sectors in Vista involves using Chkdsk? If you can get Vista to actually perform a Chkdsk. This is 20 year old technology, make that 25 year old, at least.) Point is, measuring innovation by spend doesn’t measure innovation delivered, only innovation attempted.

3) What is a user and what is a buyer? This is a complex issue. I have spent a lot of time talking to end users recently, as part of my attempt to understand the casual user phenomenon I’ve wrote about here. One thing for sure, they don’t think like buyers, and for the most part couldn’t care less or are oblivious to the issue of cost. Buyers are a different breed: caring only about cost, and, I would argue, less connected to the issue of functionality (and by the way, innovation) than many of their users. I would love to see the survey that looked at both satisfaction with functionality and satisfaction with TCO across these two populations, and then tried to correlate the different populations and their attitudes. I think we would see a very broad and complex picture that would probably make all of us in this debate look very right and very wrong at the same time.

3) What is an appropriate return on R&D spend in our industry? Or any industry? And how do you even measure that return, based on the fact that so much of R&D is just the R part, and never makes it to the D part. I asked one of the top tier vendor CEOs how much of his research ever makes it into product, and he said about 50%. But, he added, the other 50% is actually useful, even it is has no direct impact on product (see point 2 above). Does that lost 50% mean someone wasted their money?

5) How the heck can we really compare one company’s innovation spend and success with another? In addition to the subjective issues raised above, one major player, Microsoft, simply doesn’t break out any numbers regarding its ERP spend or revenues. And, I applaud the green-eye shade types like Dennis who can actually sift through the annual reports and even begin to find some of these numbers. But we’ll really never know for sure.

The bottom line is that the debate continues, and from what I can see this debate can and should go on for quite a while.

More On Oracle and Innovation from the Enterprise Irregulars

In addition to my post on Oracle and Innovation from yesterday, my colleague Dennis Howlett has also weighed in on this issue, first by citing Vinnie’s post and then adding his own perspective as well. Meanwhile, as a backdrop to the public debate we’re waging, the Enterprise Irregulars have been batting around this issue amongst themselves with some interesting points to be made. One EI, Jason Corsello, opined that innovation is in the eye of the beholder, and that for many organizations, innovation is less important that stability and the “one throat to choke” that comes with sticking with a single vendor.

Microsoft’s ability to innovate also entered the discussion, with Dennis Howlett suggesting that MSFT was good at innovation and providing customer satisfaction. I replied with the following:

NAV, and in fact most of Dynamics, isn’t what I would call a hotbed of
innovation. The model doesn’t allow for it: most of the innovation in
MSFT ERP products come from small regional partners, and said partners
and MSFT have done a lousy job globalizing that innovation to make it
available to all their customers. So, in light of the relative lack of
innovation, Dynamics customers’ high level of satisfaction (or low
levels of bitching, which are absolutely NOT the same thing) say a
fair amount about the value of innovation and customer sat — and may
support Karen Tillman’s contention, and Jason’s, that high customer
sat can exist in the absence of innovation. I guarantee you that
MSFT’s customer sat levels plummeted with Vista — having just spent
three days figuring out how to run chkdsk on my wife’s Vista machine,
something that would have taken two seconds with any of the 10
previous incarnations of the MSFT OS.

Also, we cannot know what MSFT spends on innovation, or anything else,
relating to its ERP products, as they stopped breaking out those
numbers years ago. And, as we have seen all too often over the years,
if a company is being secretive, there’s usually a good (or actually
bad) reason. So, it’s not a fair comparison to make.

I don’t think the issue is settled here, and hopefully we’ll see some more discussion in the coming months. It’s clearly an important topic, all the more so because innovation is one of the key reasons for spending in today’s economy, and the burden of proof is on vendors to prove the value of the innovation they provide…..

Oracle and Innovation: Passing the Buck Back to the Customer

My friend and colleague Vinnie “the Deal” Mirchandani took aim at a lackluster PR release by Oracle as emblematic that Oracle has lost the art of software innovation, in favor the art of acquisition. That’s a rough synopsis, read the full post and Karen Tillman’s well-tempered responses here. As someone who tries to keep a finger on the pulse of innovation, particularly with companies like Oracle, I’m going to beg to differ. Though much of the innovation that comes from Oracle these days is through acquisition, there are a couple of pretty significant pieces of innovation either already released or waiting to be released by Oracle, and more on the way.

The main piece of innovation, still very much in the hopper, though definitely delayed vis a vis its initial, rather optimistic, timetable, is Fusion Applications. We could argue ad nauseum whether what analysts and Oracle Open World attendees saw last Fall was truly innovative, but I can assure you the art of coding, to use Vinnie’s term, is hardly dead at Oracle. As I’ve written elsewhere, the presentation to the analysts was three hours or so of mind-numbing detail, delivered in dry, mind-numbing fashion, that showed that considerable progress had been made on Fusion Apps, with a lot of functionality and a lot of interesting new user interface work in evidence, to say the least. The fact that Oracle hasn’t been running full tilt to the market with Fusion Apps may be more due to the pipeline-killing effect that something that new can have on existing product sales than anything else (for more on this, read my column in Managing Automation here.)

