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Cisco’s Commitment to Smart+Connected Communities: Transforming Cisco from an Internet Plumber into a Solutions Architect

Sunday, May 29th, 2011

This is a summary of the report on “Cisco’s Commitment to Smart+Connected Communities”. For information on how to obtain the entire report, email the author, Tom Kucharvy, at TomK@Beyond-IT-Inc.com

Cisco is on a self-described mission to transform itself from what CEO John Chambers called a networking “plumber” into a trusted architectural adviser and provider of “platforms for innovation”. This requires a fundamental transformation in the company’s value-add, its sales model, the types of services it provides and, perhaps most challenging, in the type of partners the company recruits and in the ways it engages with them.

The company, as discussed in a series of my blogs beginning in May 2010, effectively began this journey by developing a solutions-based approach to promoting its video and other collaboration technologies, virtualization, and borderless networks—all by leveraging its core strength around the network as the underlying platform. It has since extended way beyond horizontal solutions by unveiling initiatives around a growing number of solutions-based “market adjacencies.” These adjacencies, which include healthcare, education, energy, transportation, sports, entertainment and public safety and security, are also being combined into more comprehensive and ambitious efforts such as its Smart+Connected Communities (S+CC) initiative, in which it provides the intelligent, integrated network solutions across multiple adjacencies to help cities drive economic, social and environmental sustainability and efficiently deliver 21st century services.

These efforts will serve as critical proof points of whether the company can indeed extend beyond the maturing and increasingly competitive market for switches and routers to become a globally recognized provider of solutions that improve businesses, societies and Cisco’s own bottom line.

Building the S+CC Value Proposition

Although Cisco has been providing tools for addressing specific, narrowly-defined industry initiatives for the last several years, its effort to pull all of these and other complementary point solutions into a comprehensive network-based, city-wide architectures began in 2008, when real estate developer Gale International selected Cisco as its networking partner in developing the intelligent infrastructure for a totally new city, the Songdo International Business District, which Gale was developing in South Korea.

New Songdo is the most expensive privately financed real estate project in history. It will be a green, LEED-certified community, designed from the ground up to emit one- third of the greenhouse gases of a typical city its size. It will also be one of the world’s first smart cities, with Internet-monitored and controlled traffic, water, power, transportation and public safety. Every wall socket and appliance will be connected to the IP network and every home and office will be able to monitor and orchestrate its own heat, air conditioning, lighting, appliances and energy usage. Each will also have its own Cisco TelePresence videoconferencing system—which Cisco claims will be the “killer portal”—though which all types of urban services (healthcare, education, safety, shopping and so forth) can be accessed.

As ambitious as New Songdo may sound, Gale and Cisco view it only as a starting point. Given the rapid growth in Asian urbanization, the duo plan to use New Songdo as a template from which they will build more than 20 new “instant cities” across Asia. Cisco will also apply the same platform to helping cities of all ages refresh their current infrastructures and enhance and automate the delivery of each individual service (from distance learning and health monitoring through energy management and security services) for which they have a need.

Although Cisco already has many of the infrastructure capabilities required for a platform on which to run and from which to deliver this broad range of services, its history as a box-pusher and plumber has hardly prepared it—much less give it the credibility—to effectively evangelize the vision of a world of vertical services, much less that of the architecture of the city of the future.

It began developing these capabilities gradually beginning with discrete initiatives, as around its Telepresence system and suite of collaboration tools, and then extended these efforts into discrete verticals, such as education and healthcare. As I discussed in a series of blogs in mid-2010 it began this process by:

  • Hiring and training salespeople and consultants steeped in these areas and created a five-stage, services-based process for guiding customers through the entire process, from solution ideation through implementation; and
  • Created a three-stage, service-led solutions incubation process that used its Internet Business Services Group (IBSG) and Advanced Services (AS) organizations to incubate new markets and create lighthouse accounts for promoting its solutions.

It promotes these solutions in its own demonstration centers and highlights them in high-profile venues such as the 2010 Shanghai World Expo. It even created its own virtual, nonprofit S+CC think tank, the Smart+Connected Communities Institute, to spur joint research and knowledge sharing, foster best practices, explore governance models, create training and education programs and eventually, create certification programs around new models of public-private partnership for achieving economic, environmental and social sustainability.

The Platform Ecosystem

But while Cisco recognizes the need to establish itself as a thought leader and to lead the recruitment, design and implementation phases of early accounts, Cisco is, first and foremost, a partner-centric company. Its goal is to package its learnings from initial lighthouse accounts, train and certify partners to use them and then work with these partners to scale new businesses (see my blog on Cisco’s Value-Added Services Partnering strategy for more details).

