Better before bigger: How Linear Tech was built: Page 4 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: Other companies envy your profitability. Numerous financial journals have commented on that, as well. The corporate environment that you have created seems like an obvious way to have a successful business, yet I can’t think of another company that does what Linear does especially for 30+ years.

Swanson: You may or may not know that I am the technical fly-weight in the company. When we started the company we said that we were going to make products and be first to market with them, and that they would be better than existing solutions. Don’t tell me what the product costs—tell me what the product is worth. So we quickly realized that pricing products based on their functional value, while doing a sanity check on what it costs is a good approach. So many people start with the cost and mark it up 2 or 3 times and think that that is a good business model. We always ask, ‘What is it worth to the customer?’ If we sell a customer something for $4 that replaces something for which he is now paying $5, why isn’t everybody happy? Why would you care if it costs me $0.50 or $1? I just gave you a better product. I think that might have been a new kind of culture.

Dobkin: And at the same time, there is a lot of infrastructure for the product. If they needed help, it was there right away, including the design engineer, if needed to fly out to customers to help them.

EDN: When I was a circuit design engineer in the 1970s and 1980s, I would get calls from the receptionist when a vendor in the lobby wanted to see me. If it was the guy or gal who just would drop off literature and disappear when I needed help, then I would ask that they leave the literature for me. But if they were the guy or gal who would stay close and support me after I bought the product and put me in touch with the factory people who would solve my problem, then I would see them even if they did not have an appointment. Designers are busy people trying to get products out the door within a very tight schedule framework.

Swanson: Well that has been so important to us, but obviously we have great products. But competitors have great products too. In this analog-challenged world, we have been so good at transferring our knowledge leverage to customers. I will occasionally see the big customers at social events. They always tell me how much they depend upon our design and field people. Our field people are brilliant FAEs. I tell the customers that those technical experts are what you are paying for. Look at our P&L statement, SG&A, and R&D. Manufacturing costs are less than that. So don’t open up our part to see how big the silicon is or how big the package is or how many leads are on it. Look at the things that you love about it. That’s what you’re paying for. They might go away grumbling but thinking about that.

Dobkin: In terms of efficiency, we can’t design a product without good test engineers and good product engineers. It’s the whole package that gets the product out into the customer’s hands and keeps it running smoothly. Right from the beginning we realized that we needed good techs, good product engineers; the whole thing. Also, our products have longevity. It’s nice to have engineers that also have longevity in case we need to answer questions about something that happened 10 years ago.

The video below is an excerpt from my interview with Swanson and Dobkin. I especially like Swanson’s phrase which in part sums up their success—“better before bigger.” The excerpt is based on the following question: “The other things you bring to the industry are your knowledge base; the three volume set of “Analog Circuit Design,” the excellent data sheets, and application notes. I remember reading EDN early in my career and smack in the middle of the magazine was a Linear Technology Design Notes application article.”