2010
The Tuck School at
Dartmouth
Bharat.Satghare
Rajeshwar Kanapathy
Abhinav Tiwari
[VIRTUAL INSTRUMENTATION:
REVOLUTIONIZING THE TEST
AND MEASUREMENT
INDUSTRY]
In the 1980s National Instruments created an important innovation called virtual instrumentation to
change the way scientists and engineers made and analyzed measurements. With two key innovations,
LabVIEW software and Data Acquisition hardware, the company was able to successfully navigate a
complex ecosystem that posed co-innovation and adoption chain risks.
Contents
Introduction .................................................................................................................................................. 2
The Test and Measurement Industry............................................................................................................ 2
National Instruments .................................................................................................................................... 2
Virtual Instrumentation ................................................................................................................................ 3
Value Vision................................................................................................................................................... 4
Innovation ecosystem ................................................................................................................................... 5
Initiative risk.............................................................................................................................................. 5
Co-innovation risk ..................................................................................................................................... 6
Adoption chain risk ................................................................................................................................... 7
Strategies to mitigate risk for DAQ card ....................................................................................................... 8
Strategies to mitigate risk for LabVIEW ........................................................................................................ 8
Strategies to mitigate adoption chain risk .................................................................................................... 9
Conclusion ................................................................................................................................................... 11
Sources ........................................................................................................................................................ 12
Glossary ....................................................................................................................................................... 12
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Introduction
The introduction of virtual instruments by National Instruments in the 1980s was a major
step in test and measurement technology. Doing so required National Instruments to not
only compete with the established analog oscilloscopes but also work around the
limitations of complementary technology. Being a relatively small company compared to
its competitors, National Instruments had to devise an ecosystem for the successful
launch of its technology.
The Test and Measurement Industry
The test and measurement industry covered any engineering application where physical
phenomena (such as voltages, currents, temperatures and so on) were required to be
measured and analyzed. The industry had started with simple analog meters to
measure electrical parameters and grew into more complex applications involving
transducers that converted other phenomena to electrical signals. An example of this is
the thermocouple, which changed voltages depending on the temperature it is exposed
to. Applications for test and measurement equipment were numerous, ranging from
academic and corporate laboratories to manufacturing lines where the quality of
products needed to be tested.
The most common type of measurement equipment is the oscilloscope. Oscilloscopes
are used to track and graphically represent voltage patterns. By tracking variations in
voltage over time, oscilloscopes can be used for testing and troubleshooting electrical
equipment. The first rudimentary oscilloscopes were made in the 1880s. The invention
of the cathode ray tube (CRT) was a major development in oscilloscope technology as it
allowed the voltage pattern to be displayed on a screen. Developments in oscilloscope
technology over the years had significantly increased their functionality and range of
applications.
National Instruments
National Instruments was founded in 1976 by three researchers at the University of
Texas at Austin: Dr James Truchard, Dr Jeff Kodosky and Dr Bill Nowlin. From the start,
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the company was engaged in the research and manufacturing of electronic testing
equipment. At the time when the company was started, it was significantly smaller than
rivals such as HP (which later spun off its electronic test equipment business into
Agilent), which has much more organizational, research and financial resources.
National Instruments first innovation was the General Purpose Interface Bus (GPIB) a
predecessor to data buses such as ISA and PCI. The GPIB product allowed
oscilloscope owners to transmit digitized data from the scope to a computer where the
data could be stored and analyzed further. While the GPIB was a significant first step in
the founder’s (Dr. James Truchard) vision of virtual instrumentation, it was significantly
slower in transmitting data and was cumbersome to program with on a computer. Many
customers frequently complained about having to hire a computer programmer just to
get simple measurements. It was clear that National Instruments needed to innovate
further to last in the world of test and measurement.
Virtual Instrumentation
A virtual instrument has three basic components: a sensor, a data acquisition card and
a computer. A signal could be any form of physical phenomena: temperature, pressure,
voltage, speeds, etc. and a sensor converts that signal into an electrical signal (usually
voltage). This electrical signal then goes into a data acquisition card that uses an analog
to digital converter that converts the electrical signal into a binary number that a
computer will be able to understand. Through a data bus, this conversion is finally
transferred to a computer that can display, store and analyze the data. Figure 1
illustrated how these three components interact.
Figure 1: Virtual Instrumentation System
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Dr Truchard sought to create both the hardware and software components of virtual
instrumentation. While transducers and PCs themselves were very common
technologies, the ability to efficiently and easily take an electrical signal and digitize it
into a computer did not exist. By creating two new innovations, the Data Acquisition
(DAQ) card and LabVIEW software Dr Truchard believed that National Instruments
could add significant value to the test and measurement industry.
Value Vision
Virtual Instrumentation’s key value proposition to test and measurement application
included:

