In the Company of Giants

by Rama Dev Jager

  That’s what they told you to do?

  Yes. Cut the workforce in half—outsource, get rid of them all. This fit in with the stockholder value that Wall Street wanted.

  Let’s switch gears and talk about your longevity as a CEO. What motivates you to continue working and to even start another company after such a long tenure at Digital?

  It’s a little complicated. The satisfaction comes not from others seeing or understanding one’s work. It’s in yourself. It’s the satisfaction of seeing the results, even though no one else knows of your achievement.

  It’s commonly said that Ken Olsen lost it, that he didn’t know the mainframe was dead and that the PC would take over the mainframe.

  They still say that even though the world has now determined the mainframe will be here forever.

  I’d like to answer the accusations, which are foolish. Aside from that, the big motivation is seeing something accomplished. I still spend a lot of time designing equipment. I can do things that almost nobody else can do. I have some background in toolmaking, a little in physics, a little in chemistry, and other things. I enjoy putting that all together. I can stay up all night working on it.

  Why does that motivate you?

  As you get older and you pass the normal retirement age, can you think of anything better than having an exciting job? Sitting down and watching television or playing golf rates much lower on the list of accomplishments.

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  KEN OLSEN

  You mentioned that the press said you had stayed too long as Digital’s CEO. When should a manager or an entrepreneur leave his or her company or job?

  That depends on a lot of things—when he gets tired, when the job is no fun, or when he really has lost it. I was on a mission then to show the world how business computing could be done. People within Digital were just too embarrassed to have an old man doing that. The greatest dishonesty was that they destroyed VAX. So few people understand the significance of business computing. Mainframe computing runs reliably every day—no one watches it. It is by far the least expensive form of computing. PCs are the most expensive.

  The stupidity of computer science is such that if you go to any computer science school and ask, “What’s the answer to the problem with computing today?” They say, “The answer is to have faster networks, faster PCs, and big databases where you can mine all that information—and then make graphs.”

  It sounds beautiful. Many companies today are in trouble because of that kind of thinking. It was these kinds of ideas which five or six years ago tagged me as being too old for the business.

  Everybody knew that PCs were going to take over the world yet it’s clearer than ever that the last thing you want is a PC running anything important. Five or six years ago PCs were much better than they are today.

  Like other successful companies, Digital had defectors who left to start their own companies. One of the best known was Ed De Castro and his company, Data General. How do you minimize such defections?

  I’m friends with De Castro now. It’s been a long time—you don’t hold hurts. This sort of thing will always happen. The miracle was that we decided not to sue them, to not make an issue out of it, and very rarely comment on them in public. In retrospect this was marvelous wisdom. Suing them would have dragged on for years. It destroys your heart. Jealousy does terrible things to people—the yellow-eyed monster that eats one’s heart out. Vindictiveness and the pursuit of revenge, just because someone wronged you, is destructive. The wisdom was in not pursuing the issue and controlling the urge for vindication.

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  That takes incredible restraint.

  And it’s logical. Jealousy and vindictiveness are not the best inclina-tions to have because the task is to win business by doing a better job than anybody else. This is what you should spend your energy on.

  Some people thought, “If that’s Ken’s attitude, let’s take advantage of him.” So once in a while we did nail somebody in court. It was usually people who sued for trivial things like a real estate activity and figured that Ken could be taken advantage of. But we didn’t do that in the situation you mentioned. It would have dragged on forever.

  So what you’re saying is you can’t keep people from taking company knowledge to start their own companies.

  No, you can’t. You must know that it’s a part of business. Certain things can’t be helped, and you live with them. You get mad for a while but it’s not a very useful emotion.

  Ed came to see me not long ago. There is no point in even remembering the incident anymore. He has a jet airplane and invited me to go flying with him. It’s so much better that way. It’s so much better not to hate people. Those who do often end up suffering quite a bit.

  You’ve had a long career. Any regrets?

  Oh yes. As you can guess, I think a lot about what I should have done at Digital during my last ten years there. It’s been fun, satisfying, and exciting, but I’m usually more conscious of my weaknesses and mistakes than I am of my successes. In many ways that’s healthy—if you’re blind to your weaknesses you get in trouble. I don’t think about any of the successes at Digital. I look forward to doing something new each day.

  You only learn if you’re conscious of the need to learn. If you conclude you’re great, that’s the end.

  Did that sense ever take hold in you? Is that a regret?

  No. I have a scientific and Christian background. The tradition of science is that you should think clearly enough such that you don’t think you’re great. Also, despite how things are presented today, tradi-

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  KEN OLSEN

  tional Christian background says that you really have no reason for pride. St. Paul said almost sarcastically, “What have you got that you weren’t given? And if so, why are you so proud?”

