CEOs must make on-the-spot decisions on the basis of trust

Summary : Advantest, JSR, and TEL: Why they were so successful when so many others failed.

 

Three of Japan’s best companies in the semiconductor industry are Advantest, JSR, and TEL. I once asked Nobu Koshiba, then head of JSR, why they were so successful when so many others failed. Without blinking an eye he said the key to their success, where other Japanese companies failed so badly, was the ability to make on-the-spot decisions with real commitments to follow-thru in front of the customer. Among customers, Nobu was famous for this in committing to develop ArFi and EUV resists, where the time-to-money horizon was unknowable. The best story I ever heard is the commitment Terry Higashi made at the signing between TEL and IBM for Albany:

 

 

 

      Don’t worry. We are partners now. I’ll sign.” – Terry Higashi

 

 

 

In the early-2000s IBM was trying to create a new semiconductor research ecosystem in Albany, New York. It was more than just another fab. John Kelly, a key IBM executive, had come to the conclusion that go-it-alone research was no longer viable. R&D had gotten too expensive in the industry’s transition in scale from micrometers to nanometers. John created the word “coopetition” to describe a new world in which competitors did early research together in a University environment. IBM had multiple chip makers willing to go along.

 

 

 

It needed a large equipment supplier to come in with enough of a commitment to be cornerstone. Just past the worst downturn in history, equipment suppliers justifiably didn’t want another region to support. Albany had no track record, was hard to get to, and IBM already had research in East Fishkill, NY. All IBM had to do was get one to jump. Then the others would have to.  All but one would balk.

 

 

 

IBM had to look for a company with a chief executive that would risk sharing their vision on the basis of trust. That company was Tokyo Electron and its Chairman and CEO, Terry Higashi. How did they know this? Terry appears in the first of the three traits of the great leaders maxim: Clarity of Purpose. It means distilling an organization’s purpose down to its essence, aligning the organization with a single sentence or less. Terry Higashi did it in three words: “Trusted Relationship Style.” TEL’s origins come from sales. So how does one differentiate a sales-oriented company? It’s that word ‘trusted.’ Note how it’s in the past tense, not the present. The past tense points to the fact that trust is not about today’s sale. Trust can only be based on an accumulation of past events that built that trust. It’s a series that gives customers the confidence to move forward with your company. With this history, Terry was the obvious choice for IBM to partner with.

 

 

 

Terry saw the vision of what Albany could be. Still, doing this was betting the company on something for which IBM was unable to firmly commit to until they had their ducks in a row for the state to officially come in. Otherwise, it was just the promises of politicians. So there had to be extreme bonds of trust between TEL and IBM, which is why Terry would prove so critical.

 

 

 

On IBM’s side was Bill Rozich, a senior executive who had taken point on the deal with TEL. After months of negotiations and legal wrangling, they were ready to sign the deal, after which the state would come in (and remember, the deal would completely fall apart if the state didn’t come in). The deal was all ready and what happened next would hinge on a single decision and few sentences spoken on the way to the signing. 

 

 

 

Terry Higashi and Bill Rozich were together going to TEL’s headquarters in Tokyo where the signing was to take place. IBM was closed for the day and there was a big problem. That morning, Bill had woken up to an e-mail that legal needed to make a few changes to the contract. So after months of negotiations, Bill had the unimaginable terror of having to tell Terry this. The deal could be off in an instant. As they went up the elevator, Bill broke the news. The silence was probably deafening. Then Terry Higashi reached out to hold Bill’s forearm and uttered eight simple words: “Don’t worry, we are partners now, I’ll sign.”

 

 

 

The key was Terry was CEO, the real power was with him, and he had so deeply internalized his “Trusted Relationship Style” that he could make the decision on the spot. His ingrained principle led him to overlook something that would wind up filed away never to be seen again. To focus on what would really be important: Albany. More than the relationship, what was really important was the trust he could have that IBM would ultimately do the right thing. This only came from years of trust building. Trusting IBM again, only put pressure on them to trust him again. Trust is never a zero-sum gain. It pays dividends well into the future.

 

 

 

Today it’s really a story of how three visionaries changed the world: John Kelly, Bill Rozich, and Terry Higashi by combining the resources of IBM and TEL. In doing so, they helped maintain the diversity of technology in the semiconductor industry.

 

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