Monday 15 March 1999
Shaking Newbridge to the core
ottawacitizen.com
James Bagnall analyses how Alan Lutz'
outside hires are remaking the region's
second largest firm
The Ottawa Citizen
Shortly after he was
installed last fall as head of
Newbridge Networks
Corp.'s flagship switching
products unit, Brian Jervis
knew he had a big
problem.
His top engineers were
immersed in a complex
project aimed at producing
a next-generation
voice-and-data switch, and
it was well behind
schedule. So Mr. Jervis
drew on his lengthy
experience as a senior
executive at Nortel
Networks Corp. to make a
suggestion.
Why not expedite things by
allowing outsiders to build
some of the components?
Why invent everything
inside Newbridge?
The response was nearly
uniform. You don't seem to
understand the problem,
his vice-presidents told
him, you'd have to change
the whole design regimen.
Mr. Jervis didn't see
anything wrong with that.
When no one in the first
line of management
responded to his concerns,
he made the same proposal
to some of the more junior
engineers.
At first, the underlings
balked, unsure of the
politics. But several found
the challenge irresistible.
Within a month, they
presented Mr. Jervis with a way of outsourcing several key chips and
shaving a full year from the design schedule.
Not only that, but the new design setup would in theory allow Newbridge
to boost the speed of the switching device from a proposed 50 billion bits
per second by year-end 1999, to 320 billion bits per second early in
2000.
"They came in and put the whole proposal on the table," said Alan Lutz,
Newbridge's chief operating officer. He is also a former executive with
Nortel and Compaq Computer Corporation. "We have some enormously
bright people here, and Brian liberated them."
It was a pivotal moment because it signalled profoundly important changes
taking place inside Newbridge -- and the rest of its 6,000-plus employees
are taking notice.
For most of its turbulent 13-year history, Newbridge has been run by a
group of managers with startlingly similar backgrounds. Many are English
or Welsh and most worked with founder Terence Matthews at
Kanata-based Mitel Corp. during the 1970s and early 1980s. The
business and social ties within this group run long and deep.
But from the moment he took the job as Newbridge's No. 1 manager less
than 10 months ago, on June 2, Mr. Lutz has been systematically
remaking the company's upper tier. Fully half of Newbridge's 10 most
senior managers have been appointed from outside firms in just the past
nine months. And, in comparison with the previous regime, it's a
remarkably diverse group -- not just culturally but, more importantly, in
terms of industry experience.
Satjiv Chahil, the executive vice-president in charge of Newbridge's global
marketing effort since last month, is a native of India with a long history at
Apple Computer Inc. Giulio Gianturco, responsible for Newbridge's sales
effort in North and South America, worked lengthy stints at Boston-based
Digital Equipment Corp. and the former equipment arm of AT&T Co. of
New York. Pearse Flynn, an Irishman, was appointed two months ago to
lead Newbridge's European sales group. Mr. Flynn is an 11-year veteran
of Compaq Computer Corp.
"The best ideas come from intellectual debate," says Mr. Lutz. "If
everybody shares the same background, the debates are nowhere near as
effective."
Mr. Lutz also hopes to influence the entire culture at Newbridge more
directly. The company is set to put into effect a new pay policy that aims
to substantially reward top performers while imposing salary freezes on
employees who have been evaluated as under-achievers.
Are the changes having a substantive impact? On the sales and marketing
side, it's simply too early to tell. Certainly the newcomers offer a fresh
style. When Mr. Chahil was introduced to Newbridge employees in
Kanata recently, he was wearing his Sikh turban.
"I'm really Welsh," he joked, "It was Peter Sellers who taught me to dress
this way."
When Mr. Flynn first examined his European headquarters facility near
London, he discovered there was so much internal security that it inhibited
conversation between employees.
The Irishman's solution was to cut the square footage in half, relegate
security concerns to the entrance of the facility and force everyone to rub
elbows. Mr. Flynn has already produced a plan calling for 35 per cent
sales growth in his region next year.
Fresh blood alone isn't going to solve Newbridge's problems. Mr. Chahil,
undeniably bright, has shown himself to be fallible when it comes to
marketing. In 1996, while serving as a senior vice-president at Apple, he
declared the Pippin -- an interactive media player -- to be "a business
model of the future".
The Pippin was subsequently dropped by Apple. Indeed, last May Apple
founder Steve Jobs joked about the huge parade of products Apple had
produced in the 1990s, including the Pippin. Apple has since retrenched
to two core product lines with a correspondingly focussed marketing
effort.
When Mr. Chahil served as Apple's senior vice president of worldwide
corporate marketing, the company supported close to two dozen different
marketing groups.
Mr. Chahil lost his job during a corporate re-organization two years ago
and Mr. Lutz is happy to tap into his experience. "Satjiv is brilliant," he
says. "He was attracted to Newbridge because it's on the cusp -- it will
either get much, much bigger or much, much smaller. It's not going to stay
constant," he adds.
