Autodesk: C-Suite with Jeffrey Hayzlett (12/03)

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Dec. 3 (Bloomberg) -- On this week's episode of "C-Suite with Jeffrey Hayzlett," host Jeffrey Hayzlett takes us inside Autodesk, the 31-year-old software company behind the ubiquitous design software AutoCAD. What started as a company dedicated to simple computer-aided drafting has grown into a software design leader with products that helped create everything from the interactive 3D universe of James Cameron's "Avatar" to some of the world's tallest buildings. (Source: Bloomberg)

Trying to help people design and create a better world.

We are going to move to cloud- based computing.

Why would you want to move from a model that is successful?

Likely want to stay alive.

Rolling out the services, you had some owns along the way.

Not everything went as well as we would have liked.

2012, unit layout people and retool.

Stop took a dive.

-- stock took a dive.

Is the biggest, bonehead move we have ever done.

I am jeffrey hayzlett and i am on a journey inside the biggest brands in america.

I have been a cmo, ceo, and a order room cowboy.

Now i am visiting the executives in charge of the most powerful companies in the world to see how they tackle the challenges of the c-suite.

I am in the bay area of california, the software and tech mecca of the united states and the world.

I am visiting autodesk, a two -- a $2 billion that was -- company that was founded in 1982. they focus on 3-d software that is use an architecture, motion victors, and construction.

These guys were very early to the market.

They were in software before software was cool.

Most of their customers were wearing pocket protectors.

Like a lot of companies out here, they are moving into the cloud.

But saying it and doing it art to different things.

A year ago these guys stumbled in their first big step to the cloud.

The record -- reorganization was a mess.

The ceo, carl bass, said it was an unmitigated disaster.

They are pushing ahead and i want to know if they can make this transition.

Clout versus box -- it is a whole new way of product delivery.

Autodesk is making some big bets and i want to know if this cloud is going to rain date -- reyna cash or dust.

Arctic -- rain cash or dust.

The business world has visionaries, too.

They reside in the c-suite.

I'm going to meet with ceo carl bass to get a sense what autodesk makes -- what makes autodesk an industry leader.

Water to autodesk and the gallery.

What is autodesk?

We are trying to help people imagine, design, and create a better world.

It is three industries that we think about.

Construction, manufacturing, media and entertainment.

The company is over $2 billion.

Give me an idea about the scope of the project -- product.

Quest across our product line, we probably have about six flagship products.

Six key ones that are at the center of the workplace of the consumer.

Whether it is building buildings or making movies, it is how to make those ideas and make them real.

This is quite the place.

This is where a lot of things are showcased that your products have touched over the years.

We built this to show off the work of our customers.

The best way to explain what we do is to be work of our customers.

The skyline looks familiar.

When i am in shanghai, it rides me of the --. what is the jin mao tower.

The other is the shanghai tower.

It shows two architectural themes.

This one, the architects sketched it out and at an idea of what eastern architecture should look like.

This building is completely different.

The shape was not drawn in the designer pothead.

It evolved this shape was not drawn in the designer's head.

It evolved over computer simulations.

What involved here?

This is the software we do for software and entertainment.

I can show you what this is.

"avatar" was done in a completely 3-d world.

Right now, we have a scene up there on the screen.

As i move it up, i am choosing where i am looking.

Aegon choose a different positioning's -- he can choose the different positionings.

He calls a virtual cinematography.

What is this?

This is a collaboration we did with airbus.

What they wanted to do was imagine the airplane of 2050. using all these techniques, new composite materials, what with the airplane of the future look like?

What would you like to find something that looked like that?

Over the course of 30 years autodesk steadily grew in reputation and revenue.

A company's -- the company's products have become industry standards.

In 2012, autodesk transitioned to cloud platforms.

It would allow consumers to access software on multiple devices.

It was a risky departure from a business model with over three decades of success.

Why would you want to move from a model that has been successful into something that you don't know yet?

Wife because you want to stay alive.

-- because you want to stay alive.

There are companies that are not moving ford's and a dash moving forward.

If you are convective fry chicken, why mess with the gravy?

Have you checked the profits of kentucky fried chicken lately?

We are going to wake up three years from now and most of the world's private design -- manufacturing, construction -- will be running on our servers.

In many places, these of the biggest parts of the economy and people will be relying on us.

