The New Honeywell Corporate Culture

Honeywell merged with Allied-Signal in 1999 and shortly after the combination was almost sold to General Electric, with Jack Welch of GE postponing his retirement to close the deal.

After the GE merger failed, Allied boss Larry Bossidy (already in semi-retirement) took back the CEO reins. Then he hired David Cote, the hard-nosed TRW CEO, to put Honeywell back on track. Cote has clearly turned the company around; in the 3 years since his arrival, analysts consensus is a strong forward-looking outlook.

So how has Honeywell's corporate culture fared under the new CEO? I've just completed an extensive review with the involvement of senior management. It's too detailed for eNews, and I'm summarizing here. But you can read the complete review on the JimPinto.com website - web link below.

Getting 114,000+ employees moving in the same direction takes time and leadership. Dave Cote and his team have spent a lot of time and energy cultivating key initiatives throughout the entire company and remaining laser-focused on them.

The NEW Honeywell is now reemerging with its own special culture, a blend of the old Honeywell and Allied Signal, with a touch of GE. The original Honeywell brought an innovative, engineering culture that thrives on customer results. Allied Signal brought financial and process disciplines, plus strategic planning. The GE influence brought organizational strength and Six Sigma commitment.

For this eNews, our interest is in "industrial automation", which for Honeywell centers around the Process Solutions Division. After the well-respected Ed Hurd departed almost a decade ago, Process Solutions drifted with a succession of relatively ineffective leaders. Jack Bolick is now President of Process Solutions, reporting directly to Roger Fradin, who heads Automation and Control Solutions, the old Honeywell "red".

Jack Bolick joined Honeywell about 8 years ago; he was at Johnson Matthey Electronics when it was acquired by Allied Signal. He's just the kind of leader that makes things happen and gets results. His results: When he took on the Process Solutions assignment, revenue was $1.65B; at the end of 2004 it's an $1.8B business, with 16% orders growth. Revenue grew 8% in 2004, and is expected to be $2.3B by 2008.

Under Jack Bolick, Process Systems has fully rebounded from its recent past. The Division is now regaining customer and industry confidence and is earning its rightful place as a leader in the process automation industry.

I've gotten to know Jack Bolick through this culture-review exchange. He's focused, decisive, open-minded, and communicates well (answers emails every day, from his Blackberry when not at work). He's a good leader, and people like his open-door policy. At 49, I would not be surprised to see him shoot to the top of Honeywell, or any other company he chooses, within the next decade.

Long-term Honeywellers who have worked in various divisions feel that the company had retained many of its strengths - specifically the unswerving demand for integrity and attention to customers. And the new Honeywell does indeed have a refreshing, more open culture, with a lot more results orientation and recognition for those who get results.

It seems that 120 years of history allows for a few bumps and bruises along the way. But it's clear that the new Honeywell has healed, and the company now has the strength and determination to move forward, and to maintain and even expand its industry leadership.

Tom Friedman book: The world is Flat

Friedman trumpeted his new book with an incisive NY Times article. He says he encountered the flattening of the world quite by chance when he was visiting the Indian high-tech capital, Bangalore. He describes his visit with the President of billion-$ software company Infosys with the awestruck hyperbole that was previously reserved for encounters with the heroes of Silicon Valley. By the way, I was born and educated in Bangalore; I moved to England when I was 20, and then to the US at 30.

In the past few years, massive investments in technology - satellite broadband connectivity, undersea cables - have changed the shape of the world, making global communications cheap and abundant. At the same time, computers became cheaper and available all over the world, and there was an explosion of e-mail, search engines like Google and software that could chop up any piece of work and send the individual pieces to Boston, Bangalore and Beijing, making it easy for anyone to do remote development.

When all of these things suddenly came together (around the turn of the century) intellectual capital could be delivered from anywhere. It could be disaggregated, delivered, distributed, produced and put back together again. And this brought whole new degrees of freedom to the way work is done - especially work that needs brains, not physical interaction.

Friedman explains what the "flat world" means to countries, companies, communities, and individuals, and how governments and societies can, and must, adapt. The future will not resemble the past. Outsourcing is inevitable and complaints or complacency won't resolve anything. Companies must develop strategies that fit global realities.

