Better before bigger: How Linear Tech was built: Page 3 of 6

July 24, 2015 // By Steve Taranovich, EDN
I [Steve Taranovich writes] recently visited the 2015 UBM ACE Awards Lifetime Achievement Award recipients, Linear Technology’s Bob Swanson, chairman of the board, and Bob Dobkin, CTO. These men are an important part of the early days of electronics in Silicon Valley and have seen the transition from Germanium transistor designs in electronic circuits, on through to the early days of the Integrated Circuit (IC) and finally, culminating in the co-founding of Linear Technology, deemed one of the most profitable and successful companies in Silicon Valley today.

EDN: As a circuit design engineer I used Linear’s products in the 1980s and I was mostly amazed at the really great technical applications force you had. They were always around when I ran into trouble and needed help. We used to call them the 'ninja' applications engineers because they would appear out of nowhere.

Swanson: There are so many answers as to how we did this (i.e., started the company) and one of the answers is a recognition that everyone believed that analog was kind of dead and had no growth and digital was the ‘wave of the future.’ That showed up in a lot of ways like in colleges when kids were deciding which discipline to take and it also showed up at customers. Everybody was analog-challenged, the world in general was analog-challenged, customers were analog-challenged. We said—look, we have this disproportionate share of analog know-how; the world has this great demand so we have to be able to supply that. It was an advantage that we had. We’re going to make ICs and we’re going to sell them to customers who are analog-challenged. The more we can hand-hold them and show them how easy it is with our help, the more we can get a premium for what we do. We would tell customers that they were not paying for the silicon but the engineering expertise we just gave to you. And that worked.

Dobkin: We were careful when we hired our field applications engineers. They were all experienced design engineers. They weren’t salesmen. They didn’t have permission to give prices.

Swanson: If you were an Analog Aficionado, Linear Technology looked like a bunch of great technical guys just doing analog and they wanted to be a part of that. After 34 years we are still the same. We can hire as many good people as we can afford to hire. So again, the great thing we have going for us is that we have a disproportionate share of really innovative people. We leverage that because the world needs innovative analog solutions.

Dobkin: We have a culture here which is not empire-building. We are very careful that people do not have their own empires. Everybody who works for Linear is working for Linear. And it is important for everybody to realize that. Then the cooperation is great, the interchange of ideas is great; we are all marching to the same tune. It helps the company and the customer.

Swanson: If you don’t have that, the company gets destroyed and it comes back to creating a culture where as you get bigger you do get some bureaucracy. As things get computerized, you have systems like approved product lists that determine which products you can build in the company’s factories. But we can live with that if we keep it to a minimum and make it easy for the engineers. We have to keep politics to zero. If we can do that then we can have the right culture indefinitely. But when those two things get out of hand, people get frustrated; innovators get frustrated.

Dobkin: One of the things we do is to hire engineers who want to innovate and build products. And then we don’t get in their way. So they build products, they like what they are doing, and that works well within Linear.

Swanson: So regarding your previous question as to how we got started—there are so many potential answers, but as I said, I thought about this in the last 3 or 4 years with people asking similar questions on our 30th anniversary. And back in 1981 when we said ‘Hey, we’re out of here!’ I was in my early forties, had kids in high school getting ready to go to college. I was looking to start a company that had some longevity. I was looking for a job for the next 20 years. So when we said ‘Can we do something better than anybody else?,’ the answer was ‘Yes!—there are several things we can do better than anybody else.' The strategy really was to ‘be better before we were bigger.’ Just be as big as you can as long as you are better than anybody else. And the other thing was, ‘How many customers really want something better?’ We weren’t quite sure. But we said, let’s do things that will enhance our longevity. We wanted to be around for 20 years ---well, we made it to 30+.

Dobkin: If you do some products right, they will sell for over 30 years. If we do some products as good as they can be done—you never have to do them again.

Swanson: We had to be careful not to wander into areas that were going to require a lot of resources and we couldn’t be sure whether we could do this better than anybody else. Are the results going to be so compelling that it will be worth this big investment? So we were careful in the early days how we spent our resources. We couldn’t afford early on a lot of mistakes, a lot of ‘dud’ product ideas. Our batting average had to be really good in the early days. So that played a role in not doing super-risky projects requiring lots of people.

Dobkin: Also, we couldn’t get into price wars. We weren’t that big. And getting into a price war, being able to sell things cheap—nobody at Linear ever thought that was one of the advantages that we would have.

Swanson: Well you know there are companies that choose to be innovators and then there are those who choose to whittle away at cost. As a strategy, if you can be really efficient, that might be a barrier to entry—but it’s always temporary. Because somebody else always comes along and figures out how to be equally efficient. Like the story I was reading about Compaq Computer. But if you continue to innovate—that’s a barrier to entry that can last for decades.

[continues...]