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Q&A with David Hudson, VP of portfolio management in Nortel’s CTO org

By Bo Gowan April 10, 2008 11:53 pm EDT

On Thursday I talked to David Hudson. A twenty-year veteran of Nortel, David is the leader of portfolio management in the CTO organization, reporting directly into John Roese.  We focused on Nortel’s Incubation Program as well as the Open Innovation Lab, both of which he leads.  Both are programs designed to drive the rapid development of innovative new products and solutions.

David Hudson David Hudson, VP of Portfolio Management in Nortel’s Chief Technology Office
Last month when my teammates and I visited Nortel’s Ottawa campus, we saw the early fruits of these programs in person.  While we also saw demos on 40G/100G, unified communications,  and telepresence that came from Nortel’s traditional R&D side, the demos that caught my attention the most were from these innovation programs.  Most were software and web 2.0 based, and built on the principles of SOA and the mash-ups of our technologies with other applications.  And most interesting of all, when we asked at each demo how long the team had been working on each project, the answer was always in months and weeks instead of years.

In my conversation with David, I asked him about how the incubation program works, what makes for a good incubation program versus using a normal R&D path, and the culture changes that these programs are creating within R&D.  Below is our conversation.

What is Nortel’s incubation program?  We carved off a portion of the total R&D and said that it is strictly for investment in new products in new spaces that fit outside the scope of our current business.  It is structured pretty much the way a VC would operate.  Our exit criteria and options are a little different than what a VC would use of course, but from a decision-making standpoint we are looking at investments based on their business appeal.  There are no blank checks.  There are no huge lump sums.  There is an early seed funding to get to an idea to a prototype, a second phase of funding to get a prototype to your first customer, then a third phase of funding that would help you go big and then transition into the business.  

The other thing that we are doing is building a social networking type of capability internally to let people across the company bring forward ideas and also tap into the innovation pipeline of others within the company to contribute to further shaping the idea and possibly getting involved in implementing the idea.

What’s the difference between a technology/solution that’s developed as part of Nortel’s incubation program and one that goes through traditional R&D funding?  It’s always difficult to create hard and fast rules, but generally we are looking for things that would address new market spaces.  The basic criteria is “will this idea expand Nortel’s total addressable market?”  If the idea simply allows us to do a better job in a space we already occupy, our bias is that the existing business units take it in.  Because eventually if the idea is good, when it scales it’s going to have to fold into their plan of record and their go-to-market plan, and we don’t want to create internal competition for the same market.

Also, the time scale is a little bit different.  With incubation we are looking from two to five years out, whereas that horizon for investment in the business units needs to be closer in. 

This program seems like a pretty significant change from the existing R&D model.  How are people adapting to it?  There is definitely a higher tolerance for taking chances within the incubation program than the line of businesses can take.  While you’d love to have a 100% success rate, realistically you aren’t going to get that.  We are adapting to the concept in this program of having lots of ideas and “failing forward” as opposed to figuring it all out up front the way we do with our traditional R&D investment.  Some of the best ideas are going to be when you get two people that you trust and respect to disagree violently.

When someone comes to you with an idea for the incubation program, do they need to have thought out a detailed business case for addressable market and potential revenues?  We do ask for a business case, but we also understand that the best ideas for incubation will be the ones that by definition don’t have good market analysis, and you can’t buy a report that says how big the market is.  So what we are looking for is some level of understanding on what the value chain is going to be, who the buyer is going to be, and what type of opportunity we are addressing.

Last month John Roese blogged about a global employee session that he hosted in a virtual environment similar to Second Life.  There are many, including IBM with a recent announcement, that are looking into virtual world platforms.  What’s the differentiation or expertise that Nortel can bring?  When we think about applying virtual reality tools to communications either in a business or consumer context, where we want to add value is the same place that we have added value in other communications.  For instance, one area is around our understanding of presence and location, and what the network and devices are capable of in terms of eliminating the hit-and-miss of trying to find other parties - that’s value add.   We are also in a position to provide the best available communication between two people at any given time.  So whether that’s voice or video or virtual reality, you can apply tools to make that best available connection.  And that can be different depending on if you are in a contact center environment, conferencing, or a meeting for example.  And also we have the ability to plug this into all of the UC, contact center and business processes work that we are doing with our SOA and web services strategy. 

