Transcript Slide 1

Success factors for value creation in
the era of technology convergence
Serge Leef
Vice President, New Ventures
General Manager, System Level Engineering Division
Mentor Graphics Corporation
May 2012
Progression in System Design
1970
1980
1990
2000
2010
2020
Integrated System
Design
Digital Signal
Processing
Multiprocessing
Gigabit,
Non-volatile
Memory
Microprocessor
Packaged IC
Consumer
Communications
Military &
Aerospace
Energy
Medical
Industrial
Automotive
Aerospace
Desktop
Computer
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Attributes of Embedded Systems
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Domain-specific
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Highly heterogeneous
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Distributed over networks
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Highly interactive with physical world
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Require multiple disciplines to implement
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Validated mainly through physical prototyping
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System integration and test organizations are pivotal
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Subject to rigorous quality, certification, qualification rules
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Typical System Architecture
PSU / Power Management
Inputs Processing
FPGA or ASIC
CPU
Control
Algorithms
Outputs Processing
FPGA or ASIC
Outputs signal
conditioning
Cockpit
commands,
Sensors
(e.g. speeds,
pressures,
temperature,
valve position)
Comms
Inputs signal
conditioning
Portable Energy Source
(Battery +
Alternator)
Bypass controls
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Solenoids,
Valves,
Stepper
Motors,
Sensor
Excitation
signals,
Comms
System Example: Car
NETWORK
ECU
PLANT
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Hundreds of PLANTs
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40-80 ECUs (4-32 bit CPUs)
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Up to 10 NETWORKS of 4+ distinct types
Modern vehicle is a complex, distributed compute and control system
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System Example: Airplane
Server
Terminal
Display
Switch
Router
Avionics
A/C Ops
(AFDX + ARINC 429 - CAN)
Cab Ops
IFE
3rd network
Lights
Windows
Galley
………
Seats
Supplier yy
Supplier xx
System A
CAN
node 1
CAN
node 2
LRU
CAN
node n
LRU
AFDX
world
IMA
CAN
node 1
CAN
node 2
CAN
node n
IMA
SWITCH
SWITCH
System B
LRU
LRU
LRU = Line Replaceable Unit
IMA = Integrated Modular Avionic (Gateway function)
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System Example: Guided Missile
In-flight power management for guidance 
Post-impact detonation 
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Medical: Multi-physics interaction and test
Pacemaker
Surface ECG
Data Link
Temperature
Hospital-based
remote heart monitor
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Blood Pressure
Multi-domain, multi-physics medical system
 Human body physiological sources
 Electrical sensors and actuators
 Ultra-compact low-level embedded software /
digital control
 High performance GUI and medical monitor
embedded software
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System Design Challenges
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Design requirements are becoming more complex
 Lower cost, lower power, lower weight
 Increased performance, reliability, or safety
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Convergence of multiple disciplines
 Everything has to work together:
Digital, Analog, Software, Mechanical, etc.
 Multi-company, distributed supply chains
 Complicated communication via a number of
domain-specific file formats, tools, and protocols
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Design optimization
 More than just getting a design to ship, a successful
project relies on predictable schedules, and optimization of
Reliability, Performance, Manufacturing Cost,
and Life-cycle Cost
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How do you design the whole system?
Specifications
Multi Physics
Sensors &
Actuators
Plant /
Mechanical
Silicon
Platform
Digital
Analog
Embedded
Software
Application
Software
Platform
Software
Network
Data
Traffic
Mixed - Signal
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Protocols
Need to Remove Walls between Disciplines
Mechanical
 Thermal
 Mechanical
 Fluidic
 Mass Transfer
Electrical
ElectroMechanical
Analog, Digital, &
Mixed-Signal circuits
Sensors &
Actuators &
Space
PWM
Control
Circuits
w
ies
+
Digital
Control
ieqs
–
Microcontrollers
Controls
DSP
Processing
Transfer
functions
Software
Cmd
Angle
k
s
+
 Advanced Algorithms
 Signal Processing
 Embedded Control
 Supervisory
 GUI & Presentation
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How to Pursue Innovation in System Design?
