Innovation in the systems business: Dynamics of autonomy and cooperation

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Innovation in the Systems Business: Dynamics of Autonomy and Cooperation Glenn C. Bacon

There is little doubt that the computer systems business is currently experiencing a rate of innovation that is unprecedented in industrial history. Thousands of new hardware and software offerings appear annually. Many of these enjoy rapid market acceptance; many others rapidly vanish. Given the youth of this industry, and in particular the software aspect of it, there is little business history to use as a base for prediction of success or failure of new product offerings.

Even though the many hardware and software components that comprise a useful computer system are developed and offered as individual products, the required technical integration of these provides unique challenges for R&D management. Newfunction, especially that provided by software, usually results from prototypes that are not well integrated with the existing product line. This article examines the problems of managing the conflicting demands of market-based autonomy and systems requirements for integration. The idea about software innovation is an interesting complement to the two articles that follow.

The Innovation

Address correspondence to Dr. Glenn C. Bacon, IBM Corporation, Orchard Road, Armonk, NY 10504. 0 1985 Elsevier Science Publishing Co., Inc. 52 Vanderbilt Ave., New York, NY 10017

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One key theme is emerging, however. That is, a new product’s acceptance seems to be related to its ability to fit in with a customer’s pre-existent information environment. This environment may be composed of paper, face-to-face, telephone, or computer-mediated information and analysis. The customer’s desire for improved productivity, either for the individual or institution, is facilitated if information or analysis capability from these various sources can be easily interwith the task at hand. Thus, related or “integrated” any extension of that environment is more valuable if it properly interfaces what is already there. This need for integration presents a very challenging dichtomy for the management of the systems innovation process. The autonomy required for innovation and the cooperation or coordination required in order to assure that any new system component properly integrates with existing ones presents the fundamental con0737-6782/851$3.30

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BIOGRAPHICAL

SKETCH

Glenn C. Bacon is Director of the Corporate Technical Committee for IBM. He has been responsible for research and development management of a variety of hardware and software products since joining IBM in 19.57. His B.S. and Ph.D. degrees are from the University of California, Berkeley and his M.S. is from Stanford University, all in electrical engineering.

with enormous flexibility and is easily accessible to almost anyone associated with computers. In fact, many of the facilities of the computer are specifically designed to enhance this malleability under the theme of improving the productivity of programmers.

User Influence flict. The magnitude of this issue seems to grow faster than the number of components involved and is thus a critical factor in managing new product development and internal venturing by companies with multiple products in the information systems business. Although the problem of positioning products with respect to each other is common in many industries, the technical dimensions of it for information products provide a unique management challenge. A central feature of the integration issue is the emergence of the personal computer. Since it is easy to use for such stand-alone tasks as text processing and business analysis (e.g., spreadsheets), it is well integrated with the user’s existing (noncomputerized) information environment for these tasks. However, as personal computer applications expand, they begin to intersect applications on existing larger computer systems or of other personal computer users. For the various systems to cooperate, the personal computer application growth must fit new constraints, thus potentially impeding its rate of innovation. In this article, we will explore the integration issue, focusing primarily upon computer software. It will be argued that computer software is key to the computer system innovation process and that some of the unique aspects of software are at the root of this management dichotomy. It is useful, therefore, to examine it closely. Further, we shall review the process by which the computer industry responds to customer needs. These perspectives will then provide the base for management considerations in dealing with the innovation-coordination dichotomy.

Features of Software Innovation

Computer software is a very malleable entity. That is, the creation and modification of software is a process

This leads to the idea that any computer user is a potential source of innovation in the software area. Not only is the potential for software innovation very broadly based, but there is also a significant motivation to attempt it. This results from the fact that the software is viewed as a “tool” by the computer user. Since that tool is often directly involved in the user’s productivity in information handling tasks, there is often a desire to customize it to the user’s particular style or task structure. The user’s role as an innovator in the instrument business has been studied by von Hippel [5]. Here too, the tool aspect is visible. In that business, the high degree of technical training of the user often qualified him to propose sound approaches to product improvement. This process appears to be greatly amplified in the computer software area due to the reduced specialist qualification required in order to propose technically feasible approaches to end-user task productivity.

