Better before bigger: How Linear Tech was built
During my interview I was very intrigued as to how these two different personalities with two different skill sets would seamlessly complement one another’s answers to my questions in an alternating manner that painted a picture of who they are and how they have grown up in Silicon Valley acquiring skills and insights into how to start a company and bring it to such a prominent position in the electronics industry.
Pictured above are Bob Swanson, chairman of the board (left) and Bob Dobkin, CTO (right) who have been in the electronics industry since the early days of germanium transistor technology.
The talents and experiences of these two leaders, in my estimation, has brought about a corporate culture unlike most of the companies in the electronics business today. This culture encourages innovation and strongly values and recognises the company’s engineering talent so that when a good idea emerges, management recognises it and “gets out of the way” to allow the engineer to bring it to fruition.
Read on and prepare to witness unique insights into early Silicon Valley, a tutorial in how to start a company and create a successful corporate culture that lasts for decades, and a lesson regarding management-level cooperation and success.
EDN: I am so impressed with Linear Technology’s longevity, but in particular the fact that the same two men who started this company 34 years ago still guide the company and have created such an employee-friendly environment from day one in which to thrive and especially value their engineering talent. That philosophy is still in effect at your company and you guys are still influencing this company both in business and technical advances.
During my 42 years as an engineer, I had some experiences at some of the companies at which I was employed where engineers were really undervalued and under-appreciated. At one company, the engineering department was told by a manager there that, “You are all overhead.”
Swanson: About three or four years ago we invited all the sales people to come in to headquarters for a sales meeting. The area sales managers come in every six months, but it was some time since all the sales folks were out here. So I was asked to give a talk to the guys and tell them about the beginning of the company. And they wanted it to be motivational. So I was thinking about ‘What is it about Linear 30 years later that enabled us to avoid mistakes that other companies that I worked for made?’
So I told the story about three other companies that I worked for that weren’t just other companies; I worked for them when they were at the zenith of their success—but it didn’t last. One was Transitron; and what happened to Transitron? During the first recession their sales went from $60M to $38M, but the one thing they weren’t worried about was engineers. Engineers were a commodity; they could get in a plane and go to London; they could go to Holland; they can go to France and get all the engineers they wanted and by the way, pay them half the wages that US engineers make. So that was my first appreciation for my thinking that when you run a high-tech company, you had better appreciate your engineers—especially the exceptionally good ones. They are not overhead, but a special, special asset.
Then I went to Fairchild Semiconductor during the “glory days” with Bob Noyce and all those guys when Andy Grove’s business card said that he was a Device Engineer. So this was really the ‘glory days.’ They innovated everything—this was magic and I was a young guy there. And then that thing fell apart in a little over 10 years. I was too junior to really know what was going on but the rumors were that Sherman Fairchild, who was a great entrepreneur in his own right, didn’t understand the chip business, didn’t understand the investment, just didn’t understand how fast-moving it was and how you had to fund it. The whole thing imploded.
So I went with the guys that went to National at the same time that Andy Grove and company started Intel. What was the lesson there? The lesson was that top management had better understand that this is a fast moving business and there are investments to be made. And if you don’t make them —you’re history. But you can’t overspend either, so there’s a balance.
So then I went to National and that’s when I first met Bob Dobkin. It was just like being in the Marine Corps, as people said it would be—it was so ‘gung ho’ there, everything was great and when it came to analog we were clearly the leader. Then, about two years before we left, they went to matrix management and all of a sudden there was all kinds of bureaucracy and politics and people like Bob and I got demotivated. It was way more than the fact that they didn’t know where analog was going as a future. So when we started Linear, we said that we were not going to make those same mistakes.
Dobkin: And analog is unlike digital systems. When you make an analog product it takes 6 months to get it out to the customers, another 6 months for them to design it in, and another year for their product to get out. So you really don’t see any business for 2 years or maybe three years on a new product. You have to understand that in this business and be able to handle that. You have to think a couple of years ahead and have them ready when they are needed. Management has to understand that these products are not going to sell in 3 months.
Swanson: Especially hard when the design cycles become 18 months or more.
EDN: Both of you have been in the electronics industry since the early days of germanium transistor technology and have grown and excelled personally over the last 50+ years as successful engineers as well as founding Linear Technology and bringing that company to a very profitable and influential position in the analog semiconductor community in so many ways. To what do you attribute this successful longevity? I can’t think of many, if any, electronics companies that have achieved such a long and successful run with the same leadership and engineering-oriented corporate culture in this tough industry of ours.