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Big companies rarely succeed in innovating
 Stagnant organizations resistant to change (IBM PC example)
 Risk/reward ration is all wrong ($10M exit event)
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Cycle: dissatisfied employees to entrepreneurs
 Purchase model: front and buyout
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Solution
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Accept a combination of organic and external
Looking at 100 opportunities per year
Closely examined 20
Bought 7 - ranging from $2m to $70m
Each GM seeks related or augmenting startups
I looked at 10 last year: Sweden, Germany, Hungary, US, France
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What makes a good environment for
technology ideas and start-ups?
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Location, public policy and culture play key roles
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Creativity is only one factor leading to possible success
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Elements essential for successful innovation ecosystems:
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Education infrastructure
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Business-friendly climate
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Risk capital ecosystem
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Culture of failure
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Education Infrastructure
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University research
 Mechanisms for funding relevant programs
 Relationships with professors who recommend best students
 Entrepreneurial professors drive commercialization of inventions
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Technology transfer
 Rights should be transferrable or licensable at predictable cost
 If not predictable, established companies do not get involved
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Government links
 Governments are NOT good venture capitalists
o Typical goals are prestige and employment
o GREED must be the key driver for capitalist enterprises
 Governments can play a role by focusing research
o Select areas of national interest
o Facilitate through funding University/Industry partnerships
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Educational collaboration examples
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France: IRT  Large scale initiative
 Government objective:
o Keep the French research competitive
o Strengthen the link between research and industry
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Allocated millions of € to improve GDP growth via tech sector
5 centers of excellence: biotech, nuclear, semi, aero, systems…
Establishes locations for each; facilities free to participants
Each center is driven by 3-way partnership among
o Universities, Government Research Labs and the Industry
o 50% to 90% of personnel costs are subsidized
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USA: CHREC  Small scale initiative
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NSF (National Science Foundation) driven consortium
Focus on “Domain-specific Computing” via reconfigurable hardware
4 University research teams: UF, VT, BYU, GWU
10-20 industrial sponsors providing funding and direction
Technology transfer options available to the sponsors and can be
licensed to other companies within NSF-inspired framework
 Great source of future hires for the industrial sponsors
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Business Friendly Climate
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Corporate registration
 2-5 days in US, Canada, Australia, New Zealand
 152 days & 50 steps in Brazil
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Legal system
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Strong protection of intellectual property
Means to enforce contracts
Rapid adjudication of disputes
Bankruptcy laws mitigate downside risks to
investors
Tax policies
 There should not be any business taxes while
the startup is in the investment mode and has
revenue below certain threshold
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Employment regulations
 Need to be able to rapidly adjust to funding and
business conditions
 Labor costs must scales smoothly and
predictably
Source: Who in the world is entrepreneurial? CNN-Money, Geoff Lewis, June 1, 2007
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Most and least friendly countries
to small biz
Rank Country
FSB
Score
Most and least friendly countries
to small biz
Rank Country
FSB
Score
1
New Zealand
2.03
27
South Africa
1.32
2
United States
2.01
28
Malaysia
1.31
1.99
29
Colombia
1.29
1.93
30
Russia
1.29
31
Austria
1.28
32
Mexico
1.26
33
Turkey
1.26
34
Korea
1.25
35
Czech Republic
1.24
36
Italy
37
Taiwan, China
1.15
38
Spain
1.11
39
Hungary
1.11
40
Slovenia
1.1
41
Uganda
1.05
42
China
1.05
43
Argentina
1.04
3
4
Canada
Australia
5
Singapore
1.88
6
Hong Kong
1.86
7
8
United Kingdom
Ireland
1.85
1.85
9
Denmark
1.75
10
Iceland
1.75
11
Norway
1.7
12
Sweden
1.64
13
Japan
1.64
14
Finland
1.6
15
Thailand
1.6
16
Chile
1.59
17
Israel
1.59
44
Poland
1.02
18
Latvia
1.57
45
Croatia
0.95
19
Switzerland
1.57
46
India
0.94
20
France
1.5
47
Jordan
0.94
21
Jamaica
1.49
48
Uruguay
0.92
