JimPinto.com - Connections for Growth & Success™
No. 287 : 9 November 2010

Keeping an eye on technology futures.
Business commentary - no hidden agendas.
New attitudes, no platitudes.

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Invensys IOM strategy explained

When Invensys last year merged four units and nine different brands into Division called Invensys Operations Management (IOM), many people wondered how the name-change could be enough of a game-change for Invensys to survive.

The OpsManage'10 user conference, Oct. 18-22, 2010 in Orlando, FL. was the first get-together more than a year after IOM was formed. It managed to attract an audience of more than 1,100, a respectable showing.

IOM President and CEO Sudipta Bhattacharya is credited with the new conceptual drive, which all his key managers support enthusiastically. The company is now selling an integration framework that can tie together IOM systems and products, as well as those from third parties, in real-time enterprise control systems (ECS). This allows manufacturing companies to extend real-time decision support across all levels of the enterprise.

Some Foxboro people, as well as many outside the company, think that IOM is ditching the Foxboro business in favor of a purely software/IT solution. That's not true. ECS includes all the pieces, plus integrates third-party solutions, and attempts to take them to a higher level. It is two-way real-time control of the enterprise. It is both hardware and software, plus the new model.

Large customers want to go beyond factory and process controls to achieve the promise and the benefits of ERP. And that's where Sudipta is leading IOM.

Key industry experts, like Gary Mintchell and Walt Boyes, editors of the leading industry magazines, are enthusiastic about the concept.

Gary Mintchell, editor in chief of Automation World, explains the ECS strategy this way:

    "Many people think that the InFusion Enterprise Control System replaces all the older pieces of the Invensys Process Systems (IPS) pie - Foxboro, Triconex, SimSci-Esscor, Avantis - when, in fact, it builds upon each of these, plus Wonderware and Eurotherm, into an application that addresses larger problems - managing plants and groups of plants more profitably.

    "In today's integrated world, none of the separate Invensys parts could stand alone as a sustainable long-term business. Combining all of the IPS parts into the new model is the only way that IOM can survive."

Writes Walt Boyes, Editor of CONTROL Magazine:
    "Sudipta Bhattacharya has taken four divisions and, in a little more than a year, done more to make them one company that the others who have tried. Invensys appears to be moving forward. They have gained two slots both in the North American and in the Global Control/ARC Top 50 numbers (not yet published). They are 9th in North America, and 12th Globally, with 2009 numbers only slightly behind 2008. Of course, there's a 10-month lag in these numbers, and 2010 numbers are not yet available."
Frankly, I find all this little more than a conceptual, theoretical framework, not a practical business direction that can get Invensys out of their current problems. Here's the key question - are customers actually placing orders? We keep hearing about end-users like ExxonMobil, Shell, ChevronTexaco, Dow, DuPont, Eastman Chemical, and a host of other accounts, but no one quotes the actual backlog for the new ECS systems. There is no traction.

Sudipta is a good theoretician, and a good motivator of intelligent top-level people (Peter-Martin and others, who I respect) but a lousy communicator with the troops - who remain demoralized and fragmented.

The vision alone won't save Invensys from its current dire predicament. The company doesn't have a few years - they've got to start showing revenue growth and profits by the end of the current fiscal year (March 2011). If they don't, Invensys is for sale.

Click Automation World: Invensys Operations Management Pushes Integrated Enterprise Control

Click Walt Boyes Blog - Invensys Operations Management One Year On

Click Give us your own opinion of the Invensys IOM strategy

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Whither Invensys?

The results for Invensys' latest half-year (ended 30 Sept. 2010) squeaked through, showing growth and profit. But, one wonders how much of this is simply short-term financial maneuvers.

The Rail Division is tanking (see Invensys weblogs, links below) and CEO Ulf Hendrikkson doesn't have the time to do much more than bail himself out of a hole. The IOM ECS strategy won't bridge the gap.

My article, "Top-tier Growth Paradigms" (weblink below) explains how/why companies in the $1-10B range cannot remain independent. In a down-market, they cannot generate organic growth and so must make acquisitions. But buying companies large-enough to make a difference is too dangerous - one slip, and you're dead meat. Invensys and Rockwell are in this middle-tier predicament, and cannot remain independent.

Can Invensys be acquired? I've been asked my opinion by several VCs and financial analysts, and make good consulting fees for myself in the process. Clearly, only a large international conglomerate can afford to buy the company, with a plan that makes any sense.

And so, who'd buy the company? Can Invensys manage to sell off some of the pieces to raise cash and still remain in business? They tried that before, and sold everything that was saleable. They tried to sell off Controls (the Building Automation division) but it's still there, waiting in the wings. That would be worth another shot. And perhaps Rail could be divested piecemeal.

And who would/could buy IOM as a separate piece? The industry majors - ABB, Siemens, Emerson, Honeywell, Schneider - probably won't (though they'll dig into the details to get good market information).