Cisco’s first step in creating this partner ecosystem was to create an open, standards-based platform. Its City Cloud Platform provides the network infrastructure, complete with a set of underlying horizontal collaboration and Telepresence services and open APIs on which partners can write and deliver their specialized, vertical applications and services. Its initial recruitment efforts are focused primarily on two broad classes of partners:

  • Technology partners, including industry-specific ISVs and system/software providers and providers of complementary horizontal tools such as analytics; and
  • Strategy, market development and consulting partners, primarily SIs with particularly strong positions in specific geographies and market niches.

Given the complexity and large number and range of partners required to design, develop and deliver managed services to cities, Cisco will rely even more heavily on partners for S+CC than it does in its other markets. It will, itself, focus primarily on the communications and collaboration infrastructures required to run these communities. This combined with the fact that Cisco does not plan to build vertical software or create large consulting or managed services businesses, will help it minimize conflicts within these inherently complex S+CC ecosystems.

Cisco is certainly making big investments and incurring big risks in its efforts to jumpstart and establish itself as a thought leader around its broad range of Smart+Connected Communities initiatives. But while its risks are very real, they will, in all likelihood, be relatively small. After all, even if Cisco’s “instant city” vision proves to be a bust, many of its component initiatives, as around telepresence, connected maintenance, energy management, clinical collaboration, distance learning and video surveillance, are already coming to fruition and have the potential of emerging into large, sustainable markets.

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GE’s Ecomagination: From Business Commitment to Business Philosophy and Social Contract

Sunday, April 17th, 2011

Five years ago, when General Electric first launched its ecomagination program, many, including some within the company, saw it primarily as a marketing and PR effort. As discussed in my April 3rd post, the company has long since proven that it was much more than a marketing program. It has now become a fundamental part of its business. And, judging from its commitments to extending the program, ecomagination is on the path to being core to GE’s business.

In fact, ecomagination appears to be more than a central part of GE’s business. Ecomagination is expanding the company’s view of and approach to partnering and is  beginning to become integral to the way GE views its business and even to its contract with society.

The Growing Ecomagination Partner Ecosystem

This, however, is not to suggest that GE believes that it can field all the technology required for its ecomagination solutions. As I discuss in greater depth in a recent report I wrote on GE’s work in building an ecosystem around its Smart Grid program, GE’s divisions are working more closely with each other to facilitate the development of and to support standards that facilitate interoperability across multiple industries (energy, aircraft, healthcare, etc.) as well as to leverage technologies and processes developed in one, to support others.

This being said, each division is also building partner ecosystems around their own ecomagination offerings—ecosystems that consist of combinations of customers, governments, academia and all types of large and small businesses. The company is also forging relationships with other global innovation leaders, exemplified by partnerships with:

  • Honda, to bring the smart grid to aerospace;
  • Better Place, with which it shares a vision to accelerate the global deployment of electric vehicles;
  • Masco, to help builders design and build more energy-efficient homes that use ecomagination home technologies,
  • Cities, including Portland, Oregon and Orlando, Florida to help them meet sustainability goals while simultaneously creating jobs; and with
  • Leading research universities, like Columbia, to realize the next generation of clean energy innovation.

And, where the partners do not yet exist, GE is helping to create them. The company’s ecomagination Challenge is an open call for breakthrough ideas to create a cleaner, more efficient and economically viable grid and to accelerate the adoption of smart grid technologies that leverage GE infrastructure. Like IBM’s Global Entrepreneur Initiative, it provides entrepreneurs with access to GE technical and commercial experts, introductions to VCs and other partners, and opportunities for ongoing technical and go-to-market relationships. The Challenge came with a pledge of $200 million (of which GE funded about half, with the other half coming from its VC partners), to be invested in promising start-ups. The winners, who were announced in December 2010, include:

  • ElectricRoute, which created a communications gateway point for electric transmission and distribution systems;
  • WinFlex, which produces rotors for wind turbines from light, flexible and inexpensive composite materials; and
  • Capstone Metering, which applies remote communications technology to water meters.

GE recently extended the ecomagination Challenge with call for solutions for home energy creation, management and use.

