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Invensys IOM strategy explainedWhen 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:
"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."
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.
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...
The end of old-style managementA 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.
Third-world innovations on the horizonToday, 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?
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.
Endless ISA debate continuesMy 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).
eFeedbackGlenn Harvey [email@example.com] formerly Executive Director of ISA (22 years) sent this letter after reading my recent rant on the ISA downhill slide:
"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."
"As someone once put it, there are five stages to any business or industry:
"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)."
"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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