Teradata Reborn

Abstract

This case is about Teradata, the largest organization focused solely on data warehousing and enterprise analytics, as it is ending its first full year of existence as an independent company in the Fortune 1000. The timing of the case is as Teradata is poised to complete the first quarter of 2009, only recently spun-off from NCR Corporation and now facing an extremely challenging external economic environment and new competitive threats from data warehouse appliance vendors. Thirty years earlier, Teradata was born in a garage, and the entrepreneurial and inventive spirit that enabled its launch flourished despite its ownership by the more conservative NCR Corporation. An important key to Teradata’s ongoing market leadership is the success of its innovation strategy that has balanced product and service research and development priorities. That strategy plays out well as Teradata launches its ‘purpose-built platform family.’ The data warehouse product family consists of bundled solutions enabled by innovation streams that can be traced back to its roots in system architecture, logical data model management and in other related areas. In this case study, major business decisions are addressed, including the concentration of innovation investments by discontinuing select areas of research and development in order to focus on what was most important for the long term success of the company. Teradata’s intellectual property strides are shown to enable the offering of packaged product and service solutions in late 2008 and 2009 that target accelerated customer ‘time to value.’ The company deems this mantra most suitable for a challenging economic climate where data warehouse investments have come under extreme scrutiny. The main protagonist in the case, Vice President of Research and Development Scott Gnau, faces an important quandary. When he meets the CEO, Mike Koehler, will his budget be cut because of the tough economic times, or will his budget be increased as the company reinvests to build innovation streams for the future.‘ Graduate students of business strategy have found the case to be effective in conveying the difficulties and opportunities associated with competing in a two-sided platform market where concomitant innovation with customers and with complementary business partners impacts research and development investment prioritization. Students of data management, business intelligence and computer science have found the case engaging from both the technical content covered in the actual Teradata patents that are discussed and with the future areas of needed research and development as articulated by Teradata visionaries. From parallel architecture innovations to logical data model modularization and synthesis innovations, these students have discovered a company where what is discussed in textbooks is actually in use at Teradata’s customers such as e-Bay, RBC Bank, Cabela’s and Travelocity. Multi-disciplinary students interested in the emerging area of service science, management and engineering have expressed that the case is a first of its kind in terms of demonstrating how critical it is to balance service and product innovation streams in order to provide customer-driven solutions. While many organizations are embracing a shift from a product focus to an additional service focus, service science students have found it valuable to look in depth at an organization where a long term innovation strategy linking the two has enabled a major market leadership play - in this case, the introduction of the Teradata purpose-built platform family. Executive education students, high-level managers, industry analysts, new Teradata employees and others who relied on a no-nonsense managerial lens to examine the case, have emphasized how Teradata has demonstrated a strong commitment to a focused strategy, and most state that the business contexts described demonstrate how important it is to develop and hone a culture of ongoing innovation that encourages all knowledge workers to engage in research and development activities. In addition, a frequent comment has been to attest to the fact that every decision made along the way in terms of research and development investment prioritization has significant ramifications to the range of possibilities for what follows. In general, the key takeaways highlighted by non-academic readers have been: 1. The gamble to exclude operating systems R&D priorities was a hard decision that required a seemingly unnecessary investment that came under close scrutiny, but it enabled overall strategy execution in an area of focus that has paid off handsomely over the long term. 2. Teradata had obviously predicted the day would come when their competitors would launch warehouse appliances, and when that day came, the company had prepared the intellectual property capabilities to lower the boom with solutions that bundled services and products to deliver ‘time to value.’ 3. When a new venture is subsumed within a larger organizational umbrella, it doesn’t mean that innovation and entrepreneurship stops, and in Teradata’s case is ongoing within their new state of independence. 4. R&D investing drives opportunities to dig deep into what your company is all about. Should you increase investments in an economic downturn 'Decrease them‘ and what exactly should go into a decision analysis when you’re not sure if more or less of your priority R&D investments might be funded. 5. How much risk does a leading-edge business take when prioritizing R&D investment options in a fast-paced technology environment characterized by an asymmetrical, volatile marketplace replete with both gigantic and upstart competitors‘ and how should one factor into these risk assessments the nature of collaborative endeavors that involve current and potential complementors‘. These aren’t easy questions!