We’re discussing how Inductive Automation first began in 2003, and the exponential growth of the company without any outside investors. Hear how IA stayed committed to their core values, and maintained relationships with Ignition community members to solve industrial pain points.
"We are staged to deliver some amazing new things on top of the platform. Eight is great… but you ain't seen nothin yet.”
Steve Hechtman is the president, CEO, and founder of Inductive Automation. Prior to starting the company in 2003, Steve had 25 years of experience as a control system integrator, including at Calmetrics Company, a prominent control systems integration company in Northern California, which he co-founded in 1988 and became president/CEO of in 2000. After enduring years of frustration with expensive and impractical industrial software, he decided to create a better solution. He formed Inductive Automation, which has achieved phenomenal growth by bringing up-to-date technologies to the controls business with web-based, database-centric products, and sensible licensing models.
Don: So, Steve, listen, thanks a lot for joining us today. I totally appreciate your time, and we're going to go through a number of questions, but the whole point is here just to have a conversation. I look forward to spending some time with you today.
Steve: Okay, looking forward to it.
Don: I happen to know you were an integrator before you ever considered creating a software company, let alone the software company that you created and the extent of it. What were the reasons that you founded Inductive Automation in the first place, coming out of the context of having been an integrator?
Steve: Well, I didn't plan it and I didn't want a software company, but I was looking for software that had specific functionality at the right price point, and I just couldn't find it. I was forced into the software business. As you know, it was an in-house product in the very beginning, and then I reached a fork in the road where I had to make a decision, play the small game or the big game, decided to play the bigger game.
Don: Sure. I'm curious. So, you were forced into it because you were looking for software, and you couldn't find it. So, you were obviously looking for it for some reasons as an integrator. What weren't you getting from the options that you had at the time that you really felt would serve your customers better as an integrator?
Steve: Well, we had sort of a niche system integration business. We got all the hard problems that seemed like other people couldn't solve. We didn't do massive waste water, water drops, or anything like that. We did all types of arcane sort of systems. And so, I had some very extreme needs, I guess, for software. Prior to 2000, we had some people on-board that created custom software solutions to deal with these problems, but that's not maintainable. In the year 2000, I bought the company from my partner, and I was stuck with all these... Well, I lost all those developers, and I was stuck with all these bizarre little solutions out there, and they weren't maintainable. It could take down a plant. And so, I needed something that was commercial off the shelf, something that was very agile, rapid application development, and at the right price point. I searched and I searched, and I found a little bit here and a little bit there, but I didn't find any wholistic, some complete solution to be able to move fast and provide value to my customers. And so, we kind of built a piece of it, and then we built a bigger piece of it, and then we had a product. Like I said, then we kind of came to the fork in the road where we had to make a decision, which way to go, and we turned it into a software company.
Don: Sure. As an integrator in the organization, and you just really had this challenge of these arcane systems or customized systems. They couldn't be maintained. You weren't able to go forward, and someone leaves, and all of a sudden, the system can't be maintained and the plant can go down. So, this makes it very, very difficult as an integrator to feel pretty good about what you're doing for those customers if you can't have the confidence you've got a maintainable and scalable solution.
Steve: Yeah. Actually, in about 2002, I kind of felt like I was just kind of stupid and didn't know the solutions that were out there, and decided to dive into it and learn about them, and it seemed like the problem was solved. When you read the marketing, it seems like the problem is solved, and then you discover it's only marketing. Well, what's the price of this? How does it work? Where do I get it? What does it do? I'm coming up with zero, and so that compelled me to come up with something, which is what you've got today.
Don: Sure. Now you said it started and then it was kind of an in-house thing at first, and it was a solution for you, as an integrator. Somewhere along the line, as you mentioned, you didn't start out to start a software company. You just wanted to solve customers' problems. Somewhere along the line, you hit on it. I'm just kind of curious, when did it hit you that you really had something here that was going to be big and that this product was going to do all those things, not just that you wanted, that would actually grow a whole company?
Steve: Oh, that's interesting because I'm not a salesperson. I'm an engineer, and so all I would do is show this software. After about the 10th time I presented it, I just showed it, and people got excited and bought it. I go, "Whoa." I was the first sales, quote/unquote, "sales guy." I had 100% close rate, 100%. When I say close, I really didn't close anybody. The software closed itself. I just showed it to people, presented it to them, and then they pulled out their wallets. That's when I knew. It didn't take very long. That's when I knew we were on to something.
