At the same time, your car doesn't lockup for no reason as PC's too often do!)

Classic mini-case
Milwaukee electric Tools' Jackson Plant has little direct product development responsibility. Nevertheless, it plays an active role in the design process. Manufacturing-cell team members participate in new product development from the outset of the cycle under its design for manufacturability focus. The result, according to plant manager Harry Peterson, is the elimination of prototype and manufacturing start-up problems, and a 35 per cent reduction in time to market.

If a business leader from another planet landed on earth in 1990, they might have thought that most executives had taken their firms to the Corporate Fat Farm.  Instead of Richard Simmons leading the flabby and overweight as they sweated off the pounds, we had Michael Hammer and his devotees leading re-engineering calisthenics across the globe.  The exercise was worthwhile, but enough is enough.  It’s time to stop pruning, and start creating and growing new value for our customers, and ourselves.  Why?

1.   The searing heat of today’s globally, competitive environment, combined with rapid changes in technology, can quickly shift who wins and who loses.  Standing still equals falling behind. Therefore you’ve got to innovate to grow.

2.   While innovation isn’t the only route to growth, it’s essential to create sustainable growth. You can grow through acquisition, but if you can’t innovate, whatever you acquired can quickly turn into a dead weight.  Similarly, you can grow by expanding distribution channels, but eventually, unless you can generate a continuous stream of new products and/or services,  these too will level off. 

3.   The underlying strategy, leadership, structures, processes and skills that drive innovation, are fundamentally different from those that are used to manage daily business operations.  Not only do the traditional skills not work, if you use them for innovation, they’ll smother it quicker than you can say Dr. Kevorkian!

4.   Innovation is not a mysterious black box.  It can be learned, and managed in service and product industries.

What does the Valley do differently --- It starts with the Growth Attitude

The orientation Valley companies take towards growth is that it's not only good; it's essential.  This attitude permeates every goal, process and action they take. 

1.  Generate and Spread Positive Paranoia

Leaders with the Growth Attitude have an omnipresent paranoia of the competition that gurgles with impatience and fear like a mildly upset stomach.  Dave Pottruck, President of Charles R. Schwab, described it to me, “Employees are always asking me when is it going to let up?  Never.  There’s no destination that we’re going to get to.  Thinking that someday we’re going to arrive on some pinnacle just isn’t going to happen.  You’ve got to enjoy the journey.”

Perhaps the most broadly acknowledged, paranoid company in the Valley is Intel. CEO Andy Grove recently wrote a book entitled, “Only the Paranoid Survive.” Chief Operating Officer Craig Barrett sharpens this by declaring, “We’re competitive paranoids.”  Does this make sense?  Intel’s the world’s most profitable company, with a near monopoly in the PC microprocessor market.  Not only do they have a rich customer base that’s locked into their proprietary product architecture, but the $1 billion plus cost of building a contemporary chip factory, not to mention the intellectual capital required, creates barriers to entry that would be the envy of any executive. Are these guys nuts?  Maybe, if you just think about the present.  But when you’ve got the Growth Attitude, you know that today’s sales don’t insure growth tomorrow.

Andy Grove is intensely aware of this.  To keep his billion dollar factories running at capacity, he’s got to convince customers to buy each new innovation of Intel’s as fast as he plans to turn them out.  Already, the business market has shown a reluctance to keep marching to the beat of perpetual upgrades -- how fast does a PC need to be to run a word processing package??!! 

Grove’s answer?  In their core business, work closely with Microsoft and promote the Windows NT operating system which does require the next generation chip, and make Windows 95 history!  That way, both they and Microsoft move back to the top of the down escalator.  Concurrently, protect the future by expanding into the consumer and work station market, even if that invites a collision with Sony and other consumer electronic giants, or even some of his current customers such as Hewlett-Packard.

To accomplish that, in 1989 Grove began consumer advertising the “Intel Inside”  branding campaign with a $5 million budget.  At that time many wondered what he was doing.  First, no high tech company was using regular TV advertising.  Second, image advertising for a component that no one would buy by itself, was revolutionary.  Most recently, Intel ads have dancing wafer fab workers touting the virtues of their new MMX graphics technology.  Does it work? 

The results speak for themselves.  In June 1996, a few PC manufacturers like Compaq, Dell and Hewlett-Packard (paranoid, speed demons in their own right!) are making paper thin margins while most others, such as Digital Equipment and AST are losing money.  Competitor microprocessor companies such as AMD and Cyrix are blow hot and cold, as Intel continues to chalk up record profits and earnings.  Windows NT sales growth is propelling growth of the Pentium Pro.  And according to studies, consumer recognition of the Intel Inside logo now slightly exceeds that of the NutraSweet swirl.  Paranoia keeps Intel moving, and winning.

