I did a boatload of podcast interviews with EDA companies at DAC in July and on my last day I got together with Dylan McGrath and Nic Mokhoff of EE Times regarding the issue of how the industry is communicating with its customer base. I think it’s interesting to note that while Dylan kinda agrees with me that he doesn’t see the evidence that engineers get all the information they need by talking to each other amd getting it off press releases, Nic generally agrees that engineers can get all the information they need off the web now, and will be able to do it even better in the future. What that means for traditional media, they aren’t sure.
Note: The sound level on this is a bit wonky because my computer was trying to balance my big mouth with Nic’s soft basso. You’ll probably have to turn up the sound to hear Nic.
It's been one of those really intense weeks. So to save some time, I decided to do an podcast on this issue, rather than write it up.
My activity in European startups looking for funding brought me into contact with Irish entrepreneur Anton Mannering in 2008 and we had a pretty good connection at the time. He popped up again this week with a new venture in New York called, The Audience Conference. Considering I was talking earlier this week about how engineering-based companies need to learn how to communicate better with their audience, I thought the reconnect with Anton was providential. Here's the interview.
Harry the ASIC Guy got into the outsourcing discussion that has been going on in EE Times, starting with the "secret" IBM layoffs, and now with revelations that Chinese engineers will work for a fifth of the salary of a comparable American engineer. He asked fro responses but as I started getting into this I realized it was too long for a comment, so I'm putting it here today.
As usual, American corporations take it on the chin. The main excuse the corporations make is that they are beholding to their stockholders and have to maximize profits in a down economy. Unemployed engineers, union workers and politicians say they are disloyal to America.
The truth is that everyone has a hand at sending jobs overseas.
Let's take a look at the unions and engineers first. The largest single stockholding group in the US is retirement funds... for unions. The pressure to maximize profits, that is causing corporations to look for offshore answers comes directly from those being pressured by the rank and file to make sure that retirement fund is healthy. So the workers being laid off, teachers, government employees. And if those funds start to dip because the stock market is on the skids ... like it is now ... the union pressure the corporations to up their contributions to the fund.
Second, US workers, including engineers, had a competitive advantage for many years because they had unbridled greed, superior technical competence and lofty ambition. But they have left the field by exchanging ambition for complacency. The attitude is, "we are the best so we must be compensated." As I have pointed out earlier this week, low cost trumps quality in today's electronics world. Outsourcing centers have adopted good old American greed and have come close enough to matching US competence to make the choice comparable. They have also adopted the long-term attitude that was once the hallmark of American business. They are willing to sacrifice monetarily in the immediate to establish dominance later. The attitude of entitlement of American workers is making them a poor choice in today's economy. That attitude is not nationwide. Many workers are taking huge salary cuts in order to stay competitive. That willingness to sacrifice is not, however, taking hold within the electronics world.
Third, government still seems to think that the big stick is a carrot and can't figure out why US companies are leaving the US for other countries. At a talk in Monterey a couple of years ago, former Seagate CEO Bill Watkins said, "If I get approached by a country that tells me if I move my corporate headquarters to their island, they will give me office space and eliminate my taxes as long as I hire locally, I'd be crazy not to take them up on it." Watkins pointed out, even before the crash in '08, that US government makes no effort to keep US companies in the US.
Fourth, corporate management in the tech sector is lead by sheep. They see a competitor do something and they go do it too, often at the prodding of the board and investors. That's what got everyone excited about off-shoring in the first place. There was little research done regarding the long term benefits. Now we're seeing some of the early adopters of the practice rethink their decision. Offshore jobs increased job mobility in India, so companies had to increase the amount of training for workers that might last only 6 months. IP theft in China has cost the electronics industry billions of dollars. The financial justification of going overseas is a lot less viable now than it was 10 years ago, especially when you factor in the significant drop in quality.
Finally, US consumers want things cheap even if they are poorly made. That's the magic of Walmart. It's hard to blame them in these times, but we got into that mindset long before things crashed. I have noticed in my trips to Europe that the cheap crap for sale is only available where American tourists show up. If you shop where the locals go, you find quality and you pay for it. When you buy a car in Europe, you can expect to keep if for at least 10 years. In the US, we want a new one every three. Same with computers. And we want a new cell phone every year. But we can't afford that anymore.
So what are the answers to losing jobs?
Institutional investors -- yes, I mean unions -- need to instruct their fund managers to pressure companies to keep jobs in the US, even at the cost of higher dividends. I've already taken that position individually with my investment manager. I dump stock on companies that go far to deep, in my opinion, in offshoring knowing that it's going to bite them in the end.
Unions need to be as concerned about corporate profitability as they are about job security, and union members need to tell their leadership that. Workers need to care about their company if they want the company to care about them.
American workers need to get back their competitive attitude, even at the cost of salaries and benefits. The unusually high cost of increasing mobility and IP theft is making the wage benefits of offshoring look less attractive. Workers would not have to lose half of what they would normally get, but 10 percent reductions are not enough. We need to go deeper.
American business leaders need to grow a pair and realize that just because the investors or board wants them to jump on the latest trend doesn't mean they have to. A CEO is hired to start trends, not follow them. One company in the UK has figured that out and is using it to their advantage. TT Electronics has recently reorganized to locate manufacturing where demand for products is. Their US facility is concentrating heavily on medical devices, aerospace products and military development, because that's what is hot in the US. But they are not limited to those arenas. They key is reducing cost by reducing shipping. The expense of moving product from an offshore facility to the actual market is becoming untenable. By locating manufacturing near the demand, they more than make up the extra cost of higher wages.