If one of the majors doesn't step up to the plate quickly, it will be left to a bottom-fishing venture-capitalist to make the deal, and then sell off the pieces (Foxboro, Wonderware, Eurotherm, etc.) to make themselves a lotttt of money. This will be somewhat like Alchemy, which bought ICS for peanuts and then sold it off to Rockwell within a couple of years, at a handsome profit.

Whether Sudipta remains part of the deal remains to be seen. Unlikely. He remains an intellectual, a conceptual strategist - not a tactical businessman.

But, on the other hand, he might just be smart enough to get an industry outsider like CISCO, or Oracle, to take the jump into industrial operations. They'd have the muscle and the financial stamina to implement the ECS strategy. And Sudipta could still carry off the kudos...

Click Review latest results on the Invensys website

Click Pinto article - "Top-tier Growth Paradigms"

Click The Invensys/Foxboro Culture - Took a lickin' & kept on tickin'

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The end of old-style management

A recent article by Alan Murray (link below) is adapted from his book "The Wall Street Journal Essential Guide to Management". This resonated with some of my own thinking and recent writings on the lack of innovation in large companies.

Some 60 years ago, the famed management guru Peter Drucker's books launched the "practice of management" as we know it today. Drucker (who died at the age of 96) was the first to preach the techniques for running large corporations like General Motors which became a prime example of corporate discipline. Drucker's ideas were promoted by elite business schools like Harvard, which helped America progress through generations of global prosperity.

Interestingly, Drucker's ideas are not thriving in the new century. GM still survives, but only with a government bailout. Where are the old giants like RCA and Westinghouse? Today, less than 100 companies in the S&P-500 stock index were there when the index started in 1957. Huge, supposedly indestructible institutions like Lehman Brothers and Bear Stearns have crashed, while new businesses like Google and Facebook have come out of nowhere.

Big companies tend to be very hierarchical and myopically self-reinforcing, organized to minimize new threats to existing order. Management is focused inward, and resources are directed toward preserving structures based on past successes, rather than future opportunities. They develop barriers to innovation by allocating resources based on what has worked in the past instead of on what could determine the future.

By contrast, small companies use radically different mechanisms - fast-acting and much more effective. Today, the fundamental value of an organization (large or small) is information bandwidth - capacity and speed. Failure in these aspects is a severe restriction. In the information economy, success comes through agility; most big companies just cannot be agile.

The large, managed corporation is becoming outdated. Much of today's business success has come through bypassing corporate hierarchies, or using revolutionary tactics to "make the elephants dance". Today's biggest winners are the enemies of corporate bureaucracy. Old style hierarchical management is obsolete.

Click Wall Street Journal - The End of Management

Click Automation World (Oct. 2009) - The demise of size

Click The End of Management, or Just a Different Style?

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Third-world innovations on the horizon

Today, almost the entire world has opened up to consumer markets, which is bringing an avalanche of new entrepreneurs and innovations.

Soon, there will be Chinese autos and cell-phones, Indian games and consumer gadgets, Brazilian foods, fashions and fads, and a bunch of new money-making toys and trends. We'll be seeing many more foreign names become American household names, competing for our money and attention.

Once the Chinese and Indians expand beyond their own burgeoning markets, at price/performance ratios that are vastly different from American and European equivalents, we'll see them moving into "first world" markets. Like Korea's Hyundai and Samsung, there'll be lots more consumer products from countries that we didn't quite expect to be here grabbing market share, competing and beating the established leaders. And like the IBM PC became Chinese, and the Jaguar auto got a new Indian owner, there'll be more and more foreign competitors vying for market-share.

What's happening to drives these changes?

  • Consumers in emerging markets are rapidly becoming wealthier, more sophisticated, mobile, and educated, generating confidence, enthusiasm, creativity.
  • Emerging countries have younger populations, which generates young entrepreneurs to compete with the ageing populations of Japan, Europe and Russia.
  • New brands are not burdened by old expectations, price structures. They can introduce new products at price/volume ratios that will upset entrenched leaders.
  • Because of their vastly bigger populations, emerging markets will have the biggest markets for everything. They'll shatter all traditional pricing structures, wreaking havoc on old pricing paradigms.
Here are some numbers to chew on:
  • Developing economies accounted for nearly 70% of world growth over the past 5 years.
  • The GDP of Emerging and Developing Economies accounted for 20% of world GDP in 2000, 34% in 2010, and an estimated 39% by 2015.
  • The global emerging middle class now stands at two billion, spending $6.9 trillion a year, expected to rise to $ 20 trillion by 2020 (that's twice current US consumption)
  • Developing countries will account for 2/3 of world trade in 2050.
  • The GDP of emerging markets will grow to be about 1.3 times the size of advanced economies in 2050. China will be approximately twice the size of the United States in purchasing power.
  • India now has more rich households than poor, with 46.7 million high income households as compared to 41 million low income. In addition, 62% of Indian households are middle class.
  • 700 million will be using the Internet in Asia within 5 years.
Established leaders that can adapt to the coming consumer-products onslaught will thrive. Those who cannot adapt will die.

