The flip-side is we deplore corporate politicians. The way you can tell you’re dealing with a politician is straightforward, even if you’re in an area in which you’re technically inept. All you need to do is ask a simple question and you’ll get something back that logically just doesn’t fit. When you ask a series of logical questions, you’re building a box. Pretty soon the person answering the questions is in the box.
And just when you’re going to put side six on the cube, the politician hops out. So you start to build a new box. After you’ve built your third box, you suddenly understand you’re dealing with a politician.
Politicians are overstanders; they’ve got something they want.
They’ve got a philosophy, a belief set. Your belief set can be Christianity, it can be political correctness, it can be liberal politics—
a set of things you believe in that you don’t require data of in order to support. You just simply believe it. Once you come from that point of view, you try to fit the world into your balloon.
But electrons don’t understand that. They don’t understand beliefs. They only understand reality and the laws of physics, and therefore people in the electron-moving business inevitably get screwed if they deal from a belief point of view. For example,
“America Forever”—that expression is a belief. There’s nothing to support that statement bottom-up. You get screwed when you have a belief that’s not rooted in the basics.
Core value number three. We do what’s right for Cypress. It doesn’t mean you sleep here on weekends, but what it does mean is you’re a company owner. We give you stock. We have the highest dilution percent per year, due to employee shares, of any company.
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We do about six percent per year. We give stock to everybody, and we give it every year.
No matter where they are on the chain?
No matter where they are on the chain. Our shares are highly dis-criminatory, but there is at least a little bit for everybody, so everybody watches the ticker tape.
They care.
Right. So we choose wins over looking good. We reward personal initiative. Go out and kick ass, take names, make it happen and you will get the credit for having done it. We’re loyal and fair to our people.
Core value number four: We make our numbers. We set aggressive quantitative goals. We set aggressive quantitative goals in all areas and we achieve them. It’s our fetish for numbers.
What kind of quantitative goals can you set in “soft” areas like marketing or Human Resources?
I can tell you the first pass yield—the success percentage of every sales area manager—in selling each of our fourteen product lines. I could tell you what he was selling well, what he wasn’t selling well, and 99,000 other metrics. I could go into our tax department and I could show you Pareto plans for reducing our tax rate, piece by piece.
I can go to HR and show you metrics for training. Again, we set goals that are quantitative, we set goals that improve, and we compare ourselves to that and go beat on it. It’s a mathematical version of kaizen—Japanese continual improvement. It’s all over the company.
The alternative is to have a floater who has no goals, no objectives, and says, “What? Who am I? Why am I here? What am I doing?” So we constantly improve. The goals get tougher all the time.
For example, we used to track revenue-per-employee. We used to drive it up. We then ran into the problem where a VP chooses not to hire a $100,000 heavy-hitter, and chooses instead to hire two college grads and spend a lot of time training them. Does he get hit by a factor of two in revenue-per-employee? Maybe he shouldn’t, given that the two college grads might be cheaper than the one heavy-hitter.
We’ve gone to a new metric though we still report revenue-per-employee because it’s a metric that all semiconductor companies are
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compared by. We now use dollars of revenue per dollar of indirect labor cost.
Our costs are the best in the world. We don’t tolerate waste. That is a contrast for those of us who worked at big companies and saw a lot of waste.
Like your experience at AMD?
AMD has always been catastrophic. When AMD was in the throes of laying people off—blood spewing all over—the board of directors was a pocket board. I don’t have a pocket board. My board will kick me in the ass routinely, which I appreciate. For example, if I’m screwing up—maintaining that we only do manufacturing in America, regardless of the facts—then it’s their job to hammer on me. Jerry’s board is the other way around. Jerry does what Jerry wants.
For example, it is rumored—I haven’t verified this—that he has a driver and bodyguard in Northern California, and a driver and bodyguard in Southern California. He’s got either a Rolls or Bentley in each place. He was asked to give up the Southern California or Northern California car, and he said no. This was happening during the bottom of AMD’s business.
Was it a company car?
Yes. Company car, company bodyguard, company driver. There was also the week-long Riviera trip that Jerry takes. One of our directors was walking along the harbor in Cannes—he was taking his son to Europe for the first time. They see this incredible yacht with twin Ferrari engines in the back, and decide to nose around. They get to the back of the boat and there’s Jerry with his daughter and his wife—who are both about the same age—and some other dolly hanging on him. Of course AMD’s board of directors get invited and he cruises around the islands during vacation.
I’ve also heard—no verification—that this is written off as a business expense. We don’t do that here. We sometimes go out of our way to show that we don’t do it.
Core value number five: We make what we sell. We like to make things. Basically, we’re proud of our technology and products. Our designs are excellent and our designers are extremely disciplined, relative to the typical flaky Silicon Valley company. We like to manufacture stuff and we like to make it in volume. We have good product quality.
