Lessons from the Movie Makers

Tom Peters

Robert X. Cringely's Accidental Empires: How the Boys of Silicon Valley Make Their Millions, Battle Foreign Competition, and Still Can't Get a Date is a wonderfully readable, acerbic, funny tale of America's most important "industry": microprocessors, software, and personal computers. Few survive Cringely unscathed. Even the index, with entries such as "IBM, demise of," packs a wallop!

Cringely concludes by addressing "the greatest threat to our computing future as a nation. Forget about the Japanese; their threat is nothing compared to (the) loss of intellectual vigor."

His answer is "the software studio." Cringely likens today's software giants to movie studios of the 1930s. "They finance produce, and distribute their own products," he writes. Unfortunately, it's hard to do all those things well." Contrast that with the movie studio of the 1990s: "It is just a place where directors, producers, and talent come and go—only the infrastructure stays."

The computer business, Cringely claims, has "held to the idea that every product is going to live forever." Instead, he urges software firms, especially, to find a way to quickly produce their Rocky I – Vs. "You don't have to keep the original team together to do a sequel," he adds, though follow-on products have to maintain the feel that made the original hit popular.

Most start-up teams, according to Cringely, "don't really want to ... create a large organization. (They) end up functioning in roles they think they are supposed to like, but most of them really don't." But in his model, such bands could stay independent and vital by working with a movie studio-equivalent, which performs "central finance, administration, manufacturing, and distribution."

Cringely's rationale is straightforward. "Not all smart people work at Apple or Sun or Microsoft," he asserts. "In fact, most smart people don't work at any of those companies." But via the software studio scheme, the best and brightest could "package ideas and talent together just like independent movie producers do today." Responsible for a dozen or so people at most, "They can be Steven Spielberg or George Lucas to Microsoft's MGM or Lotus' Paramount."

Cringely hits the nail on the head. Not only for the computer industry, but for everything from chemicals to food to pharmaceuticals. Consider a possible universal model:

1. Infrastructure Inc./Integrator Inc. The main tasks of these "mother companies" are: (1) service, (2) sales, (3) marketing, (4) logistics, (5) systems integration, (6) deal conception and financing. Big movie studios already work this way. Publishers such as Random House or Simon & Schuster and telecommunications companies like MCI come close. Computer companies are learning, too. Apple farms out a great deal of almost everything. EDS is a systems integrator; for example, it was just tapped by NCR, AT&T's computer hardware-making arm, to become one of about eight specialist "integrators" through which NCR plans to pass 80 percent or 90 percent of its sales. McDonnell Douglas wants in as well. It's seeking an encompassing commercial-aircraft development alliance with Taiwan Aerospace in which it would retain only systems-integration tasks—design, final assembly, and flight testing. Even car makers are cozying up to such ideas, appointing certain master suppliers as integrators for major automotive subsystems; these integrators manage dozens of suppliers in their own right.

2. Independent infrastructure providers. Manufacturing, service, maintenance, training, and information-systems "products" are increasingly offered by independent infrastructure subspecialists. Via its new Contract Financial Management service, Arthur Andersen, for example, will perform turnkey bookkeeping operations—even including a chief financial officer!

3. Talent Packager I. Independent producers come to the integrator's "studio" with a total deal (story, stars on contract, director), maybe even financing.

4. Talent Packager II. Michael Ovitz, head of Beverly Hills' Creative Artists Agency, is often called the most powerful person in the movie industry. He controls a huge talent bank and manages his stars' exposure. Superagents in sports and book publishing play similar, mighty roles. Why not such talent banks in semiconductors, software, or biotech?

5. Independent smart people. One-person bands with eye-popping backgrounds now number in the millions. Their schtick is gravitating from exciting task to exciting task, never tied to anyone's payroll.

One caveat: In Outsourcing and Industrial Decline, professors Richard Bettis, Stephen Bradley, and Gary Hamel write that a "series of incremental outsourcing decisions, taken individually, may make economic sense, but collectively they may also represent the surrender of the business's capability to compete." The de-integration notion, all important for revitalizing moribund firms in fast-paced markets, can go too far. How do Walt Disney, Paramount, Random House, MCI, and Apple retain their uniqueness? While exemplary network integrators combine clout and distinction with the energy of numerous independent entrepreneurs and superstars, they can quickly become hollow to the point of meaninglessness. Achieving the right mix is no mean feat.

(C) 1992 TPG Communications.

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