Nick Booth recently interviewed our CEO, Nick Earle, for The Evolving Enterprise on the relevancy of hardware and how to drive change in technology – check out the full interview below.
Nick Earle hit the headlines a lot in the last 12 months. Perhaps that’s no surprise as his company, Eseye, has been doing some interesting things, with partners like Amazon Web Services, and clients like Costa Coffee and Bosch, to name a few.
Earle has an interesting back story, too. He led the cross-company global transformation teams of two multi-billion-dollar companies, HP and Cisco, from hardware-led to software-led business models. He was also SVP at Virgin Hyperloop, one where he sold the world’s first Hyperloop project to Mumbai “to revolutionise transportation”. Here he talks to The Evolving Enterprise’s Nick Booth.
Nick Booth: Why does hardware need to become relevant again?
Nick Earle: The simple answer is that hardware is the only way you can implement an IoT (Internet of Things) solution that turns products into experiences and delivers the business case. Over the last few years, billions of tiny sensors were being embedded in industrial equipment and new consumer devices. They enabled local features in the device but the data that was collected was not being transmitted back to the corporate systems to help provide dynamic personalisation services back into the device to enhance its operation, based on how it is actually behaving or being used by the customer.
It’s in the new edge aggregation devices where the sensor data collected via wireless protocols like Bluetooth, LoRa etc. meets the edge applications, allowing a subset of the trillions of data points that are now routinely collected, to be backhauled over the internet, or private network links, to the centre. Here data can be interpreted, and new innovative processes implemented such as auto diagnostics of service issues, reconfiguration of device firmware settings and automatic implementation of central policies to the edge such as anomaly behaviour monitoring and re-issuing of security certificates into the device. That’s not just a software solution, that’s software plus intelligent (and often custom) hardware and that’s why hardware needs to become relevant again.
Nick Booth: Aren’t you the man who turned HP and Cisco into software companies? Did you transform those two giants on your own?
Nick Earle: No! Change is never driven by one person. At both HP and Cisco, I was asked to head up teams that were tasked with cross-functional business transformation on a global scale. At HP this was triggered by Carly Fiorina who came in as the new CEO and wanted HP to be relevant in the emerging internet era in the late ’90s.
At Cisco, it was triggered when John Chambers wanted Cisco to aggressively embrace the newly emerging Cloud and Managed Services models that would enable them to increase the percentage of their business that was annuity-based. In both these cases, the approach was the same, to assemble a dedicated team of subject matter experts and change management specialists to take on what was an enormous task, as both companies were approximately US$50 billion (€45.8 billion) in sales and had in excess of 70,000 employees.
You know you have succeeded when the new processes, tools, metrics, compensation models, etc. start to be embedded in the wider organisation. And in both cases, once this occurred, I proposed that the group be disbanded and I moved on to the next challenge. Thousands of people were involved in the change at HP and Cisco, not just a few, and I’m very proud of the way both companies managed the transitions and thrived.
Nick Booth: How on earth did you persuade people to accept that culture change? Did you have to stage a coup and boot out the old hardware die-hards and install your own people? Or did you charm each person with your vision of the liquidity of the new organisation and the durability of companies that can shape-shift as conditions change?
Nick Earle: In both cases, I did have to recruit a new team. In HP’s case, we used to say that if you were so frustrated with the old HP and Sun being considered the ‘dot in dot com’ and you were considering leaving then you were perfect for our team! In the Cisco case, we needed to go outside for a lot of the talent as a deep understanding of cloud technologies and software-based annuity models was not in abundance, given that 75% of its revenue came from products and the rest came from services such as maintenance.
It’s interesting that you use the word charm, I call it evangelism and it is absolutely key to driving change. To illustrate this, I often use the analogy of the caterpillar: if you think about it a caterpillar is a pretty good analogy for a big complex company, slow-moving, lots of independent parts that all have to move to make progress, and a basic reluctance to fast-paced change. So, the question is: how do you get a caterpillar to move? Shouting at it has no effect and pushing it causes it to adversely react and ball up.
