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 / Second Quarter 1997 / Issue 7(originally published by Booz & Company)


How to Manage Creative People: The Case of Industrial Light and Magic

One recent product shows the benefit of the relationship to both parties. I.L.M. engineers had pushed for a machine that would put the power of S.G.I.'s refrigerator-sized $30,000-and-up servers into a PC-sized and PC-priced workstation. That call was answered in S.G.I.'s new O2, introduced last year at $7,500, roughly comparable to a fully configured PC for advanced graphics use, but far more powerful. It is now S.G.I.'s best-selling machine.

"All that power ends up back on the desktop,'' Mr. Morris said. "That gives people who do animation and light the shots the ability to do things in real time.''

Silicon Graphics's executives say that their biggest customers, companies like Boeing and Chrysler, are also demanding, but not as intensely and obsessively as I.L.M. While today's personal computers could create the kind of special effects a Silicon Graphics workstation produced a few years ago, nobody wants to make -- or see -- a 1992 effects movie today. The need to constantly do more creates a constant thirst for more technology.

Mr. Morris notes that film equipment from the analog age had a life span of 50 years; indeed, some of the equipment used on Star Wars had previously been used on Cecil B. DeMille's The Ten Commandments. "That model has gone completely," he said. "You are forced to buy the new technology. You can't have people working on workstations that are half the power of your competitors'.''

But I.L.M.'s voracious appetite is only one reason the relationship works, managers say. "There are some cultural similarities between our two companies,'' Mr. Lauer said. "Neither of us feels very obligated to hold on to what worked yesterday or today and assume that it will work tomorrow. When we have a new concept, they can help us through a lot of the trial and error because they know very well what will work.''

The JEDI agreement does not prevent I.L.M. from sourcing equipment from S.G.I.'s competitors, although as a practical matter it has not found compelling solutions from other companies. Nor does it prevent S.G.I. from offering products developed at I.L.M.'s suggestion to competing effects houses, which it does often.

Mr. Lauer said the closeness of S.G.I.'s relationship with I.L.M. presents a challenge when marketing to competitors. "There's an incredible desire and urgency in this industry to have what no one else has,'' he said. "Some people don't understand the relationship and think it's unfair. On the other hand, there's an understanding that the relationship yields better technology sooner.''

Nothing about the relationship is etched in stone. I.L.M. may get a new product first, or it may not. It may use a prototype machine in effects production, or it may not.

"It ebbs and flows like any other relationship,'' said H.B. Siegel, I.L.M.'s chief technology officer, himself a former S.G.I. executive. "Sometimes we're in position to take advantage of a beta test unit; other times we'll let a unit go to full production and then evaluate it. There's no financial investment by either party, so there's no non-free-enterprise reason for anything we do.''

This kind of collaborative, but non-exclusive, agreement is a new model for strategic alliances, said Timothy M. Laseter, a partner in Booz-Allen & Hamilton's New York office specializing in sourcing issues. "I.L.M. stays ahead by getting a supplier to customize its solution,'' he said.

The JEDI agreement is in this way similar to an alliance between Mercedes-Benz and Bosch, in which Bosch creates new automotive subsystems to Mercedes' specifications, but is then free to market them to all comers.

"Because technologies are evolving, the relationship will continue to be valuable over the long term even though the technologies that come out of it are broadly available,'' Mr. Laseter said of the I.L.M. arrangement with S.G.I. "It is far more than your traditional customer/supplier relationship. It may be a leading indicator of where some of these strategic relationships are going.'' 

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