Buzz. Wall-E. Up. Walt Disney's Pixar is synonymous with animated films, which display creativity, magical stories, and unforgettable characters. Behind the fun of making these films, Pixar has a set of deeply rooted values that champion excellence, tap innovation, and encourage collaboration. Bill Capodagli, the co-author of Innovate the Pixar Way: Business Lessons from the World's Most Creative Corporate Playground, and co-founder of Capodagli Jackson Consulting, says, "These are just the starting points for pushing your own team or organization to unleash a Pixar-style creativity, innovation, and brilliance. From its humble beginnings in the 1990s, Pixar modeled its culture after Walt Disney's legendary studio of the 1930s. In fact, Capodagli has written one of the most authoritative books about Disney called the Disney Way. In deconstructing Pixar's success, Capodagli provides readers with a proven example of how an organization can cultivate innovative talent across all levels of employees and background.

Enterpriseleadership.org sat down with Capodagli to learn more about what fuels innovation at Pixar and how Capodagli's consulting practice applied similar techniques to technology-based organizations. Here is what he had to say:

EL. Why did you decide to write this book? 

BC. I have been studying the Disney culture more about 30 years.  I continue to speak on keynotes about Walt Disney's success. Pixar first came to our radar screen in 1995 when we were in the middle of writing the Disney Way. We watched this rather obscure boutique arise from being a subcontractor to Disney to replacing Disney animation in the late 1990s. Disney acquired Pixar in 2006 for a cool $7.4 billion. The Pixar president, the creative officer, and retired co-founder all admired and emulated Disney's creative genius. Pixar honors the legacy of Walt Disney by refusing to take short cuts and bringing the story to life in each of their movies. It lives by the simple formula that quality is your best business plan.

EL. What was your first-hand experience dealing with the Pixar folks?

BC. During the research of our book, Pixar was all consumed with the launch of UP, which ultimately got an Academy Award nomination for a feature film. We were fortunate to have one of the Pixar cofounders grant as much time as we needed to understand the inner workings of Pixar, especially how the organization was born in the spirit of collaboration and trust. We talked with other Pixar employees as their time prevailed. They shared with us some wonderful stories about the collaboration and this childlike playground Pixar has created.

EL. Can you describe some of the methods Pixar uses to innovation?

BC. The Pixar cofounders pioneered computer graphics technology back in 1974. The 1984 hiring of John Lassiter helped to bring all of the pieces together. Pixar's innovation brings technology and art together.  John was an animator and the cofounders were these computer graphics technocrats. Walt Disney said when art and technology come together magic happens. That is really Pixar's secret and that is how it works today. Everyone at Pixar works in a collaborative environment. The technical people and animators work hand and hand.

EL. If I want to make my organization more innovative, what things can I take from the Pixar innovation model?

BC. The culture of collaboration is the missing key in most organizations. At Pixar, everything revolves around the story boarding, which Walt Disney created.  In the traditional sense, it involves pinning up the story on the board and then starting to put the story together in that conceptual phase. Everyone contributes to the story during daily meetings.  In most film companies, the executive producers, directors, and some of the executives preside over the daily meeting. Everyone participates in the daily meetings at Pixar. An open discussion takes place about how they can make what they are doing better.

The brain trust is another interesting concept. Pixar has a brain trust whenever a director or a producer decides that their stock needs some input. The process includes a group of eight directors and other they would like to invite to this meeting. During the brain trust, they present segments of the film and have a lively two-hour discussion about how they can improve it. The key to the brain trust is that there are no mandatory notes, and no mandatory action. It has absolutely no authority. The director and his or her team make the changes as they see fit.

EL. Does Pixar normally have many people seeking them out for their innovation methods?

BC. I am sure they have many people seeking them out, but they are like a closed set. They are not like Disneyland or Disney World where you can visit and observe the innovation, creativity, and the customer service. They do know welcome people in to observe the process.  I have known many companies that tried to open Pixar's door.

EL. How does Pixar reward employees for outstanding innovations?  Do they have a specific rewards system?

BC. We asked the co-founder about that. The biggest reward system these people have is that they can publish their findings and their methods in technical journals and speak at technical conferences. Technical people value this more than to monetary rewards.

EL. What is the Pixar education program about?

BC. Pixar modeled its education program after Walt Disney's eight-page, 1938 memo to Don Graham. Don was an art educator in the Los Angeles area. Walt wanted his animators to, not only be technically competent in drawing, but he wanted them to be creative when they got into the story. This memo outlined ways of doing education in music and comedy and storylines as such. The two Pixar cofounders had a copy of this memo and decided this was a good way to provide an education program to everyone in the organization. As a result, everyone in the organization can take up to four hours of educational courses on company time at Pixar University. It offers more than 110 courses. They say someone can go to Pixar U as a janitor and take enough courses to obtain the equivalent of a BS in filmmaking.

EL. Can you provide an overview of your managing consulting business?

BC. I have spent most of my professional career in management consulting.  In 1980, my clients started asking us to benchmark the best-of-the-best companies. Disney would always appear at the top of the list, come up as one of the best of the best, not only in customer service, cut in areas of training, turnover, and even in production. Disney has the fifth largest laundry in the world. I have taken many clients behind the screen to Disney interviews. My firm has interviewed 1,000s of Disney employees. We started using Disney as a model for our consulting practice. In 1998, when we wrote the Disney Way, we did 90 percent consulting and about 10 percent public speaking and seminars. Because of the Disney Way, we spend more time doing the opposite.

EL. Where does the innovation initiative reside in many of your client companies?

BC. Our main thrust is to help our clients develop a culture of innovation. That means having a culture where you unleash the abilities of everyone in your organization.  Walt Disney and the cofounders of Pixar believed that innovation comes from everyone in the organization.  Because one person has the idea for a film, that person is not the only innovative genius. Rest assured that innovative ideas from everyone on the team went into making that film. Pixar promotes and encourages that. We have organization tell us that they cannot afford to have the Pixar-type innovators. We say that is not the case. 'You need to look at everyone in the organization as an innovator.' These people might not come up with the next Harry Potter novel or a flat screen TV. Instead, they need to be innovative about how they do in the cost-effective way to serve their customer.  Everyone has input into that.  Unleash that power on these things.  We encourage people to do that.

EL. Does that include IT? Is IT a different animal from everyone else?

BC. I do not think so. Pixar has taught us that the technocrats and the animators need to work in concert. One person is no more equal than another person is. In many technical organizations, engineers and IT people reign super. The production people and other support people feel like second-class citizens. In other organizations, the marketing people might have that perception.

Sure, you can train people on techniques like storyboarding, or improvisation that help stimulate those creative juices. On the other hand, everyone has a stake in helping to make people more creative. The good ideas come from everyone in the organization. We found that many of the ideas, especially in large corporations, come from the front-line people who are trying things out and saying, 'Gee, this seems to work better than what is coming from corporate. You need to unleash that capability and have a culture that nurtures that.

EL. Are you saying that storyboarding can apply to other things besides filmmaking? Have you ever applied it to IT people?

BC. Yes. I have storyboarded with many IT groups. One large IT group wanted to install a large computer system in many locations throughout a foreign country. We brought a group of 30 IT professionals from all over the world to convene at hotel for a week. We started storyboarding by throwing ideas out to the group.

To prioritize things, we said, 'What are the first things we have to do? What are the plans? How can we put it together to carry out a materials management system throughout this large organization?'  In turn, the group members put their ideas on a card, and then we posted the cards on the wall. It does not become that person's idea. The facilitator read all the cards after we presented the problem. We had a discussion around that. At the end of a week, we had this gigantic ballroom filled with cards, plans, and ideas that would have taken months to put together the comprehensive plan that emerged from this.

EL. Can you tell me more about what came out of that storyboarding?

BC. They started working on the implementation. They would meet quarterly and refine the plan-such as what barriers keep coming up? They would react according. What would normally take three years to four years to carry out took 18 months.

EL. Can you talk about another technology project you worked on?

BC. At Whirlpool Corporation, we worked with the global No-Frost team. It was very similar to this overseas IT team. The Whirlpool team had the task of designing a brand new no-frost refrigerator, along with a factory that could  be built and produce products anywhere in South America. Normally, individuals from marketing, purchasing, technology, and such would meet and say, 'You go do this and you go do that.' After a week, they would go off in their own corner of the world. Every six months, they would get together and start putting the pieces together. This process would take about four years.

This team had a 20-month time period to get this project off the ground. Instead of doing it the traditional way, we worked with this team throughout their 20 months. They brought in individuals from all over the world. They had full-time representation in Indiana.  Before they even began the project, we got together for an entire week of team building and planning. We did things similar to the IT team. We put strips of tape on the walls. We had cards and said, 'Now for January what are all of the things we need to do?'

This team came together with the common goal of getting this thing done in record time. The barrier with the organization broke down. When we had the entire plan up there, we asked everyone, 'What are the things you need to be involved in to make our goal of getting the plans for the factory and the no-frost refrigerator done on time?' We found that technicians were doing engineering tasks and purchasing people were saying, 'I could help with marketing.'  Everyone looked at accomplishing the goal rather than trying to work in his or her own silo. We had great results.  Despite a cut in the product cost half way through the project, the team still met all the milestones and deadlines.

Elizabeth M. Ferrarini is a free-lance technology writer. Reach her at elizabethferrarini@yahoo.com.

