PTC’s Chief Technology Officer on Innovating Across the Three Horizons

By Scott Kirsner |  February 14, 2023

Steve Dertien is the Chief Technology Officer at PTC, a publicly traded maker of design, augmented reality, and Internet of Things software. The Boston-based company had $1.9 billion of revenue in 2022. We spoke with Dertien for the research report Benchmarking Innovation Impact 2023.

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Steve Dertien, CTO, PTC

Innovating Across the Horizons. Within every product team here, we have architects and innovators. I get to look at the technology strategy of how all those products work together, and what customer challenges are out there. And there is Horizon 2 and 3 stuff that my team works on, separate from the product teams.

When we talk about Horizon 2 and 3, it is things in that three-to-five year horizon. We’ll look at acquisitions, and blue sky things like the industrial metaverse. What could you do with state-of-the-art machine vision?

We have a group we call the Reality Lab, and that team has no boundaries. Right now, we are looking to commercialize what they’ve been working on for the last three to five years, moving from a demo here [in our headquarters] and asking customers, how effective is this in your operating environment? We might establish a “north star” vision with a customer like Volvo. 

We run an innovation program across the company as well. [Employees are] pitching ideas on a topic like the impact of sustainability in design. What could we be doing that we’re not yet doing? We might incubate an idea… until it’s a product definition. It takes roughly 12 to 18 months to go from a clean sheet of paper idea, to an early customer using it.

SaaS is a tool for innovation velocity. You probably couldn’t tell me what version of Zoom or Teams you’re using. The new versions just show up.

Because most of our products are software-as-a-service, it accelerates that faster. SaaS is a tool for innovation velocity. You probably couldn’t tell me what version of Zoom or Teams you’re using. The new versions just show up. With our on-premises business, it’s slower. It’s a whole big enterprise upgrade schedule. 

My Team. On my team, I have about 130 people in three categories. One is Atlas, which is the backbone for our software-as-a-service products — the user experience and identity management across our portfolio, as well as how our infrastructure supports SaaS. Another chunk of the team is really [focused] on innovation delivery in the two-year window —things like analytics or augmented reality. They also look at how acquisitions fit into the strategy. The third group is the Reality Lab, which is not associated to any product. They’re off testing future technologies. There are eight people… Many are MIT Media Lab graduates. They’re visionary researchers.

The Reality Lab at PTC.

How We Prioritize. We prioritize horizontally, by product line. We get together and say, relative to what we’re spending, what does R&D have the capacity to do? And relative to our idea backlog, what can we actually do? We want to make sure we are adding features so the product continues to advance. We do that regularly; as an executive team, we are checking in every six months, and asking, “How are we doing relative to our plan?”

Staying in Touch with Customers. We’ll regularly go out to meet with customers of every size. Some collaborations are way deeper, like the way we work with Volvo and Polaris. We’re constantly innovating our vision together. 

If customers are excited about something like robotics, and teaching the robot how to do a task… We will take in some things that are thought provoking just to understand it. It may even drive feature improvements, to make things one step easier, like teaching that robot how to do a task. There are plenty of cases where a customer will surface something intriguing. But we want it to be at least in the spectrum of what PTC is interested in.

Back in the Office. As of December 2022, our individual contributors in R&D come in two days a week. Managers are in three days a week. Inside sales is in the office five days a week; they’re constantly talking to each other about deals. With the Reality Lab team, they ask at least two or three people to be in the office every day. So it really depends on what role you have. We have taken a role-centric approach. 

Exploring Blockchain Opportunities. A blockchain is really best when it’s distributed and multi-party in nature. We said, “Well, supply chains are multi-party, and trust is important.” There were some interesting use cases, but it never was enough. There are 50 other solutions with good security and scalability.

When you’re looking to get into a new line of business, acquire your way in — and then invest like mad.

It wasn’t a big problem for our customers, even though people were talking about it. So we said, “Let’s not step on that too hard.” It got really hyped up because of Bitcoin, but in this type of [business-to-business software] setting, it didn’t take off that much.

Balancing Acquisitions and Organic Innovation. In terms of the balance [between acquisition and organic innovation], our CEO would say the recipe for success is pretty clear. When you’re looking to get into a new line of business, acquire your way in — and then invest like mad.

We use the Geoffrey Moore model, “zone to win.” There’s an incubation zone, where you’re working on moonshots and investing in the future. You expect nothing in return, and you don’t worry about the profitability. Once you get to a certain threshold, it graduates into the transformation zone, where you are trying to turn it into a profitable, grown-up business, but the margins are allowed to be different. The core, for us, is products like CREO and Windchill. Those are in the performance zone. The last one is the productivity zone. We have some acquisitions we’ve made over time — sometimes it’s the closet that has some misfit toys in it — and you’re investing to keep customers happy and keep them profitable. They just want to keep using the product. So you put leadership and organizational structure around those four boxes.

‘A Happy Balancing Act.’ To call my team an innovation department would be a mistake. I think we have a happy balancing act of net-new stuff that my team does, versus stuff that happens within the product portfolio. I don’t know that it could be successful any other way.