Tom Friedman's "Flat World" NY Times article (3 Apr.2005) is now only available to NY Times subscribers. But you can read some of it, plus an interview with Friedman, through the web links below.

The outsourcing myth

WIRED provides numbers: In 2003, US businesses took in $ 61.4 billion by "insourcing" (providing labor for foreign firms), while $ 43.5 billion worth of American jobs were lost to outsourcing.

Business efficiency comes through automation to increase productivity, as well as reducing the costs of goods and services through whatever means available. Like the old British Luddites (who went around destroying cloth mills) labor unions opposed automation because assembly-line workers would be left jobless. Now, politicians make the same argument against outsourcing. As I have pointed out before, more US jobs have been lost to automation than outsourcing.

Critics focus on the perceived decline of US manufacturing, although this is a natural and necessary process. While the US workforce employed in manufacturing has decreased from 28.4% 1960 to 11.7% in 2002, productivity has increased by 103% since just 1980. Management and professional specialty jobs have increased from 23.4% of total employment to 31.1%, adding almost one million jobs a year since 1983.

Interestingly, although some information-tech jobs have been exported, total IT employment remains 74% higher than in 1994 – just 2% below the peak during the Y2K scare. According to the US Bureau of Labor Statistics, computer-related jobs will account for seven of the 30 fastest-growing fields through 2012.

Solaia patent bust

In the late '80's many products were already transferring data from PLCs to PCs, and Square D applied for a patent on the "idea" in Dec. '87. Two years later patent 5,038,318 (now known as "the 318 patent") was actually granted: "Device for Communicating Real Time Data Between a Programmable Logic Controller and a Program Operating in a Central Controller". This gave Square D patent protection on a basic technique that everyone was already using. Square D was acquired by Schneider Electric, who tried to sell the patent, but no one in the automation industry wanted it - it seemed valueless.

Then Solaia was formed, a company which didn't have any products at all, and was solely in the business of licensing patents. Solaia bought the Schneider patent, and then hired the heavy-weight law firm 'Niro, Scavone, Haller & Niro' to pursue anyone who was violating the patent (transferring data from PLCs to PCs). And that meant everyone.

Solaia initially bypassed the automation companies who, of course, would not give in easily. They went directly to major end-users who were notified that their use of PLC suppliers' products was in violation of Solaia's patent. And, would you believe, they successfully collected more than an estimated $20 million in license fees. Several companies "wimped out" - they evidently felt that it would cost less to pay (estimated $500,000 each) than to defend the lawsuit. Up to now, Solaia had successfully avoided testing the value of their property by appearing in court.

In the meantime, Rockwell Automation, one of the major PLC suppliers, filed a countersuit - not against Solaia, but their lawyers Niro, Scavone & whatever, alleging that they "conspired to extract tens of millions of dollars in licensing fees" and for filing "baseless, sham" patent infringement suits.

Just recently, rather than fight Solaia as Rockwell has done, GE Fanuc Automation (another major PLC manufacturer) settled out of court. But, in a case against another end-user, ArvinMeritor, Rockwell undertook to defend, and Solaia had no choice but to proceed with the lawsuit.

The result appears to be a clear win for Rockwell. According to Walt Boyes’ "Sound Off" weblog on the Control magazine website, the court denied Solaia's motion for a summary judgment against ArvinMeritor and Rockwell for patent infringement, and granted ArvinMeritor and Rockwell summary judgment that they did not infringe on the patent.

This may be the end of the matter, though Solaia will probably appeal. But this will certainly weaken their case against anyone else. One wonders if the end-users who have already paid up will counter-sue to get a refund. Meanwhile, GE-Fanuc and other manufacturers who wimped - uh, settled - must be kicking themselves and/or firing their legal wimps.

eFeedback

"I have to echo Gary Costello's views in the last newsletter; this time from the other side of the pond. I too left engineering to pursue writing about technology as a career. While my observations do not relate to electronics hardware and software, they do relate to the use of such technology in manufacturing.

"Here in the UK, the denigration of highly qualified and experienced engineers has been going on for longer than in the USA. This is not a case of too many engineers for too few jobs. Rather it is the opposite; that there are too few engineering opportunities to support qualified people, who then leave the profession - or migrate from the country.