Homes. Businesses. Schools. Cable for broadband applications is everywhere. Much of that cable comes from one well-known company, Belden Inc. In fact, Belden offers 1,000s of wire and cable products, such as multi-conductor, paired, coaxial, and flat and optical fiber cables. With the gradual decline in the traditional market for cable products, Belden, with corporate roots going back almost 90 years, has worked hard to transform itself into a new company - one that can meet the demand for wireless communications and the need for broadband cable products in emerging countries. The current Belden was formed in 2004 through the merger of Belden Inc. and Cable Design Technologies Corporation. Today, the $1.3 billion company is one of the largest U.S-based manufacturers of high-speed electronic cables. It focuses its products for the speciality electronics and data networking markets, including connectivity.

Like many companies, Belden saw a sharp decline in 2009 revenues from 2008. John Stroup, Belden's president and CEO, said, "By focusing aggressively on technology innovation and investing in global growth, we have seen a stable demand for our products in most of our major markets. We have demonstrated our ability to perform well during these uncertain times. We are also in a good position to excel when recovery re-ignites demand for our products."

Enterpriseleadership.org recently sat down with Stroup to talk about Belden's innovation initiatives, its customer-centric, go-to-market strategy, and the move from a legacy brand to a provider of special transmission products for key global vertical markets.  Here it what he had to say:

EL. Can you describe your business model or business strategy?

JS. We try to help our customers transmit data and signals in what we consider mission-critical applications. We go to a very diverse set of end markets. Most of our customers use our equipment -- whether it is copper cable or fiber optic cable or wireless or industrial networking -- in applications that are important to them. We help them get their information from point A to point B correctly, quickly, and reliably. These three things matter. We service hospitals, college campuses, large enterprises, medium-size enterprise, industrial applications such as factories, and infrastructure applications such as alternative energy.

EL. How has the economic downturn affected your business?

JS. It had a significant impact on us. Our 2009 revenues went down 30 percent from where they where in 2008. Some amount of that was correction and inventory, but much of that was role reduction and demand. Most of our customers buy our equipment for capital projects. We saw decreases in manufacturing utilization and in commercial real estate development.

EL. What have you been doing to expand into new markets?

JS. The recession has been an impetus for us to be more aggressive. When core markets like ours are declining, you need to focus on how you find growth. We have been aggressive geographically in emerging markets. We also have been aggressive in some of our market segments that have not suffered the same decline, such as wireless, as well as our industrial Ethernet businesses. Both of those businesses actually experienced growth during the downturn. We tried as hard as we could to deal with the recession affectively from a cost point of view. We tried to reinvest in the dollars we felt could give us a good return.

EL. Can you describe some of your key technology investments?

JS. We continue to invest in some product-related technology that we consider to important regardless of the environment. For example, we have made significant investments in wireless technology, which is important to our future. Customers are continually converting to wireless whenever possible because of the advantages of convenience. We are investing much money in our industrial networking applications. It turns out that industrial applications now use commonplace technology, such as routers and switches. We are a leader in this space. We are always making investments in expanding the bandwidth of our coppered fiber cable products. For example, we have been investing in 10G copper cable. It allows our customers to use copper instead of fiber, which is less expensive and easier to use.

On the manufacturing side, we continue to make the typical investments in ways to reduce out costs. In addition, we are also making many unique investments so that our machinery is more conducive to our Lean manufacturing environment. We work very hard to build our products according to the just-in-time manner. The cable industry has been a batch-manufacturing environment largely because of the long changeover times in the machinery. We have been working hard in the manufacturing environment to find ways to reduce the changeover of our machines and reduce the amount of scrap we incur in a changeover. We see this as an innovation area that is important to our business's success. It is also a unique innovation in our industry.

EL. You joined the company a year after the merger of Belden and CDT. How did you folks handle the integration of the product lines from the two companies?

JS.  There was an aggressive integration on the manufacturing and the product roadmap side. We have fully integrated the product roadmaps and the technology innovation between both companies. We did aggressively consolidate the backoffice function and the manufacturing function. The customer-facing resources are largely dedicated to the individual brands. The behaviors we go after with those brands differ. In the front end, you can have many different value propositions, brand propositions, and customer-facing resources. Today, a common organization services most of our product, technology, and the backoffice. Our strategy in the beginning focused on trying to leverage the backend as best we could, and to create an environment where we could use common processes as best we could.

EL. What is your customer-centric, go-to-market strategy?

JS. We have a history of being a product-oriented company. We needed to become more customer-centric. We organized our resources around vertical markets and around customers rather than around products. Our goal includes doing as much as we can for the customers we target with our key markets. We have made many investments to support that.

Out most significant investments includes expanding our products lines beyond our flag ship  copper cable to now include wireless, connectors, active connectivity components, and fiber optic. When we go in and work with anyone of our customers, whether it is a big hospital or a casino in Las Vegas, we can now help them solve their entire problem with a broader range of products. We are doing so with customer-facing resources that we organized around the customer and the market segment rather than around a product. We do not have five or six different product people calling on that same customer. We have one customer-centric account executive who navigates and organizes our resources to make certain that we help that customer solve its problems.

EL. Do you have a formal process for innovation?

JS. Our innovation process starts with the definition of our markets. Every year we have a strategic planning process, and a plan to execute it. The process always begins with our served markets. We subdivide that into sub-vertical markets, and then within those sub-vertical markets, we define the applications. Within those applications, we have the desire to offer unique capabilities in that application. We want to become the preferred supplier. When we think about innovation, we do not try to limit it to just technology. We think that innovation can happen in all areas of the company. We try to focus our innovation and our resources around a model that starts with the served market.

A great innovation we did in 2009 had nothing to do with products. It had to do with the way we package our products. We did this innovation in our channel group, the people who work with our distributor partners. We had a specific distributor partner that struggled with how it could profitably sell a certain type of product to an important customer segment. After spending time with the distributor, we completely reinvented the way this cable product comes off the reel. Now our partner can profitably deliver that product to the end customer. The innovation here was not how much bandwidth or how much copper we use in the product to get the same level of performance. Instead, the innovation was the new way the distributor got the product.

EL. What is your corporate governance model for making these investments?

JS. We take our full board through our strategic plan every year. It is part of an approved three-year plan. We share with them the investments we plan to make. Our sources of funds are the things that are going to happen year after year. These investments provide incremental margin dollars. We can give these dollars to our shareholders as dividends, or we can reinvest them in the company. We take our board's buy in and approval. This process has much detail in it.

We then construct an annual budget, which the board has to approval. Again, it is part of our three-year strategic plan. We also have a capital plan. Most of the innovation we do has to link to some form of capital investment -- whether it is a manufacture innovation or a technology innovation. If we do it right, the board sees several views - the 36-month strategic plan, the annual budget, and the capital budget. We give the board a quarterly update on how those programs are performing compared to the commitments we made in the strategic plan. Like any company, we do not always bat 1,000. Some programs do exactly as we predicted. We have other problems that need to do better. In this case, we do our best to describe why - What was the problem? Where did we go wrong? Was it a conceptual issues or an execution issue?  Where did we make the mistake?

EL. You have Lean. Do you have the balanced scorecard for measuring investments?

JS. We use a methodology called strategy deployment. It is similar to ocean planning. It works as follows: We identify the critical improvement priorities for the company. It cascades throughout the organization. No matter what part of the organization you are responsible for, your priorities will link in someway to the overall corporate objectives. For each one of those improvement priorities, we ask you to identify a few metrics. We call them targets to improve. Typically, they consist of two or three for each initiative that you will track. You consider these things as a barometer of how your improvement priorities are doing. We track that monthly. We use as a mechanism to report on our performance - if we have fallen short, what is our cause, what is our counter measure, and what are we going to do differently to try to get us back on track. It enables us to measure our strap plan and our breakthrough. We also have our key performance indicators. We track the things that tie to our budget. These metrics really do not change year and year out. They are mostly financial, but they also include things such as safety, incident rates in our manufacturing locations, inventory turns, and other metrics for forecasting accuracy.

EL. How global is your company?

JS. More than half of the revenue comes from outside the U.S. That is a big change from where we were three years ago. The largest market after the U.S. is Western Europe (Germany being the largest). We are trying to be in the largest countries in Asia. Our business has become more significantly global since I joined in 2005. We would expect that to continue.

EL. What is next for the company? More expansion outside the U.S.?

JS. We think emerging markets are going to be very important especially in the next five years. We feel that it is quite likely that the growth rates in Europe and in the U.S. are not going to be very strong. Other capital-intensive vertical markets we serve include China and India. We are planning to make an investment in Brazil. Today we do not have much of a position there. It is an important area for us. Product extensions are important to us. We still have a relatively small share within the verticals that we serve globally. These vertical include the areas of connectors and connectivity. We want to offer a greater portion of the entire solution beyond the cable piece. It is where our legacy is and where our foundation is. It is very important to us.

EL. Is it hard for the company to shake the legacy identity?

JS. There are two sides to the coin. Many customers see our legacy identity as a good position to be in. Our reputation stands out in this area. It surprises me a little bit. The number of people I meet who know about Belden amazes me. They all have a good opinion of the products. Not having that would be horrible. On the other hand, because we are so well known as a cable company, we have had to work hard to do more things within industrial networking or within wireless. Some times, it can be more difficult because people think of us a cable company. Through our acquisitions, we have been able to leverage the brand of our acquired company.

EL. Have any technology investments turned out to be a mistake?

