Introduction to Maxims of Tech

Summary : How to thrive in the extreme sport of business: These maxims compile much of the wisdom G Dan Hutcheson learned over the years working with most of the world’s foremost technology companies and executives while closely following the winners and losers. In watching the most successful players and contrasting them to those companies they have defeated in the marketplace I found a lot in common.

These maxims compile much of the wisdom I have learned over the years working with most of the world’s foremost technology companies while closely following the winners and losers.  In watching the most successful players and contrasting them to those companies they have defeated in the marketplace I found a lot in common. 

This book is the product of a compilation of Maxims written in my weekly e-letter, The Chip Insider, over many years. They are typically presented as a Maxim and then a story of a company and the executives that exemplify its use in practice. The idea was that instead of having an entire business book centered around a single idea, make the informational content of a Maxim with its example consumable within a single sitting.

They became very popular among executives to a degree I did not understand until Jim Morgan, the CEO of Applied Materials at the time called to ask if I could turn them into a book. He told me that he found them both a great reference for getting a perspective when solving current business problems and as an educational tool for up and coming executives. 

As a result of the way these were compiled, you will occasionally come upon current day technologies written about in the future tense because they had not been invented yet; or companies that were strong at the time which no longer exist due to a merger or a Maxim violation after the particular piece was written.  Also as I later started writing on med tech and green tech at weSRCH.com you’ll find some of the Maxims have been applied to these areas as well.

One of the reasons for starting this process, was I found what winners know and practice in tech companies is very different from what is classically taught in business schools. When I started, no business schools taught technology business principles and it’s still very rare. In many cases, the classical lessons still apply, but they are applied differently by the leaders of tech and they are only a subset of what these leaders know and practice.  This is why Apple stumbled after John Scully replaced Steve Jobs and only recovered when Steve came back.  It’s also why Andy Grove of Intel and Bill Gates of Microsoft were so successful in PCs, while the management types from IBM, starting with all the advantages, failed to hold on to what they had created.

The most important feature of tech businesses, which is also the most common failure point, is that tech adds a fourth dimension to business. The first three are the classics: labor, capital, and land. The fourth, technology, is problematic because it is ever changing. The product you produce today will be obsolete tomorrow, its patents will expire, or a whole host of other issues arise that bleed away profits. This is true of high-tech, green-tech, and med tech.

Classical business was primarily focused on B-to-C (Business to Consumer) where a few businesses serve an amorphous mass of consumers.  The teachings were that leadership and marketing were generic to all business.  B-to-B (Business to Business) was thought be a lesser form of B-to-C.  This was more convenience than fact.  B-to-B quickly became a fashionable subject in B-schools in the late 90’s when it became clear that the Internet had blended the High-Tech service sector with consumer marketing for the first time and its growth created demand for a new, stronger graduate.  Today these lessons similar to these are beginning to be taught.  Still, to understand the Maxims, you need a strong grounding in business teachings.  So, think of this more as a post-graduate course rather than the end-all-be-all promise that some books claim to provide. 

I hope you never lose the urge to learn, because that is what makes the leaders I write about so good at what they do.  They don’t apply old formulas as much as they are always in search of new ones.  The best in Tech learned long ago to put aside the textbooks and learn directly from the masters: their peers.  Figure out who the truly good ones are, rather than the lucky ones, and learn from them.

The extreme challenge Tech offers over any other business is what attracted virtually all the leaders of Tech.  Blending constant change, technology, and high cyclicality into the business mix makes it the ultimate business challenge.  This is what attracted great leaders like Jim Morgan of Applied Materials.  It is also what has repelled equally great leaders from mainstream business like Jack Welch of GE and Warren Buffett of Berkshire Hathaway.  As Clint Eastwood said in his Dirty Harry character, “A man’s got to know his limitations.”  If you are ready . . . read further . . . as you have entered the extreme sport of business.