Ecomagination as Integrating Umbrella

Ecomagination serves as both an inspiration to and obligation of GE’s businesses. Led by Jeff Immelt’s conviction that investment in ecomagination will be good for all of GE’s stakeholders, the ecomagination goals for R&D spend, revenue growth and environmental responsibility (energy efficiency and greenhouse gas reduction) ensure that all the company’s businesses contribute. Ecomagination provides corporate leadership, not only by providing the structure for the product approval process, but also by providing continuous feedback on best practices, environmental trends, and the continual monitoring of claims to ensure GE leadership.

Ecomagination also serves as a central coordinating group for key stakeholder outreach, with executive-level, strategic customer engagements; employee engagement; and collaboration with NGOs, governments and other corporations. Furthermore, ecomagination.com raises topical and sometimes controversial issues, and invites the public to participate in the conversation.

This year, ecomagination is expanding its role in driving cross-business initiatives. GE’s heritage with electric vehicles dates back nearly 100 years to Charles Steinmetz and is entrenched in many GE businesses. GE Capital’s Fleet Services is a world leading leasing company. GE’s Licensing & Trading works with automotive manufacturers to improve fuel efficiency. And of course, GE Energy designs and manufacturers electrical equipment from the WattStation EV charger, through all of its local distribution equipment, to the generating technology itself. The company is aggressively endorsing electric vehicles (EVs) through its normal channels, and especially through its commitment to put 25,000 EVs on the road by 2015, both in its own fleet and in those of key customers. The ecomagination team is leading the company’s coordination of these activities.

Given all this, there can be little doubt that ecomagination is far more than an advertising program. It has become a fundamental precept of General Electric’s business philosophy and its social contract. Nowhere is this more evident than in the company’s Digital Energy group’s Smart Grid program (which I discuss in more depth in my aforementioned report).

Posted in Corporate Social Responsibility, Innovation/Entrepeneur, Smart Infrastructure | No Responses »
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GE’s Ecomagination: From Marketing Campaign to Business Commitment

Sunday, April 3rd, 2011

Most of us have seen General Electric’s ecomagination advertisements. But while ecomagination may make for a catchy slogan and an interesting, and even compelling advertising campaign, it is much more than a marketing program. It is a totally new way of viewing General Electric’s value proposition, of defining markets and conceiving products and of allowing GE to “Create Shared Value”—a set of business policies and practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates.

GE CEO Jeff Immelt has spoken directly and often of the private sector’s responsibility to the country. He believes that the private sector must embrace the realities of environmental, national security, and other societal concerns; and that it must assume responsibility for addressing these challenges.

The company’s ecomagination initiative is a central component of his willingness to stake General Electric’s future on this proposition. His recent acceptance of President Obama’s invitation to chair the newly created Council on Jobs and Competitiveness is indicative of his believe that business must partner with the government to jointly address such needs.

The Genesis of Ecomagination

One may be forgiven for assuming that GE’s five-year old ecomagination initiative, which has been at least partially promoted around GE’s concerns for the environment and a desire to “leave the earth as they found it”, has its roots planted firmly in the clouds.

This, however, is not the case. The initiative, which is intended to promote the development and sale of energy-efficient products is, in fact, a hard-headed business decision. It is based primarily on Jeff Immelt’s conviction that energy efficiency and alternate energy are becoming big growth markets and that most resources, and especially energy resources, will become increasingly scarce, costly and subject to government regulation. And since GE is already so ensconced in so many related markets (from water purification to jet engines and all stages of the electricity chain, from huge nuclear plants through home appliances and light bulbs (or as one exec poetically puts it, “from turbines to toasters), it was ideally situated to stake out a leadership position.

This vision of proactive business opportunity is bolstered by another, much more defensive calculation—that Americans’ perception of big business is in a “dark cycle” where the people who can make our economy better (including corporate executives) are considered its worst enemies. With citizens’ trust in big business at an all-time low, Immelt is concerned that “populism will turn to protectionism”, harming not only economy as a whole, but GE in particular.

To some, ecomagination was initially perceived primarily as a marketing campaign. The program, however, is a corporate business strategy built upon the belief that one doesn’t have to choose between economic viability and environmental responsibility; you can have both. The program has steadily gained momentum as public awareness and commitment grew around sustainability, as GE doubled down on its investments, and as the market has come to accept—and indeed demand—a growing number of energy-efficient products. Over the program’s first five years, GE:

  • More than doubled its investment in cleaner technologies, from $700 million in 2004 to $1.5 billion in 2009;
  • Earned more than $70 billion in revenue from ecomagination; and
  • Introduced more than 90 ecomagination products. (Note: Ecomagination products must be both significantly and measurably better in operating performance and in environmental performance. GE business applications are audited by GreenOrder, a sustainability strategy consulting firm. Compliance is measured by a GE corporate approval council.)