JS. Yes. We have made our share of mistakes, mostly going down the wrong path. For example, a path we took for wireless technology did not work the way we had hoped it would. We had to stop that and move onto another path. In manufacturing, some of our process improvements did not give us the results we wanted. As a culture, we do not want people to be afraid to make mistakes, and we also want people to feel comfortable raising their hand when they do. I believe that you do not want to spend good money after bad.

Elizabeth M. Ferrarini is a technology writer from Boston, MA. Reach her at elizabethferrarini@yahoo.com.

Enterpriseleadership.org recently sat down with Dr. Hendler, a professor of computer and cognitive science, and the assistant dean for IT at Rennselaer Polytechnic Institute (RPI), to learn more about the Semantic Web. A pioneer with Berners Lee on the development of the Semantic Web, Dr. Hendler also serves as the RPI's constellation professor of the Tetherless World Research Constellation, a program to access information at any and place without being tied to a specific computer or device.

Developed by Tim Berners Lee, the World Wide Web, as it was first called, made it possible for us to get information, communicate, do business, and entertain ourselves via the Internet. Because the Web contains boundless amounts of information, we rely on search engines to find what we want across the Web and within specific Web sites. However, search engines cannot always accurately interpret what we seek. We wind up having to examine the results to see if we have a correct match. For example, a search on soap could produce everything from soap we wash with to soap operas to SOAP, which stands for Simple Object Access Protocol. A May 2001, article in Scientific American, called The Semantic Web, discussed an  innovative semantic technology or agents that would be able to distinguish the relevance between pieces of similar and unlike pieces of information.  So, if you put in Camay and Dove, you would get soap not people named Camay and Dove. The authors of that article included Berners Lee, Dr. James Hendler, and Ora Lassila.

EL. How does the Semantic Web differ from the Web we know today?

JH. The first Web was about documents and then pointing the documents at each other. Web 2.0 had added the social aspect. Humans can quickly generate things on the Web and share them with other people. Twitter is a good example. I can very quickly put something out there and many of my friends will see it. Facebook is the same sort of thing, but it is a little slower and designed for larger communities. The Semantic Web does those same types of things with the data in your life. For example, how do I, as a company, make my catalogue something that can get out there? My database and your database know they talk about the same things. How can we share our data?  How does a publisher make it clearer what defines an article? The Semantic Web is all about adding more information to the Web in a way that computers can better process that information, and use it to help people do a better job on the Web.

EL.  Can you give an example of how an organization you work with uses the Semantic Web?

JH.  You will not come to a Web site and see that you are immediately using the Semantic Web. The site using Semantic Web technology can do better things than traditional Web sites. For example, I am on the board of Bintro, an emerging company that does job matching. You want to look for a nanny position in New York City. Bintro might match you with someone looking for a childcare provider, not a nanny. By using the Semantic Web, Bintro understands something about the location, such as New York, and about nanny being a type of childcare provider. Bintro brings that type of information to the Web, and uses it in Web applications so you do not have to do many of these tasks through key word searches. The site will automatically use matching technology and other types of technologies to make the Web better.

Small companies you have never heard of supply the tools to other small companies, such as Bintro, that want to leverage the Semantic Web. These companies are trying to figure out how to take this new technology and make it available to people.

EL. Can you explain the role of ontology with the Semantic Web?

JH. Ontology is a term used in the semantic Web. It is a simple idea. If I have a database with the number 17 in it and if you have a database with the same number, we might want to know if they stand for the same attribute. Now if they both represent someone's age, then we know our databases are the same thing. On the other hand, if one database represents the data as age and the other database, as an interest, then the databases are talking the same language. To tell a computer they are both the same, I need some kind of structure that says there are things called people, that people have things called ages, and that people have things called addresses. Ontology defines how to develop that kind of vocabulary. The Web has many different levels of that. They range from simple to complex. The first generation of Semantic Web products had simple ontologies. If I know that you are a radio person or a journalist, then I know you must be a person. It does not sound very exciting. If I am looking for people's pages and I find some databases that say you are journalist, then I know you are a person. A publisher is one type of person and a journalist is another. Now we can share standards. It becomes a way for computers to see what you think in your terminology and then pull it to other people's computers.

Many companies now work on how to help people turn their data into this format by building tools for manipulating this format, and bringing the formatted data to the Web.

EL. Is CERN involved in the Semantic Web?

JH. Jim Berners Lee worked at CERN when he developed the World Wide Web. He still has some connection to CERN. It, of course, has an interest in putting data on the Web for collider projects that generate huge amounts data for large groups of diverse global scientists to analyze. CERN wants to learn how these people work together.  CERN has an interest in the Semantic Web, but it is not a key developer of the Semantic Web.

EL. Who are the key developers of the Semantic Web?

JH. Many standards organizations have been involved in creating standards for the Semantic Web. The funding for the early research 10 years ago came from the U.S. Defense Department and the European Union. Later research has come from work done by universities, and emerging companies. Large companies, such as Microsoft and google.com, see the Semantic Web in some of their operations. Oracle supports many of the Semantic Web standards directly. Some of the search sites use it.

EL. Does the Semantic Web have applications in certain industries such as pharmaceuticals?

JH. Most new technologies first find a foothold in some particular vertical area. Healthcare and life sciences were the first ones to realize the importance of the Semantic Web. Within their individual systems, they were doing some of it. Financial services companies also have an interest in the Semantic Web. Now we are seeing search engines, such as Google.com, getting interested in it.

EL. What specific applications for the Semantic Web do you see in some of these verticals?

JH. People are now looking at the Semantic Web in several ways. Data integration within the enterprise is one area. Many companies in vertical market segments have many different databases and want to pull that information together and provide it to people. Social networks enable us to create people talking together, but they cannot see the data, use the data, or change the data. For example, a pharmaceutical company has many different chemical databases and many different drug test databases, the Semantic Web could pull together all of the compounds that have certain properties.

Cross-enterprise data integration is another area for the Semantic Web. For example, a company wants to publish some of its data so that it is integrated with other people's data. The U.K. government and others are interested in transparency that can come about by publishing government data. They envision people building applications that will help citizens analyze that data and, in the process, derive some trust in the government. Citizens will be able to say that too much money is going into one place when it should be going to another place. To do that, you need to integrate information from all sorts of different government agencies, all of whom have data in different formats. If they want to expose it on the Web in a way that is integrated, that needs Semantic Web technologies. That is something is happening now in a big way.

Large-scale Web systems are adding functionalities, such as the semantic search engine, and the semantic match engine. Many publishers want to do this to allow them to better track things in new media.

Many different players have an interest in the Semantic Web for different reasons. The tools have started to become available. Some people refer to this as Web 3.0. Web 2.0 brought people together in a conversation. Now we are trying to bring people and machines together in those conversations in doing different things. Web 3.0 is very exciting for early adopters and large entrepreneurs who are trying to create the next Google.com.

EL. What is RPI's role in the Semantic Web?

JH. The research lab I run does some development work. For example, with the government datasets, we have been turning them into these Semantic Web forums and building demos to show people how easy it is to do integration in this new way. As a researcher, I have to be early into a technology, help make it happen, and then evangelize it. I have been doing the Semantic Web for a long time. In some ways, my lab is about figuring how we can start building on top of the Semantic Web to create the future of it. You might say my job is to create Web 4.0. We do much work with companies and government agencies that are trying to learn how to use these technologies in new ways.

EL. You have the nickname father of the Semantic Web?

JH. Tim Berners Lee is the father of the Semantic Web. Our article in Scientific American 2001 was the first use of the term in a widely read popular place. It was attributed to us as the originators. Many people had been working on the Semantic Web before us. I am certainly one of the people who helped to make it popular by making people understand the vision and how to apply it to the Web.

EL. What should CIOs know about the Semantic Web because it is going to affect the types of applications they build?

JH. There are several answers to that. With any new, potentially disruptive technology, the people who understand early what is coming and how to use it can provide much value to an organization. Nowadays when companies are just starting to figure out how to use enterprise social networks, such as twitter.com, CIOs and CEOs really need to track technology trends. Because the Semantic Web has passed the potential technology phase, CIOs and CEO need to understand how to use it in their enterprise.

Companies that depend on their Web presence need to consider ways to improve their visibility. Search companies have started to generate Web pages with certain information. As a result, when you do a search, you see an organized presentation of the information. Currently, when you Google your company's name, for example, you get a couple of random sentences that have you search words. It would be nice if you could say: 'If someone looks for my company name, I would like them to see the company name, logo, and location.' Right now, there are many ways of doing that, but there is no way you can give that information to Google to make sure it gets it right.

Large companies make these metadata deals. They tell the search engines how they want their information put out and displayed.  Now the search engines are opening that up to smaller companies, new companies and individuals through these Resource Description Framework front ends. That has generated much excitement. CIOs and CEOs must know about this.

EL. Could the semantic Web have an affect on Google.com?

JH. It will affect Google in a couple of different ways. In the past few months, Google has adopted some of the semantic Web standards. It enables people to do a better job of showing what they have and getting Google to display it. Google has an interest in new technology that has to do with a search engine. For a long time, Google said it was not interested in the Semantic Web because it did not see how broadly to apply it. Google now sees how apparent this is to do, and as a result, has become interested in the Semantic Web.

Elizabeth M. Ferrarini is a technology writer from Boston, MA. You can contact her at elizabethferrarini@yahoo.com.