The answer is that you don’t have to, all you have to do to get it moving is to get the front legs to move. Once the first pair goes, the second follows and before you know it the whole thing is marching forward. The front legs are those people in the wider organisation who want to be the early adopters of the change, so the key is to find them (not easy as they are probably not the execs who are threatened by the change) and work with them first.
That’s where the head comes in; the head is the central team pushing out the crazy evangelical messages of how great the world will be once the change has been made. It’s a simple analogy, but a pretty good one based on my experience.
Nick Booth: Why and how is hardware relevant again? Has hardware changed in nature? Is it about smaller, more portable units?
Nick Earle: Yes, the devices are clearly getting smaller. At Eseye, we have 2,000 IoT customers and in many cases, the hardware device is just a square few inches. As the SIM (subscriber identity module) becomes part of the Silicon, as it is with our new alliance with Gemalto, the devices will get even smaller again. But critically, they will be no less complex.
My view is that hardware has always been relevant but over the last few years it became unfashionable. The IT industry often resembles a large flock of birds, most times it looks like they are all doing their own thing independent of each other with lots of noise and squabbling but every now and again they all act together and move as one. The common mantra that ‘software will eat hardware’ was started by Marc Andreesen, and turned into the first big tech IPO (Netscape) then fuelled by the VC (venture capital) community into a tens of thousands of software-based start-ups.
The rise of the FAANGs (Facebook, Amazon, Apple, Netflix, Alphabet (Google parent)) reinforced the view that hardware was at best invisible and at worst irrelevant going forward. This belief was accelerated as the hyperscale Cloud companies like AWS and Azure emerged and as the iPhone became the dominant consumer device. We came to believe that if hardware existed at all, it was just in a few lights-out mega data centres dotted around the planet.
This wasn’t a wholesale move away from hardware but a shift from on-premise to Cloud for standard computing tasks, fuelled by a vastly cheaper ‘rent it, don’t own it’ model. Thanks to the collision of smart cellular-connected devices, edge aggregation compute and the compelling business cases we are seeing in the early adopters for IoT-driven transformation, hardware is front and centre again. It’s alive and well at the edge and the hardware guys are now suddenly in demand as are companies, like ours, that have significant hardware and cellular expertise. Maybe the birds will flock again!
Nick Booth: The IT industry has complained of this problem for decades. Why has it never been able to train people? (Is it the quality of the trainers that’s the problem? Is it the delivery of the training? Is it because the IT industry constantly rips up the rule book and starts again, leaving trainers in its wake?).
Nick Earle: As you say we’ve been talking about this for years. I’m a keen gardener so if IT training was a plant it would definitely be a hardy perennial! It’s a multi-faceted problem but if I had to pick the biggest factor, I’d say it’s the pace of change in the IT industry which is breathtaking and still accelerating. The relentless effect of Moore’s law, the constant introduction of new capabilities like AI, which change everything, and the transformation of business processes across all industries, from physical to digital, means that the pace of change is exponential, not linear.
To illustrate the difference between these two worlds, consider this example: If I walk a meter in every step and I walk 16 steps I end up 16 meters away, that’s how the linear world works. But if my steps are exponential and double each time e.g. 1, 2, 4, 8 etc, then I end up 65km away. Traditional training methods are linear we learn something, we document it. We teach it and we move on. Using traditional techniques for training in an exponential world is like trying to catch a ball that’s bouncing down the stairs. You can’t do it.
Nick Booth: How do you think the skills gap can be bridged?
Nick Earle: We need to stop talking about training and focus on constant learning, and this means breaking down organisational silos and accelerating cross-functional collaboration.
There are some really innovative IT tools that enable this, like Slack, which are chalk and cheese when compared to traditional tools like email which is now, would you believe, 50 years old! But it’s also about other factors such as the physical environment where you work, which needs to be designed for spontaneous collaboration (think large kitchen areas rather than fixed desks and cubicles), hiring people who want to be constantly challenged and implementing incentive schemes that reward curiosity, experimentation and risk-taking. Get this right and you’ll create institutional learning, changing the role of management from inspection and measurement to enablers of change.