GE surpassed a number of its initially, publically-stated ecomagination goals and has now committed to going further—re-doubling its ecomagination investments over the next five years to $10 billion and growing ecomagination revenues at twice the rate of the company’s top line. Employees and investors have long since come to recognize that what’s good for the environment can be good for business—and vice versa.

Ecomagination Initiatives

Ecomagination initiatives now pervade the company. General Electric has and will be dedicating $15 billion over 10 years to work on new ecomagination-related projects and virtually every division of the company is involved, with many introducing new product categories, in addition to fielding more energy-efficient versions of traditional offerings.

The company’s power and energy groups, in particular, are commercializing smart grid solutions, sodium and lithium battery technology, offshore wind, multi-fuel gas turbines and new generations of nuclear reactors and clean coal technology. Examples across GE groups, as shown at www.ecomagination.com/technologies, include:

  • GE Appliance’s ENERGY STAR qualified washers, refrigerators, dishwashers and GeoSpring water heaters;
  • GE Aviation’s GEnx Aircraft Engines and Fuel and Carbon Services consulting solutions and ecomagination-certified TrueCourse™ flight management system to help airlines optimize jet fuel use;
  • GE Energy’s 7FA and LMS 100 gas turbines, wind turbines, nuclear generators, and Integrated Gasification Combined Cycle coal gasification process;
  • GE Lighting’s compact fluorescent and LED lights;
  • GE Rail’s Trip Optimizer throttle control systems and especially its Evolution series of locomotive;
  • GE Software + Services, which pulls together offerings from multiple groups, including GE Digital Energy, with its Digital Energy UPS system, and GE Intelligent Platforms, with its Proficy software platform, that helps industrial and commercial companies improve energy efficiency;
  • GE Water’s line of advanced water and wastewater treatment systems, which cut water consumption, energy usage and its associated greenhouse gas emissions); and
  • GE Healthcare, which is generally focused on the company’s parallel (to ecomagination) vision of “Healthymagination,” is also improving the energy efficiency and reducing emissions and paper usage attributable to products by going digital, including through its use of Digital X-Ray, Digital Mammography, High Efficiency MR (Magnetic Resonance) Systems and Voluson ultrasound technology.

Then there is the rapidly growing number of specialized ecomagination products, including a growing portfolio of solar- and wind-powered alternative energy systems, smart meters and recently announced Nucleus home energy management hub and Wattstation electric car charging station.

Even the company’s Finance units get in on the ecomagination action. Its Business Finance group, for example, finances purchases of the company’s locomotives and jet engines and the building of solar and wind farms. It also earns money from eco-friendly assets by investing in third-party verified carbon offset projects that would not have been viable without the offsets. GE Energy Financial Services now counts on renewable energy investments for 30% of its $26 billion portfolio.

In fact, GE Broadcasting is one of the few divisions that is not in the ecomagination act (unless, that is, you count the ecomagination commercials that are run on NBC and other GE networks). But now that 51% of NBC Universal is being sold to, and will be operated by Comcast, it no longer counts. Smile

Whatever one believes may have been the original motivation for ecomagination, there can be little doubt that it is now fundamental to the General Electric’s business. But, as discussed in my next post, it is now becoming more than a core part of the company’s business. It is becoming part of the company’s Business Philosophy and its Social Contract.

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Partnering Strategies for a Smarter Planet: Developing Win-Win Partnerships with IBM

Sunday, January 9th, 2011

This is a summary of my new January 2011 report “Partnering Strategies for a Smarter Planet: Developing Win-Win Partnerships with IBM”. For more information on this report or to purchase it for $995, click here.

IBM’s Smarter Planet initiative is the foundation of what, if successful, may represent one of the most fundamental corporate transformations of all time—transforming IBM from a provider of IT solutions into an architect of solutions to some of the world’s biggest, most pressing needs.

IBM intends for its application of IT tools to real-world “where digital meets physical” needs to enable it to leverage its strong position in the maturing, “relatively small” IT market into an entirely new role—that of being the primary digital enabler (and, in some cases, the centerpiece) of solutions for dozens of other much bigger markets, from healthcare to energy and transportation to government. The company’s contributions to solutions to some of the world’s most pressing problems could also provide very nice side benefits, including enhancing the company’s already strong brand image.

The benefits of IBM’s Smarter Planet focus, however, are likely to transcend society and the IBM Corporation—they are also likely to benefit a number of IBM’s partners. Maximizing these benefits, however, can require some careful balancing.