Low-Cost Experimentation Beyond this enormous breadth and diversity of sources of innovation, there is a low cost for innovative experimentation. It is not difficult to prototype new ideas of reasonable scope. These prototypes can be used and refined by their developers and demonstrateed to peers. Should peers find the prototype useful, it is easy for the original designer to create a copy for them to use and to further refine. This phenomenon greatly mitigates the “vicious circle” resource problem in innovation management studied by Burgelman [2]. Here again, the nature of the computer itself amplifies the process. Increasingly, computer users are tied to electronic networks of other users. Thus, geographically dispersed communities of interest in particular areas of innovation can emerge. Any particular design-

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er is then able to both test ideas and receive feedback from a large group of expert peers.

Sets

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usage

of Tools

It is, however, this tool aspect of software that is the root of the dichotomy outlined earlier. Tools are most useful in “sets. ” That is, any particular task will usually require an ensemble of tools. Thus, tool sets for auto mechanics are different from those of aircraft mechanics, which of course differ from those of carpenters and plumbers. Within any set, however, it is important that the tools be well coordinated. Thus, standards have emerged for bolt sizes, wood sizes, piping, etc. The tools fit these standards and are collected in sets sufficient to complete the tasks of the craftsman. In software, the fit of a set of tools for a particular task is generally described by the term “integration. ” This implies a commonality in the description of data, communication protocols, screen formats, command structures, etc. In fact one of the key elements of innovation in software is in the design of systems services for assuring better integration of tool environments. This is an important aspect of the popularity of the UNIX@ operating system. The dichotomy arises when a new and innovative piece of software is moved from the environment in which it was created (well integrated or not) to another user’s environment in which it is likely to be less well integrated. To the extent that the new piece of software is built within a framework of design standards to which adherence totally assures integration, this problem is mitigated. However, the history of software development leaves little doubt that the invention of any new piece of systems function is likely to offer facilities that have no counterpart in the pre-existent systems structure. This of course creates the need for designing new standards to assure the integration of these facilities. As new products serve a broader context of enduser tasks, this dynamic will persist. Thus, the new function resulting from the innovation process seems to have an intrinsic ability to destroy pre-existent integration. If one could create standards for new types of systems facilities before the facilities themselves were invented, this untidy situation could be avoided. However, simple causality seems to preclude such an opportunity . Thus, we seem forever destined to have innovation and integration as mandatory but mutually conflicting needs in computer system design.

The Dynamics of Systems Growth

To make the best of this imperfect situation, it is necessary to further examine the technical evolution of computer systems in the presence of advancing technology and expanding customer needs. This will allow us to better understand how to minimize the direct conflict and improve the productivity of both the innovation and the integration task. It is useful to partition a computing system into three basic layers of function: hardware, systems software, and application software. Progress in computing can be seen in the movement of the boundaries between these major layers [l]. For example, the boundary between hardware and systems software is, to a high degree, determined by the cost of the hardware technology. As the technology advances, it becomes efficient to put more and more of the systems software function into custom hardware logic, microcode, or dedicated microprocessors. This allows more rapid execution of that function. Examples of this can be seen throughout the history of computing. Floating point arithmetic was originally done in software and is now a hardware function in high-performance machines. Currently, functions like communication protocols and high-level language function are becoming efficient in direct hardware implementation. The latter is a key factor in the so-called fifth generation machines. The boundary between systems and application software has an equally interesting trajectory. Systems software provides function that is a common service to many different application types. When such function is available in the systems software, the application programmer is saved the task of designing and implementing it. Operating systems and data base supervisors are key examples of such systems software function. The fourth generation languages and application generators represent a current movement of what was previously application layer work into the systems software layer. They have greatly improved the productivity of the application writing task. Application software is traditionally written by the user institution or purchased from software vendors who have expertise in the particular user application area. A key point is to observe that progress in this area is measured in terms of moving further into the work domain of the user. Thus, the principal source of new function being added to the layers that comprise a com-

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puting system results from the decisions of the end user of that system. The lower layers of systems software and hardware are largely devoted to lowering the cost of that function to the end user. As these lower layers become more efficient, more complex and perhaps less valuable user function can now become economical. This makes clear the idea that advances in hardware are enabling of advancing computer usage but do not play a direct role in defining its direction. An understanding of this process allows us to see clearly how the computer industry is market driven. Since the customer is largely in charge of defining the application programming and is solely responsible for the usage patterns of the machine, directional progress is very much in the hands of the user. In fact, the computer industry may be unique in this regard. It is hard to think of other product areas where the ultimate user determines the function. This extremely strong user role may be the fundamental explanation for the explosive growth of the computer industry.