If Tom Adams has his way, his company, Rosetta Stone, could become the Google.com of the $83 billion language learning product industry. Rosetta Stone's disruptive technology enables people to learn a foreign language in an interactive, immersive methodology. The company markets its more than 30 language learning products in more than 150 countries. The millions of customers include the U.S. Army, U.S. State Department, Reuters, and Marriott Hotels. When Adams joined Rosetta Stone as CEO in 2003, annual sales were a palfrey $10 million. His emphasis on technology innovation, and innate immersive language learning helped the company to grow revenue to more than $200 million for 2008. In 2009, the company took a confident giant step by doing an initial public offering. Adams says, "We raised half of the $112.5 million total ourselves. The rest came from the sale by our private equity backers. On the first day, the stock went up close to 40 percent. Because our business was doing well, we felt comfortable going ahead with the IPO."

Enterpriseleadership sat down with Adams to learn about his strategy for growing Rosetta Stone. Here is what he said:

EL. What are some of the factors that have contributed to Rosetta Stone's growth?

TA. The company has grown tremendously because the market is very large and disruptive. We differ from other companies. We are more cost-effective, and a more convenient way to get great results when you learn a language. We eliminate the need to spend thousands of dollars on classroom solutions. In an economic environment, people look to get more bang for their buck and that makes us more compelling.

EL. Can you frame this context of being disruptive?

TA. We teach in a technology enabled way with an immersion method. We do not explain the language. You learn the language the same way you learned your first language. The way babies learn. Toddlers figure out the language by themselves and parents sort of point to stuff. There is a context around the child. We leverage your innate ability with both structured activities and curriculum sequence. In effect, you learn very naturally. That has been very successful because you use your natural language learning ability.

What makes us a disruptive technology company? You can pass tests after you have taken language training with other offerings, such as tapes, books, CDs, online offerings, and classes in school. On the other hand, most likely you will not be able to speak the language to any great degree. People focus on wanting to learn to speak a new language. They do not want to learn how to translate literature in a foreign language. That is how we differ. If you really want to learn to speak a language, you can spend the money, stay in the country for weeks, and immerse yourself in the language. That is a proven way of successfully learning a language. Few people have the time or the money to do that. We have that same immersive type of offering, but we deliver it in a very convenient technology-enabled way.

Based on findings from our massive Nielsen Research study, we learned that people spend more than $83 billion on tools and classes to learn a language. Institutions represent an equal amount of demand again. We have not been able to conduct a survey to get that type of data. Organizations spend massive amounts of money on language training products that are inferior to ours.

EL. What is your growth rate like?

TA. Since I have joined the company, we have had a 20- fold expansion in revenue. In 2008, a challenging year for us, we grew 53 percent. Our revenues last year were $209 million. That was the largest growth year for us. Like everyone else the economic downturn has affected us. For example, because people have been traveling less, we have seen less activity at our airport kiosks. People have to be more careful with the money their because credit is in short supply. Despite all of the things, we still grew at an incredible rate.

EL. What is behind your product's technology? 

TA. We have two kinds of technologies that drive our company: the digital technology and the pedagogical technology. The digital technology leverages our interactive technologies such as speech recognition. The second technology leverages our method and unique teaching system. Our product improves over time as we innovate and find better ways of effectively teaching our technology to speak a new language interactively. Likewise, as the competency of our speech recognition technology expands, we will be able to provide augmented experiences in our offering. You will be able to use your voice to drive a learning experience inside our offering. Again, all of this might sound complicated or abstract, but it is very simple when you start to use the product.

EL. How much do you invest in technology to drive the innovation?

TA. We invest about 10 percent of sales. We have maintained this investment rate for the past several years.

EL. How do you decide what you are going to invest in?

TA. We are a vision-oriented company rather than a customer-oriented company. We do not look to the customer to tell us what to do. We talk to the customer extensively. We try to understand what their problems, such as why they struggle with current methods, and current tools. We are all about customer insight. On the other hand, we do not worry too much about what they say they want. 'Why?' Most people work within the old paradigm of traditional language instruction. We look at what language learning should be like, how it feels, and what you should learn.

EL. What is your business process for making these investments as a visionary company?

TA.  Our senior product team tries to figure how specific innovative technologies can help us move the dial for people who want to learn languages. From here, we will start to define a product concept, design and build, and iterate as we go along. We test the efficacy of our product on an on-going basis. None of us speak 30 languages. Some of our speak six or seven languages. To this end, we can try a new language fresh and see what it would be like for a new learner. This approach gives us a rigorous innovation.

EL. Do you work with your IT organization to make these investment decisions?

TA. Yes. Our IT organization gets involved in that we do. IT, however, functions as more of a support service for what we want to achieve. For example, we depend on our IT staff to track students' activities and progress. We work with them to make sure we follow through on our customer support. CRM applications are important here.

EL. Do you package the product in such a way that you break it into different types of modules for different types of experiences?

TA. Yes. For example, our level 1 and level 2 comprehensive curricula provide us with enough language so you can manage in a country. You will be able to every day functions done in that country. In level 3, you move toward being able to connect with people. You will be able to talk about your opinions, your feelings, and more abstract notions. A grammatical progression follows that.

We currently offer five levels in both English and Spanish. You get about 200 hours of instruction. Most people opt for the three levels. People who try to learn enough of the language for a vacation usually opt for the single level.

Although our mission is to teach you to communicate verbally, we teach both reading and writing comprehension.

EL. Are you looking at leveraging this technology with other types of products?

TA. We plan to launch an online socialization offering. It would allow you to practice the language you learned with reverse sound with other native speakers. For example, a French learner would use his or her voice to interact in a software environment. We augment that by allowing you to go through conversationally coaching class. Here you use the language you have learned to practice speaking with a native speaker. That person is exercising your speaking ability. Beyond that, we will be enabling you to mix with French people who want to practice their English. You will do a language exchange activity with them in French for five minutes, and then the activity will turn to English.

EL. How does your speech recognition technology work?

TA. Speech recognition is one of the unique things about our product. We have developed a proprietary speech recognition technology. For example, as you speak a particular phrase in French, the speech engine will recognize each word you say, and it will highlight the words that you said very well. It will be clear that you said some words not well. If you really said the wrong thing, it will not accept your answer. That is extremely powerful.

When we task people why they want to learn a language, everyone says that they want to speak it. If they use language tapes or CDs, they do not get any feedback from these methods. They do not know if what they said is right or wrong. With us, the system gives you voice prints.

EL.  How are some of your more established competitors falling short with technology?

TA. Berlitz is one of the oldest, established language training companies. It still uses the bricks and mortar classroom approach. It does offer some videoconferencing. This company does not an interactive, proprietary technology the way we do. They are not investing in speech recognition either.

Many companies use technology in the language learning space. They, however, rely too much on translation. They think that the old ways of memorizing vocabulary lists, understanding the difference between direct and indirect objects, and conjugating verbs are a valid way to learn a language. They operate operating on a flawed assumption.

EL. What takeaways would you give to someone you are at the helm of a company involved in disruptive technology? What can management people from your company besides a language?

TA. Do not give customers what they want; give them what they need. Customers struggle with saying what they really want. If Henry Ford asked people what they wanted, they would have said faster horses. Instead, he built a motor car. You have to understand what people really need. Do not listen to customers too much, but care about them enormously.

Do not focus so much on your competitors. If you study competitors over time, you will end up being like them. Happy companies make a difference, especially if they are comfortable and visionary in their own skin. They also need to be passionate about what they do and strive not to be outstanding, not incrementally better.

EL. What is your view of language education in schools?

TA. Education has had too little innovation. Yes, people spent money on technology within school environments or university environments. They, however, have gotten very little for their money. We really do not focus on true innovation within the learning state. Rosetta Stone is only doing this in the language space right now. We think we can transform our schools and make effective pedagogical innovation in language learning.

Elizabeth Ferrarini is a technology writer from Boston, MA. Reach her at elizabethferrarini@yahoo.com.

The Internet might have sounded the death knell for print newspapers and magazines in the United States. High quality print media, however, continues to thrive around the world. Developing countries in Eastern Europe and Asia have stepped up their efforts to keep pace with people's demand for print media. In fact, Goss International, a $1.1 billion developer and manufacturer of web offset presses, plans to capitalize on the international appetite for print media, especially newspapers, magazines, catalogs, and advertisement. The Shanghai Electric Corporation recently bought a majority interest in Goss International.  The company also expanded its global business focus through the acquisition of Heidelberg Web Systems in Germany.

Goss's presses and finishing systems print everything from books to directories from coupons to advertisements for customers on four continents.  The company sells it presses to large advertising agencies, major metropolitan newspapers, magazine publishers, and major commercial printing companies. Customers include R.H.  Donnelly, KP Group (Russia), AIW Printing (Australia), Segerdahl Corporation (U.S.), and Valpak. (U.S)

Founded in 1895, Goss International has become known for aligning technology innovation and product reliability with customers' requirements. Some of the company's technology firsts include the four-color newspaper tower, tele-color remote ink key control, and high-speed circular newspaper inserter. Bill Rogers, Goss International's CIO, says that the company's innovations, such as marrying print with wireless and online access, give advertisers new capabilities. Meanwhile, Rodgers says that the company has begun to apply its engineering expertise to new markets such as wind turbines.

Enterpriseleadership.org recently saw down with Rogers to talk about Goss International's process for making technology investments and driving innovation.

EL. Can you describe some of the international growth areas Goss is looking at?

BR. Prominent families in the U.S. own many of the major metropolitan newspaper. It has been a rough road for them.  U.S. newspapers have been losing advertising dollars to the Web. Several major metros have closed and others have been losing money. The international market for print continues to drive our growth and revenue.

