Leadership Requires Continuous Reinvention of Yourself and Your Company
Date: Thursday , December 02, 2010
Leadership means being the best at what you do, but it’s much more than that. In my view, leadership involves looking ahead at an inevitably changing business landscape, assessing what will be required to enable your company to continue as a leader in that changed environment, and then making the hard decisions to get you to that stage. It is a tougher task than continuing to be the best at what you do. It is also a riskier task, because it entails reinventing yourself and the company, moving beyond what you do supremely well and taking on new challenges that are not your core competency.
Those new challenges, which demand the development of new core competencies, may involve dealing with new technologies, new marketing or distribution models, new cultures. Moving in this direction can feel like going against all collective wisdom. You can end up with everyone (shareholders, advisors, sometimes even directors and employees) recommending that you and the company should continue doing what you already do well. Sometimes you give yourself the same advice.
This isn’t surprising. After all, executives have become successful managers and leaders because they have developed certain skills. They are understandably comfortable with success achieved, and would prefer to continue doing what they already do well. The same applies to every employee in the company.
Inspiring the company to go in a new direction is much more difficult than inspiring everyone to do better what they already do.
But reinvention is essential if you want to survive, not to mention continue as a leader, beyond today and even tomorrow. The more successful you are in one generation, the less likely you will be a leader in the next one, because the bigger the danger that you will keep doing what has already worked brilliantly for you. This is the ‘Innovator’s Dilemma’, articulated eloquently by Harvard professor Clayton Christiansen. On the other hand, if the company succeeds in reinventing itself, the rewards are enormous.
You can see how this has played out in the semiconductor industry, where I was a senior executive prior to my current role as CEO of Mentor. With a 35 percent annual decrease in the average cost per transistor, new applications are constantly emerging.
Companies that take the lead in each new technology soon become leaders in the total semiconductor market as the new technologies provide an ever larger share of the market growth.
This is why leadership in the semiconductor industry has been so dynamic. Every decade, the composition of the top ten semiconductor companies changes because new technologies emerge, usually driven by new companies. More than half of the semiconductor companies who have been at some period listed in the top ten have dropped out along the way (only Texas Instruments has remained in the top ten throughout semiconductor history).
Keeping a spot in the top ten has demanded continual reinvention because the technology periodically undergoes radical changes. For example, in the 1950s the top ten semiconductor companies were leaders in the design and production of germanium and silicon transistors. In the 1960s leadership required expertise in bipolar integrated circuits. In the ‘70s metal-oxide semiconductor (MOS) memory was the key technology. The ‘80s were all about microprocessors, the ‘90s were dominated by the system on a chip (SoC). The 2000s became the fabless decade. And going forward?
If you look at what leading companies are doing today, you’ll see they are reinventing themselves with an eye to the future. Take Intel, for example. While the company’s core strengths are based upon a totally different set of competencies, Intel is now working to become a leader in areas like wireless communications and embedded processor design and marketing.
Texas Instruments has reinvented itself several times as its businesses commoditized and had to be rejuvenated. This has occurred by successful transition from transistors to integrated circuits (ICs); from commodity ICs to digital signal processor-based SoCs; and more recently to analog as the wireless baseband market commoditized.
Apple is another example of successful reinvention. The company first made its name in computers. With its introduction of the iPod and then the iPhone, Apple expanded beyond its core competency into new areas. Significant increases in gross margin have followed – the reward for reinvention.
Mobile phone giant Nokia started out in the nineteenth century making paper and wood products, then added rubber products and cables. Eventually it expanded into electronics and by the 1980s was playing a pioneering role in the evolution of mobile communications. IBM used to be known for big mainframe computing systems. From there they led the way in personal computers, and now the company has a large services component.
The pattern can be seen in all kinds of industries. You cannot rest on your laurels, no matter how impressive they are, if you want to have continued success and profitability. Companies that are leaders for the long haul know this.
At Mentor Graphics we continually question ourselves. We ask whether what we are doing is similar to what our competitors are doing. If it is, we consider whether we need to do it at all. And we deliberately target areas where our competitors are not playing. We moved into embedded software in the mid-1990s because we realized that it was becoming an increasingly challenging problem for our customers, yet no one in EDA was addressing it. We are still the only EDA company to do so.
We are also the first and only EDA company to add thermal analysis products to our portfolio which use computational fluid dynamics to better address systems design issues and help customers solve challenges all along the supply chain, from chips to boards to systems and beyond. For instance, our products have impacted the design of entire buildings such as data centers.
In another example of reinventing ourselves, we applied EDA to the transportation market when no one else was doing so. We saw an opportunity to do for the automotive market what design automation had done for semiconductors and computer and communication systems.
If I may switch from business to history here, I would like to remind you of a story concerning Alexander the Great. When he had conquered an empire stretching from the Balkans to the Nile to the Himalayas, he is reported to have wept because he had no more worlds to conquer. If the story is true, then with all due respect for a brilliant general, I would have to say that he didn’t look hard enough. There are always new worlds waiting, new opportunities – if you are willing to reinvent yourself to take full advantage of them.