"The paradox in this, is that our automated industries suffer from acute skills shortages, while suitably qualified people go to waste. Ironically, those in engineering employment are better paid and more highly valued than at any time in my thirty years experience in industry. The net result of this seems to be that they stay put, and hence openings for engineers created by employment churn are lost.

"New engineering jobs are not being created, so without movement of personnel, openings are few and far between. If further evidence were needed, there is a conspicuous move towards outsourcing engineering expertise. This is particularly apparent in the automation industry where the growth in use of systems integrators is replacing in-house engineering talent. It is also happening in every walk of manufacturing life from design to maintenance operations.

"This doesn't have to be a bad thing. There is an argument that such specialization hones the required skills better than could be achieved by in-house engineering teams that must address a broad range of engineering disciplines. However, there is little evidence that specialists, such as the new breeds of systems integrators, deliver the opportunities needed by young graduates. The notion of employing and training apprentices has virtually gone from the UK.

"Unlike Gary Costello's experience, demand in the UK for writers with a sound knowledge of engineering has never been higher and age does not come into it. There are simply too few young engineers and those that do exist cannot be tempted away from their rare but highly paid roles. I use freelance engineering writing talent, but most of it comes from people who are 50+ years of age. Far from receiving diminishing pay for their skills, most of these engineering writers have never had it so good."

"It is easier for me to now appreciate the bullishness about China’s economic prospects. The work ethics, energy levels, standards of service, and pace of change not only surpass Europe (by a factor of 2 if one needs metrics), but also seem to be individually espoused and universally shared. You do get the feeling that each individual strives to excel - without supervision. (The employee manual seems to have only three words: do your best!) There are no weekends. The year of the Rooster, like others, will be 365 days of work. I was amused to notice that in the Beihai Park (Golden Gate Park of Beijing) no one is stretching on a bench or reading a book, let alone sun tanning. Everyone is moving.

"China boasted last year that Beijing will be ready for the 2008 Olympics before Athens is for 2004! The airport certainly is: efficient, streamlined. While we have not visited the Olympic site, you can rest assured that it will be ready, together with all other city construction and renovation, on target by 2007. How do I know? Well, there is a tall building under construction in front of the China World Hotel (ex Shangri-La). This is where we stayed for five days. During those five days, much to our disbelief, they completed the steel frame for six new floors! The skyline across is shaped by skyscrapers and cranes. Incidentally, 25% of the world cranes are now operational in Beijing.

"The Hotel is of astonishing charm and beauty. We lodged at the Club level where service at the lounge (called Horizon) is practically uninterrupted (hence allowing me to work in the wee hours without torturing my wife with clicks and light). Chefs roll in breakfast trays as of 5:00 am. Service is impeccable. In the lobby, violinists play virtuoso classics. Two Chinese men rotate in 12 hour shifts to say Hello as you head towards the dozen banks of elevators. The health center is the size of a football field and is open from 6 to 11. By comparison, at the Bentley (my favorite hotel in London) the health club is the size of a room, has no ventilation, no pool, and opens from 10 to 7. Prices at the Bentley are twice the price of the Shangri-La for half the service, and one tenth the amenities.

"We visited as many restaurants as there are lunches and dinners in five days. Each was a culinary experience, some augmented with unparallel elegance: superb décor, high beams, charming courtyard, exotic lighting, pleasing incense, hand crafted furniture - all while maintaining authenticity and simplicity. And again, impeccable service."

"Modicon no longer exists as a company, subsidiary, or brand within Schneider Electric. Modicon is now a product family name for all PLCs under the Telemecanique brand.

"The structure is a follows:

• Schneider Electric is a corporation that manages over 70 different brands in 130 different countries.
• There are 4 global brands: Schneider Electric, Square D, Merlin Gerin, and Telemecanique.
• There are a number of independent international brands including companies like T.A.C., Digital, Pro-Face, Sarel, Crouzet, MGE, Clipsal, and others.
• There are also a large number of local that are specific to regions or countries including Fellar, Alombard, EOCR, PDL and many others.

"In addition under each global brand there are a number of product family names. Examples of these product family names are Modicon for all PLCs, Altivar for all drives, and Advantys for distributed I/O.

"I know my email is a little confusing but the modicon.com address is a legacy of the past. [paul.hamilton@us.schneider-electric.com] also works and will be the address structure for the future."