We have seen much growth potential in China. It will accelerate once we get passed the current economic situation. Right now about 10 percent of the Chinese population has the discretionary income to buy newspapers and magazines. As that percentage grows, there will more of a demand for not only newspapers but higher quality print products such as magazines.  In fact, Chinese people gather in droves at newspaper viewing stands to read about what's happening around the world.

We have customers with global operations in China. They have already started to invest in huge printing facilities that will accommodate about 40 presses. India is another growth area for us. There are about a dozen Indian families that control much of the wealth. A few of those families want to use the same U.S. model of family-owned newspapers. We have customers who have bought many multiples presses within the same family. At this time, the print quality in both China and India cannot compare to that in many parts of Asia or in Europe. We sell presses that are priced for that economy.

EL. What distinguishes your presses from your competitors?

BR. We do much personalization of print media. For example, we can print catalogues that have specific items for sale or that will go to a specific demographic population. So, instead of one catalog going to an entire group, we can produce a special catalog for 100 or 1,000 people based on their needs.

We provide the print system, but we don't provide the demographic data. The customers get the demographic data from database marketing firms. After our press prints the material, it sorts it into books or signatures and then bundles that the books with either twine or in plastic.  If you go to our Web site, you will see a time lapse movie that shows one of our folders that took about three months to build. In 60 seconds, you will see the complexity of handling the folder.

EL. What is the challenge of building a printing press, say, to handle a magazine or a newspaper?

BR. We engineer everything to the customer's specifications. For example, we configured a printing press to stuff plant see packages in the publication. As a result, we build very few of the same thing. A customer's specifications can be based on geographical needs or physical needs. For a customer that wants to get new technology, but is located in a major metro area, we would fit the new technology to reside within the specified building. In the meantime, we would keep the old press running until we built the new one. Some of our customers have constructed a building just to house the printing press.

EL.  Are any two printing presses alike? 

BR. No! Some of our low-end presses are very similar. A customer might order six of the exact same thing, but they are engineered to order.

EL. Your company has earned a reputation for innovation. Can you talk about some of your technology innovations and the value it provides customers?

BR. Goss RSVP is technology that connects a cell phone to a two-dimensional bar code on print material, such as an advertisement. Depending on the cell phone, you can use his or her cell phone to scan the bar code in the ad. You would get a five-digit code to get more information about the product or you could connect to a Web site or see a video. A project we did for a real estate agent allows you to scan a particular house in the ad, put in a short code, and view more information about that house, including a short video. We are ahead of the times. We have designed some of this for the next generation phone that will run on 3G, and eventually 4G. Today we have lots of customer using the SMS part of it.

EL. Can you talk about other innovative technologies?

BR. Our tagline is 'innovation for business.' We have 1,000s of patents. Many of these patents fall into several areas - reducing labor for the customer, improving print quality, and reducing environmental impact. For example, a few years ago, we developed a technology called gapless printing. It decreases the space between the images or between the pages in the book and thus uses less paper.  By using this technology we have helped customers collectively save about 2.2 million trees over the last 10 years or about 4,300 acres of forest land.

EL. What percent of your annual revenue do you spend on product development and innovation?

BR. It's about 15 percent. We have sustaining engineering for our older equipment and new engineering for recent products.

EL. What process do you follow to make technology investments?

BR. All of our major investments are business investments. We do not like to distinguish between investment types, such as technology. The technology team works closely with the business team to develop and conceptualize ideas. We then put together a business case. Depending on the size of it, we might do a pilot. From there, we will develop an appropriation's request with a project plan, benefits, and return on investment.  We will review the request at the quarterly steering committee meeting that I chair.  All of the business leaders from around the world attend that session. We go over the status of major projects and upcoming projects, and anything else people might want to talk about. It is a governance meeting because we have about 15 people in a teleconference at the same time.

We also have a technology leadership team comprised of all of the on-site technology leaders. We meet monthly via a conference call for two hours to discuss what we accomplished, what we need to get done, and who needs what help.

EL. Are you part of other major investment decisions in the company besides technology?

BR. I participate in all decisions about technology, including our computer aided design systems. I also participate in decisions about engineering, marketing, and sales. I have input into decisions about how we support our customers with technology. For example, most of our newer presses have the ability for us to monitor that press remotely and to adjust it remotely. For example, we can adjust the print quality or the speed of the press, or we can look at what is coming off the press. It is like a remote console.

EL.  Where does the innovation come from?

BR.  We have a research and development group. Because many employees have been with the company for many years, they have solid relationships with each other and the management team. Our innovation comes from the open dialog we have with employees and our customers. For example, I might ignite some of their ideas when I talk about what I have seen at other places or conferences.

I have a card that says I am the chief innovation officer.  A colleague recently came to me and said: 'Because you build large, rotating, high reliability devices, have you ever thought about getting into the wind turbine business?' As a result, I have met with executives from wind turbine companies, as well as have attended a few industry conferences. That technology has a deep tie to how we build high quality presses. In fact, some of our presses have been printing the same newspapers for 60 years. Our technology undergoes much stress testing to ensure the reliability of engineering.

EL. Are you thinking about having a core of the business in wind turbines?

BR. Yes! The manufacturing and design engineering section on our Web site talks about projects we are doing with several wind turbine manufacturing companies. We might never put together a wind turbine and sell it. On the other hand, wind turbines have many components that look similar to those found on a printing press. Both types of components have similar lifecycle and duty requirements.

EL. Have you come up with other innovative ideas?

BR. Because we have a large service force, we have added some things such as Skype. Our Skype videophone enables our service people to see remotely how a press is operating. For example, if a press is making a loud noise, we can dial into it electronically, but we can't see what is wrong with it. This new device will function as our remote eyes and ears. Service people will be able to transmit video of a customer's press to our engineers in the main office. The engineers can help to speed up the solution to the problem.

EL. What marketing challenge does your business face?

BR. Our business is based on relationships.  You do not go shopping online for a multimillion dollar printing press. We spend much time educating prospective customers about what we do, how we do it, and why it is better than what our competitors offer. Depending on the price of the press, our sales process can take several years.

EL. How do you communicate business impact to your constituents?

BR. I came up with a periodic checkpoint meeting comprised of directors and vice presidents from functional areas. We each go over some tactical issues about our area. We also talk about we have accomplished and what we need to improve.

EL. Do you attend any meetings of the board of directors?

BR. We are privately held. I, however, attend four board meetings a year to talk about technology and innovation. The board presentation package helps me to further understand our strategy.

EL. What is your process to revise the corporate strategy?

BR. Once a year, the global management team meets. We go through a series of presentations about each site, including any functional areas. Our customers also attend this meeting. Print industry consultants provide us with a three-year vision on where they see the market going.

Elizabeth M. Ferrarini-She is a technology writer from Boston, Massachusetts. Reach her at elizabethferrarini@yahoo.com

When Ralph Szygenda joined General Motors as CIO in 1996, the automaker was one of the largest, most diversified corporations in the country. However, the IT organization was at an all time low. GM had just unleashed EDS, the IT outsourcing organization. Szygenda says, “There were about 20 of us left in the company who knew anything about IT. EDS did everything. We had to start from scratch to rebuild IT.”  Thus began Szygenda’s legendary career to become the global CIOs most CIOs want to emulate. He and his team began to build what would become the world’s largest outsourced IT organization. He says, “We consolidated endless numbers of systems, applications, networks, and processes.” Under Sygenda’s leadership IT’s focus shifted from systems to cars, customers, and innovations, such as OnStar. GM emerged as a global business, especially becoming the number one automaker in emerging markets such as China.   Now things are different. Szygenda retired on October 1, 2009, as GM emerges from bankruptcy to become a more focused, leaner automaker. He says, “Now the entire company can focus on getting closer to its cars and customers. ”   A month before he retired, Enterpriseleadership.org had the pleasure of sitting down with Szygenda to talk about how the role of IT changed the company, how GM plans to deal with some of its operational issues outside of IT, and what changes we might see for  the IT organization.  Here is what he had to say:

EL. Because of the bankruptcy, how did the company's business strategy changed? 

RS. Clearly, it is still in development. A couple of things happened. The bankruptcy took away many of GM 's decades old legacy problems. More management time went into legacy, healthcare cost, and Delphi, a bankrupt automotive supplier spinoff from GM. We had to give Delphi more money than anticipated to keep it alive because of its criticality to our supply chain. GMAC, the financial services business, has also gone away. Our strategy is to concentrate and make time for our customers. That is what a car company really should be doing. It gives us an opportunity to do this without many of the legacy issues we had in the past.  

EL. What changes have you made or plan to make to the IT organization and how will these changes affect the outsourcing partners? 

RS. Not a significant amount! I believe in the IT organization shadowing or mirroring the structure of the business. It goes for any company. As GM restructures and changes how it runs its international operations, the IT organization also changes to adapt to that particular area. Our base strategy remains the same -- to use process information officers (PIOs) as well as CIOs. These people drive the common elements of product development, manufacturing, or supply chain across the company. That strategy or that direction for an organization issue will probably stay in place. 

EL. Do you still have the same number of outsourcing partners? 

RS. During my past 13 years here, we have reduced the number of suppliers to less than 20 key IT suppliers. That number includes all of the product companies, such as Microsoft, Oracle, and Cisco, as well as services company, such as IBM, HP, Capgemini, and Wipro. We have mostly service providers along with both hardware and software product suppliers.   From an IT viewpoint, we run our sophisticated model of buying and brokering IT. We have 1,000 people inside the company that have the responsibility to design the business direction and the acquisition of IT.  