Immigration keeps re-fuelling America's population growth and success, while the population of most European countries continues to decline, bringing uncertainty. America will continue to be in the top ten of happiness and quality of living indices for decades to come.

This discussion was adapted from the Trendwatching briefing for Nov. 2010 (link below), with extensions from other sources.

Click Trendwatching Briefing (Nov. 2010)

Click The Third World Goes High-Tech

Click Chindia - The rise of China & India - Jim Pinto at TEDxDelMar

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Endless ISA debate continues

My recent diatribe on the decline of ISA in the global business environment got a lot of attention.

The larger ISA local sections were pleased that I was voicing their frustrations. Strong sections like Cleveland, Houston, Will-Dupage (Chicago) IL, Boston, Northern California are getting fed-up with ISA's general lack of support - clearly some of them will secede from ISA sooner or later, which will hasten the end.

Some of the ISA committees did indeed give me feedback - that they concur with my conclusions, but are not yet agreed on solutions. My response to them is that committees can NEVER agree - getting volunteer accord is like herding cats; always "instant indecision". The debate will continue till something inevitably breaks.

On the LinkedIn ISA group (there are some 3,500 members) at least one intense discussion was generated. Someone suggested that ISA was fulfilling the important role of promoting Certified Automation Professionals. When I enquired whether the CAP initials after his name had helped him get a promotion, or a salary increase, he agreed that had not occurred. Others thought that I should work with ISA, rather than just criticize; I enquired whether they had read my many constructive articles written over several years. There was no response.

Glenn Harvey was the respected Executive Director of ISA for about 22 years (1977-99) before he retired. He sent me a response, published in the eFeedback section below. I sent Glenn's letter to most of the key people at ISA - members of the executive board, several key membership committees, and of course, the current executive director. There was nary a response.

ISA has been unable to keep an executive director in the decade since Glenn Harvey left. I have met and talked with each and every one of the new executive directors at great length during their tenure, and even after they exited. They all complained about the same problem: how difficult it was to make any changes through endless debate and inability to make decisions with well-meaning yet ineffective volunteer governance. Plus, constant interference from the chain of command that extends to former-president's and officers who KNOW what is best for ISA.

If YOU are a member, or ex-member of ISA, I'd like to know your view about what ISA should be doing to better fulfill its mission of representing the automation profession. Please login at the ISA weblog (weblink below).

Click Log your own comments and feedback - ISA weblog

Click ISA continues downhill slide

Click Whither ISA? (Nov. 2009)

Click ISA - The Melting Iceberg Continues to Melt (July 2006)

Click Antique Governance Plagues Cash-fat ISA (Sept. 2005)

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Glenn Harvey [glennharvey@charter.net] formerly Executive Director of ISA (22 years) sent this letter after reading my recent rant on the ISA downhill slide:
    "With much regret, I believe that you are right on target both on your prediction of ISA's future and the root cause. Unfortunately, I cannot see any resolution to the two-headed problem you cited. The leaders and the management are mutually supportive of each other. Changing one without changing the other won't solve the problem and there is no way to make a clean sweep of the volunteer leadership. Some of those folks have been standing in line and kissing frogs for 20+ years to get into a leadership role and they won't give it up for any reason short of death (their death, not ISA's).

    "ISA's financial reserves are sufficient to let this debacle continue for several years. The leadership is not going to close the doors and give the reserves to a deserving 501(c)(3) organization (the only way assets can be distributed); they will continue to flush it down the drain until the last dollar has been wasted."

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The ever cogent and forceful Bob Fritz [rfritz@avtron.com] had this to say about why automation creativity sleeps:

    "Did it ever occur to you that Automation has simply run its course, insofar as creativity and innovation are concerned? When industries start, there is creativity, growth, and innovation. After awhile, all this slows because the low-hanging fruit is harvested. Progress then slows to a steady state replacement phase, with little innovation, and eventually something else replaces the industry. In the latter stages, investment stops and someone harvests the remaining cash.

    "As someone once put it, there are five stages to any business or industry:

    1. Wonder
    2. Thunder
    3. Plunder
    4. Blunder
    5. Going Under

    "I think automation is somewhere between (3) and (5) now. I and some of your readers were fortunate to work in the industry when it was (1) or (2)."

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Reese Horton [rhortonj@msn.com] had these insights about America's joblessness and loss of manufacturing:

    "There are limited means of creating wealth. Farming, mining or processing of natural resources, manufacturing, and using our brains to do these more efficiently and effectively.

    "Banks don't create wealth. Services don't create wealth (I'm in a service job). Both simply create costs for those creating wealth.

    "Maybe collaboration is the only way enough brains can get together and work out our energy dependence problems as well as how to overcome incredible conflicts of interest at some levels of government.

    "Hopefully, we can collaborate to work out how to reprocess spent nuclear fuel, and use more natural gas in our vehicles. Since we still own a controlling interest in GM and Chrysler, why don't we tell them to manufacture at least 10% of their cars with dual fuel capability including natural gas?"

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