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Success factors for value creation in the era of technology convergence
Serge LeefVice President, New VenturesGeneral Manager, System Level Engineering DivisionMentor Graphics Corporation
May 2012
© 2010 Mentor Graphics Corp. Company Confidentialwww.mentor.com
Progression in System Design1970 1980 1990 2000 2010 2020
Microprocessor
DesktopComputer
Packaged IC
Military & Aerospace
Digital SignalProcessing
Communications
MultiprocessingGigabit,
Non-volatile Memory
Consumer
Serge Leef, Information and Communication Technology Research Forum, May 2012
Integrated System Design
EnergyMedical
IndustrialAutomotiveAerospace
4
© 2010 Mentor Graphics Corp. Company Confidentialwww.mentor.com
Domain-specific
Highly heterogeneous
Distributed over networks
Highly interactive with physical world
Require multiple disciplines to implement
Validated mainly through physical prototyping
System integration and test organizations are pivotal
Subject to rigorous quality, certification, qualification rules
Attributes of Embedded Systems
Serge Leef, Information and Communication Technology Research Forum, May 20125
© 2010 Mentor Graphics Corp. Company Confidentialwww.mentor.com
Typical System Architecture
PSU / Power Management
Inpu
ts
sign
al
cond
ition
ing Inputs Processing
FPGA or ASIC
CPUControl
Algorithms
Outputs Processing FPGA or ASIC
Out
puts
si
gnal
co
nditi
onin
g
Cockpit commands,
Sensors(e.g. speeds,
pressures,temperature,
valve position)Comms
Solenoids,Valves,Stepper Motors,Sensor
Excitation signals,Comms
Portable Energy Source (Battery + Alternator)
Bypass controls
Serge Leef, Information and Communication Technology Research Forum, May 20126
© 2010 Mentor Graphics Corp. Company Confidentialwww.mentor.com
ECUECUNETWORKNETWORK
PLANTPLANT
System Example: Car
Hundreds of PLANTs 40-80 ECUs (4-32 bit CPUs) Up to 10 NETWORKS of 4+ distinct types
Modern vehicle is a complex, distributed compute and control system
Serge Leef, Information and Communication Technology Research Forum, May 20127
© 2010 Mentor Graphics Corp. Company Confidentialwww.mentor.com
System Example: Airplane
Serge Leef, Information and Communication Technology Research Forum, May 2012
3rd network
ServerTerminal
Display Switch
Router
WindowsGalley
Seats………
Lights
Avionics(AFDX + ARINC 429 - CAN) IFECab OpsA/C Ops
IMA
LRU
LRU
SWITCH
LRU
LRU
IMA AFDX
world
CAN node 1
CAN node 2
CAN node n
CAN node 1
CAN node 2
CAN node n
System A
System B
SWITCH
LRU = Line Replaceable Unit IMA = Integrated Modular Avionic (Gateway function)
Supplier xx Supplier yy
8
© 2010 Mentor Graphics Corp. Company Confidentialwww.mentor.com
System Example: Guided MissileIn-flight power management for guidance
Post-impact detonation
Serge Leef, Information and Communication Technology Research Forum, May 2012
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© 2010 Mentor Graphics Corp. Company Confidentialwww.mentor.com
Medical: Multi-physics interaction and test
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
Hospital-basedremote heart monitor
Pacemaker
Surface ECG
Blood Pressure
TemperatureData Link
Serge Leef, Information and Communication Technology Research Forum, May 201210
© 2010 Mentor Graphics Corp. Company Confidentialwww.mentor.com
System Design Challenges Design requirements are becoming more complex
— Lower cost, lower power, lower weight
— Increased performance, reliability, or safety
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
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
Serge Leef, Information and Communication Technology Research Forum, May 201212
© 2010 Mentor Graphics Corp. Company Confidentialwww.mentor.com
Specifications
How do you design the whole system?
