Water, Broadway, Peyton Manning and Software

I was recently invited by Kevin Klau, who is Group Executive for Danaher Water, to participate in an innovation panel he hosted in Denver. Danaher Water includes several operating companies: Hach, Trojan Technologies, OTT Hydromet, Pall Water, Sea-Bird Scientific and McCrometer which all build products for the water industry.

It had to be the most eclectic panel I’ve ever been a part of. I was joined by Debra Coy, who is a top ranked Wall Street water analyst and partner at XPV, which invests in the water industry, Robert Hartwell, who is currently performing in Hello Dolly on Broadway and is founder of the Broadway Collective; and Will Day, an abstract artist, whose Peyton Manning canvas hangs at Bronco Stadium.

As you can guess I got the “technology questions”. I thought I’d share my answers.

You’ve lived in the tech world for a long time. Do you think it’s more difficult for established, big companies to embrace the notion that ‘failure is ok’ when we’re rewarded for success?

The first thing you need to think about is Hardware is not Software. I was invited a few years ago to speak to the leaders of GE’s businesses. It was a dinnertime talk, so no PowerPoint. I decided the title of my talk would be “Hardware is not Software”. I started by saying, I don’t know how to build MRI scanners, jet engines or locomotives, but it certainty it’s not the same as building software.

First of all the cost of software is the cost of thought. If I can imagine it you can create it so the cost of creation is zero. This is clearly not the same for hardware. And since the cost of creation is zero, then the cost of failure is also zero.

So in the world of software, rather than think ‘failure is ok’ you should think Turn Quick, not Fail Fast. Several years ago I had Adam Pisoni, CEO of Yammer in my Stanford class. He made an interesting comment. “We had no idea what enterprise social networks were, so instead we decided to instrument the application”. Because this was an application delivered as a cloud service, they could see what the user was doing, and eliminate software paths that no one was using, and extend the paths that users were using. Turn Quick, not Fail Fast.

In your work, what’s an example of a company you’ve seen that has really transformed itself?

I’ve seen not a company, but an industry transform itself. The enterprise software industry has moved from being a disconnected business selling a product for a one-time price to a connected business, which is selling and delivering product-as-a-service. Fifteen years ago I wrote a book, The End of Software, which discussed the economic reason why this change should occur. Today, no one would build a software company, which is not delivering their software as a service.

What lessons do you think we can learn at Hach?

There are three lessons to be learned.

First, get connected. Connect your machines, Connection has transformed our consumer world. Google connected 1,000,000 machines and changed how we find information. Netflix connect 1,000,000+ people and changed how we watch TV. Uber and Lyft connected 1,000,000+ cars and changed how we get a ride.

Mass connection is the basic first step.

Second, build digital service products. Today at Danaher Water you focus on building physical products. But the customer is interested in how to maintain or optimize the security, availability, performance and change of your products. So start building digital (not human) service products to deliver to the customer the information required to maintain or optimize the availability, performance and security of your products. Of course if you can tell the customer what to do then why not do it for them and ultimately deliver your product-as-a-service.

Third, create a new sales team and channels to market. We all know many examples where the products were created, but never made a dent in the market. Sun Microsystems in 2006 launched a compute cloud service, where you could purchase an instance for $1 per hour. Sounds a lot like AWS doesn’t it? But while engineering built a great product their sales channel was optimized to sell million dollar servers, not a couple of hundred or thousand dollar compute instances. Amazon never had that conflict. They started as retailers, no enterprise sales force and built a channel, pricing and product to enable a wide variety of customers to use their product. So make sure you build a new sales channel, lest your cool product dies in R&D.

Of course, the 2-hour conversation covered many other areas including how to foster innovation, bring new products to market and one of my favorites — can you teach curiosity? But we’ll leave that for another time.