Perhaps no industry has contributed more to enhance the quality of life of people worldwide than the technology industry. Our products and services influence every walk of life, the way we work and the way we play. Still, we need to re-focus. The road to recovery is often the road to discovery. The promise of an industry turn-around challenges us to learn how to engineer that turn-around.
What I want to say is “Let’s get real” by creating real solutions for real customer problems-not examples of technology for technology’s sake or digital pies in the sky. Let’s get real with innovative technology that enables people to do what they want to do better, faster, more productively, and more cost effectively than they ever could before.
Rock’s Law and Moore’s Law
Two unique conditions frame the situation we face today:
- Rock’s law. The first is an obscure observation about the cost of capital. It was offered by Arthur Rock, a venture capitalist. It says that the cost of capital equipment in our industry will double every four years. That observation has held true to the point where the cost of new high-end wafer fabrication is prohibitively expensive to everyone but the largest players. Developing new and more technically advanced transistors are very expensive.
- Moore’s law. Another economic theory, Moore’s Law, states that the average cost of a semiconductor transistor will decrease by half every 18 months. By the late 1970s, the incremental cqst of a transistor had already dropped below a penny. Today, the cost of transistors is approaching one-millionth of a penny. We’re practically giving them away.
Once something is essentially free and it has value, it will find its way into many places. This is true of the transistor. Software and silicon have become the “plastic and steel” of today’s economy. This should make all of us feel better about our long-term macroeconomic prospects. More products are characterized by the features and functionality defined in software and silicon. The IT industry is rapidly becoming the DNA of every industry—and it is changing the competitive dynamics.
We have an enormous influenceand enormous responsibility to ensure that people take advantage of the technology that we create. If we can be criticized for anything, we can be faulted for our tendency to create a lot of technology and very little innovation. What’s the difference? In a word, customers.
We have been guilty of pushing our capacity to deliver more and more, faster and faster, simply because we can. Sometimes we forget that someone out there has to do something a whole lot better than they could before. Otherwise, what we do is basically irrelevant. It’s high time we refocus around the customer. Adopt a policy that says: “No new technology without real customer input or without real customer demand.” At AMD, we call this “customer-centric innovation,” and it is driving everything that we do these days. Being a “customer-centric” company demands that you understand the needs of both direct customers and the customer’s customers, meaning consumers.
We have seen a dramatic transformation in what consumers want from their technology. With the Internet and improved wireless communication standards, PCs are arguably more connectivity devices than productivity devices.
- At home, the primary applications for a personal computer are e-mail, instant messaging, and Internet access. The time is fast arriving when we will see the PC become the central hub of the home.
- At work, productivity is still supremely important, but with the Internet, productivity is seen as dependent on connectivity. Companies know that their scarcest resource is creativity and that the only way to exploit it is to connect people to the resources they need to rapidly bring their idt:as to life. In short, at home and at work, connections are the currency of our lives.
While Rock’s Law and Moore’s Law continue to be technically accurate, they have declining relevance because they say nothing about customers and what they might do with that technology. They say nothing about “customer-centric innovation.” If any business “law’ is relevant to our times it’s Metcalfe’s Law, developed by Robert Metcalfe when he was at Xerox PARC. His law states that “the value of a network grows as the square number of the users of that network.”
For example, if you were the only one with a telephone, it would be of little value. However, since almost everyone has a telephone, this device has incredible value. A company is a network of people, capabilities, and ideas. Using Metcalfe’s Law as a model, the value of a company depends not on its size, but upon the number and quality of that company’s connections in the world.
I mention the “quality” of relationships because I believe that in the future, the quality of the connection will count the most I see Metcalfe’s Law as the new Rule of Engagement—one that will set the standard for excellence in our industry and for our customers in the years to come—because it represents a powerful connection between companies, between peoples and between cultures.
Partnerships and relationships are the key to a new business model. Our commitment to this “connected business model” is something we reinforce in everything we do every day. Work with your partners, and deliver compelling technologies that deliver superior performance.