More innovation is coming out of Anthony Lye’s CRM group, in the form of the very interesting social CRM apps, also well-documented and reported on. I’ve had a number of briefings over the last few months, and I would say that innovation is alive and well at Oracle, and anyone, particularly a competitor, who thinks otherwise is seriously misjudging Oracle in the marketplace.

The remainder of Vinnie’s post begs a relatively complex question, which is whether Oracle’s customers have gotten enough value for the $75 billion they have spent on Oracle in the last five years. Vinnie makes a complex problem a little too simplistic by lumping all customer spend in one big bucket that includes net new customers, existing customers who are buying net new functionality, and everyone who is paying for maintenance and service. IMO it’s a little too big a bucket to support a discussion of whether customers are getting enough innovation from the company.

But that’s not to let Oracle or anyone off the hook regarding the value of their spend with their vendors, particularly the 22 percent entitlement, I mean maintenance, fee that is now the norm in the industry. Every vendor needs to think hard about what it’s doing with not just their customers valuable maintenance dollars, but more importantly what they are doing with the much more valuable customer relationship on which this spend is based. If Vinnie is right, that there is little to show for that spend, then shame on the vendors for gouging their customers, and, shame on customers for putting up with that gouging. If he’s wrong, then, it’s the vendors’ job to show that all those revenues actually result in something positive for the customers, instead of just something positive for investors.

I think in the specific case of Oracle, there is something to be said for how they spend their R&D budget, based on Fusion, social CRM, and other new application innovations in manufacturing, finance, and logistics, to name a few. I suggest in particular that Vinnie be given an updated version of the Fusion mind-meld I was part of last Fall. And then let’s have a debate about whether Fusion Apps are innovative or not. Knowing Vinnie, that would be a lot of fun.

A Luddite’s Confession: I’d Rather Take a Hike

My good friend and colleague Vinnie Mirchandani asked me yesterday in the middle of twenty project deadlines if I would write a guest post on how technology has impacted my hobbies. As I pondered the request, and looked at one of the other guest posts, I realized that, however high-tech my work day is, my leisure time is decidedly low-tech. Almost embarassingly so. While this may not be the place to confess that I’m not all bytes and gadgets, I offer this post up as an insight into why I sometimes eschew the latest in trendoid technology in favor of something more practical. Useful. Meaningful. Accepted. Comfortable. You get my meaning.

All the Data In the Universe: Satellite Collisions and the Data Glut Problem

Two communications satellites collided in geosynchronous orbit two days ago, and, while no one is expecting an interstellar solar array to crash into your backyard as a result, the impact of this collision can and should be heard across the business world, especially as we all ponder a brave new world replete with seemingly infinite data and, allegedly, the analytical resources to understand those data.

According to published reports, Iridium, the owner of the American satellite that disintegrated in the upper atmosphere, claimed that the collision with the defunct Russian satellite was unavoidable, the result of an increasingly crowded sky and a lot of bad luck. Or was that really what happened?

How about placing the blame where it belongs: a massive, and potentially highly costly data analysis failure. One that, if we believe the common wisdom about how easy it is to accumulate massive amounts of data and turn them into “actionable information,” should have been relatively easy to overcome. Except it wasn’t.

If you sense an object lesson, one of reality’s little dope slaps across the collective knuckle-headed wisdom of our industry, you’re catching my drift. Read on.

Here’s what happened from a data analysis standpoint. There are are 18,000 objects tracked by the Pentagon in inner space, some of which are space debris, others working satellites. Every day, Iridium said, it receives 400 “conjunction” reports from the Pentagon about possible collisions with Iridium’s 66 satellites. Inner space is an enormous three-dimensional area, in which these 18,000 objects caroom about in largely predictable orbits. This is a large, but also finite data analysis problem. It should be easy to do something to keep those 18,000 objects from running into one another. Heck, that data warehouse has to be smaller than Walmart’s. So analyzing the problem should be a no-brainer, right?

Wrong, according to Iridium. The company “didn’t have information prior to the collision to know that the collision would occur,” in the words of company spokeswoman Liz DeCastro.

Ms. DeCastro’s words were echoed by the Pentagon, which basically said it can’t track all those 18,000 objects all the time. Though it does manage to send Iridium, on which some of the Pentagon’s communications depend, those 400 reports per day. Something is being tracked, apparently.

So, a couple of questions are begged by this story. If the 400 conjunction reports are useless, as this collision seems to prove, why are they being collected in the first place? And, if the Pentagon can’t track all those 18,000 objects all the time, what are these conjunction reports about anyway? A waste of taxpayer’s money? Perhaps.