Customizability: In addition to the ability to log large amount of data on a
computer, virtual instrumentation gave users the ability to customize and
automate much of the processing that was required with several engineering
applications. Users could now perform complex analysis such as filtering,
frequency transforms, and statistical processing on a computer without having to
enter it in manually.

Real-time analysis and response: By having a computer processing data in
parallel to gathering the data on the DAQ card, users would now be able to see
the result of their analysis instantaneously and respond to the analysis quicker.
An example analysis of this is any application where users had to monitor a
process continuously, the vastly reduced time of data processing allowed users
to quickly respond to changes in the process.

Upgradability: Moore’s law which stated that the computing power of computers
would double every 18 months meant that the personal computer industry was
improving computers at alarming rates. By making the data acquition card and
software upgradable, users could now leverage the improved computing in their
applications and perform even more complex analysis in much shorter time.

Ease of use and computing for the masses: Dr Kodosky believed that given the
right development platform, anyone could program on a computer. In the 1980s a
very privileged set of computer science graduates could program computers
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effectively. This meant that for any data acquisition application, a specialist
programmer was required to develop code. By leveraging graphical user
interface (GUI) tools offered by the Macinstosh platform, Dr Kodosky wanted to
build a graphical programming language that was easy to use and powerful in its
application. This would open up programming for not only an elite few but to all
scientists and engineers.
Innovation ecosystem
Figure 2 outlines the overall ecosystem for Virtual Instruments.
Figure 2: Virtual Instrumentation Ecosystem
Initiative risk
The core initiative risk for National Instruments lied in the development of two key
products: LabVIEW and the DAQ card. While its previous technology GPIB, had been
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developed in university labs, the company had devoted all of its efforts in developing
these products.
Co-innovation risk
Necessary technologies for the DAQ card included the Application Specific Integrated
Circuit (ASIC) which allowed companies such as Texas Instruments and National
Semiconductor to create semiconductor chips intended for sole purposes. The key
chips used in the DAQ card were the analog to digital converter and a controller chip to
transmit data to a data bus. The invention of these chips was critical to the DAQ card’s
core functioning: collecting data and transmitting it to the PC.
The DAQ card would also be added to the computer’s motherboard by a data bus and
the speed of the bus would limit the speed of measurement and response. The Industry
Standard Architecture (ISA) standard superior in performance than any other bus at the
time and the adoption of the ISA in PCs was necessary as the DAQ would need to
transmit vast amounts of data (high bandwidth) very quickly (high speed). This relates
mainly to the benefit of real-time processing that Dr Truchard had envisioned as a key
value add to virtual instruments.
For the LabVIEW software it was necessary that the adoption of the Personal Computer
be far and wide-spread. The PC was a necessary component of the whole system
which was assumed would be readily available to all customers. Without the use of a
PC, the capabilities of the system would be missing.
In addition to the PC, National Instruments also needed the operating system of the PC
to have a graphical user interface (GUI) so that the LabVIEW software would be easier
for users to program with. The OS also needed to have the necessary development
tools to make programming in the GUI environment easier for National Instrument’s
software developers creating LabVIEW.
Without any of these co-innovations, the virtual instrument innovation would not work
and the success of each of these technologies posed significant co-innovation risk to
National Instruments.
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Adoption chain risk
If the innovation project along with the co-innovations did do well, there was the
adoption chain risk also to be considered. National Instruments sold the virtual
instrumentation system to customers through two separate channels: direct sales by the
sales team and value-added sales by third party system integrators.
The sales team had to be incentivized to sell the new system over the older technology
which they were already comfortable selling and one that had an existing customer