Smarter Planet Ecosystem Benefits

IBM bases its entire Smarter Planet vision on an obvious (at least to those of us in the IT industry) proposition—traditional real-world infrastructures and processes can be made much more effective and efficient by making them more:

  • Instrumented, as through the use of sensors;
  • Interconnected, as by the Internet; and
  • Intelligent, through the use of analytics.

Since all these of these capabilities are already available, IBM and its partners have opportunities to begin providing real value around them today. And since all of these capabilities will be ubiquitous in the future, these markets will grow rapidly into huge opportunities. Companies that develop, tune and develop proof points around their current offerings have the potential of establishing themselves as leaders in these markets of the future. And, oh yes, their solutions also have the potential of providing big societal benefits in the normal course of doing business.

But how can companies achieve the market traction required to establish themselves in such new markets? Individual ISVs typically lack the visibility and the scale; large physical market vendors (like Eaton and General Electric) have little experience with sensors, Internet enablement or analytics; and IT system vendors (including IBM) lack the experience, not to speak of the brand permission and customer relationships, required to build smart buildings and power grids.

The solution, of course, is to build an ecosystem that seamlessly integrates the products, expertise and brands of thousands of complementary companies into compelling solutions to pressing needs. And while a number of vendors are building their own ecosystems around specific classes of solutions today, IBM’s Smarter Planet is, by far, the broadest (encompassing 25 different initiatives), the biggest (consisting of thousands of partners) and the most highly visible (with 35-40% customer recognition).

Dancing with Elephants

While IBM is building both standards and go-to-market ecosystems around each of its 25 Smarter Planet initiatives, those for Smarter Buildings and Cities are currently the most developed, followed by those around Energy and Sustainability. But even within these, IBM’s own offerings, much less its brand and customer relationships are limited. This leaves plenty of white space for partners.

Consider, for example, Smarter Buildings. While all partners must, at a minimum, provide products and services that contribute to an end-to-end solution, IBM particularly values partners that can deliver additional capabilities. Partners like Honeywell, Schneider and Eaton, for example, have established relationships with real estate developers and construction companies and can provide IBM (and other ecosystem partners) with the brand permission and deep customer relationships required to play in areas like smart building design and operations. They also have deep expertise in areas such as HVAC and lighting and may often offer performance-based energy contracts (which IBM does not). IBM not only encourages, but depends on such partners to take the lead in many accounts.

IBM, in turn, also provides considerable value to these companies. First, as mentioned, the Smarter Planet brand provides considerable market recognition and an established base of partners. IBM, of course, is also more likely to have IT and C-level contacts among companies looking to build new buildings and retrofit older buildings and can bring partners into Smart Data Center contracts. It has the IT skills required to integrate all building systems into a seamless network, the digital dashboards required to monitor and manage them and the analytics software to optimize performance and anticipate and prevent disruptions. Just as importantly, it has a huge, established ISV program with well defined processes and a library of Industry Frameworks that greatly reduce ISV’s work in building applications.

IBM certainly provides partners with new opportunities to expand into new and vastly larger markets than most could hope to enter alone or with their own smaller ecosystems. Meanwhile, its extensive technical and market development assistance programs can proactively help its partners capitalize on these opportunities.

But while all participants can value from participation in Smarter Planet ecosystems, such relationships are not without friction. There are risks to dancing with IBM, as there are with any giant. Although the company has relatively few products that compete directly with those of its ecosystem partners, IBM has huge technical, consulting and outsourcing services organizations and it values account control at least as much as any other company.

Partners, therefore, must tread carefully. On one hand, in order to gain the greatest value from the relationship, they must understand the types of value they can provide that will make them most valuable to IBM at different stages of the market and of specific customer engagements. On the other hand, they must simultaneously ensure that their brand, their value adds and their customer relationships are not subsumed by or eventually subjugated to those of IBM.

The bad news is that uncertainly and jockeying for position is inherent in all new markets. Maneuvering is always difficult and sometimes imposes great stress in the relationship. The good news is that as markets grow (and those for Smarter Planet solutions inevitably will) relative roles always seem to sort out, go-to-market relationships are solidified and coordination processes are formalized. Partners will increasingly recognize and agree on when and how they can work together, and when they will not. These relationships have become so common in the IT industry that a word has been coined to describe them. The word is “coopetition.”

Posted in Business Trends, Corporate Social Responsibility, IBM, IT Industry Trends, Smart Infrastructure, Societal Forces, Technology's Impact on Job Skills | No Responses »
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