DifSerent Approaches

to Innovation

From this examination, it becomes obvious why there are so many more new application programs than there are systems programs or hardware architectures. More importantly, we see distinctly different approaches to the management of innovation in these three layers. In the application area, the dominant constraint is selecting the particular environment of systems software and within hardware which the application must execute. Consequences of this choice are measured more in terms of marketplace breadth than they are in any particular constraint on a technical design of the application function itself. In the systems software area, an innovative product is much more constrained. Not only must the new idea properly interface with the rest of the systems components in order to obtain their services, but it must also not destroy the interfaces expected by the large and uncontrolled set of applications that use the pre-existent system. This is referred to as the issue of compatibility management. This same situation pertains to the hardware and microcode level of the system in an even stronger fashion, since both the system and the application software are dependent upon the stability of interfaces there. Innovations in systems programming and hardware thus tend to fall into one of two classes. For existing systems, successful new ideas tend to be evolutionary

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additions of facilities that do not modify pre-existent interfaces. Driven by the marketplace, some of the most successful commercial software products have undergone substantial evolutionary enhancement and restructure while still allowing compatibility with the first applications that were written for them. The other mode of innovation is obviously the creation of new hardware and software systems from whole cloth. Here, of course, the challenge is in an entirely different dimension. First, since it is a new system, the base of applications that might use it is either nonexistent or a constrained set of those available for an older system, thus limiting the possible initial market breadth. The other challenge is that to be competitive, a new set of systems programming and associated hardware must also have most of the facilities of competing old systems in addition to those innovative ones that it uniquely demonstrates. Thus, a new system is a new technical offering to the marketplace which, if successful, will undergo the customer-driven evolution described above. The purpose of this tour through the dynamics of the systems birth and growth process is to allow us to understand that the technology transfer mechanisms for different types of systems innovation can vary substantially. The transfer process is increasingly difficult as one moves from new applications to modification of existing systems structures to proposals for new systems. It often takes a good deal of technical management sophistication to realize which of these routes a new idea will follow. It is indeed a very costly mistake to develop and manufacture a new hardware and systems software architecture and then realize that the application base for that market will take a decade to develop.

Management Considerations Systems Innovation

in

With this background, we can now examine management issues. We will focus entirely upon the innovation side of the innovation-coordination dichotomy. The management literature is rich with techniques for the assurance of coordination and cooperation. Our challenge is to assure successful innovation in the midst of these. The first task for management is to become comfort-

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able with the fact that innovation in the software business is a uniquely messy process, not amenable to straightforward organization and mission structure approaches. The source of important new ideas, as a result of the dispersion of systems users, is very unpredictable. The prototype of a new product or the proposal for the enhancement of an existing one is more likely to come from a group other than that currently responsible for the product design. Thus, the management approach to realize the value of these innovations is more akin to hunting and gathering than it is to systematic farming. The next important management realization is that the key to innovation is people and not organizations or institutions. The frustration for management is that the establishment of a new department with a mission to get the business into some innovative area far from assures the success of that endeavor. Without inspired technical leadership, the resultant products of that department are almost certain to be noncompetitive. A more likely road to success is to build a department or organizational structure around an emerging idea and an able leader rather than to hope that the ideas will emerge within the shell of an organization. This consideration should cause serious question about many of the governmental programs, both in the United States and abroad, attempting to accelerate the development of new computer products in local economies through the creation of quasigovernmental organizations rather than through the commercial venturing process.