Any other interesting projects/activities in the program that you can give us insight on?   We of course are working on virtual world applications as John talked about on his blog; we have IPTV, which started in the incubation program; and we’re working on the application of wireless technologies like WiMAX and applying them in the enterprise to provide some unique values.  Then there are some retail experience-of-the-future activities that we have going on.  Those are a few examples of what we’re working on.

I know you are still ramping this program up.   Is there a “quota” on how many incubation projects you want to have active?  No, there’s no limit.  In a steady state, we expect to have somewhere from 20 to 40 projects going in various phases of the program.

I’ve heard John and others talk about a “better than reality communications experience”.  What does that mean, and how can you get any better than reality?  If you have everybody in the virtual domain interacting digitally, you have the opportunity to not only provide all of the same cues, feedback and quality of experience that you have in the real world, but you can also add a lot of value through the things you can do with the digital data that you can capture.  For instance, recording meetings and data mining the conversations to extract meeting minutes automatically.  In addition, in a virtual meeting there are no bad seats - nobody is stuck in the back of the room.  Those are the types of things that are potentially very compelling.

Separately, Nortel now has an Open Innovation Lab.  What’s the focus there?  The Open Innovation Lab is one source of ideas for the Incubation Program pipeline, but by no means is it the only one.  The concept of the Open Innovation Lab was that we wanted to have a couple of small groups of people who could work with other groups in the company to basically experiment with technologies that  are just on the horizon of productization.  So these are technologies where it’s not yet a given how they will be used, and we are trying to apply them to real customer problems. 

By in large it has gravitated to the notion of communications enablement.  SOA technology is a big part of what the Open Innovation Lab plays with.  We’re finding ways to sneak communications into surprising places.  We can take bits and pieces of our technology and combine it with what carriers, enterprises and others offer and show how you can deliver a new communications experience.

Categories: Corporate / Executives
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Trackbacks/Pings

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Comments

  1. Hi Dave,

    I think you and I met many years ago when I worked on the Dan-Ray integration and some of the early SL-100 customers; FNB, Aetna, Wright Patterson and IBM projects back in the 80s.

    I now work for a major customer of Nortel.

    Anyway, I am curious about the current direction of Nortel CTO.

    From you comments, it seems as if you guys are focusing more on edge and user experiential things where the field is pretty crowded. I am not suggesting you cannot compete there but 1) are the margins reasonable for a company like Nortel and 2) there seems to be some gaps in the vision and strategy department.

    Do you really believe that VR is that imminent? What exactly is it that you/Nortel understand about presence, location (and by extension, identity) that your customers do not? Why do you feel that a contact center is different than a meeting, and how does that perceived difference translate to value?

    I can already record meetings and manage participants over a web interface (although I cannot virtually “move” their audio as with Diamond). BTW I still want that “RMM” feature (Remote Make Mute :) )

    For a long time I have felt the “voice” is the “killer app”, but how is Nortel going to make that a reality? I agree that your innovation labs are interesting, but unless your designers go out and liaise with your customers and their customers (perhaps that real world Sabbatical that was always discussed, but never implemented?) I fear that the result will be as one dimensional as most of the other solutions are today.

    To me, you need a core group of people that can straddle the design and customer reality space to appropriately guide and rank whatever innovation emerges from this R&D group. Of course. the flip side of this group of folks is that they can clearly articulate the advantages of these innovations to your sales people, who frankly seem a bit frazzled lately.

    August 24th, 2008 at 8:29 pm by many

  2. I’ll try to touch on all the questions here.

    On margins: I guess the key is the phrase “a company like Nortel”. We are making a play to maintain an equipment business in places where we have unique capability to deliver highest capacity and reach at the best economics. Meanwhile we see a complementary pair of opportunities around software systems married to a services consultancy. This is a big, big change for Nortel, to be sure, and one where we believe that unique capability will drive margins while services and solutions become increasingly the entree to the customer.

    On VR … I would position that there is an opportunity which arises from the explosion of pervasive, high quality interfaces. We can take advantage of these devices for communication and collaboration that goes beyond SIP and sharing the speaker/microphone. Quite a number of our customers also see this and see it as a way to differentiate themselves to their customers as well as to their employees. Having an audio experience that is rich (stereo, positional, etc) vs flat certainly contributes in a significant fashion. That rich audio experience can be enhanced with appropriate visual which in some cases are cues and in other cases informational. At one level, it’s similar to the differentiation that similar technologies brought to gaming, but applied in a way that is business centric.