  Whatever you think you’re good at is just at the surface of it all.

  There’s nothing you’re so good at that you really understand completely. When you get your degree in computer science or your degree in business they tell you, “Now you know it all. You don’t ever need to open another book.” I’m sure they do this because I’ve seen the results of people whose attitude is that they know it all. That attitude is so contrary to science and traditional Christian views it is obviously unwise.

  Some people don’t understand this: designing a financial system, designing an organization, designing a circuit or a computer diagram are almost the same thing—they generate the same satisfaction. The satisfaction is the same but there is much reason to be humble because there’s so much one doesn’t yet know.

  Success in business is so fragile—human beings are involved, and the market is involved. People who follow somebody else’s wisdom without thinking about it will miss these things. Being critical and analyzing issues ahead of time is satisfying. You must have humility if you’re trying to figure things out differently from everybody else. But most people don’t think at all. They fall in love with phrases. The best assumption to have is that any commonly held belief is wrong.

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  BILL HEWLETT

  Hewlett-Packard

  PEOPLE ARE EVERYTHING

  Bill Hewlett and David Packard really are the patriarchs of Silicon Valley. Not only did they create a company which now employs over 100,000 people worldwide and is considered the father of the industry, they created a company with values—a company that treated its employees right, and had genuine concern for their welfare. They created a company with a management style that served as the model for the rest of Silicon Valley, and consequently, the rest of the world. Even at age 84, however, Hewlett is far too humble to accept such accolade without remonstration. And perhaps that—and not sheer wealth—is the mark of a true legend.

  Hewlett was born in Ann Arbor, Michigan in 1913, but grew up most of his life in San Francisco. Hewlett’s father, a physician, taught at Stanford Medical School. When he was just twelve, his father died
of a brain tumor. Hewlett often reminisces that if his father hadn’t died, he might have chosen a career in medicine. But, instead, Hewlett chose to become an engineer.

  Bill Hewlett met David Packard in the Fall of 1930 as a 225

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  BILL HEWLETT

  freshman at Stanford University. With the steady encouragement and guidance of Professor Fred Terman, Hewlett, Packard, and two of their friends—Ed Porter and Barney Oliver—were able to start a small company from their home.

  On August 23, 1937, Hewlett and Packard had their first offi-cial business meeting to develop “tentative organization plans and a tentative work program for a proposed business venture.” In 1939, they formed a partnership and flipped a coin to determine the name order for their newly hatched venture.

  Hewlett won the toss.

  After some time, Hewlett and Packard found a two-story house in Palo Alto that they decided to rent. The house had a one-car garage, which Hewlett and Packard decided to use as their workshop. The garage is now a California Historical Landmark known as the “Birthplace of Silicon Valley.”

  According to contemporary business school strategy, Hewlett and Packard’s initial business approach was fairly unstrategic: they contracted out jobs, manufacturing custom devices such as a foul line signal for a bowling alley and a motor controller for a local observatory.

  But, they soon realized that an invention of Hewlett’s, the audio oscillator, held promise as a potentially viable commercial product, with applications in medicine, defense, and geo-physics. Hewlett’s audio oscillator was HP’s first major product, and it became a big hit. The company grew like wildfire.

  In 1957, HP went public, and its commitment to innovation allowed HP to diversify its product line substantially.

  Nowadays, the HP behemoth makes thousands of different products.

  Yet, during all of this growth, Hewlett and Packard maintained a commitment to their employees. They developed a code of values, called “the HP Way” which emphasizes a commitment to innovation and customer focus while at the same time fostering well-being in its employees and the community at large. The HP Way serves as a model for many companies today, both within Silicon Valley and throughout the world.

  It is indeed difficult to overestimate Hewlett-Packard’s contribution to Silicon Valley’s emergence as the world leader

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  in entrepreneurial activity, job creation, and technology innovation. And a large part of HP’s success can be attributed to Bill Hewlett. With his humility, generosity, and sincere concerns for the welfare of employees, Bill Hewlett is truly a legend, and a role model for generations of future managers.

  We interviewed Mr. Hewlett at his home in Portola Valley, California.

  “You usually remember your successes and not your

  failures.”

  One of the most logical places to start is your association with Fred Terman, your professor. What was your incentive to take his advice and start a company and take a leap?

  We were all in the same radio engineering class in college. The class was divided into two groups, one was the ham radio operators, and the other was the non-ham radio operators. Dave and I were in the ham radio group, and a very close friend of mine, Ed Porter, was also in this same group. Dave soon started taking graduate courses in this area.

  Realize that this was in 1939, and that was no time to be starting a company. But it was almost as if we didn’t have anything else to do—I think that it was probably the supreme optimism of youth. We were well trained, and we knew we wanted jobs, but we didn’t know what they were.