Digital Analog
Mixed - Signal
Sensors & Actuators
Plant / Mechanic
al
Application
Software
Platform Software
Embedded Software
Multi - Physics
SiliconPlatform
Serge Leef, Information and Communication Technology Research Forum, May 2012
DataTraffic Protocols
Network
13
© 2010 Mentor Graphics Corp. Company Confidentialwww.mentor.com
Need to Remove Walls between Disciplines
Mechanical Electrical
ControlsSoftware
ControlCircuits
Electro-Mechanical
Sensors & Actuators &
Space
Digital Control
Micro-controllers
DSP Processing
Thermal Mechanical Fluidic Mass Transfer
Analog, Digital, & Mixed-Signal circuits
Transfer functions
Advanced Algorithms Signal Processing Embedded Control Supervisory GUI & Presentation
PWM
–
+
+
Cmd
Angle
ieqs
ies
w
ks
Serge Leef, Information and Communication Technology Research Forum, May 2012
14
© 2010 Mentor Graphics Corp. Company Confidentialwww.mentor.com
How to Pursue Innovation in System Design? Big companies rarely succeed in innovating
Stagnant organizations resistant to change (IBM PC example) Risk/reward ration is all wrong ($10M exit event)
Cycle: dissatisfied employees to entrepreneurs Purchase model: front and buyout
Solution 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
Serge Leef, Information and Communication Technology Research Forum, May 201215
© 2010 Mentor Graphics Corp. Company Confidentialwww.mentor.com
What makes a good environment for technology ideas and start-ups? Location, public policy and culture play key roles Creativity is only one factor leading to possible success Elements essential for successful innovation ecosystems:
Education infrastructure Business-friendly climate Risk capital ecosystem Culture of failure
Serge Leef, Information and Communication Technology Research Forum, May 201217
© 2010 Mentor Graphics Corp. Company Confidentialwww.mentor.com
Education Infrastructure University research
Mechanisms for funding relevant programs Relationships with professors who recommend best students Entrepreneurial professors drive commercialization of inventions
Technology transfer Rights should be transferrable or licensable at predictable cost If not predictable, established companies do not get involved
Government links Governments are NOT good venture capitalists
o Typical goals are prestige and employmento GREED must be the key driver for capitalist enterprises
Governments can play a role by focusing researcho Select areas of national interesto Facilitate through funding University/Industry partnerships
Serge Leef, Information and Communication Technology Research Forum, May 201218
© 2010 Mentor Graphics Corp. Company Confidentialwww.mentor.com
Educational collaboration examples France: IRT Large scale initiative
Government objective:o Keep the French research competitiveo Strengthen the link between research and industry
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 Industryo 50% to 90% of personnel costs are subsidized
USA: CHREC Small scale initiative 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
Serge Leef, Information and Communication Technology Research Forum, May 201219
© 2010 Mentor Graphics Corp. Company Confidentialwww.mentor.com
Business Friendly Climate Corporate registration
2-5 days in US, Canada, Australia, New Zealand 152 days & 50 steps in Brazil
Legal system 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
Employment regulations Need to be able to rapidly adjust to funding and
business conditions Labor costs must scales smoothly and
predictably
Serge Leef, Information and Communication Technology Research Forum, May 201220
Most and least friendly countries to small biz
Rank CountryFSB
Score
1 New Zealand 2.03
2 United States 2.01
3 Canada 1.99
4 Australia 1.93
5 Singapore 1.88
6 Hong Kong 1.86
7 United Kingdom 1.85
8 Ireland 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
18 Latvia 1.57
19 Switzerland 1.57
20 France 1.5
21 Jamaica 1.49
22 Netherlands 1.45
23 Belgium 1.45
24 Germany 1.37
25 Portugal 1.36
26 Peru 1.33
Most and least friendly countries to small biz
Rank CountryFSB
Score
27 South Africa 1.32
28 Malaysia 1.31
29 Colombia 1.29
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 1.2
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
44 Poland 1.02
45 Croatia 0.95
46 India 0.94
47 Jordan 0.94
48 Uruguay 0.92
49 Ecuador 0.92
50 Brazil 0.92
51 Philippines 0.9
52 Greece 0.76
53 Indonesia 0.61
Source: Who in the world is entrepreneurial? CNN-Money, Geoff Lewis, June 1, 2007
© 2010 Mentor Graphics Corp. Company Confidentialwww.mentor.com
Risk Capital Ecosystem
Serge Leef, Information and Communication Technology Research Forum, May 2012
A
B
C
• Refine prototype(s) into product• Engage with teaching customers• Pricing, packaging, marketing
strategies• Market development
• Achieve product differentiation• Win business against competition• Build repeatable success
methodology
• Sales organization & execution• Productization and wide
deployment• Outbound marketing programs• Public launch
• Develop working prototype(s)
• Understand the ecosystem• Business model
development• Market definition
21
Phases and Milestones* Series A funding - $1M to $3M Series B funding - $5M to $8M Series C funding - $8M to $15M
Red zone – latest exit point for outside investors
Red zone
*Based on observations of a typical fabless semiconductor startup company, 2006-2009
© 2010 Mentor Graphics Corp. Company Confidentialwww.mentor.com
Risk Capital Ecosystem Before Series A
Friends and family Angels
o Former entrepreneurs - series A or earlier if familiar with space o Less demanding than real VCs o 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
Serge Leef, Information and Communication Technology Research Forum, May 201222
Source: Interviews with ex-head of Investment Banking of a major Wall Street Company, March, 2012
Venture Capitalists 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… 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
Illusions of Entrepreneurship: The Costly Myths that Entrepreneurs, Investors, and Policy Makers Live By, Scott Shane, Yale University Press (January 28, 2008)
© 2010 Mentor Graphics Corp. Company Confidentialwww.mentor.com
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
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”
Motivation factors driving serial entrepreneurs* 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”
Serge Leef, Information and Communication Technology Research Forum, May 201223
*Source: Confessions of Serial Entrepreneurs, J. Wang, eterpreneur.com, January 8, 2009
© 2010 Mentor Graphics Corp. Company Confidentialwww.mentor.com
Comparing Success Factors
Success factor US France Japan China India Russi
a
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
Serge Leef, Information and Communication Technology Research Forum, May 2012
• Educated work force alone is not sufficient for success
24
© 2010 Mentor Graphics Corp. Company Confidentialwww.mentor.com
Summary Convergence of innovations in computing, sensors, mobility,
and networking are driving exciting prospects for advances in automotive, aerospace, medical and consumer markets
Capitalizing on these opportunities is a challenge for inventors, entrepreneurs, academics, businesses and governments
Each has a role to play in driving value creation
Proactive public policy should focus on ALL success factors: Education infrastructure Business-friendly climate Risk capital ecosystem Culture of failure
Serge Leef, Information and Communication Technology Research Forum, May 201225
© 2010 Mentor Graphics Corp. Company Confidentialwww.mentor.comSerge Leef, Information and Communication
Technology Research Forum, May 201226