    We do see different meeting modes (contact center as 1:1, collaboration as N:M, training as 1:N, etc) around a core set of capabilities. The base technologies that we are building apply to all but the presentation as well as specific feature set will vary depending on the application.

    As to features likes RMM … that’s a great area to think about and one which preoccupies our roadmapping. If every participant in these trusted, immersive environments is a unique digital stream, then you can create a very interesting set of features which allow you to tailor the “meeting” to you … I’m not in a position to share the roadmap details at this time but you can have RMM as well as “RMQuieter”.

    On your last point, we have made some deliberate strides but clearly need to do more. Small teams working under Agile processes (vs the SL100 Gates!) have proven to us that you can straddle the design and customer reality space. It’s a bit back to the future, I think you may recognize, as we excelled at this in the days of the emerging digitally switched voice feature set. We do have product and technology teams operating in this mode today and will have more. We also have a Design for User Experience team which was formed precisely so that we can do the “guide and rank” which you note.

    I would be happy to discuss further - the points that you raise are at the core of what keeps me occupied, and excited.

    August 25th, 2008 at 8:36 am by David Hudson

  3. David,

    Thank you. I am excited by some of the possibilities out there too.

    When I use the phrase “a company like Nortel” I am referring to the need for higher margins to sustain a historically high SG&A. I remember SG&A as being internally regarded as high relative to competitors as far back as the late 1980’s :) What people don’t realize is that that high SG&A used to be extremely customer focused and used to drive standards into the network.

    Nortel has always struggled with whether it is a hardware company or a software company and the changing economics of both. The change from custom silicon to vendor based silicon when the NT-40 was abandoned was a good example. I think probably 60% or more of the code bulk in the DMS is directly attributable to proprietary hardware, and most of that is OA&M software. The coupling makes it tougher to leverage that software that is reusable and well tested.

    One problem to be solved, It is still far too painful and slow to introduce a new service. I think, is that your customers largely still use a gate process There have been some notable exceptions recently at the edge, but when it comes to introducing or modifying NEs or network call flows it is a terrifically cumbersome process made necessary by confidence in quality. In our network high quality interfaces are only as good as the weakest link in the chain. Contributing to the problem greatly is extensive testing and obtaining scarce lab resources. IMO, one thing that would help alleviate this is a way to virtually prototype or simulate the various permutations and interactions. This is a bit of a double edged sword because often a company that can do this ends up enabling some companies that do not. However, I think it would be a terrific win for any company that can provide an easier path to introducing new services into a large network smoothly.

    I also believe we try to roll some complexities out in much too pervasive a manor. Friendly trials and small scale rollouts that ramp up are much more satisfying learning experiences and ultimately have a higher quality while ultimately taking less time and about the same amount of resources to accomplish.

    I think to the “back to the future” point, we may start seeing capabilities that are currently “in skin” come out to be more easily manipulated and changed, rather than requiring a silicon respin.

    Another pain point is the sheer number of software/hardware versions/releases/loads out there. It is almost as complex a problem as introducing a new service.

    At the same time the existing KPIs are less meaningful as the network breaks apart into more discreet functions. The result is that things work (or don’t work) by accident, rather than by design. Problems occur and we are not aware of them and end up managing by outage or the end user perception is that the behavior of the network is inconsistent.

    Point taken on the 1:1 vs. 1:N on conferencing, however I still see the same set of tools/issues on both; need to collect participant information, record minutes and actions, give everyone a chance to talk out issues, govern the time effectively etc. I imagine feature sets will still be “bundled” unless there is an effective way (yet to be invented) to give the user power to manage the features. I am barely able to keep up with all of the features on our current conferencing system. I think an “AI” sound leveler that normalized the volume and could possibly filter background noise would be great.

    As I recall there were fits and starts to the successes in the past. Integrating the Dan-Ray feature set so that it did not consume all of the CPU and memory resources was one :) I recall the great work done by the BNR human factors folks, software design teams, SOS folks and of course the field support and support for software environment and documentation (voluminous as it was) that tied it all together. I hope that past success can be recaptured in a modern instantiation. I am glad to hear you articulate a little more about the incubation program and lab. It is IMO on the right track and a net positive.

    As far as Agile processes goes, I am a believer in FDD with some small adaptations, like a little more focus on code inspections and a much tighter relationship with the customer and users (if they are not the same)

    http://en.wikipedia.org/wiki/Feature_Driven_Development

    August 25th, 2008 at 11:23 am by many

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