  A lot of people say that you need a completely original idea in order to start a business. Do you think that this is true? How did you get your ideas to make particular products?

  We certainly didn’t have an original idea. Our original idea was to take what we could get in terms of an order. Most of our initial jobs were contract jobs—ranging from just about anything. We did a random number of projects. I had worked on an audio oscillator. So, we wrote to a number of people around the country for orders, and surprisingly enough, we got some. And that’s how we started in the electronics business. It was an opportunity provided for us by a course in electrical engineering.

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  BILL HEWLETT

  It was Dave’s job to market it, and my job to produce it. So, he was the entrepreneur and I did the work.

  Once you started the business on Addison Way, did you worry about competition when you became your own company?

  There wasn’t really much competition when we were doing the contract jobs. There wasn’t much until we got into the oscilloscope and the oscillator business. There was a company in Boston called General Radio. The head of General Radio was a very cooperative guy. He said to us, “General Radio needs competition.” He gave us encouragement and suggestions, which is unusual for a competitor.

  One of the things that often gets overlooked in the history of HP, because it was such a success, were any mistakes that you made. If you were advising someone who was starting their own company as to pitfalls they should avoid, what would you tell them?

  Well, I’ll tell you that you usually remember your successes and not your failures.

  Hmm. I don’t know. It wasn’t a clear channel from the garage to the computer—it was a big jump. And yet that was a mechanical jump—we did it step by step. We did it because our customers wanted us to do it. First, they wanted instruments, and then they wanted computers, and we did what they wanted. So it is really important to find out what your customers want, and do what they want.

  You went away for a while and served in the war. How did that affect your role in the company?

  When I left we had fifteen people, and when I came back, we had 250.

  So, Mr. Packard was doing something right.

  Yes. But, most of these people had second jobs. So, after the war, we cut down to 80 people. And that was a tough decision.

  How do you handle that?

  I guess the only thing you can really do is think of the alternative. If you don’t let some people go, then the company will go bankrupt, and

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  you won’t be able to support anybody. It also helps to choose the best people and only choose those that you really need. The other thing you do is to really learn how to get the most out of your people—and that doesn’t mean squeezing them, but rather creating a place for them where they like to work.

  Let’s talk about HP’s culture. Everybody in the Valley admires the culture at HP and part of that stems from the HP Way. How did you decide to choose the objectives you chose? Was it a long, drawn-out process?

  We had a management team, and we went to Sonoma one winter, and sat down over a weekend and talked about the company. At that time, we wrote down the corporate objectives, and really analyzed them. But, most of it is really common sense. The customer comes first. Without profits, the company will fail. A lot of these things are really just common sense written down.

  We interviewed Ken Oshman, one of the founders of ROLM, and he attributed ROLM’s culture to you and the HP Way. The whole idea of workforce diversity and progressive policies towards employees was pretty unusual in the mid-1950s.

  Well, Dave and I did a lot of different things for the company at the time—keeping the books, making sure the product worked, developing new ideas. And, our friends were the ones that we worked with.

  They weren’t employees, really. They were our friends. And so, it was important to us to understand how they felt about things in the company. It was important for us that all the employees were treated well and enjoyed themselves.

  There was an instance where somebody became ill and had to take some time off, and needed money to pay his health bills. We discussed the situation, and we decided that the company should take care of it
. But then, we thought to ourselves, “These types of things happen, and employees should be covered in these types of situations.” So, we decided to offer health insurance for all our employees. [HP was one of the first companies to do so.]

  So, ultimately we helped our employees. And, our employees helped us.

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  BILL HEWLETT

  Let’s talk about the centralization issue. In 1990, you and Mr. Packard felt that the company was becoming too centralized, so you went back in and instituted new training. How did you know that it was becoming too centralized?

  The system was just overloaded. When you wanted to hire a new sec-retary, you had to go through five different levels. Overhead was killing us, and we couldn’t afford to do this. At that time, Packard and I were retired, but we saw this happening. We said, “This is ridiculous! You can’t get a decision made! Something is wrong with the system.” So, we went back in and cut the decision time down and removed a lot of needless channels.

  What was your guiding principle for selecting the right employees?

  We didn’t have business schools back then. And, we really had two types of employees: business employees and technical employees. We really tried to understand each other and complement each other.

  For example, Barney Oliver was an excellent scientist, and Noel Eldred was an excellent manager, so it was obvious where each person’s expertise was.

  You ran HP in the 1960s and 1970s. What do you think your strengths were as a manager?

  Well, I learned from Dave, and Dave and I got along. I was really a technical guy in the beginning. And, Dave was a great manager.

  “Getting along with Dave” is not an acceptable answer to us. ( All laughed. ) What do you think your strengths are, really?