For cryin' out loud Washington, start thinking about incentives to stay in the US. Real ones.
We need to start thinking long-term as consumers and demand products that provide long-term service. It's time to stop being cheap and start being smart.
New Media Age reported that in the UK Proctor and Gamble is going to start paying publications based on how well people respond to advertising and promotional efforts. It's called "pay for engagement" as opposed to pay for clicks or visits. If a reader plays a game, downloads information, signs up for newsletters, they get paid for it.
This is a very new approach and some publications are balking, but it makes a lot of sense to me. The real value of any media now is not that it reaches a lot of people, but that people respond in a positive manner by engaging with the sponsor. This plays well into the social media world, especially when you offer materials that can be downloaded for later review, including podcasts.
So I spent a great deal of my morning trying to get into the EE Times Virtual Conference on SoCs. I was able to get into the exhibit hall to see really bad demos and webinars, I could get into the resource center and download a lot of badly written marketing material and a few good articles. But the meat of the conference... the panels and keynotes ... was unavailable to me. Even Tech support couldn't figure it out.
So I wandered into the chat room and found a half dozen people with the same problem. And since they were all engineers I figured they weren't using a Mac like me, so my tech couldn't be the problem. We all had a lovely chat about the conference as it was shaping up and learned something very interesting:
Engineers don't like marketing materials (who does?), they don't like presentations, and they don't like webinars.
Webinars? I thought webinars were the be-all and end-all of marketing. That's where engineers talk to engineers, virtually.
The knock on webinars were that they were too long and too filled with marketing BS, which is really interesting since most webinars are written up and produced by engineers, not marketers. Marketers get to make suggestions in content, but it's the engineer that is the editor in chief. So if the engineers are in charge of the vehicle that is supposed to be the most popular way of reaching engineers, can engineers really talk to each other?
Well, yes, but not in a controlled environment. What the engineers in the chat room said was the most valuable part of the exhibit hall was the chat room with other engineers, not all the controlled messaging of the virtual booth.
Hence the title of this post. There is a great deal of time and money spent on trade shows, virtual and otherwise, that all goes for naught. The only thing that matters is the personal interaction. That's what makes the sale. The most valuable tool in a company's marketing arsenal is anything that creates a conversation, not a blind blasting out of information and noise.
I'm preparing presentations for all kinds of sectors on social media strategies and I'm currently looking at market dynamics. For many years I've said that good marketing on mediocre products always beats good products with mediocre marketing. I still believe that. Today, however, I've come to realize something else while watching a Microsoft commercial about why people should buy a Windows-based machine:
A product will succeed in the market because it's cheaper, even if it is technologically inferior, especially in today's economy.
That's the entire message of the commercial and, in the end, it's why Windows-based machines continue to outsell Apple. And in this current economy, that is the trump card.
In World War II, Germany had superior tank technology. The were better armed, had better targeting optics, had better armor, better drive trains... they outclassed all opponents. But when a tank crew got their assigned tank, they were told they had the better machine, but it was the only one they would ever have. If they lost it, they should die in the process, or expect to get transferred to infantry.
On the other hand, the US had the Sherman tank. It was OK. It couldn't beat most of the German tanks one-on-one, but it could handle a 5-1 confrontation, so the US manufactured thousands. And they made them safe enough that the crews could abandon a damaged tank quickly, go back to supply and pick up another. Tank crews would always be tank crews. The US won the tank war through a cheap and plentiful strategy.
In the technology world today, and going back to the beginning of the computer industry, the same strategy is prevailing. Windows-based computers are buggy, maintenance intensive, require significant tech support... but they are cheap and easy to replace. Most technology niches have captured most of the concept of the computer industry by creating buggy, maintenance intensive products that require significant tech support. What they miss however is keeping them cheap.
That's what is killing the semiconductor design and manufacturing industry. Jacques Benkoski wrote on this issue this week in EE Times where he pointed out that FPGA design starts are beating the crap out of ASIC design. I understand Rajeev Madahavan of Magma will be making a counterpoint on that position at EE Times Virtual Conference on September 16 and from the description of his keynote seems to agree with my position. I'm looking forward to hearing what he has to say.
The point is that the hard cost of technology has to be brought down, while increasing profitability. The soft costs of increasing efficiency, reducing respins and reducing time to market are only valuable when money is flowing. If that were not true, we'd all be working on Macs.
But what do I know? I prefer technology excellence and efficiency to cost. That's I've been working on Macs since 1989.
Guy Kawasaki did a post in Open Forum this week on "Is Advertising is Dead" reporting on a panel of advertising experts from Facebook, Yahoo and Microsoft. The purpose of the panel was to discuss the benefits and pitfalls of using advertising to support a web-based business. There were some good points, but like every other discussion I have seen on advertising it missed an important point: How do you make it work?
Advertising does not create sales. It improves them, but it doesn't create them. It reinforces opinions and impressions that have already been established. For advertising to work, the initial sale has to have been already made; the first impression established. The panel got close tot he subject with the statement: The key starting point is great content. When you have great content, you’re more likely to attract audiences, and audiences are what advertisers are looking for."
The content is what establishes opinion and creates the initial openness to a sale, but that content has to have at least the appearance of objectivity to do its job. If the content in the online publication is obviously biased in favor of a particular vendor, it doesn't meet the definition of "great content" that the panel says you have to have.
This is the key component missing from social media programs in corporate America and what needs to be addressed before they will become valuable to the market.