EL. How will the IT budget change and what new IT investments do you plan to make because of the restructuring? 

RS. IT cost will bottom out this year. It has been difficult because of the bankruptcy and the conservation of cash. We have reduced cost every year for the past 13 years through efficiency. In other words, we have taken cost out of the operating side of the IT business and put it back into development of new capabilities and application. This year that figure has been lower than what it has been because of the bankruptcy. It will start to go up again because we cut it very severely this year. So going into next year, we will put more money into innovation as the business changes the particular processes where it wants to go. 

EL. Can you describe the investments you made over the years that have really paid off? 

RS. Twelve years ago, this company operated very decentralized with autonomous business units. Today the company runs the common processes for product development, supply chain, and manufacturing the exact same way throughout the world using this exact same technology, saving a significant amount of money and permitting great speed for product development. For example, 12 years ago, we had 23 computer aided design systems. Today we have one. We cut the product development cycle time by more than 50 percent. We have approximately 30,000 design engineers around the world using this same technology. People on different continents can work in parallel to design together. We move eight million vehicles throughout the world using the same supply chain systems. We purchased $90 billion dollars of services and materials using the same purchasing systems throughout the world. We deliver just in time to plants and manufacturing facilities across the company.   OnStar is another example. We have five million customers using that technology in vehicles. It saves many people's lives. We can diagnose vehicles and tell our customers all through technology that they have an issue. If they have an accident, we can notify emergency resources through satellite systems linked to our call centers. We can stop stolen vehicles automatically if the police officer wants to bring the vehicle to a halt. The person driving is in trouble. All that includes technology changes that have occurred in the company over time.   At the same time, we have saved significant IT dollars through efficiency. In fact, we have reduced billions of dollars. At one time, we had 7,000 IT systems. Today, we have about 1,500 systems taking out billions of dollars of costs, and moving from autonomous businesses to very common business There have been significant changes in the business. 

EL. Can you describe the current governance process for making technology investments? 

RS. We have CIOs for the major business units in the company. Given the company's global size, 14 years ago we created the role of process PIOs or experts in business direction. For example, we have a business PIO in change of the entire product development process, from concept to actual vehicle development. We have another PIO who handles all manufacturing processes throughout the company. Another one has the supply chain. They drive initiatives across the entire company by doing two things: trying to put together and analyze the business needs, and driving the strategic direction with the business leaders on defining the most important requirements to transform the business.   Every year we do a portfolio process where we analyze those needs coming from the business PIOs, such as the PIO for product development. In this case, we would work with an IT project management officer to see what the company needs. We also do a comparative analysis or a competitive assessment of all of our competitors each year. Next, we take all of the particular IT requirements we need to do and we rank from one to 60. We go back and socialize with the business leaders, come back in, and ask senior management in the company to evaluate how we should proceed. This occurs every year through a pretty detailed portfolio process for the company.  It's unclear whether we will modify this process. I don't think it will happen totally. It is business driven, kind of a ROI investment area. We look at ROI in two areas -- one is analytical based on cost savings, and the other one is intuitive based on what we think we need to do. We look at business ROI, which includes IT. We do not do independent IT, except for running the computer center, or telecommunications, I don't expect a significant difference because the process has worked successfully over time.   GM's major issues revolve abound legacy cost issues of not having the right products for the marketplace. It is a global process around the company. I'm not sure anyone will say there is an issue with that. We had a 40 percent reduction in the marketplace of sales, which cash could not overcome.   

EL. How do you categorize the technology investments?Do you look at what is innovation or what is explorative? 

RS. I have a strategy manager who works across the entire portfolio process. Under those areas, we have clearly new process transformations, which include strategic area changes in the portfolio. Then we have, what I call, more tactical new product launches in the company that need IT investment, such as regulatory or initiatives to keep the business running.  Next, we have strategic business process transformations. For example, we have different regulatory requirements in Russia and in China. We have to meet all of those. We have new product launches every year because the vehicle designs change. Here we might need more leading-edge technology. We might experiment with new IT in areas where we see how they would adapt to GM from that perspective.  

EL. Are you going to make any changes to the way you measure your technology investments? 

RS. It is solid ROI with a total business appropriation request.  Any major changes must link with the business for measuring a business change. You can't get much better than that. On the other hand, the intuitive side is very difficult to measure. For example, how do you evaluate every new change to a new HR system?  Some of that is intuitive. I am not sure we will change that. We will change the business's end goal to focus more of customers and the cars. We will drive a different perspective from more customer-oriented systems, more product information gathering, and new ways to communicate with the customer. We will drive more investment in those areas. The IT process will not change.  The business needs will tend to tilt and change more toward the customer, the vehicle design, and the need to meet the market needs.  

EL. Have your expectations of your internal staff changed? 

RS. This organization has always been very aggressive. Most of the people on the senior IT leadership team have come from outside GM. As a result, they have had different mindsets, and difference experiences over time. The overall IT speed of the company will accelerate. We will have to deliver our requirements faster. Our IT people view this as a positive move. However, they will be under greater pressure, along with the IT suppliers, to deliver quickly on these requirements.  

EL. Can you describe your growth in foreign markets?

RS. Ten years ago, we were not in China. Today, we rank as the number one automaker there. If you look at the new emerging markets, GM has done quite well there because it did not have the legacy area. People say, 'How can GM be a leader in China and still have all of legacy problems and then go bankrupt in the U.S.?' We did not have the legacy cost issues outside of the U.S. I appointed an emerging market head who makes sure we address those markets from an IT perspective very quickly. 

EL. Is GM looking to move OnStar into new markets such as healthcare? 

RS.  Coming out of bankruptcy, we must concentrate on the core automotive businesses and nothing else. GM has a long history of being in all types of businesses, everything from heating and cooling to owning Hughes Corporation. In fact, we owned EDS when I joined the company. Diversification is not one of goals right now.   OnStar plays a key role in the insurance industry. We understand, as well as provide, all of the internal analysis of the vehicle electronically. For example, an insurance company might say, 'We will sell you insurance on the miles driven.' This information automatically feeds the insurance company. It is paid per usage. We are doing some of these things.   For the government, we can monitor vehicles with OnStar. We know which vehicles have evacuated from a hurricane. We can tell how many people are on the highways. We immediately work with government agencies to give them that input.   We leverage the fact that the vehicle acts as another node on the IT network. This leveraging helps us to use OnStar for online navigation and information you want. Many businesses have wrapped themselves around that. One example includes directing people to restaurants. There will be more of that. The killer application will always be safety and security followed by navigation. It is hard to find applications that may be extremely successful after that. It is a new territory for innovation.  Today OnStar has no direct similar competitors. We have about five million customers. Other companies install tracking devices into cars after they are built. No other competitor builds a system like OnStar directly into the vehicle. If there is something wrong with my vehicle, I get a diagnosis via email.  

EL. What is IT doing to drive innovation within the company?

RS. For a long time, IT has have been transforming all of these business processes, and transforming the technology in the vehicle, though innovations such as OnStar. We are taking that process to other parts of the world. The processes in the company for product development and manufacturing are very good. They will not affect GM's ability to compete in the automotive business. This is a fashion business. You need the right car or truck to meet customers' needs. These needs could include energy efficiency, comfort, or reliability.  Ten years ago, IT was fragmented or spread across the world. For example, within 10 years, we have gone to no presence in China to being number one using IT. This is a nice success story. GM also uses more social media than any other company. We have been into blogging for years. We have experience with Second Life. We will see more of that.   The next generation of technology will offer more transparency to customers, letting then know everything about our products and our company. Our next move includes making sure GM has the speed it needs to transform after the bankruptcy. Our legacy issues are gone.   GM had two issues -- legacy cost which was a major driver and the 40 percent drop off the marketplace. You can see right now with the Cash for Clunkers how many people are buying cars because of the stimulus.  IT has never been an issue for IT. If you talk to any members of the executive team today, they will tell you the same thing. I am not sure that executive leaders in other companies would say that IT does what I need it to do.

EL. What was the genesis for GM's major outsourcing of IT? 

RS. When I joined the company, IT was decentralized. It offered mediocre processes.We inherited outsourcing when GM spun off from EDS. We had to make it work. In 1996, we were the largest corporation in the world. About 20 people who knew something about IT remained with the company. EDS handled everything else. We had to make it to work.  Industry analyst reports say that 70 percent of all enterprise IT includes acquired services through some form of outsourcing. It is a way of life. We did it way before our time. We have done it pretty well. It has allowed us to move quickly. We did not have to worry about having all of those internal people and assets in the company and trying to make it leaner. We could never have moved that fast with technology. The Internet also enabled us to redesign all of the interfaces, whether it is to the supplier, or dealer using the Internet. If we had to do that from a hard-coded environment, it would have taken us a decade or more. It took us three years. 

EL. Can you give me some examples of IT firsts at GM? 

RS. We were the first one in California to display customer info versus going through a dealership 10 years ago. We were the first one to interface with a supplier base. We had 1,000 of suppliers at that time we were buying $100 billion of materials and services. We did all of that online. Meanwhile, the rest of GM was encumbered by speed in areas such as production. Within three years, IT helped transform GM. IT will not keep GM from being successful. Instead, it will be whether or not this company can meet customers' needs with the right products fast enough. The perception quality problems have taken decades to fade away. Most people believe we have good products and want the U.S. auto industry to succeed. The entire American car industry still has a perception issue that will linger for a few more years.  That will occur in the next couple of year.