Swanson: When I was at National and ran their analog group, there were three design groups: the advanced linear group that Bob Dobkin ran, standard linear ICs that Jim Solomon ran, and a third one that was consumer linear integrated circuits (CLIC) headed by Tim Isbell. A bunch of us were getting frustrated near 1981 and I decided I was going to leave. I was thinking “How do we get this thing started? How can we possibly succeed? Especially in an analog business where a lot of people think it’s last year’s technology. So I said ‘What can we do better than everybody else?’ and ‘Is there anything we can do better?’ Because if we can’t answer that question yet, we might as well stay at National.
The choices I had involved Bob (Dobkin), who was running the advanced analog group, but he was making really ‘slick’ general-purpose things like voltage regulators and amplifiers, and so forth. The other groups were working on things like speech recognition and speech synthesis and a lot of way far out in time projects. So, if we were going to get this company off the ground, we couldn’t have projects that took five years to get any sales. His (Dobkin’s) products went to market quickly and saw sales after a year and a half. OK so that’s three years and not 5, 6, 7, or 8 years. So I said let’s start this company. Bob (Dobkin) is the guy that I want to start it with!
Bob Dobkin pointing to his 43 patents on Linear Technology’s Patent Honor Roll.
Dobkin: It’s important that when you’re coming up with products for a new company, you have to give the customer a benefit. Right from the start we tried to give the customer a benefit in performance, we provided support, and when complications came up, we were there to help the customer. And it’s Bob’s (Swanson’s) fault that we have efficient manufacturing, good delivery, and we never gave the customer anything to complain about regarding the products.
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.
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.”
EDN: What I see quite a bit is acquisitions and technology flowing out of this country. We don’t really manufacture much anymore, but technology was big for us.
Dobkin: We manufacture our own wafers; to be a good analog supplier we need to have control of a lot of specialized processes that don’t come from foundries. We’ve got processes that we developed specially designed for analog. 40 years ago everybody did analog on the same bipolar process; it’s not the same now.
Swanson: One of the challenges going forward is you can’t afford to spend $2B to set up a new fab to support $100M of business. There are some things that good business sense says that ‘You can’t build a fab to do that.’ But here’s a $100M piece of business we can make money at, but we’ll have to depend on somebody else’s fab. But it is true today that 95% of what we do—part of the secret sauce is in the wafer fab.
Linear Technology’s high speed ADCs were touted on the cover of this May 10, 2001 edition of EDN. Jim Williams wrote articles for EDN from May 5, 1975 to 2011. See his work here.
EDN: Well, you guys have been around a lot of years and that says a lot about your company and the respect it has in the industry.
Swanson: When you think about it, we have to be proud of what we’ve accomplished. And a lot of it was, ‘Wow, this is what we said we would do.’ We set these high goals. Some say ‘Nobody sets goals nowadays,’ but then a little while later they say, ‘We’ve almost done it!’
Probably the greatest thing is the culture we have with these really bright engineers who choose to work here. They could work anywhere, and they have rough days and good days and there are times when we won’t do exactly what they want, but they get most of what they want. And they feel that it’s an inspiring environment and they stay with us, and they innovate, and they do things that other people can’t do.
EDN: It’s so refreshing for me to witness your unique corporate culture when I meet with your marketing engineers and design engineers, a real bright group, and I can see that they are all very happy here at Linear. You listen to all their ideas and give them opportunities to run with an idea. It’s almost, but not quite, like a mom-and-pop organization—certainly a close relationship between management and designers.
Swanson: We need to keep that. National got to be a $1B company and they said ‘we have to have matrix management…’ they totally messed things up. Even then I thought that just because we are a $1B company, I don’t understand why we have to change anything. Some of those things they wanted to change were the reasons we got to $1B. Why would you change that? Well they did anyway.
So, I think we can go a long way with this structure. I hope that when I’m gone that they don’t change very much of it.
Dobkin: At our size we’ve kept the same structure that we had when we were smaller. And we’re growing with it. And I think the management here has seen that this structure works. There’s no reason to change it.
Swanson: The only thing we changed a few years ago was when we got to a point where we said ‘Everybody can’t report to Bob (Dobkin).’ We broke the company into product groups: power, signal conditioning, and so forth. Then power got so big that we split it in two because if you’ve got two really smart guys—it’s got to be better than one smart guy. So we get to the point where we dice things up to an area where they can really focus, because we have to beat the competition.