22
Netherlands
1.45
49
Ecuador
0.92
23
Belgium
1.45
50
Brazil
0.92
24
Germany
1.37
51
Philippines
25
Portugal
1.36
52
Greece
0.76
26
Peru
1.33
53
Indonesia
0.61
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1.2
0.9
Risk Capital Ecosystem
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Refine prototype(s) into product
Engage with teaching customers
Pricing, packaging, marketing strategies
Market development
Develop working prototype(s)
Understand the ecosystem
Business model development
Market definition
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•
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Achieve product differentiation
Win business against competition
Build repeatable success methodology
•
•
•
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Sales organization & execution
Productization and wide deployment
Outbound marketing programs
Public launch
Red zone
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Phases and Milestones*
 Series A funding - $1M to $3M
 Series B funding - $5M to $8M
 Series C funding - $8M to $15M
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Red zone – latest exit point for outside investors
*Based on observations of a typical fabless semiconductor startup company, 2006-2009
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Risk Capital Ecosystem
Before Series A
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Friends and family
Angels
o
o
o
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Former entrepreneurs - series A or earlier if familiar with space
Less demanding than real VCs
More proactive in looking for investments
State governments invest in early rounds of subjects of
interest - motivation to develop new business segments
Universities – in California: Stanford, UCB, UCLA, USC,
CalTech provide facilities and access to professors
Normally nurturing behavior
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
Illusions of Entrepreneurship: The Costly Myths that Entrepreneurs, Investors,
and Policy Makers Live By, Scott Shane, Yale University Press (January 28, 2008)
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Venture Capitalists
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VCs have specialization; some specialize in A or B rounds; $23.2 billion invested in 2010; $28.4 in 2011*
There are companies that specialize in mezzanine financing including investment banks and pension funds
After Series B…
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Private equity players can participate instead of VCs, focus on on-going revenue producing companies
IPOs – most desirable successful exit for the investors, but should not be done until absolutely necessary
Sub IPOs - create public shell company and merge startups into it.. If the venture is too small for a real IPO,
then use penny stock market to raise capital (many shady players in this space)
Selling the venture can also be viewed as a success
Most startups fail
Source: Interviews with ex-head of Investment Banking of a major Wall Street Company, March, 2012
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Culture of Failure
“Failure, something we all fear, provides the greatest moment for us to learn. How we
manage or better put how we are honed to manage the process of failure provides not
only the basis for but is the best indicator of future success” - Entrepreneurship: Cultural Views on
Failure A Good Indicator Of Chances Of Success, Ainsley Brown, Commercial Law International, Dec 2011
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Failure carries a huge stigma in some cultures
 Can be cross-generational
 Need to find ways to cushion social damage
 Develop structures that support “serial entrepreneurs”
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Motivation factors driving serial entrepreneurs*
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Need to prove self
Have a lot of energy
Heed a lot of stimulation
Starting businesses that will make a difference
Typically interested in “big ideas”
*Source: Confessions of Serial Entrepreneurs, J. Wang, eterpreneur.com, January 8, 2009
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Comparing Success Factors
Success factor
US
France
Japan
China
India
Russia
Education infrastructure
Yes
Yes
Yes
Yes
Yes
Yes
Business-friendly climate
Yes
No
Yes
No
No
No
Risk capital ecosystem
Yes
Some
No
No
No
No
Culture of failure
Yes
No
No
No
Yes
Yes
• Educated work force alone is not sufficient for success
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Summary

Convergence of innovations in computing, sensors, mobility,
and networking are driving exciting prospects for advances in
automotive, aerospace, medical and consumer markets
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Capitalizing on these opportunities is a challenge for inventors,
entrepreneurs, academics, businesses and governments
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Each has a role to play in driving value creation
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Proactive public policy should focus on ALL success factors:
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

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Education infrastructure
Business-friendly climate
Risk capital ecosystem
Culture of failure
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