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Although I can’t tell you Cypress stands for quality, I can tell you that our fetish for numbers and logical reasoning causes our product to be of high quality. Of the thirteen preferred vendors at AT&T, we’re ranked number one in quality. We’re the only one of the thirteen with under a billion dollars in revenue.
You said that you don’t really care about quality, and yet you’ve also stated that, “We make the best chips in the world.” Are you saying quality’s really an end result of your working hard?
What I’m saying is, we do not have a culture which says, “Quality’s what I’m about.” Let’s suppose that Ford’s little motto turns out to be a core value.
Quality is job one—
—or has been inspired to be a core value. Hypothetically, you’d walk up to a person in the Ford assembly line and say, “What do you do?”
He wouldn’t say, “We bang out one car every second.” Instead he’d say, “Quality is job one.” That’s what would motivate him because he’s prioritized it really high. Quality, in this case, is defined as average outgoing quality, as opposed to the broader TQM concept of corporate quality.
But, if you asked our people what they do, they’d say, “We make the lowest cost wafers in the world. We make the hottest transistors in the world. My RAM is faster than anybody’s RAM. My RAM has a smaller chip than anybody else’s RAM. We can ship into any socket, anywhere in the world, at any price and still make a profit better than our competitors.” They would say all of those things, but they wouldn’t say, “We emphasize quality manufacturing. It’s the most important thing we do.” It just isn’t in the woodwork. Nonetheless, the way we operate produces a high quality product.
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GORDON EUBANKS
Symantec
BRANDS AND BANDS
Gordon Eubanks is president and CEO of Symante
c
Corporation, a software manufacturer. Symantec is best known for making the Norton Utilities, but also develops other desktop software products including programming languages (Symantec C++) and communications tools (WinFax Pro).
Eubanks’ route to the CEO slot was circuitous. Though he had no particular interest in electronics during childhood, Eubanks recalls childhood dreams of one day owning a computer—which, in the late 1950s, bordered on megalomania.
He settled on studying engineering at Oklahoma State University and graduated with a Bachelor of Science degree in electrical engineering in 1968.
From 1970 to 1979, Eubanks served in the United States Navy as a commissioned marine officer. During his tenure as a submarine officer, Eubanks was part of what he likes to call the “Hunt for Red October stuff.” Although his team never stole any Russian submarines, Eubanks is very fond of his Navy experience. He describes it as a high-pressure manage-
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ment environment where accountability was key. This sense of accountability evolved into what his colleagues describe as an intense focus and drive to succeed.
As a master’s degree candidate in computer science at the Naval Postgraduate School, Eubanks had to choose a thesis advisor. His selection: the combative, but legendary Gary Kildall, founder of Digital Research [not to be confused with Ken Olsen’s Digital Equipment Corporation] and the inventor of the CPM operating system.
During his work with Kildall, Eubanks created EBASIC, one of the first widely used “Basic” language tools for Kildall’s CPM. EBASIC evolved into CBASIC, one of the first commercially successful languages for personal computers.
Eubanks, who describes the software industry as “one of the greatest opportunities of the 20th century,” started Compiler Systems Inc., whose first major product was CBASIC. The company was moderately successful, and Eubanks sold the company to Digital and became one of Digital’s vice-presidents.
Dissatisfied with Digital’s management, Eubanks left again in 1983, and founded C&E (Coleman & Eubanks) software with Dennis Coleman, a Stanford business school professor.
In 1984, C&E purchased Symantec, and Eubanks has been president of Symantec ever since.
One of the reasons for Symantec’s growth to a half-billion-dollar company is Eubanks’ cookiemonster strategy: Symantec’s purchase of more than 20 companies gives it access to top quality people and products, which it has deftly used to diversify its product line.
Another aspect of Symantec’s strategy is its close partnership with Microsoft. Never ascribing to membership in Silicon Valley’s “We-Hate-Bill” club, Eubanks and Symantec have adroitly taken advantage of the relationship by creating products that complement those of Microsoft. Because creating utility software requires a deep understanding of the operating system, Symantec and Microsoft developers work closely together to ensure the interoperability of their products: Microsoft developers inform Symantec of anticipated changes
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to Microsoft’s current operating system, and Symantec adapts its software.
Gordon Eubanks was one of the most approachable, down-to-earth executives we interviewed. Eschewing technical jar-gon or trendy management-speak, Eubanks’ mantra is simple: to make products that add value to the customer.
We met with Eubanks at Symantec’s worldwide headquarters in Cupertino, California.
“I don’t think companies need to be based on a
totally new idea.”
One concept that business schools try to dispel is that you need a completely original idea to start your own business. Do you believe this?
