The Right Way For You To Handle A Competitive Threat
When I worked at Maxim Integrated Products, we used to have our planning meetings over at the Peppermill restaurant in Cupertino. I think it’s gone now, but it was a great venue for us to meet at.
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The Peppermill was great because, well, there weren’t a lot of people in the restaurant at 8:30AM, so we could be ourselves. That meant we could have the animated discussions we always had with lots of yelling at, and over, each other.
The breakfast meetings were always on a Tuesday. The usual group was Jack Gifford, the CEO, Dave Fullagar, the VP of R&D, Len Sherman or Charlie Allen representing technical applications, and whatever business unit was presenting.
I would attend this meeting about once a month. And this particular Tuesday, I brought with me Dave Bingham, one of Maxim’s founders.
Dave was a brilliant engineer. Dave’s brilliance came from a combination of wicked creativity combined with a healthy sense of pragmatism.
About one month prior, Dave had come up with an unbelievably clever way to cut our production costs in half on our flagship product line. The insight Dave had was a way to take advantage of the tools we were using to fabricate our chips to cut the size of a die in half using the same process technology.
It was a totally new way of doing things that would help us sustain our competitive advantage versus Analog Devices. ADI was putting a lot of pressure on our pricing at the time to try and gain share.
I walked the group through Dave’s idea. It was pretty simple to explain the cost savings we would get at each step. Dave helped explain the technology, and how we would implement this in production.
There was no yelling at this meeting, only stunned silence. The idea was elegant and unbelievably simple to implement.
Speed is the one thing that's impossible for a larger company to defend against.
The only questions Gifford had were, “How quickly can we get this into production and how do we handle the changeover from the old technology to the new technology?”
Within three months we were in production with the new technology, and we were phasing out the old technology.
We were in a race and we knew it. It wasn’t that we were worried about ADI using the same idea we had. They were using a different technology and the idea wouldn’t help them.
The concern was, and it always is, what else can your competition do to hurt you?
A few years later, our other large competitor in the space, Linear Technology, came up with a major breakthrough by developing 10kV ESD structures for their devices. This was a big deal. These devices connected to the outside world, so a human could touch the device and potentially damage it. Linear's breakthrough eliminated that possibility.
We were caught completely flat footed.
We could see that we were vulnerable to losing our whole communications IC business which was a large share of the company’s revenue at the time. All Linear had to do was go to the major laptop vendors, show them what they had, and we would lose a customer base we dominated.
We had to act fast. We reversed engineered their breakthrough, and then developed a plan to one up them by developing 15kV ESD structures.
The only wrinkle is we had to develop a new process technology, something that usually takes well over one year, to do it. We developed the new technology and got to production in 6 months. I was worried every day that Linear would wake up and do the right thing, but they never did.
The Maxim/Linear Technology rivalry was friendly. We all knew each other. So when we came up with our new ESD technology we quickly got feedback that they were surprised at how quickly we had responded.
In fact, Linear didn’t think we had the technical capability to respond, yet we did.
That’s the lesson: Always assume your competition is smarter than you are.
Sitting on a great idea will get you killed. You have to move fast because there is another group, just like you, that is smart, hungry, motivated, and ready to eat your lunch.