Don: Yeah, I guess that's pretty convincing when you, the non-salesman, sold 100% of the time just by people looking at it. That pretty much tells the story.
Steve: Well, even today, our account executives, we think of them as the sales department. They're not the sales department. They don't sell anything. You can't sell this stuff. You can only show it, right? The software sells itself.
Don: Couldn't be a better situation, actually, than that.
Don: This company, I know you had the integration business, but this company got built, really, the hard way. It got built from the ground up, not taking on any investor money. I'm curious, as a businessperson, why did you choose to build it that way? And why was IA maintaining that status, even to this day? I mean, that's something that I find is very interesting as a business model where most companies in this arena take on other people's money, venture capital. They have a different model for how to build. Why'd you choose your way of building?
Steve: Well, we did. We bootstrapped it up, but we were actually evolving. We were learning. It kept us from making any big mistakes. I've never talked about this before, but there was actually a potential early investor who had a substantial sum of money that he wanted to invest. But, he wanted to take the entire product, the entire business, in another direction. That's when I just said, "No," and decided we've got to do this ourselves so that we can do it our way.
Don: Right. I've had conversations with you in the past when we've talked about your viewpoint towards our audience, towards our customers. When I say our customers, I mean the customers that are the integrators, and of course, those customers that are the end user industrial organizations, and the responsibility felt to do it the way you wanted to do it was impacted by the responsibility you felt towards that community, towards those people that were going to use the product. I'm just curious for any thoughts you have on how, as that group of people that you're building this product for, influenced your thinking of why you kept the company the way you have?
Steve: Well, it's got to be a win-win-win situation, or I should say win-win-win-win. We got to make a product that... We call it the gift that keeps on giving for integrators. You buy the software once, and you can keep delivering more and more value to the end user. It's got to be a win for the end user to where they can get their ideas implemented, cost-effectively, in a timeframe, very rapidly. You got to be agile. As a result, we see the results and more words here back at the company, and then the employees have an opportunity to continue to grow. It's win-win-win-win. I think that's the winning formula, but you asked about the responsibility.
Steve: It was driven home to me after our first ICC because I was familiar with customers in our Northern California area, but I really got a view of the world at our first ICC and every one ever since in that we have a community here, and people... It's like a cult following, is what it is. As long as we keep that winning formula of win-win-win-win, it will continue to grow and will continue to do good in the world. Manufacturing, I've never ceased to be amazed by the ROI on just doing a simple little thing, but when you do a big thing and make some process vastly more efficient, it's the gift that really keeps on giving. Well, that answers the question, I think.
Don: Yeah, it does, totally, totally. Thank you. I know we've both experienced the Ignition Community Conference and what happens when you sit there with these customers, that there's an air about it. There's a flavor about it. There's a feeling about it that really, really... It's palpable, and people come to the conference for the first time and they go, "What is going on with this?" I have never seen myself such a collegial atmosphere where integrators are sharing with each other. Clearly, they're competitors, but they also have this sense of the good they're able to do for their customers and the willingness to collaborate.
Steve: I've never seen that before where integrators come together like that. I've never witnessed or seen that before.
Don: Yeah, and you've been to other conferences, I know. I name conferences here, but you've been to conferences where there is just an air of silence without even talking about anything because you're in the market. You're in the area with there with other competitors.
Don: I think that's a big thing about what you say about how it has come about, is there's a responsibility that these folks are putting a lot into Inductive Automation, putting a lot into the Ignition platform, and that's something that you've continued to support as you've gone forward with your business model.
Steve: Absolutely. Oh, and I might add, it's just a lot of fun. It really is. If you're going to work hard, you might as well make it a game and have fun out of it.
Don: Yeah. I noticed that, really, when we bought this building here, and I watched you go to town as an integrator, not letting anybody else do it, but the entire system of this building... I remember sitting in the building with you before it was all torn apart in front of a computer screen, and you were showing me how the different sections of the building would handle the air conditioning unit of exact temperatures, using ignition, of course, for the entire automation system in the building. It seemed like you were having fun.
Steve: That was the first time I put my hand on controls in years, right? Because now I'm running a business. That was fun. That was a lot of fun. I love the business.
Don: Yeah. Well, but let's go back to the business, now, not that this isn't also fun, building a business, but you've experienced a lot of growth in the past few years as Inductive Automation has really accelerated. From a CEO standpoint, what is it like to scale a team like this? Kind of, I guess, what challenges does it bring? It's different than building software, building a team like this, and what are the benefits that you've experienced in building that team?