Internal Markets

The “internal market” plays a key part in the management process. Since firms concerned with venturing in the systems business are usually extensive users of computer systems, the popularity of new ideas can often be tested well before it is necessary to make a decision to go to market. Frequently, a new product concept develops a very strong internal following before management decides to embrace it as a business strategy. The develoment of UNIX,@ outlined by Ritchie [4], is an outstanding example of this phenomenon Given the critical, market-driven aspect of the software business, it is important that internal innovators have simple routes to the marketplace. Here again, there is a dichotomy. A firm’s reputation for quality and service invariably requires an extensive degree of testing and documentation before a product is commit-

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ted to the marketplace. This approach is mandatory for enhancements of existing systems and hardware components. However, it is necessary that new applications be allowed into the marketplace which do not require such a costly process. These must be clearly presented to the customer as having a lower degree of service support and having possible exposures in quality. To take advantage of the innovation, the customer may well rationally choose to accept these risks. Thus, the systems firm may offer a spectrum of product terms and conditions in order to better match the nature of the innovation process. The fact that such a spectrum must exist is a manifestation of the fact that the systems vendor may have not yet decided that a particular innovation will be part of its long-term system offering. In other words, a new product may well be in the realm of a market test rather than a part of the present strategic architecture of the system. This requires an additional level of dialogue between the vendor and the consumer of the product and a risk to both. The consumer may well come to depend upon the innovative product and require enhancements that the vendor is not prepared to produce. On the other hand, an innovative product may become so popular that even if it is inconsistent with the architectural strategy of the supplier’s principal system, the marketplace demand forces a long-term commitment and potentially a substantial amount of increased work in order to best fit it into the overall architectural strategy.

User Groups

Another important source of innovation for systems vendors is that of user groups, which are either formally organized with the assistance of the vendor or come together informally as a result of common interest. These groups not only provide a technical exchange forum but are often the most vocal proponents of innovative enhancements for the systems that they have now come to depend upon. As well as demanding innovation, these groups also insist upon coordination and integration. Thus, management dialogue with these groups is extraordinarily valuable.

New Business Units An important feature of many innovative large companies is the creation of independent business units. These allow the exploration of a new marketplace or, in

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the context of this paper, an entirely new systems structure with a minimum of constraint and overhead from the rest of the corporation. These seem to be particularly well suited to offering completely new hardware and software structures that are not tied to the rest of the current systems offering. They are particularly poorly suited to incremental enhancements of that system. This of course arises from the fact that the notion of their being “independent” is not true. Thus, the creation of independent business units as the solution to any particular technology transfer or innovation exploitation is naive. The other consideration of independent business units is that they can become very successful. In that case, the new systems offering that they have developed is very likely to grow and intersect the original product offerings, even though it was quite independent of them at the start. When this happens, a very large number of software “integration” tasks must be defined and managed in order to assure the coherence that the users of both the old and the new product demand. For example, in the past year there have been over a hundred products offered for microcomputer-tomainframe connection or “cooperative processing” [3]. Thus, the innovation process seems to foster the need for even more innovation. This new systems growth process presents management with another key strategic choice. If the users demand coordination between a new system that is offered and an existing one, management can either attempt to integrate the function of the new system into the existing one or decide to let the two systems evolve on their own but attempt to interconnect them. Given the large number of new entrants into the systems marketplace, this latter approach is becoming of increasing importance, since many large computer users expect to systems environments for the have “inhomogeneous”

indefinite future. Although this opens the environment for the offering of new systems types, it requires a new level of standards activity for interconnection architectures among these environments. Again, we see that innovation and coordination are inextricably intertwined.

Needed: A New Paradigm

Although the above discussion is not offered as a complete consideration of the innovation process in the management of computer systems, it is meant to motivate the fact that a new management paradigm will ultimately emerge in this area. Computer-related product lines have an unprecedented technical coupling among the individual components as a result of the customer’s demand for integration in his information environment. This, combined with the uncertainty of the value of an innovative component, seems to mandate a much more interactive and iterative approach to new business development. A new level of customer dialogue and supplier responsiveness is clearly required.

References I.

Bacon, Glenn C. Software.

Science 215:775-779

(Feb 12, 1982).

2. Burgelman, Robert A. Managing the internal corporate venturing cess. Sloan Management Review 25(2):33-48 (Winter 1984). 3. Goldstein, Barry C., et al. Directions in cooperative processing workstations and hosts. IBM Systems Journal 23(3):236-244 4. Ritchie, Dennis M. Reflections on software research. of rhe ACM. 27(8):758-760 (Aug 1984).

pro-

between (1984).

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5. van Hippel, Eric. The dominant role ofusers in the scientific instrument innovation process. Research Policy 5:2 12-239 (1976).