Dobkin: And we have to keep the customers happy.
Swanson: With good people, you let them do the right thing and stay out of their way and help them when they need you to be there.
Dobkin: Our attitude in the beginning was to help the customer. Even if he doesn’t buy your product, he will come back to you next time. Do him wrong and he will never come back to you next time.
Swanson: I remember in the early days, our FAEs would design in a TI $0.50 part. I would say, ‘we have a $1 part—what are you doing?’ The FAE would say that ‘He doesn’t need our $1 part, Bob [Swanson]. We have 3 of these really good linear parts designed in and he needed a linear regulator, and the $0.50 part is just good enough and if I try to force a part on him that he doesn’t need, it will come back to bite us.’ Well, I reluctantly gave in to that.
EDN: It’s great that that type of culture filters down to all your employees from you guys.
Swanson: That’s a culture I had to learn. I used to say ‘Hey, we’re in business here and we could be out of business and our success isn’t official—what do you mean you designed in a TI part?’ They convinced me that it was the right long-term thing, and we’re not going out of business next month!
Swanson: I’ve learned over the years that designing in the parts that are the right parts that the customer needs and not stuff that they don’t need—in the end goes to our credibility.
EDN: I had interviewed a bunch of people about the early days of early IC technology when I wrote my first feature article for EDN… and the new engineers nowadays have great tools like simulation, etc., but what I see in my travels is that engineers are losing that feel and insight for the transistor and what it is doing inside that IC. So many designers just plop down an RF amplifier or data converter without a full understanding of the functionality and what’s happening inside that IC. Simulations are excellent in today’s electronics world, but I find that many designers do not know the true limitations of that tool. What do you think about that with regards to IC design and also circuit design? First let’s look at IC designers as a case.
Dobkin: For a lot of analog functions, the simulation is only so good. You still have to understand what you’re doing when you make an IC. Simulation is much better than it used to be, but there are still some things that don’t simulate, like the interaction of thermal effects in power devices. You have to know what you’re doing there. When you’re doing really high speed circuits, you need to understand what’s going on because, not only are you simulating transistor circuits, but you’re simulating the package and everything outside to make it actually work properly.
From the customer’s point of view, many of them know more about IC simulation than transistor circuit simulation. Some do, of course, but not to the depths that you need to design an IC. Plus, if you’re designing an IC, you’re using lots of MOS devices, as well as Bipolar. The small signal MOS devices are not readily available as discrete devices. We, as designers, have to know the transistors because that’s our business. We have to know how to simulate them and when the simulation doesn’t work, we have our own SPICE internally that’s used, as well as commercial simulators. And we also give our LTspice out free to our customers so they can simulate our models when they’re doing a system design. We probably have the world’s most popular SPICE with over half a million downloads.
Swanson: That’s an interesting point that Steve brought up. What I learned in the early days is that the analog guys really had to understand the silicon, more so than the digital guys did. When we talk about the digital guys, sit them down at the computer and they can immediately design things. And I understand, over the years, how we’ve had to advance our tools because the products got so complex that engineers said, ‘I can’t do this anymore without these tools.’ And I knew the tools were imperfect, but the question you asked was, ‘As we deal more and more with better simulation and better tools, are the engineers losing that feel for the silicon that they had to have 15 years ago?’
Dobkin: No (emphatically stated)—they’re not losing it. Circuits are more complicated and they still have to understand the silicon and how it interacts with the transistor next to it. The only thing that we’ve done is that we made it easier to get it right the first time. And there are still things that the simulator doesn’t handle. So we do the simulation and we do it to the best of our ability and then we do the rest of the debugging on the chip because if the simulators were perfect, everything would work the first time. And that happens a very low percentage of the time.
Editor’s note: During this interview with these two industry icons, I sensed that they know their place in the industry and in their company and effectively used the talent of their employees in a way that I personally have never seen in my 42 years in electronics. They are strong, talented, and intelligent leaders, but with a touch of humility and compassion for their employees from which other companies can learn a great deal. There is a really good book written by two Japanese gentlemen (One of them a Nikkei Electronics editor) which says a great deal about the corporate culture at Linear entitled, “The Company That No One Leaves.” This book gives wonderful insight into one of the key reasons this company has had such success over the last 34 years.
I sincerely wish Bob Swanson and Bob Dobkin many more years of success. I know that someday they will want to retire, but their influence on Linear Technology’s corporate culture will carry on to ensure the continued success of their company in the future.