Elizabeth M. Ferrarini - She is a technology writer from Boston, MA. Reach her elizabethferrarini@yahoo.com.  

Founded in 1983, Erickson Retirement Communities is not your typical construction company. John Erickson, the company's founder and current chairman, saw the need for building continuing care retirement communities (CCRC) for middle-income seniors, especially the baby boom generation. Today, the company's 23 communities in 12 states house more than 21,000 seniors. The $1.3 billion company has designed each CCRC as a self-contained campus with apartments for independent living, an assisted care facility, and a skilled nursed facility. Each CCRC has a fitness center, a convenience store, a restaurant, and a full-service medical facility.

While Erickson is currently building new CCRC's in Colorado, Kansas, and Virginia, it has begun to leverage its expertise in geriatric care and technology to build a series of medical facilities to serve the local community. Since 2004, Erickson has been investing in electronic medical record (EMR) technology to drive these facilities, as well as healthcare at all Erickson's CCRCs. John Lambeth, senior vice president and chief information officer at Erickson, says that our "technology investments in both healthcare and construction differentiate us from our competitors. In 2008, the InformationWeek 500 recognized us for our construction software and our EMR."

Enterpriseleadership.org recently sat down with Lambeth to talk about the company's process for making and evaluating technology investments to enter new markets.

EL. Can you describe your business model and your business strategy?

JL. We build continuing care retirement communities (CCRC) and then populate them. Once the community has created value, we sell it to a third-party who sets it up as a standalone 501C3 corporation. Erickson then gains it revenues by providing the management services to that community, as well as reimbursements from the Medicare billing. We set up a benevolent fund for those people who run out of money and can no longer afford to pay.

Our overarching part of our business strategy resolves around our senior communities, especially how we provide care to seniors. Part of our business strategy includes our growing medical practice, which extends outside of our communities. We have based this on the electronic medical record (EMR). For example, our Howard County medical center services people that are not our residents. This facility highlights the advanced geriatrics medical practice we have in our communities. Our strategy also includes things such as our retirement living television channel, which appears on cable networks in a variety of states. We also have our own Medigap insurance product, which our residents can purchase at a lower cost than similar products offered by AARP. It is called Erickson Advantage.

EL. What do you offer that other senior living communities do not have?

JL. Our on-site medical practice has become a key competitive differentiator for us. No other CCRC offers that. As a result, our residents can live within our communities through the span of independent living, and on to assisted living or at our skilled nursing facility. Each community has a fully functional medical practice. We have stepped out in front with the use of EMR technology. Moreover, we have also integrated our EMR technology with long-term care systems to create a level of productivity that even doctors in private practice or in another CCRC do not have.

EL. What is your technology platform?

JL. Our infrastructure runs of products from Cisco and Microsoft. The two core medical systems include GE Healthcare's Centricity for EMR and CareMedx to manage the skilled nursing facilities. We have integrated Centricity into CareMedx. When it comes to our enterprise architecture, we distinguish the portfolio of systems related to the medical side from those for the construction side. We manage the portfolio of operational systems as a side entity.

EL.  Can you describe some of your key technology investments?

JL. We have been investing in EMR technology since late 2004. Our goal is to have a complete EMR. For example, we added an e-prescribing component, which gives us the ability to do prescriptions electronically. Our e-orders component enables physicians to put orders electronically into the record. We link to external labs. If residents go outside for specialty lab analysis, we get those results back electronically. We now do advanced directives electronically and associate those with the EMR, such as meals or dietary.

EL. Can you describe some of the benefits your EMR capability provides your residents?

JL. Usually, when new people move to one our communities, they often continue to use their own outside physician. After about six months to a year, many residents decide to go with our community physicians because of convenience. At that time, the residents will bring in paper medical records or we will get them from their former physician. We have an initial process to get as much information into our base EMR system. Our community physicians do a full series of diagnostics for residents who decide to use our medical services. We also scan the paper records in their original form and make them attachments to the EMR.

Many of our residents arrive with a shoebox of medicine. Because of our EMR capability, we offer those residents who use our medical facilities with one place that records all of their medications. We can look and see if what interactions those medications have with each other. We also offer programs that help our residents to get off certain medication. Many of our residents wind up taking rid of many of their medications because they just do not need them or they do not work well together. That is the beauty of the EMR.

EL. Do you have any clinicians on your team?

JL. Yes, a medical doctor who reports to me is our vice president of medical informatics. He also makes rounds at one of the communities. I spend an hour or two a week either with the chief medical officer or with his direct report.  We talk about the direction we are heading with EMR.  The equivalent head of nursing who is our VP of health and operation relies on that same technology set. We meet weekly to make sure we are in harmony. We all sit collectively on the e-health executive team.

EL. What technology investments have you made on the construction side to build your communities?

JL. We are a large construction company. Building a CCRC's has all of the complexity of building a college campus. We invested in building construction management software, called EricksonWare. It helps us to manage all of the different components, the documents and the workflows associated with one of these construction projects. A CCRC can cost several  $100 million. The software really used by the construction division is unique.

EL. Can you describe any other major technology investments?

JL. We have a significant investment in our data center. Because of our EMR capabilities, other CCRCs and private physician practices have started to approach us about handling managed medical services for them.  This offering will become a new source of revenue. Our data center houses the systems that manage all of the activities for our 23 campuses and our 21.00 residents. In addition to our medical capabilities, we deliver a host of other systems such as general services, work order systems, menu management systems, HR systems, and door-entry access systems. We deliver all of these services remotely from one location.

EL.  Did you have to invest in network infrastructure enhancements with the idea of offering new services?

JL. Yes. We made significant investments in our network capacity. We had to make sure that our each of our systems had adequate bandwidth to come back to our location. We also needed bandwidth to provide Internet access for our residents. None of our communities has less than a 3-megabyte circuit to and from their community to our data center. We also invested in fibre and optical networking technology to connect out data center with our four corporate buildings.

EL. Can you describe the process for making these capital technology investments?

JL. Our annual capital investment budget has an allotment for technology. All of our investments have to align with our business priorities and the business strategy. Our capital steering committee includes members from our executive team. Our CEO presides over this committee. We usually look at our main thrust for the year. If it is revenue generation, we might have a higher portion of our capital investment monies going to technology and sales and marketing. We usually carve the pie accordingly based on our priorities.

Next, various project committees hear requests for capital. For example, our e-health executive committee reviews capital investments in technologies related to our medical facilities. Each group requesting funds has to bring a business case with an ROI to that committee. The chief medical officer, the executive vice president of health and operations, and I sit on the e-health executive committee where we approve projects about our capital investment allocations. Our enterprise executive committee includes the chief marketing officer, the chief financial officer, the executive vice president of health and operations, and me. This committee hears all business cases outside of healthcare.

EL.  How do you measure the success of these capital investments? Does the board of directors get involved here?

JL. The board gets regularly updates about our capital investments. The board has the oversight responsibility of ensuring that we spend our dollars according to our intended allocations. The board also has a keen interest in how we spend technology dollars among the different departments. The audit committee takes much interest in what we do with technology. Either the CFO of I will give regular updates to our audit committee about compliance issues around technology.

EL. What methodology do you use to measure the success of these capital investments?

JL. We have an ROI process and a customer satisfaction process. Our semi-annual technology satisfaction survey looks at customers' direct satisfaction with technology in the areas of innovation, strategic focus, service delivery, and general quality of services. This survey goes to both executives, as well as users of the systems. For every project, we apply go-live practices from the Project Management Institute. It includes an after-action review. Once we take the project live, we institute a process to do a post-deployment ROI for our capital investments. For example, we just did this for our investment in a human resources information system, which was more than $1 million.  We hired an external consultant to interview all of the folks throughout the business to see if we did get the kind of benefit that we expected. We validate whether we achieved the stated ROI or not.

JL. At the end of the day, do you show capital investment linkages to new customers, new sources of revenue, or improved processes?

EL.Yes! Our executive team has a business strategy and a business plan for technology that both map to the planks (strategic drivers) in the overall business strategy. For example, in 2008, our business strategy focused on becoming a leader in senior living, attracting and retaining the best employees, and demonstrating corporate social responsibility. The technology planks for becoming a leader in senior living might include attracting new customers, increasing sales growth, and improving sales productivity. Next, we define some investments against that, such as replacing our sales automation system. We made some investments in our CRM system and our data warehouse. The latter investment will help our sales department to understand price elasticity.

EL. What is your role in the corporate strategy?

JL. Our business strategy has a technology component. After the executive team sets its overall business strategy, I initiate our annual portfolio planning process. I meet with each executive team member. We develop a portfolio of prospective investments. I then take those investments back to the executive team where we prioritize against our business strategy. Next, the team carries out a quantitative voting process where we measure them on ROI or impact to the business. We then go through an above-the-line-below-the-line process for looking at our portfolio of investments. This process helps us to decide if we can squeeze in any pending projects or scale down.

EL. Has the economic climate affected your business in anyway?

JL. Erickson is a construction company that builds large communities years before we populate them with residents. We have no shortage of demand for our communities. On the other hand, some prospective residents have had to wait longer to sell houses than they anticipated. The bond market that drives the construction market has become very tough to crack. We have relied on many of our long-term financing relationships. Many one or two campus CCRC campuses are struggling. Some of them have approached us about managing all of their services or running their communities.

EL. What are you doing in the area of innovation around technology?