People will be running their business on our computers.

This is the way the world is going.

We are going to move to cloud- based computing.

It is obvious to me as the sun rising in the east this morning that this is where it is going.

What we do to make people as comfortable as possible?

We test it like crazy and we get audited by security expert.

Are you trying to outpace the customers?

We are not insisting that they moved.

What happens over time is that we think we have to make this offer so compelling that they want to be over here.

We are not doing enough on the cloud.

We are not doing fast enough.

We have taken it position relative to our competitors and say, we are going to be out in front of this.

2012 -- what happened?

You had to lay off people.

He had retool some things.

Not everything went as well as we would've liked.

Kg 5 as a company born and bred to innovation, autodesk's wanted to stay ahead of the technology curve.

Part of that effort was conducting an internal reorganization.

But it backfired.

New toys were slow to adjust and the company struggled in the second quarter of 2012. autodesk had to lay off seven percent of its workforce -- nearly 500 people.

You started to reorganize to get into the cloud.

What happened?

Likes not everything went as well as we would have liked.

There are some real challenges on how to sell cloud-based services.

We were combining our shrinkwrap software into suites.

We were making changes in the sales organization and we were transitioning from a geo-based sales organization to an industry organized -- industry- based one.

Is that too many things at one time?

I think as we reflected on it, it is little like changing the transmission as you are driving down the highway.

If you had to lay people retool some things.

Like the layoffs were about retooling and ringing in -- bringing in new talent.

It seemed to be reactionary and not proactive.

I would have thought you would have thought that through.

I thought the announcements were mostly in high site -- hindsight, not foresight.

We asked ourselves those questions.

We were paying attention to things that worked and did not work or it we recognize that we did some steaks -- made some mistakes and needed to do things differently.

Unless they've freaked out and said, oh, we made all the longest seasons -- all the wrong decisions, let's back up.

Then you have those signs that say, don't back up, tire damage?

That is how i think of some of those decisions.

They started offering subscriptions for the most expensive software.

As the move to make autodesk more inclusive a departure from their core identity?

You're really shifting the model.

It doesn't seem to be working as well as he would have liked.

I think you have to take a long-term view on it or it -- it.

It changes the way to -- it changes the way we are making money on the business model.

Our model up until now has been what we call perpetual.

It is a licensed-based.

It is like buying a car.

Many customers want to leave the car.

You think about the industries we serve.

They have projects -- five years, seven years.

They have always wanted us to provide software to them on a rental basis.

They use it for the duration of the project, then, when the probably -- project ramps down, they stop using it.

Twice i've looked at things online and i see some criticism of the model, where customers just don't want it or it -- want it.

We are not forcing them.

We are not saying that renting is the only way to get our software.

We give them the option to buy it.

If someone does not like that they have to -- that rental is available for all of us, -- will that conversation will come up sunday.

We don't make dos software.

At some point it becomes irrelevant, but i don't think it is imminent.

Autodesk continues to develop cutting edge products for the design industry.

They're also looking to penetrate the mainstream.

Will free consumer apps like sketchbook helped the brand expand?

Tell me about your role here.

I am in charge of strategy and marketing.

Applets me between the sales organization and product team.

My job is to work to go to market from our business models.

Why the consumer apps?

I don't quite get that.

Like sketchbook.

Why are you doing those kinds of things?

Why not?

To me -- to me, it would be a bit of a distraction.

That consumer droop has done more to help understand what autodesk is than anything we have done in the company.

We are creating a customer of auto decks that are going to be future professional customers.

My mother-in-law uses sketchbook -- is about making money.

Where is that crossover for you?

That whole movie you're seeing?

People want to make things and cells anodyne -- design things.

We are developing -- we delivering these tools for hobbyists.

We're integrating these technologies.

We can advertise to those people, we can chart some small amount of money.

Is not so cutting edge it's bleeding edge?

Would you rather be ahead of a change or would you rather be attacked by a change?

I would rather capture the change.

The best way to capture it is to be ahead of it.

2012 had some failings that were fairly public.

We did not have sales were in the design industry, everyone knows autodesk.

Wall street wants constant growth and it is caused them to look outside its -- and look at new markets.

They have made a huge investment developing products that appeal to hobbyists.

I am going to get a sense of the company future inside the rmb lab.

-- our and that the -- r and d lab.

Everything here is digital fabrication.