These maxims are the lessons learned from the winners and the countless losers.  This is an attempt to codify these lessons into a basic set of rules that can be treated as a handbook for competing.  I chose to call these maxims, as they are not hard and fast rules.  In fact, a close reading will find maxims that conflict with each other.  Similar to life, the key to your success will be in developing an understanding of how to balance the conflicting elements and when to apply one and not the other.  With that in mind, I start with the first Maxim, which is something of a disclaimer:

  

There are no rules without exception

Back in the days when I was working closely with Bob Graham* at Applied Materials, I became a religious follower of his concept that a system supplier should sell a complete solution.  He had built Applied’s market position by offering not only a tool, but also a working process to go with it.  In his mind, Applied was in the business of providing on-wafer results.  Everyone that went up against Applied with a tool strategy failed.  Then Bob left for Novellus.  At the time, Novellus was faltering and he had been brought in to turn it around.  I remember visiting him one day asking:

 “So Bob, what are you going to do?  You’ve created an unbeatable marketing strategy at Applied selling process, so how are you going to beat it?

 “We’re going to sell hardware Dan.”

“You’re WHAT?”

 “That’s right; we’re selling tools this time.  Think about it.  There is no way we can beat Applied on process.  But a lot of customers don’t need their complete solution.  And Applied, which designed the P5000 to handle every process, came up with a system that is complex, unreliable, has low throughput, and is costly to run.  Novellus’ competitive advantage is that the Concept One was designed to be efficient and cost effective to run.  Brad (Mattson) is a much better system architect and he designed the Concept One to be simple and inherently reliable.  Applied can’t compete on these points.  So we must convince the market that manufacturing efficiency and cost per wafer is really how they should be evaluating tools, not process technology.  SEMATECH’s just been founded to make American semiconductor manufacturers competitive.  It is manufacturing efficiency and cost per wafer that they’ll come to focus on because this is America’s problem, not technology.”

How did Bob develop this insight?  It was good modeling.  I had been working with Bob to rebuild the cost of ownership models I had developed for lithography and etchers in the early eighties.  Initially, he wanted to apply them to CVD to evaluate system architectures.  This led him to recommend Applied acquire Novellus.  When this failed he left for Novellus.  It was these models that gave him the basic insight as well as the tools to convince customers.  At first SEMATECH fought these concepts, but eventually they adopted them as Bob predicted.  Bob used this strategy to turn around a languishing Novellus into a hot start-up and ultimately into the giant it became.

* Bob was arguably the greatest High-Tech marketing executive of the twentieth century and certainly was the greatest in the semiconductor equipment business.  SEMI even named an award after him: The Bob Graham Award for excellence in sales and marketing.

 

Study the great leaders

It is important to study again and again the campaigns of the great leaders and their decision making processes.  First, because they are the true masters.  Second, because business is so complex and changing, you often find overlooked jewels that fit your new circumstances.  Third, because no one can remember it all.  Restudying refreshes and makes it easer to transform knowledge to instinct, which is essential for fast decision cycle times.  Fourth, you will learn the false maxims as the ones these giants discarded.

In the business of high technology, one can’t ignore the obvious giants: Bill Gates, Andy Grove, and Steve Jobs.  One can also find greats in our own industry to study that are more relevant.  People like Alex d’Arbeloff, Jim Bowen, Bob Graham, Dan Maydan, Jim Morgan, and Peter Rose to name a few.  I have learned much from them and many others, which I have tried to codify in my maxims. 

 

Maxims are easy to know but hard to practice

No matter where you are in your career – at the beginning or an experienced veteran at the end – you will find yourself breaking the very rules you have learned and you will sometimes pay dear-fully for it.  There is simply too much to know and life is so fast paced.  Often, you simply fail to heed to warning signs until it is too late.  Nevertheless, I have found over the years that the better you learn these maxims and the more you internalize them from knowledge to instinct the better you will become.  You will avoid mistakes in the first place.  When you do make mistakes, you will recover faster because this knowledge will enable you to see the error faster.  Over time, you will stop fearing mistakes because of your ability to recover.  You will become stronger.  You will come to not only trust, but believe in the maxim that all mistakes are learning experiences.  As Friedrich Nietzsche once said so eloquently, “That which does not kill me makes me stronger.”