But the more salient questions for our world of enterprise software are the following: Was it really not possible to do some analysis that could have prevented this collision? And, as we collectively build data collection capabilities across the enterprise, sucking up every datum from the factory floor, the extended supply chain, and the consumer world, what are we doing about our ability to really analyze those data? I would warrant that the failure of Wall Street’s much-vaunted quants in keeping their own knickers out of the fire they helped create was a major proof point in the failure of our collective data analysis capabilities. And here’s another: despite all the watching, data gathering, and notification, there was nothing Iridium or the Pentagon, apparently, could do to stop the collision from happening.

Ms. DeCastro chose her words carefully: There wasn’t any information Iridium could have used to prevent this collision. There was, however, a payload’s worth of data, in real-time, that was intended to help prevent this kind of disaster. The fact that Iridium, which has a financial interest in keeping its satellites in the air and its customers communicating, and the Pentagon, which has a lot of complex interests in keeping space debris from hurting its spy-in-the-sky capabilities, not to mention any future space-bound weapon systems, cannot analyze the available data and predict this kind of outcome in an “actionable” way is an object lesson to the business intelligence world: Too much data is just as bad as too little data, especially when you get the same lousy result.

So, if you think those conjunction report-equivalents you’re producing by the hundreds are going to keep your satellite from crashing into someone else’s, think again. Those reports could end being as useful as the Pentagon’s conjunction reports: an excuse for failure and an example of the futility of the world of too much data. Further proof that we have a long way to go before our analytical capabilities catch up with our data gathering capabilities. A very long way indeed.

Reaching the Casual User: A New Challenge to the Enterprise Software Market

I’m increasingly hearing from companies that use enterprise software that the majority of their users will soon be “casual users” of any one enterprise software product. This is creating an enormous disconnect across the different constituencies that have been traditionally served, or underserved, by enterprise software. This disconnect between customer or buyer (usually the CIO), casual users (as often top management as they are “worker bees”), and vendors has enormous ramifications for, well, everything. I’ve just written a column for Datamation on the subject, riffing on the Andy Warhol concept that, in the future, everyone will be famous for 15 minutes. I invite you to take a look. As the user base becomes more casual, the need to rethink how users achieve process mastery, how companies consume enterprise software, and how vendors build community and engage with their users will become of paramount concern for all. At risk is not just our collective investment in enterprise software, but the whole notion of who our market is intended to serve.

Uncovering the Impact of Enterprise Software in the Global Economy: Let’s Play Enterprise Ball

SAP batted first this week in a game I hope will go not just into multiple innings, but will end up in a major playoff series as well. The game is about defining the real impact of enterprise software, and how a vendor join the league is the following: define how much your software contributes to key aspects of the global economy, and do so in a way that mere mortals (such as all those parents and neighbors who scratch their heads when we tell them what we do for a living) can understand.

Here what our first game looks like so far.

In inning one of Enterprise Ball, played during SAP’s Business Suite 7 launch in New York, SAP rolled out the following statistics:

85% of the Fortune 500 run SAP software.
65% of all chocolate in the world is manufactured using SAP software. (My personal favorite).
2.5 billion utility bills are processed by SAP software each year (aided, I will add, by SAP partner StreamServe, which helps SAP’s customers do this in an efficient manner)

And, here’s the one that knocked it out of the park:

70% of world economy’s transactions in some shape or form touch an SAP system.

That last one is pretty amazing – and, to be fair, probably not SAP’s alone to command. Which underscores the fact that Enterprise Ball is very much a team sport, and any number of vendors could be credited with an assist on that one. And probably should be. (And if that invite to the PR teams of enterprise software and hardware vendors to feed me some numbers wasn’t explicit enough, let me know and I’ll try smackin’ someone upside their PR head.)

Indeed, Enterprise Ball is also a game in which competitors get to show off their cooperative spirit. Or have it shown off for them, despite their competitive differences. So, in that spirit of sportsmanship, there’s probably a major assist for Oracle in that 70% of the world economy statistic, considering the preponderance of Oracle databases in the SAP customer base.

(In fact, I’m secretly hoping Oracle will bat next with some of their own stats on their impact on the global economy. They’ve been doing this in their advertising campaigns for years, and I hope they’re ready to move from the exhibition season into regular season play.)

What I love about this game is that everyone who plays gets to be a winner. Because the more we as a market can define the impact of enterprise software in terms that even our parents and neighbors can understand, the more we can also define to the growing numbers of enterprise software users why their mastery of what often seem like arcane business processes are actually part of a larger economic value. This is more than an obscure agenda – enterprise software’s growing importance in an individual company’s success is all too often poorly understood, to the detriment of user satisfaction and enterprise efficiency, not to mention a company’s return on its enterprise software investment.

So, let’s play Enterprise Ball. We’re in the first inning, and SAP just batted. Who’s up next?