Steve: Well, still an engineering approach applied to business. Our organization, if you look at our organizing board as broken down into divisions that naturally flow from one to the other, and so as we grow, we tend to break divisions, right? Then we hire up in a division that sorely needs it. Next thing you know, the joining divisions start feeling the pressure, we have to hire for them. And so, it's this circle we keep going through, and hiring and beefing up every aspect of the business. I mean, we could hire a gazillion salespeople and just beef up just that one division, and next thing you know, we've broken the whole organization because they're selling so much software. We don't have the support team for it. We don't have the finance team for it. We go about our growth very strategically and orderly, but it does present its challenges every single day.
Don: Sure, sure. As you say that, though, the engineering approach, I think, is pretty important because just like you iterate the software and you have a development timeline for the software, you're iterating the organization. And there's a development timeline for the various iterations of the organization. I think there is a real parallel there. I see many organizations don't understand that building the organization to support the building of the software are similar processes, one applied to business and the other applied to software development.
Steve: No. You don't just come out of school and sell software. In fact, that's one thing that I realized, is you either get into the software business or you get out. You can't straddle. You can't have one foot in and one foot out, which was part of the decision to form a software company. You have got to get in with both feet.
Don: Sure. As you have developed yourself as the CEO, which didn't happen overnight, it's also this iterative process of your own development. There's a lot of talk about the four pillars. I know that you wrote about the four pillars, and just for our listeners here, the four pillars are really the new licensing model, new technology model, new business model, and new ethical model. Those are core to those of us who work with you in building out the culture of this organization. And so, I guess I'd say when you think about it, what do those mean to you, as the leader of the company? Maybe a build-on question is, how have you managed to maintain those core values throughout the years? It's kind of a two part question.
Steve: Well, so they're half of the value proposition. Somebody could copy our software, but they couldn't copy our company, right? Those pillars are utterly important, how they come about... I didn't just dream up... It's not a marketing scheme. It's us, right? It's just what we became. It's what was inherent in me, and in making a decision, I always consulted myself as an integrator, right? I wouldn't do something to the company, or to other integrators, or end users that I wouldn't do to myself, right? Those four pillars were inherent. Then later, a more or less codified what we were doing... It was what we were doing. It wasn't a marketing scheme. It wasn't something we wrote up one day, right, and it said, "We better start following these." It was the other way around. That's what we were doing, and then we codified it.
Don: That totally makes sense, totally makes sense. Now, I'm going to go back to something. You said win-win-win-win, and you made reference to the experience you had at the Ignition Community Conference. I remember that first conference, myself. Doug, our director of marketing, I looked around afterwards and said, "We called it the Community Conference. My gosh, it's true. We have a community. They're here. They show up. They want to talk to us."
Steve: Yeah, yeah. I didn't know if anybody would show up at all.
Don: Neither did I. I was very happy when they did. When you think about this podcast, it's really a new way for the Ignition Community to sort of connect, and grow, and cross-communicate. That's our reason for launching the podcast. The Ignition Community, it's kind of always been a huge component of Inductive Automation. Just maybe a little more common from your viewpoint, why is that? What does the community mean to us today? And what do we look forward to hearing from on the podcast in the future? I mean, I'm going to be involved in doing a lot of these interviews. I'm very excited about that, and I'm curious about your view of the community and what it means to us today, and how does that have meaning going forward?
Steve: Well, the community is what Calmetrics was in the early days. In the early days, we did a rapid iteration and improvement of the software and the company just by looping through Calmetrics. You got immediate feedback, sometimes within the hour and had a fix out sometimes within the next hour. Now, on a macro scale, Calmetrics is no more, but the community fills that function. So, they use it in the most diverse ways I couldn't imagine in a million years, and then we get feedback. We have our feedback request form and other people get to vote up various things that have been requested, and those get rolled into the software. Now, otherwise, the community is the reason for the game, right? It's partial to the whole game. We are part and partial to the whole game. Integrators are part and partial to the whole game. So, we have a big game going on here-
Don: What was the second part? The second part, Steve, was just... I'm curious, as we look at launching the podcast, which is going to be a chance for more community interact and go forward. This is kind of our launch interview, if you will. When you think about it, and we've talked a lot about thought leadership and what does the manufacturing community need, digital transformations on people's minds. We're a part of this overall evolution in manufacturing. What kinds of things do you think you would like to hear and you think our community might like to hear as we bring on guests on the podcast and share with that community?
