At Employee Fair, EMC Calls for Innovation from the Bottom Up

How does a giant company like EMC build an image as an innovator when it employs only a handful of full-time researchers, has a reputation for acquiring rather than inventing new technologies, and sells some of the unsexiest boxes in the IT back room—file servers, disk arrays, and other backup systems that, if they’re working properly, no one ever has to think about?

Holding a two-day innovation conference open to all 42,000 employees, and getting 1,000 of them to attend either physically or virtually, might be a good start. And that’s exactly what EMC (NYSE: EMC) did in Franklin, MA, last week. It was the second time the company has hosted such an event, and it attracted more than twice as many participants as the 2007 inaugural version (which Bob chronicled here).

I attended the first day of talks and discussions, which culminated in a science-fair-like “Innovation Showcase” where 30 teams of EMC employees—winnowed down from nearly a thousand entrants—gave poster presentations to a panel of judges. They were competing for trophies, cash prizes, and, more importantly, the resources and attention that could help their ideas blossom into new products.

The winning poster: a concept for bringing cloud computing into consumers’ homes, developed by EMC employee Manu Fontaine, a senior director of marketing and business development in EMC’s Washington, DC, offices. Fontaine proposes selling inexpensive, networked storage devices that make creative use of peer-to-peer networking to store users’ data for life.

Of course, you aren’t likely to see EMC selling these devices right away. (Although one of last year’s winning ideas, for a sort of automated bibliography service for business documents stored in EMC’s object-based Centera archiving system, is already being piloted with customers.) The point of the innovation conference and the showcase, according to Jeff Nick, the Hopkinton, MA-based company’s chief technology officer, is to get EMC employees thinking about products or services that might cut across existing business units, and to highlight ideas that deserve to be nurtured further by his office or by EMC’s Centers of Excellence, a cluster of advanced technology development groups in Brazil, China, India, Ireland, Israel, and Russia.

“There isn’t enough money to take all of these ideas and turn them into major, funded programs,” Nick told me in an interview between presentations. “We don’t have the capacity to do that, and it would be irresponsible. But if you can seed these ideas with just enough water and nutrients and light, with the joint support of the Centers of Excellence and the corporate CTO office, you can incubate them to the point where we can take [and develop] the ones that appear to be the most fertile.”

The message seems to be that EMC can make do with a grassroots approach to creating attractive new products that help customers manage digital information, carving out resources here and there when needed. (The way Nick sees it, by the way, EMC is in the business of “not just storing and optimizing and managing and protecting information, but enabling the derivation of value from information…technology can be commoditized, but information cannot.”) Nick calls this bottom-up strategy “targeted idea incubation.”

But he admits that the model is “still in its formative stages.” And given EMC’s recent history, incubating any kind of innovation has got to feel like an uphill battle. In 1999—the year Joe Tucci was appointed president and COO–EMC was named as the New York Stock Exchange’s “Stock of The Decade,” in recognition the company’s phenomenal growth in the 1990s as it pioneered a series of new storage systems for minicomputers, mainframes, and corporate data centers. But under Tucci’s leadership, EMC has been far more aggressive about acquiring smaller companies—including Data General, Documentum, Legato, VMware, SMARTS, Rainfinity, Captiva, nLayers, RSA, Infoscape, Avamar, Berkeley Data Systems, Voyence, Pi Corporation, Conchango, Iomega, and more than a dozen others—than about building new products inside its own walls. Its biggest seller, the Symmetrix line of storage servers, dates to 1990 (the first version stored a then-massive 24 gigabytes). As the company has diversified into software and services in recent years, nearly all of its major new product releases have hailed from acquired subsidiaries.

Unlike Microsoft or IBM, moreover, the company has no dedicated research and development organization charged with scoping out the future and making sure EMC has products customers will want five or 10 years down the road. The closest analogs with EMC are the Centers of Excellence, along with small research groups in China and at the Bedford, MA-based RSA division.

Nor is EMC likely to build such an organization. “Companies like IBM have thousand-person research towers on each coast,” Nick (who himself joined EMC from Big Blue) observed during his hour-long presentation at the innovation conference. “We feel like there is a more disruptive way to tackle this, using the collective power of the community as our innovation arms and legs.”

Employees need to think of innovation as part of their day jobs, not as something separate, Nick told me. And as the company continues an effort to disperse more everyday business functions to the Centers of Excellence, he says, the atmosphere for innovation is improving.

“My fundamental premise is that we have an opportunity here at EMC that is unique for us, at where we are in our evolution,” Nick says. “We started out creating these Centers of Excellence in order to get a local presence and tap the talent pools in each region. What’s interesting is that they are becoming melting pots. People from disparate product groups are sitting one desk down from each other. They talk, and all of a sudden the boundaries between storage and content management and security and resource management are no longer geographically and organizationally constrained. It turns into a wonderful place to tap into for cross-cutting solutions.”

In fact, out of the 984 teams competing to enter this year’s innovation showcase, 414 were from the Center of Excellence in Bangalore, India, and 169 were from Cork, Ireland.

As far as I could tell, the first-, second-, and third-place winners in the showcase were all from EMC’s U.S. offices. But even the ideas that didn’t win prizes “are still being propagated and cultivated inside the organizations that brought them forward,” Nick says. “All we can tell at this point in the story is what has risen to the very top, but everybody is enriched for having participated.”

The next step for the top proposals in the showcase, Nick says, will be for his office or Centers of Excellence to pry loose some funding to allow their creators to demonstrate how the ideas save money, improve processes, or benefit customers. The best projects will end up paying for themselves as they grow, he says. “I don’t believe in the big bang theory of innovation,” Nick says. “You can’t just have a vision of where you want to be. You have to build a staircase, and if you do that right, the increments can be monetizable; the first step can fund the second.”

So, will any of this change the overall balance at EMC between growth-through-acquisition and growth-through-innovation? Harry You, executive vice president and head of corporate strategy, gave an inconclusive answer to that question in front of the innovation conference audience last Tuesday. He said the list of companies EMC might want to acquire is getting shorter, but he also said that Tucci hired him last year in part “to help him work on the next big deal”—a large acquisition that, if I understood him correctly, is still in the works and still very hush-hush.

You said EMC “needs to be bigger” to have bargaining power with its large customers, some of whom are also growing—just look at the newly merged Bank of America and Merrill Lynch, which together forked over $180 million to EMC last year. “If there is an opportunity in the next few quarters…we might pick up scale or assets or reach in our channels, but we’ll only do it if it makes sense,” You said.

But amidst all that M&A activity, You added, “innovation dollars have to be constant if not growing. If we don’t give you the resources you need, we are strangling off the future at EMC.” Which must have felt like a bit of water for Jeff Nick’s grassroots.

Wade Roush is the producer and host of the podcast Soonish and a contributing editor at Xconomy. Follow @soonishpodcast

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