PART TWO: DID WE JUST HEAR THAT?

By Peter Zaballos

TALES FROM THE EARLY-ISH DAYS OF SILICON VALLEY

Managing the product marketing at LSI Logic for silicon valley and the greater Bay Area in the 1980s was equal parts daunting and thrilling. I wrote earlier about how groundbreaking LSI’s custom semiconductor technology was and how it helped unleash a massive wave of innovation across the landscape of computing.

LSI made it possible for a startup to come up with a product, and build it in just a few months. We helped lower the cost of starting a company, and shortened the feedback loop to that company finding out of their product hit the mark. And at this point in the computing industry, Apple had proven the merits of a personal computer with the Apple II (launched in 1977), and IBM validated Apple’s direction by introducing the IBM PC (launched in 1981).

But the world (and users) needed so much more to make these tools really productive. Bigger disk drives. Better graphics cards. Support for printers. So these Apple and IBM – along a host of other IBM PC clone makers (Texas Instruments, AT&T, Radio Shack, HP, Commodore,..and literally 100+ others) – stormed into the market to get their share, and add their value.

And the rapidly customized semiconductors we invented at LSI Logic fueled and enabled them all. It seemed like every new customer we met with was planning for a big future – either with a truly novel new product or a quick copy of someone else’s – they all had production volume forecasts in that classic “hockey stick” growth curve

I was a year or two out of college, and my days were spent meeting with customers or prospects, spending time with our salespeople, and crafting six and seven figure revenue deals those hockey stick volume curves promised.

It wasn’t exactly a bubble forming, it was more that entirely new categories of computing appeared on the scene, and there was a scramble to fill the voids this innovation created. The two big areas we saw our customers furiously attacking were the markets for graphics cards and disk drives. I was literally in meetings from 8am to 6pm every day with companies bringing products to those markets.

[And I learned that this would be my “normal” for most of my career. In meetings all day accumulating work to follow up on, then spending most of the night and early morning getting all that work done. This really never changed. In my last two roles as CMO of two tech companies it was the same. All that changed was the nature of the work I was doing, but the pattern remained the same throughout.]

And unlike today’s elastic cloud computing world of software where supply is never an issue, in the semiconductor industry, supply is always the issue – just ask anyone in the auto industry, like General Motors, right now. There’s a finite number of chips on a wafer. A finite number of wafers that can be processed each day. And capacity increases are generally measured in “buildings” – so ramping capacity takes lots of time and lots of money.

So while we were furiously meeting with all these companies storming into the graphics card and disk drive markets, we were also having to assess their likelihoods of succeeding, and try to figure out who would get what allocation of our finite supply of wafers. This was a real issue, 98% of these graphics card companies went bankrupt or were sold for scrap eventually. The same for disk drive companies.

Consolidation in the disk drive industry at a high level

Allocating capacity to a company who failed in the market meant we would not ship those wafers/chips and collect OUR revenue – and as a public company, our revenue forecasts mattered a lot. So every new piece of business of any significance was something we all scrutinized, frequently meeting with the CMO (Bill O’Meara) or the CEO (Wilf Corrigan) before closing a deal.

The flip side of that was every company we met with was convinced (as they should be) that THEIR revenue plan was rock solid. And since it was a competitive market (generally we competed against smaller firms like VLSI Technology, or the custom chip divisions of larger semiconductor companies, like National Semiconductor) we had to fight hard to get orders.

This all created a wild environment, and whenever there’s loads of demand coupled with a constraint on supply, weird behavior starts to show up.

DID WE JUST HEAR THAT?

I remember going to meet with a customer in Berkeley who made popular graphics cards. I went with our sales rep who happened to have recently come to the US from Ireland and I think part of his enjoyment was experiencing this industry in the context of American culture. He was super smart and had an awesome sense of humor. He picked me up and off we went up the freeway to the customer.

The salesperson, Fra Drumm, had been meeting with this customer for weeks, and had been told they were ready to place a $1M+ order for a new graphics chip they wanted us to make for them. And they were also speaking to our main rival, VLSI Technology. It was going to be super competitive. This was an important piece of business we wanted, and we’d had a meeting with Bill O’Meara reviewing the terms we were going to propose and what room we had to negotiate. 

Bill wanted me to call him as soon as we left the meeting to let him know how the negotiation went.

Vintage Gucci Luggage Set

We got to the company and were seated in the Purchasing Manager’s office, made introductions, and quickly reviewed the outlines of the potential order. When we pressed for an indication of how competitive we were the Purchasing Manager waited a bit, and then said that they liked Gucci luggage. And I thought, “not my style, but lots of people like it” and I said something like “that’s interesting, a lot of people love that.”

Silence

The Purchasing Manager again said that they liked Gucci luggage.

I glanced over at Fra real quickly and he gave me a look that said “WTF? Did we just hear that?”

It dawned on us both, at that very moment, that we were being asked to buy this person some Gucci luggage to get the order. 

And we both had the same reaction. We quickly apologized for having to leave, but we had another meeting to get to and would be in touch.

And we left.

I was pretty bewildered. There was no way I was going to bribe this person, but I also wondered if I had blown up a big piece of business over the cost of some luggage, and immediately got worried about the reaction Bill and the other sales leaders would have to this.

This was right about the time that “car phones” were a thing, and when we got into Fra’s car I dialed Bill and told him about the Gucci luggage “hint.”

He asked what I did, and I told him we got out of there as fast as we could.

He had a quick and curt reply: “Good” followed by “that’s not how we work.”

At the time I was relieved. It is only with hindsight that I can see that something I had taken for granted was the integrity of Bill and the other leaders at LSI Logic. I’d only known Bill for months, and never really had an issue like this crop up. It was reassuring at the time, to say the least. BTW, that graphics card company was out of business within the next year. We dodged an allocation bullet there.

But as I progressed in my career I came to realize just how unique the culture at LSI Logic was. How important it was that we built that business with integrity.

At some point in the next year one of the sales reps at a distribution partner got ahold of the price list for VLSI Techology’s products and brought it to our office. For a nanosecond we were thrilled. When Wilf Corrigan found out about he was livid (and he was unambiguous with his anger) and instructed us to get it out of the building. Now. Which we did. Unambiguously.

Going back to Bill O’Meara’s reaction, he provided me with an internal reference for how to behave under pressure, how to keep clarity on what really mattered. At various points in later in my career I worked in organizations where I witnessed salespeople lying to get orders. In some cases lying to me in my role as an executive to get an order. And in those organizations the CEOs did not have Wilf and Bill’s integrity, and reacted with “but we got the order.”

No surprise that I left those companies and wondered how I chose to work there in the first place because it is critically important that you work with people who have uncompromising integrity. Because every business runs into problems. And it’s when you’re facing those problems you want the people above and around you making decisions you can stand behind.

That was the best Gucci luggage I never bought.

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2 Responses to “PART TWO: DID WE JUST HEAR THAT?”

  1. Bill Gascoyne Says:

    Ah, yes, Fra Drumm, TAARCOM, no? I recall Tim Ayres relating a story of how he and one of the Mikes (Ingster? DiIorio?) had to go to a customer and apologize for someone having told them that we could do a precision analog delay line in a gate array. Another time, some Brazilians showed up in the Florida design center to start a design. When told that their NRE hadn’t been paid, they started pulling wads of cash out of their boots that they’d smuggled through customs. Interesting times, indeed!

    Like

  2. PART THREE: WHERE’S MY DAMN PÂTÉ? | Open Ambition Says:

    […] The juncture of success and meaningful failure « PART TWO: DID WE JUST HEAR THAT? […]

    Like

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