base. Since the sales team was selling to chiefly engineers and scientist for high
technology applications, having fundamental knowledge in the engineering and
sciences arena was critical to the sales team’s success. Attracting the best and brighted
engineering talent that was willing to move into a sales management role was a huge
challenge for the company.
The system integrator (SI) model worked on the basis that the SI would buy the platform
from NI at a discount and sell it to the customer for full price along with separate billing
for customized modules developed on the LabVIEW application. The SI industry existed
because many customers did not have the core capabilities to build test systems
themselves and outsourced this to SIs. Many SIs were one man shops where their sole
source of income was consulting fees for software development and hardware
integration. They needed to be convinced that the virtual instrumentation platform would
bring significant revenues and that there was value to the SIs for using the National
Instruments platform. Without widespread adoption of the National Instruments platform,
it would be hard to convince SIs to adopt the platform for them.
The customers were the last and the most important piece of the adoption chain. For
customers it was important to have value in trading up from their existing system.
Training was an important component since the virtual instrumentation system was very
different programming style and was dramatic change from the turn key but limited
solution most oscilloscopes proposed. The cost of switching for customers would
include retraining of personnel, and maintenance & service costs.
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Strategies to mitigate risk for DAQ card
To reduce the co-innovation risk, National Instruments made a strategic decision to use
off-the-shelf components for the hardware. Even though ISA had been developed at the
time, NI used GPIB as the interface technology when developing LabVIEW since it was
the standard at that time. The GPIB card was connected to the oscilloscope and relied
on the oscilloscope’s digital output to be used as input to the LabVIEW program.
When ISA became popular later, NI developed the DAQ card on ISA for use with most
computers. The DAQ card contained the AD-DA chipset on board and could be used
without an oscilloscope.
Even for the AD-DA converter, instead of developing and creating the circuitry on the
board, NI chose to buy the standard AD-DA chip, which was tested and proven, and
added that as a separate component on their board. National Instruments strategy of
strictly using off-the-shelf hardware technology was a little risky in that they were always
waiting for certain technologies to be successful and could lose ground to other
competitors. However, National Instruments knew that by creating the software and
hardware ecosystem where the software was upgradable to different sets of hardware
buses, they could reduce this risk. LabVIEW was initially released to only work with
GPIB but once the ISA standard was popular, an additional module was added to
support the ISA DAQ cards.
Strategies to mitigate risk for LabVIEW
A major part of the LabVIEW vision was that it would be accessed through a graphical
user interface. National Instruments had the choice of either building the GUI widgets inhouse or out-source the creation or use off-the-shelf components.
NI chose to use off the shelf components to reduce their risk. At the time of the
innovation, Apple Macintosh was the only mainstream computer with a rich graphical
user interface. NI used software development tools from Macintosh to build the
graphical components of the LabVIEW software thereby reducing both the development
time and the risk.
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Later when the Windows OS overtook Macintosh in popularity in the user community
that NI was interested in, NI also developed a version of LabVIEW for Windows.
Strategies to mitigate adoption chain risk
In addition to developing the technology for the DAQ card and the LabVIEW platform,
National Instruments had to ensure that customers could easily switch over to its
products. National Instruments undertook a number of steps to minimize adoption chain
risk:

Integrated solution: National Instruments was one of the first companies to offer
an integrated product offering for test and measurement customers. Customers
previously had to purchase each component of the instrumentation solution such
as the oscilloscope and software from different vendors. By offering an integrated
offering that combined its own and partners’ products, National Instruments
made it easier for customers to switch over to its virtual instrumentation platform.