I think that few companies are started on a totally new idea. Actually I never heard anyone who tried to say that because it is sort of ludi-crous. Most companies get started on incremental value-added ideas.
What you are trying to do is to give value to the customer.
I would say the fundamental way to start a company is when a new technology allows you to do something fundamentally cheaper than is done in the past, and therefore either broaden the market tremendously—i.e., fax machines—or you take over the existing customer base because it is fundamentally cheaper. So, for example, the minicomputer industry wasn’t a brand new idea. It simply allowed us to build computers for the tenth of the price of a mainframe, and now we can apply them into new markets and to new areas and give people the power to do things they couldn’t do before.
So I don’t think companies need to be based on a totally new idea. What you do have to be able to do is to add value to the customer. We were founded on the idea that the existing software desktop publishing titles were not effectively serving the customer, and we created a product called Q&A which integrated the functions of an existing company’s product line called PFS, into a suite. What we did is took three disparate products and integrated them together to improve the functionality.
I was walking around Palo Alto once with Fred Gibbons and Esther Dyson, and we went to a street fair. I went into a bookstore and I said, “Gee Fred, there are no books on PFS.” Fred turned to me
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and said, “I’d fire our documentation people if there ever were a book. Why would you ever need a book? Our products are simple.
They have no complexity.”
And all of a sudden, the light went on. The fact that people didn’t want things that were so low in functionality and so simple was not the opportunity. Customers wanted things they could grow into—
today’s complexity is tomorrow’s obvious thing. Customers wanted to adapt the product to their system. I also thought that having books about your product didn’t mean the product was deficient, but it just helped build the product’s market. While Fred knows more about marketing than I’ll ever know, I thought he missed the boat on that issue.
So, it became crystal clear to me that if someone could make a product that did what they did but had richer functionality, people would be able to grow into this product instead of switching to another one. That’s where the idea of our company’s focus came from—the idea of taking an existing product and adding significant value to the customer through the integration of the products.
So, most companies are not formed on totally new ideas.
However, it is absolutely true that you’re not going to get rich today by doing what Bill Gates does. One of the things Bill said during a speech, loosely paraphrased, was, “There is no lack of opportunity, but the current opportunity isn’t what we’ve done, because we’ve already done it. The opportunity is to do something that is new.”
These two concepts may seem contradictory, but it depends on your place in the market. Today, in software, an incrementally better spreadsheet has little opportunity. In 1981, an incrementally better spreadsheet had a lot of opportunity. In fact, there have been two incrementally better spreadsheets. VisiCalc, originally invincible, was put out of business by Lotus 1-2-3 which was essentially put out of business by Microsoft Excel. But, at some point, incrementally better just doesn’t work.
Thus, the issue really is not whether there is a totally new idea, but whether there is value added to the customer. Is the switching cost of your new product worth its benefit? Is the whole gestalt of your product good enough to convert customers?
When starting a business, I would actually look for areas with some proven track record of need. The highest risk is something that has never been done before, because more often than not, “never done before” means “people don’t want it.” And, “never done before”
usually isn’t true—rather, it’s usually “never succeeded before.”
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And, “never succeeded before” could result from bad execution rather than a bad idea. Many people give Phillipe Kahn [founder and former CEO of Borland] credit f
or Turbo Pascal as if he invented the idea of a low-cost programming package. Not so. There was a Pascal program before Turbo Pascal at the same price point, but it was such a terrible product that it failed. Kahn just had a really good product.
The point I’m trying to make is that you must have something that is really worthwhile to the customer, whoever that might be.
How do you determine what is worthwhile to the customer?
Well, the customer decides what is worthwhile to the customer.
Customers decide and once they decide it is very difficult to move them.
So is picking the next winning product solely a crapshoot?
No. I think you can do research, you can use intuition, you can spend time with customers—it isn’t a crapshoot at all. But successful products serve customers’ needs. And if you’re trying to replace existing products, then your new product must in some way be of incremental value. Whatever the reason, there must be some value to the customer that is really there.
Customers are smart—start with that. We tried to build our company on the fact that customers are actually intelligent, and mostly make reasonable decisions, and sort out the bullshit from the reality.
In the end, you have to be giving them something of value. It’s clear that you can’t sell novelty for an extended period of time. Find a pet rock nowadays. There was a time when you couldn’t go anywhere without seeing a pet rock. You probably can’t buy one today.
What about the idea that customers don’t know what they want—the idea that you just create something customers didn’t have in mind, but once they see it, they’ll purchase it?
Everything is a continuum. No matter what issue we talk about, there are extreme conditions. In math, you focus a lot on boundary conditions. People have a tendency to deal with boundary conditions. The idea that customers don’t know what they want is such an example.
The truth is that if you are going to start a business, the best probability of success is in building something that the customers want. It’s great to talk about how Procter & Gamble invented mouth-
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