While the new sales and marketing executives prepare to make their
mark, the most immediate changes under Mr. Lutz are taking place in
engineering. One of Mr. Lutz' first major moves was his decision last July
to split Newbridge's engineering effort into three groups.
The biggest unit, with roughly 70 per cent of the R&D budget, is switching
-- Mr. Jervis' group. The other two units include access products
(wireless technology, for the most part) and Internet Protocol (IP)
products.
Mr. Lutz' decision to create a separate IP unit, run by an aggressive young
insider, Jim Arseneault, led directly to a fundamental change in
Newbridge's core strategy. Since the early 1990s, Newbridge has been
one of the globe's leading developers of high-speed switches that run on a
technology known as asynchronous transfer mode (ATM) technology.
ATM is a technique for splitting digital information, whether voice, data or
video, into same-size chunks and sending them across the network to their
destination, where everything is reassembled in the right order.
A second major technology, involving IP, has been strongly promoted by
archrival Cisco Systems Inc. of California. Until recently, Newbridge
founder Mr. Matthews has dismissed IP-based networks as a poor
second cousin to ATM networks -- mainly because IP technology can't
yet guarantee that voice or video signals will be transmitted on time,
resulting in garbled conversations or jerky video.
However, IP networks are very good at sending data such as e-mail, and
they're getting better at dealing with voice and video.
Mr. Arseneault devised a new strategy that will see Newbridge embrace
both ATM and IP. He uses the following analogy. When a message
absolutely, positively has to get there then it will travel on ATM. But if
regular post is OK, as it is with most e-mail, then an IP network is the
most cost effective way to go.
For the past few months, Mr. Arseneault's group has been working
overtime to develop a new strategy for making the worlds of ATM and IP
co-exist -- a concept they're calling Real World Networks.
Newbridge is expected sometime next week to begin unveiling key parts
of this strategy. "There'll be a series of announcements," says Mr. Jervis,
whose group has been heavily involved in creating the new program. "I've
just finished seeing about 25 of our biggest customers and I can tell you
they're intensely interested in what kinds of services they can put in native
IP or on ATM. We're giving them the best of both worlds," he says.
It's no simple matter trying to blend the two separate worlds. Among
other things, it involves developing new network management software,
security features and high-speed devices known as routers to carry the IP
traffic.
Newbridge is working with at least four separate affiliates to pull this
package together. These include: IronBridge Networks Inc. of Lexington,
Massachusetts., which makes terabit (trillion bits per second) routers,
NorthChurch Communications Inc. of Andover, Massachusetts.,
Kanata-based TimeStep Corp., a network security specialist and
Kanata-based Bridgewater Systems Corp., which makes software for
creating IP services.
Newbridge holds a minority stake in each of these companies, but it may
opt to formalize its IP strategy by creating a joint venture involving some
or all of these affiliates. The company's IP efforts will be consolidated in
the Boston region, where Mr. Arseneault has recently been seen house
hunting.
Coincidentally, Nortel Networks -- one of the first major players to opt
for a combined ATM and IP strategy -- is also doing most of its
carrier-scale IP research in the Boston area as well.
Mr. Lutz says drawing on Boston-area talent is no coincidence. "You
have to be where the centre of thought is in a particular industry", he says.
"In the case of IP, it's either Boston or Silicon Valley (in California) and in
Silicon Valley, IP happens to equate to Cisco."
The unveiling of Real World Networks will of course be just the first step.
Mr. Lutz is well aware of Newbridge's past track record of promising
more than it can deliver. His management shakeup will amount to nothing
if it doesn't also restore the company to the good graces of its investors.
The interesting part of Mr. Lutz' moves is how they're being taken by Mr.
Matthews, who still owns a commanding 23 per cent of the company and
places a very high value on loyalty. So far, it seems Mr. Matthews is
willing to go along with Mr. Lutz, even when his moves result in the
dismissal of longtime friends.
A case in point was Mr. Lutz' decision last fall to replace Scott Marshall
with Brian Jervis. Mr. Marshall was one of Newbridge's first employees
and had been a key engineer for Mr. Matthews at Mitel. The two are
close personal friends.
When Mr. Lutz first proposed the move, Mr. Matthews balked. The
company founder later accepted the need for the change, but only
grudgingly. Mr. Matthews phoned Mr. Marshall to let him know that, if it
were up to him, no change would be made. But the change was made,
signaling the start of a new era for one of this region's most mercurial
firms.
Mr. Matthews has apparently made his peace with the new kids. "Terry
realizes that he needs Alan and Brian as much as they need him," says one
Newbridge insider who has worked with all parties. When Mr. Jervis did
his whirlwind tour of Newbridge's largest global customers recently, Mr.
Matthews accompanied him every step of the way, opening doors and
making introductions.
He is now singing the praises of Mr. Jervis as fervently as he once did for
friends now working elsewhere.
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