 

There is no best product.  Find out what is best for the individual

If there were, there would be only one in the market.  This is a fiction brought about by many factors, such as the fact that in order to sell a product, the sales professional has to believe that it is the best and that customers, having gone through a long selection process to find the best solution for them, believe it is the best solution for everyone.  When this is truly the case, the market does figure it out and the company with the best product wins a monopoly.  However, this is rare.

It is a fundamental principle that individuals are different and thus have different needs.  It is the job of sales to discover these needs with each individual customer.  Then to position the product in each customer’s mind so they see it meets their needs and buy.  It is the job of marketing to survey customer needs and segment them into markets.  To figure out how a company’s products meet these needs.  Then drive buyers in and give sales the tools needed to sell.  It is also the job of marketing to communicate to and work with product development.  Development teams need to know customer needs and how they can be segmented or resegmented based on the company’s core competencies.  It is the job of development to fully understand customer needs and engineer products to meet the correct spectrum of needs.

How a company is structured to meet these needs can vary and is best left up to each company to figure out.  In some cases, a select few individuals have the intellectual and emotional bandwidth to span all three areas.  These individuals usually become legends in their industry.  They often make the best CEOs and presidents.  Henry Ford or Akio Morita are two obvious examples.  In chip making, clearly Andy Grove, Morris Chang, and Pascale Pistorio meet these criteria.  In equipment, there are the legendary Bob Graham, Shoichiro Yoshida, Ken Levy, and Peter Rose.  On a contemporary basis there are individuals like Sass Somekh, Patrick Lam, Arthur Del Prado, Martin van den Brink to name a few.  If you study them, you will learn a lot.  But you don’t need one of these superstars to succeed.  You just need to make sure that there is a structure in place that ensures all the jobs are done well.

If any of the three groups in your company fails to do its job, the cost, will be at the least, lost revenues.  Markets can be lost and in the worst case, entire companies can be lost.  Failure escalates at an exponential rate as each of these three fail.  When sales fails, the cost is lost revenues.  When marketing fails, the cost is lost markets.  When product development fails, the cost is invariably a lost company.  When product development succeeds brilliantly, competitors are decimated.  When marketing succeeds, markets are won.  When sales succeeds, customers are won. 

GCA disappeared largely because of infighting between the three groups.  Each was trying to do the other’s job, while neglecting their own.  Nikon took the stepper market from them because their three groups were in perfect alignment to the market.  Applied Materials was able to win the CMP market because the existing players never developed an adequate understanding of customer need.  By the time Applied came along, customers were so frustrated they would have bought anything.  The fact that they were patient and forgave Applied’s early missteps is proof of this.   Applied and Novellus won CVD away from the furnace suppliers because the latter failed to comprehend the value of marketing and hence, failed to comprehend the customer’s need for greater uniformity. 

It is also a fundamental principle that individual needs are different throughout a customer’s organization.  At the senior management level, they need to feel secure that development programs will proceed smoothly and products will ship on time.  Middle management needs to know if you can deliver the solution and if you will support them after the sale.  Engineering needs to make it all happen, so they need all the details.  You can also work the customer through its customer’s worries.  Your organization must comprehend these differences and structure itself appropriately.  One of the reason’s KLA-Tencor’s Copper marketing program was so successful was that it sold to a burning need through the highest level of the customer.  K-T didn’t have to develop any new products.  They simply had to bundle them in a way that highlighted the solution they had to offer in terms of the customer’s needs and concerns.  That was brilliant marketing.  Applied Materials’ Total Solutions campaign, Kulicke & Soffa’s K&S Connect, Teradyne’s Because Technology Never Stops, and Advantest’s Why Test When You Can Advantest worked on the same principle.  Intel’s Intel Delivers and Intel Inside campaigns are two more excellent examples.  These are all programs that drove leadership through advertising based corporate marketing.

 

By G Dan Hutcheson

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Annexure :

This series is the product of a compilation of Maxims written in Dan's weekly e-letter, The Chip Insider, over many years. They are typically presented as a Maxim and then a story of a company and the executives that exemplify its use in practice. The idea was that instead of having an entire business book centered around a single idea, make the informational content of a Maxim with its example consumable within a single sitting.

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