 2.  Externally Focus:  Get Everyone Looking Out

Silicon Valley leaders are constantly scanning their external environment.  They act as though they had a small radar dish on their head that constantly probes the external environment looking for ideas, information and opportunity.  Valley leaders make informed, rapid decisions using this constantly refreshed context.  What appears to outsiders as gunslinging or intuition, is more often than not, action based on a rich, database of tacit knowledge.

Valley leaders will also share with outsiders what more traditional firms keep to themselves.  Why?  To get feedback so when they do pursue an innovation or partnership, they’ve got the right target and the best support they can.  David Brown, former president of Quantum Corporation, used to share Quantum’s strategic plan with key customers and suppliers. Wouldn’t this compromise Quantum’s competitive position?  Brown responded that it enhanced Quantum’s position.  If customers or suppliers saw something in their strategy, that didn’t fit with their view of the future, they’d tell him in time to fix it.  Furthermore, if they know what the strategy is they can help.  If they don’t, they can’t.

Nothing destroys a rapidly growing Valley company’s outward orientation as rapidly and insidiously as success. As the firm grows, the number of people who are in regular contact with the outside world shrinks rapidly.  In no time you can have a firm with 1,000 people of which only a small minority have ongoing contact with customers, competition, suppliers, etc.  The rest spend their time interacting with only each other.  Colleagues quickly become friends, and fulfill a critical requirement of human existence:  community.  Crass as it sounds, it doesn’t take very long before maintaining internal priorities and friendships becomes a priority.  Just as differentiation is required for ecosystems to thrive, the same is true for innovation and growth.

                                                            Figure 1

Cisco’s John Chambers never stops pushing people to think of the customer. Once a year, Cisco conducts an independent customer satisfaction survey that measures fifty-five attributes. Chambers believes vehemently that there’s a 1:1 correlation between customer satisfaction, growth and profitability, with a twelve month lag.  Accordingly, all Cisco managers have customer satisfaction goals as their primary performance, and compensation, measure.  At Cisco, how you’re doing “out there” is the basis for how well you’re doing “in here.”  Doing so exposes people to alternative views which spur innovation.

They don’t play games with the numbers.  Chambers told me about a problem they were having with a Japanese customer regarding Cisco’s hardware design.  Some considered what the Japanese were complaining about was simply a minor cosmetic flaw, but not Chambers.  As he states, “We stick with what the customer defines as problems, and if they say it’s a quality problem, then it is.”  

 All well and good, but what company doesn’t try to be customer focused or conduct their own customer satisfaction surveys?  The difference is at Cisco, the survey results are not just a matter for a one-time discussion, they’re hardwired, from the top down, into the compensation system.  Can you can say that for your firm?

 Let’s sharpen this with an example.  In the mid-1990’s, customers rated Cisco’s software lower than other product and service dimensions.  After an intense effort, the software scores improved, but the customer’s rating didn’t go up as much as Cisco’s own internal software quality measures.  Some were upset, but Chambers and his team looked deeper.  What they learned was that customers had seen a tremendous improvement, but the importance of software had also risen dramatically.  It used to be that if a local network went down for a while, it was an inconvenience.  Cisco’s customers pointed out that was no longer true.  With the entire organization now linked together, if the network went down, so did the business!

3.  Flatten the Organization and Blur boundaries with Open, High Velocity Information

 The first step has nothing to do with the boxes on the organization chart.  The first step is an attitude switch away from job descriptions, status, hierarchy, and most importantly, the infamous “need to know”.  In traditional organizations, information becomes currency that is hoarded at each succeeding level of hierarchy.  In an economy based on knowledge, those without information can’t responsibly contributed, while those with information are compelled to act.

The Growth Attitude says everyone needs to know. Hewlett-Packard General Managers hold regular cafeteria sessions with all employees to describe how the business is going, what the competition is up to, how this quarter’s revenues look and what you can do to help, followed by a wide open question and answer session.  With rare exception, most questions are answered directly and immediately.

Does your firm publish it’s own daily newspaper?  Without toppling a tree, five employees at Silicon Graphics publish a daily newspaper, Silicon Junction, over their internal Intranet.  The paper focuses on key projects, customers and issues while sprinkling in other information about the (Silicon Graphics) community.

The SGI Intranet is the backbone of Silicon Graphics’ product design process.  Web-based development begins with a series of concept papers that are electronically posted and available to all.  As development moves forward, tools and templates that address the details of SGI’s process, are readily available. As CEO Ed McCracken describes it, “In the old organization, if you wanted more information to get the job done, you were a subversive.  Managers used information to govern who was in and out of the loop, and of course the decisions.”  McCracken, maintains his own home page that contains copies of his most recent speeches to analysts or the press, as well as video clips.  People plagiarize his comments, which pleases McCracken to no end.

Valley leaders with the Growth Attitude go far beyond what used to be called an open door policy.  If you were to sit in a meeting at most any Valley company, you’d be struck by the mix of people, expertise and ages in the room.  More importantly you’d witness a degree of candor that’s not typically found in hierarchical companies.  In the more direct cultures such as Sun Microsystems or Intel, it’s likely that you could walk in on a high volume argument between a senior executive and an entry level engineer.  There is no status or seniority that’s based on age.  Power and status is based on what you know and can deliver. 