JL. We are working with Intel on some pilot programs in home health technologies, which is a booming field now. These technologies will allow a person to have a higher level of support than pure independent living. For example, we have a device that combines a blood pressure cup, a scale, and a thermometer. A Bluetooth enabled patient station sends those statistics in real-time to the doctor or the nurse to interpret. If something does not look right, a nurse could go over and visit the resident and say, 'Your temperature has been up for three days.' The home health concept allows the resident to stay in his or her apartment longer. It costs us less as a community for residents to be in independent living than in assisted living or skilled nursing.

Elizabeth M. Ferrarini - She is a free-lance writer and IT consultant from Boston, Massachusetts. Reach her at elizabethferrarini@yahoo.com.

aQuantive. Capture Software. Clear Commerce. Although all of these companies offer different types of technology products, they have several things in common. They all got a head start with funding from Voyager Capital, an early stage venture capital firm, based in Seattle, Washington. All of these companies also got acquired by more established IT organizations. For example, in 2007, Microsoft paid more than $6 billion for aQuantive. In fact, many of the emerging companies Voyager Capital funds get acquired.

With funding dollars getting tighter and tighter, Voyager Capital has focused on funding companies in three technology areas: wireless, digital media, and enterprise software, and in three geographic locations: California, Oregon, and Washington, Bill McAleer, the co-founder and managing director of Voyager Capital, say that its go-to-market strategy involvement helps its portfolio companies to become very successful. He adds that a good part of this process includes the active involvement of CIOs, CEOs, and investors.

Enterpriseleadership.org recently sat down with Bill McAleer to discuss what technology areas he likes, how he works with CIOs, and how he handled technology decisions as a business executive. He has about 30 years of business experience and 20 years of senior executive and equity financing experience in the IT industry. Here is what he had to say:

EL: Can you describe your investment portfolio?

BMA: As an early state VC firm, we provide the company's first round of venture funds. We also fund growth stage companies that have about $10 million to $15 million in revenues per year. We've been in business since 1997. We like to work with our portfolio companies at the board level by setting strategy. We also help these companies pursue the typical venture model.

Our current allocated fund runs around $110 million. We have less than a half billion under management in about three funds. We come across many innovative technologies and entrepreneurs. The Seattle market, in particular, has grown dramatically over the past 10 years. It's my top ranking portfolio sector. Catalysts for growth in the Seattle area include Microsoft, RealNetworks, Nintendo, and three of the major wireless companies. We rank third in VC-backed companies that have created the most jobs in the country. The technology growth in Seattle outpaced more traditional technology areas such as in New England.

EL: Do you use technology to look at your overall success or failure of the companies in your portfolio? Do you automate that process at all?

BMA: Not too much! That's more of an art than a science. We'll generate some data summaries. As far as evaluating the portfolio, we don't use much technology other than communicating with the companies. We aren't running highly sophisticated financial modeling or analysis. We'll track our investments and do some of our reporting with a product that does some of the limited partnership accounting. We don't deal with a lot of sophisticated portfolio analysis. We have mostly early stage companies. Growth stage companies tend to track their key data. We do have access to databases. We use the Web for searching out companies and looking for deal flow and deal history.

EL: Are there reasons other than technology for why you've selected companies in your portfolio?

BMA: We tend to look, from an investment perspective, at companies that have strong fundamental technologies. Ideally, we like something that is innovative or differentiated. Most of all the deals we invest in have some technology elements in them. We look for market factors.  We also look at places where the market might shift and if a company is taking advantage of a paradigm shift. For example, we did an investment in a Portland healthcare company called Kryptiq. The marketplace for this company concerned a regulatory requirement related to HIPPA compliance. The healthcare environment wanted to connect its patients with the providers and the physicians. This company provided a connectivity layer which enables its applications to run on top of that layer, and, therefore, to connect those three pieces of healthcare. They had a good core technology. In that example, we also looked for specific market trends that could benefit us.

EL: Do you look for disruptive innovation?

BMA: Yes, we've looked at several of those. We typically look at a combination of technology and market shift. For example, we backed a Seattle company called aQuantive.  It came about as a result of the Internet and Internet advertising. It captured analytics on Internet advertising. IT had   unique technology that allowed it to apply analytics to measure the effectiveness of Internet advertising. That was a big win. Microsoft bought the company after it went public. The company went for $6 billion. We have another company in the video market. It has an innovative technology for manipulating media with an ad. Most of our innovations we've funded have been more transformational than disruptive. In hot technology areas, we tend to see many slight variations of products. To this end, we have to watch this scenario carefully.

EL: Can you describe some of the technology areas that are on your radar screen?

BMA: The Web has created a great opportunity to connect the participants of a company's value chain. Now companies can have a better understanding of both their customers and their suppliers. We've looked at a number of Web-based software applications that enable you to connect the supply chain or the value chain with the company. Typically, the various parts of the supply chain have existed as independent silos that are hard to connect. Web-enabled applications provide the opportunity now to really collaborate as a company.

EL: Do you have any type of an external advisory board, such as a CIO board?

BMA: We do. It is comprised of three types of people: CIOs, CEOs, and investors. For example, we have the former CIO of Bell South and Lehman Brothers. Our advisory boards trends to have more former or current CEOs of well-known companies than CIOs or investors. We look for people who can represent the three geographic areas we serve. We try to infuse customer insight into our investment strategy, try to update our investment strategy annually with our advisory board members, and look at certain sectors in that investment strategy.

For example, we call upon our CIOs to help us plan our annual off site investment meeting with CIOs. Speaking with CIOs gives us a perspective on what our portfolio companies will do to connect effectively with their buyers. After all, these folks and their staff look at innovative technologies. We ask CIOs about what trends they see in the marketplace, and what current critical elements they have to deal with.

We try to get outside perspectives on where certain markets are going. For example, we've had George Gilder, a futurist and author, speak at some of our venues. We also bring in some investors and bankers to hear about the things on their hot plate.

If you look at the food chain, VC's reside at the front edge of the innovation curve. CIOs reside at the end of the curve, while investment folks reside off to the side of the curve where the potential is.

EL: Because you're dealing with many early stage companies, are you interested in growing these companies or seeing that they get acquired?

BMA: Most VC firms will tell you they invest in companies to fuel their growth to become larger companies. The majority of companies that we fund get acquired.  In the enterprise market, we're seeing large IT vendors needing to augment their solutions. Of course, these large companies want to acquire companies with innovative technologies. Over time as paradigm shifts occur, you can go back and spot the trends of how companies grew through acquisition. VMware is a good example of a virtualization company that grew through acquisition.  If we hit the market right, we can create a big company. However, out of our portfolio, we have several that will make it all of the way through to become a big public company.

EL: Besides the advisory board, how do you help your portfolio companies sell their product successfully in their key markets?

BMA: One of our venture partners and advisors is the Chasm Group, a premier marketing firm in the technology industry. We spend much time with our portfolio companies on their go-to-market strategies. Before early stage companies can develop a focus, the CEOs have to experiment with the target segments or the way the solution works. To this end, it's okay for the management team to go out, to speak with potential customers, and to see what sticks and what doesn't.  They need to do this especially if they intend to sell to the enterprise and ultimately to CIOs. Our CIOs involve themselves in the application of some of the solutions from our portfolio companies. The CIOs we've meet will take risks with innovative products.

On the other hand, we've come across CIOs who are adverse to risk and who will only buy from established vendors. On the other hand, we've seen some organizations that have reduced the number of vendors in order to sample more innovative technologies from smaller companies. If an early stage company wants to go after the enterprise, you have to point them to the right target sectors. For example, the financial services sector tends to be more innovative and takes more risk on innovative companies.

EL: Of the boards you've served on, have you gotten involved with the strategy and the technology investment decisions the company made?

BMA: That's an interesting question. As a board member, I haven't been heavily involved in any technology strategies, unless it related to the company's product strategy. In the latter case, the focus was on some of the priorities for system implementation or technology implementation within the enterprise. I got involved in these discussions through audit committee meetings. A couple of the boards I was on had periodic presentations about CIO priorities, but it was rare to have the CIO at a board meeting, expect once a year. As senior leader of a company, I gave presentations to the board about technology investments and strategies.

EL: What challenge did you face in handling technology investments when you were a company executive?

BMA: I got involved in the tech business when I became an executive at a major hotel. I worked with a strategy group to figure out what technology innovations we wanted to use for that particular company. At the time, technology was an afterthought in the hospitality industry.  It has changed now. Look at what's going on with customer relations management, and customer tracking. Technology became a big enabler of frequent traveler program, which is an important industry segment. You now can understand what customers buy and what they prefer at a hotel. Back when we tried to determine this information, we looked at the customer to see what physical characteristics we could discern. Today corporate management has a higher awareness technology as a strategic asset.

EL: As a former CFO of a company, how did you CIOs to make investment decisions?

BMA: I had a period where a CIO reported to me. I worked tightly with the CIO because the financial organization as to be a partner to the business. We worked closely with some of the operating units to move some of their technology initiatives forward. We implemented CRM technology for tracking customer support. Typically, we worked the operating units and the CIO to define a proposal. Most of the funding came out of the capital budget. As a result, we worked with CIO to do an ROI analysis on major projects. We had our annual review of IT priorities and the capital required to support those priorities.

The software as a service model has changed things a bit. In some cases, the operating units fund their IT expenditures out of their expense budgets as opposed to capital budgets.

Elizabeth M. Ferrarini - She is a free-lance writer and IT consultant from Boston, Massachusetts. Reach her at elizabethferrarini@yahoo.com