Direct sales force recruitment: National Instruments created an official
Engineering Leadership Program that trained fresh new engineers from leading
schools in the country to be sales and marketing managers. Part of the program
was a rigorous training program as well as one year spent doing technical
support. This not only allowed National Instruments to provide unrivaled technical
support from engineers, it also allowed the engineers to learn softer skills in the
process. The program produced engineers that were well versed in technology
and had basic business skills to complement that knowledge.

System integrators: National Instruments created a formal program known as the
Alliance Member program to formally recognize system integrators. This program
offered members not only discounts on hardware, they received LabVIEW
software and training free of cost. The Alliance Members also benefitted from
strong relationships with the direct sales force to bring integration sales leads
that helped foster business not only for National Instruments but also the Alliance
Members. In order to overcome the unproven technology hurdle, Dr Truchard
offered a direct line to R&D engineers for Alliance Members to provide direct
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feedback on the technology and gain immediate insight into bug fixes. The
Alliance Member program significantly lowered switching costs for SIs to begin
using the National Instruments platform.

Training and education: The LabVIEW platform represented a significant shift in
user interface and functionality from the existing product platforms. As customers
were more familiar with these existing product platforms, National Instruments
offered training, often free, to potential customers to ease the transition process.
Ongoing education and training programs allowed customers to easily transition
from existing platforms to LabVIEW and to also use LabVIEW to its fullest
potential. The company also partnered with universities and professors to
distribute its products for use in classrooms. Students who become accustomed
to using LabVIEW in the classroom became potential customers and users once
they graduated from college. Training and education strategies helped reduce
customer adoption risk as more customer were willing to adopt a platform that
offered technical support, training and gained recognition in academic labs.

Technology and user support: Since National Instruments’ platform was a
significant shift compared to existing instrumentation products, the company
developed a robust in-house tech support platform. The company wanted to
ensure that customers would have minimal difficulties in resolving technology
issues and functional issues. The company also developed tech support
expertise to deal with issues regarding its partners’ products. Doing so allowed
National Instruments’ to provide support for all components of the integrated
product offering.

User community and experts: Developing a large user and expert community
was part of the company’s long term strategy to drive adoption of the LabVIEW
platform. The user community allowed users to share solutions and program
modules. Experts could develop new ways of using the company’s platforms and
could handle troubleshooting as well. This community gave potential and existing
customers a platform to share ideas and give National Instruments feedback on
its products.
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
New markets: National Instruments did not purely focus on going after existing
users of oscilloscopes, where it would face a higher hurdle in convincing users to
switch over. The company also targeted new markets that had not been using
oscilloscopes and could benefit the most from the improved functionality of the
LabVIEW platform. By focusing on new markets such as in-line manufacturing
quality control and long term data logging, National Instruments could build up a
customer base comparatively quickly and with fewer resources than it would
have by purely going after existing customers of oscilloscopes.
Conclusion
National Instruments was able to successful align all players in the virtual
instrumentation ecosystem. The company went public in 1995 and now enjoys over
$700M in revenues each year. Leading the charge for virtual instrumentation, the
company has continuously innovated on the LabVIEW and DAQ card platform. Now
supporting a myriad of hardware buses (including PCI, USB and firewire), the National
Instruments platform has become an important tool for engineers and scientists all over
the world.
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Sources
‘The History and Technology of Oscilloscopes’ http://ltodi.est.ips.pt/joseper/IM/Hist%C3%B3ria%20dos%20Oscilosc%C3%B3pios.PDF
‘What is virtual instrumentation?’ http://ieeexplore.ieee.org/xpls/abs_all.jsp?arnumber=887453&tag=1
Glossary
Acronym Expansion
AD-DA
Analog to Digital, Digital to Analog
ASIC
Application Specific Integrated Circuit
CRT
Cathode Ray Tube
DAQ
Data Acquisition
GPIB
General purpose interface bus
GUI
Graphical user interface
ISA
Industry Standard Architecture
NI
National Instruments
OS
Operating System
PCI
Peripheral Component Interconnect
SI
System Integrator
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