How close are we to reality?

I think there is tremendous potential here.

I think if it comes down in price we will see it in larger and larger market.

It is not unlike a automotive company that has a test track outback.

This is our testing environment so we can create the best software possible.

What we have here is a powerful production machine.

We're hooking up software to them it to have artists come in and use them creatively.

It is cutting with a stream of water.

50,000 psi.

You can cut four inches of steel.

Everyone's dream.

Autodesk is obviously a company that missed a critical change.

New platforms, new sales models, new market.

I'm headed to the c-suite to see how corporate leadership is ensuring that all of this change pays off.

How are you doing?

Tell me about this meeting.

We are towards the end of the day.

I am going to look at their cloud-based machining program called cam.

This is an image i have been using with the sales guys to help them understand the opportunity that is out there.

We spent a lot of time in this yellow box, private design.

There's a whole other part of companies that we don't talk to.

These are new uses for us.

The opportunity for us is to get software into that space to help increase production.

There is an opportunity and new space for us.

I look at where we are is having the advantage of, i can help you out on the desktop is much as i can help you out on the cloud.

There are things that i can do in the cloud that i cannot do on the desktop.

Are you able to sell that to what is virtually a steel toe network or sneakernet?

These guys are running dongle to dongle.

I don't know if they know how to spell cloud.

They are entrenched but will not -- will not pass by a opportunity.

You come in here with apis that i this day, you have this number of cells?

We have goals for download.

We have goals for revenue.

It was more board to establish ourselves in the right way.

When i look at success for most things in the c-suite, it is about keeping score and that is about hitting the sales or the margin numbers.

This is randy new to the company, to the customers.

With too many kpi's, you end up doing the wrong thing.

I don't want to wish this on carl, but imagine that this product doesn't get words that -- guess where it is at -- gets where it is at.

It would be ugly.

[laughter] we have to confront the data and understand the underlying numbers.

There are times when we have looked at it and say, listen, this is just the wrong product.

It was just a -- idea.

2012 is not your most shining moment as a company.

You had some failings that were fairly public about rolling things out.

What were those conversations like in this room?

We did not have sales were wanted them to be.

We had very open discussions in this room.

I never felt personally attacked to the discussion.

I was felt that we were in it together.

I felt the we actually work through things where everyone was feeling accountable and responsible.

There are ideas, theories, plans, and then you hit the things that happen in the world and you have to correct and adjust.

I think that is a good dynamic area how soon you see it?

You get the point were carless saying, we had an unmitigated disaster.

-- you get to the point where coral was saying, we had an unmitigated disaster.

You can get into a problem quickly but you have to manage your way out of it effectively.

You don't want to duplicate those problems.

It takes a couple of quarters to pull out of the problem.

It takes a bit of a -- to assess the problem, make sure you are assessing the root cause, and find out the most graceful way to exit.

There was not a single thing that we could go back and say it was this one thing.

If we just change that, everything will be back to the way it was written -- it was.

That requires conversation.

That is where this team works well.

It is a bit of a different twist on the thing you are asking.

There's one thing though i would do again that we did you -- we were especially blunt with the outside world.

That helped over time.

When we talk to people, we do not play hide the ball.

I think we got a lot of feedback from that.

I am going to say this is an unmitigated mess, mistake, huge.

This is the biggest bonehead move we have ever done and i'm going to say that.

You are in this room.

What are the rest of you saying?

Are you going, what is he smoking?

That kind of accountability is great.

It is one of the things that makes incredible.

.no it lays the groundwork for being open with the employees, the community outside, what have you.

When you battle through adversity creates a bond and you gain confidence from the ability to recover from that adversity.

The people you go through that adversity with, you have a tighter bond.

It includes customers.

Ari heck of a lot more understanding and a lot more loyal if you are honest with them.

It is always important for a company to innovate.

For autodesk c-suite, in this case, to lead change.

To pay sick, not to move ahead of their customers too fast.

We learned at autodesk debate overestimated their shift to a cloud model.

They did too much, too soon.

Carl bass and his entire c-suite are honest about the results.

It will be about having dialogue with customers helping them to move to the cloud.

It is critical to consumers concerned about their security on the cloud.

They say timing is everything, and for autodesk, time will tell us if the model will succeed.

..

This text has been automatically generated. It may not be 100% accurate.

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