 4.  Promoting People with Passion and Giving them “Skin”

Have you ever been on a truly high performing team?  One that clicked like a hot jazz combo?  Hopefully so, for the experience is extraordinary.  If you have, ask yourself, was it an emotional experience?  Of the thousands of executives I’ve asked this question around the world, the answer is always an emphatic, yes!  When I ask these executives what made it emotional, their answers invariably include a description of prevailing through some crisis. 

With all the talk about how emotions cloud our decision making, emotion gets a bum rap.  I’d argue that there’s nothing more important in knowledge work and leadership than having people who are passionate about their work.  This passion fights against complacent behavior, which in turn creates “me-too” products and services. Inevitably, this passion can also fuel some very strong debates. Cirrus Logic’s CEO Mike Hackworth excels at engaging in such debates.  He keeps one channel of his mind wide open for the brilliance, while using another to manage the potential disruption.  In Hackworth’s mind, that’s a small price to pay.  If he shuts out the brilliance, he might as well shut down Cirrus Logic.

Passion is also tied to one’s investment and consequences. Some people will always put in 110% because that’s just how they’re built.  Many more will put in that much, if they have a significant investment in the outcome, particularly with upside opportunity.  In the Valley, people often describe this as having some “skin” in the game.  With a bias towards upside opportunity, Valley leaders use skin to motivate knowledge workers.

One form of skin is the credibility that being associated with creating cutting edge technology offers.  Valley leaders and peers don’t hesitate to glorify those who are behind the creation of new products and services internally and in the trade press.  Such a reputation can insure that you get to pick your next project, in your current company, or elsewhere. 

Stock is, by far, the most common form of skin Valley leaders use.  Stock options are very powerful for two reasons.  First, the potential to accumulate significant wealth is real.  Second, the value of the company’s stock is directly tied to its ability to innovate consistently.  Third, stock creates “I am the company” ownership that is powerful.  The key differences between the use of stock in the Valley and most Fortune 100 companies is that in the Valley, the number and types people who receive options is much broader.

Many Fortune 100 companies mute or eliminate passion.  They hire the brightest stars they can find, and then spend the first few years of employment showing them how to “fit in” (read: conform) to the organization.  Metaphorically, the goal is to chip off all the star’s points until they become a perfect circle, at which point they declare, “You’re now one of us!”  The passion that they bring to the organization is lanced and drained as though it were an infection. 

Finding and nurturing people with passion is so important that Valley leaders take hiring people very seriously. If you want a job at Cisco, SGI, Sun, Cirrus, or Quantum, you’d better get ready for no less than six, and often twice that many interviews.  These will be with your prospective boss, co-workers, boss’s peers, subordinates and a key executive.  Knowledge work thrives in a tight community and before you ask someone to join your community, you better make sure most of the community wants them as well.  This is a cultural fit and values test that follows the basic competence screening.

A by product of passion and competitive paranoia is high expectations from everyone, including your peers. You better be a contributor, for no one has time for anything less. There is a “do what it takes” expectation that makes for long hours, changed vacation schedules and the like. This is not all good, for burnout is a serious Valley issue. 

The Valley also has a fair amount of leader-generated turnover that occurs in conjunction with down business cycles and the demands of growth.  In contrast to some traditional firms that strive for low turnover, Valley companies use turnover as a time to re-assess their people, and upgrade as necessary. To compensate for the high stress, many Valley firms have sabbatical programs that kick in every four to six years.  The bottom line is performance counts, and no one has patience for anything less.

In rapidly growing firms, jobs grow faster than capabilities, necessitating constant upgrading of managers.  Valley firms can’t meet their managerial needs only by promoting from within. Hiring from the outside requires sensitivity and judgment when turning down internal candidates.  Schwab’s Pottruck provides a useful rule of thumb for outside hires that works well under all situations.  The outside candidate must be clearly more talented, and someone that internal candidates would enjoy learning from, or the outsider is not hired. 

 5.  Go for It:  Set Stretch Goals, Make a Decision, Make it Work, Or Learn What Will

Valley leaders possess and express a sense of confidence in themselves and their organization’s ability to learn.   It’s not that they don’t have a healthy respect for failure, they just don’t equate failure with death!  Quantum’s David Brown is fond of saying when choosing between two alternatives, “Let’s make the best decision we can, and then focus on making our decision work.  If we’re wrong, we’ll find out and fix it.”

Luck is a central element of growth and innovation. Look at the re-emergence of Sun Microsystems due to Java.  Sun came out of the background with its Java authoring software that enables small applications to be attached to Internet web pages.  Was Java planned that way?  Not at all.  It was supposed to be an operating system for hand-held computers.  By constantly scanning both the environment and their project for opportunity, Sun engineers turned what had become a stalled development effort into a corporate success story.

©2000 Christopher Meyer