Steve: Well, as I mentioned, this is such a diverse field. I mean, there are so many fields wrapped into this thing. We only have a relatively small view, I suspect, and I'd like to hear what's going on in security, what's going on in MQTT implementations. Early on, I did so much messaging of memory blocks back and forth between processors and so forth, and you connected 16 applications, the one in point device, and now you use a broker, right?
Steve: Oh, my God, if I had that in the early days, right? I'd like to hear about topics like this or 21 CFR 11 implementations for real or whatever. I don't know exactly what to expect, but I expect we're going to have some very interesting topics.
Don: Sure. What's interesting to me that gets me excited about it is, all of the ways that people are extending the Ignition platform and all of the vertical expertise that exists... When you have people, like on [inaudible 00:20:18], who have deep decades of experience in oil and gas. You have people who have deep experience in food and beverage... Or these deployments and how they're using Ignition and broadening it out is really exciting to be able to bring on folks and say, "What are you doing," and also just trends overall in the industry. Who is pushing the envelope to try and move the digital transformation train sort of down the track a little bit?
Steve: Yeah. When we have our director's meetings, I never cease to be amazed with information that comes to the table. You couldn't conceive of it, you know? And so, it's going to be interesting.
Don: Yeah, it certainly will be. In fact, that brings me to IA and a question for you, as founder and CEO, because this is really an exciting time for IA. You have seen the iterations of the software to this point in time, and you have your vision of how it will iterate going forward, but we just released Ignition 8, so let's stay with the present right now.
Don: We just released Ignition 8, and there's a lot to look forward to with Ignition and the company, at large. So, what are you excited about, in terms of your vision for the future, both, for Ignition and for IA?
Steve: Well, when we released Ignition, it was exciting, and the statistics went straight up. So, that was an exciting time. I look at 8 as that, exactly the same thing because with 8, we were able to go back and make things in retrospect to improve the platform and to ready it for a new surge of growth. We are staged to deliver some amazing new things on top of that platform. 8 is great, but you ain't seen nothing yet.
We're just getting started, and then I'm very excited... I'm personally involved right now, very deep research and big data, big data analytics, it is so exciting. It is so amazing, so look for something coming up with that. As far as the company, itself, it's going to grow as a natural consequence of the products we deliver. I'm excited about this one thing, continuity. Continuity, right? Four pillars, don't change the company in terms of that. Just don't do anything stupid. There's one thing about this business, is manufacturing processes get put in, and they keep reducing for 20 years. You have got to have that continuity. It's not like a new cell phone every six months. This is a different business. People want to put in a system and let it produce. It costs money to put it in. Now let it produce. Let it produce for 5 years, 10 years, 20 years, right? It's that continuity that... I'm just excited because we've done it, and we will continue to do it. Nobody else that I'm aware of in this... Well, maybe that's not entirely true, but very few people can make that claim.
Don: I think that claim is a big one to be able to make, is the continuity of being there, continuing to deliver the stability that our customers really need in order to move forward with their business.
Don: A lot is on the line when you're running manufacturing plants 365 days a year, 24 hours a day, in many cases. I mean, they really have to have uptime. If we can give them stability and continuity in that area, that's a pretty big deal. I have maybe a final question. First off, just thanks for being here. Thanks for taking time out to just have a conversation because I hear all the time, even coming back from the CSA conference last week. People are very interested in, what's Steve up to? What's he got on his mind? Where's he going? So, for me to answer that question is one thing. For me to sit down and ask you that question is a lot better.
Steve: Well, you just think big data analytics. That's what you should be thinking about.
Don: I would think that and say, "Stay tuned."
Steve: Stay tuned. Yeah.
Don: Stay tuned. As we kind of wrap up here, and that you have to have anything else to say, but for our audience here, is there any final thoughts or anything about the company, or you, or your interests, or anything you just want to say as sort of a last couple of minutes here?
Steve: Well, I am actually humbled by the community's support, and by this game that started out as a simple... Just trying to solve a few problems and what it's turned into, the responsibility is... I take it seriously. We will march into the future together here. We'll see each other in 5 years, 10 years, 15 years from now.
Don: Yeah. Steve, thanks. I totally appreciate your time and totally appreciate your thoughts. Thanks for being here today.
Steve: You're welcome.