Avi Cohen Creating Value In Technology Companies

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1. Creating Value in Technology Companies - Lessons Learned… Avi Cohen, COO, ECI Telecom, Formerly, Group VP, KLA-Tencor June 2008 Legal Disclaimer: This presentation…
  • 1. Creating Value in Technology Companies - Lessons Learned… Avi Cohen, COO, ECI Telecom, Formerly, Group VP, KLA-Tencor June 2008 Legal Disclaimer: This presentation is privileged and confidential. It is intended to be read only. Any other use or distribution of this material, in any form, is strictly prohibited.
  • 2. Lessons Learned 1985 - 1994 1994 - 2006 2006 - ALLEGRO KLA Instruments Accelerating Yield • • Founded ALLEGRO in Founded ALLEGRO in • • President of KLA President of KLA • • COO and Deputy to the COO and Deputy to the early 1985 Instruments Israel Instruments Israel CEO early 1985 CEO • • Acquired by Octel • • GM OMD and President GM OMD and President • • 9-2006 ECIL(NASDAQ) Acquired by Octel 9-2006 ECIL(NASDAQ) Communication in 1991 KLA-Tencor Israel 5-97 KLA-Tencor Israel 5-97 Communication in 1991 to 3-03 • • 10-2007 LBO 10-2007 LBO • • Stayed with the to 3-03 Stayed with the • • Sr. VP 1-02 company till late 1994 company till late 1994 Sr. VP 1-02 • • Octel was acquired by • • Group VP, Officer and Group VP, Officer and Octel was acquired by member of Executive Lucent in July 1997 Lucent in July 1997 member of Executive Staff 8-03 Staff 8-03 for $1.8B for $1.8B 2
  • 3. 1. Strategy before tactics Strategy is about choosing your direction and implementing it relentlessly Strategy provides a mechanism for an organization to see what is essential and to stay focused Strategies must be built on a deep, rigorous and iterative cycles of understanding that consist of: Reviewing the facts Asking all the right questions Engaging in strong debate Learning Making decisions A well articulated strategy translates that understanding into a simple, crystallized concepts that guide all efforts Provides an internal platform for decision making, consistent prioritization, trade-offs and execution Resource allocation Making choices about how to compete 3
  • 4. Confusing strategy and tactics An “annual budget process” is NOT a way to create the company’s strategy… Budget is not about how much to allocate to each activity or to manage costs Budget is about determining which activities best support the company’s strategy and should be fully strengthened and which should be eliminated entirely As a result, the “budget” process is a tactical tool that can only follow a set strategy 4
  • 5. 2. Differentiation drives returns Customer preference is driven by differentiation Differentiation is about decommoditizing and therefore provides pricing power Sustainable differentiation creates competitive barrier and is the basis for economic success Differentiation must become a culture and a way to manage the business 5
  • 6. Connecting strategy and differentiation “When you think about strategy, think about innovation, technology, internal processes and service add-ons – whatever works to be unique” (Jack Welch) “Everything that gets done in a company is either core or context” (Geoffrey A. Moore) Core = any process that contributes directly to differentiation creating sustainable competitive advantage Context = all other processes required to fulfill company’s commitments Context delivers diminishing returns Organizations that focus on context become uncompetitive “Strategy determines what is core to a company’s competitive advantage” (Geoffrey A. Moore) 6
  • 7. 3. Evolve your company’s core competence In today’s global economy, technology advantage is often a temporary state Today’s core become tomorrow’s context… (Geoffrey A. Moore) Companies MUST evolve their core competence or risk seeing their business being marginalized When current core competence cease to differentiate, resources MUST be shifted to “new core” Context Core 7
  • 8. 4. Culture of constant innovation Globalization Deregulation Pressure to Innovate Commoditization Protect against the forces of inertia… force extraction of resources from context to core Do not accept a culture of “comfort” or “cruising along”… keep the organization agile not allowing to settle for a “small improvements” mentality “Even if you’re on the right track, you’ll get run over if you just sit there.” Will Rogers (1879-1935) Create a roadmap for differentiation and discontinuities (“changing the rules”) Separate effort Innovation Protected budget Inertia 8
  • 9. 5. Technology as a growth engine Technology is an accelerator for the strategy (vs. being a strategy on its own) Do not allow new ideas/ technologies to run your business Figure out how to apply technology to a rational concept that reflects the company’s strategy Your technology group motivation must not be the fear to be behind but rather the desire to turn unrealized potential into results 9
  • 10. 6. A culture of discipline Discipline ≠ Bureaucracy Bureaucracy compensates for lack of discipline and it decreases creativity and entrepreneurship A culture of discipline is built around the coexistence of clear constraints with giving people freedom, responsibility and authority within the framework Business process ≠ Rigidity High Process ≠ No innovation Hierarchical Great Process ≠ Slowness Organization Organization Culture of Discipline Bureaucratic Start-up Organization Organization Low Low Culture of High Entrepreneurship 10
  • 11. 7. Simple organization Construct clear roles and responsibilities (R&R) for the organization minimizing vagueness Organization should reflect the best structure for implementing the defined R&R It should be crystal clear who is responsible for what results… Organization charts should be as flat as possible. Layers add unnecessary complexity and cost Managers should have 6-7 direct reports and 8-10 once they are experienced You get the most out of your organization when reporting relationships and R&R are very clear 11
  • 12. 8. Culture of team work Team work is a MUST for talented teams to realize their full potential Teamwork remains a competitive advantage, both because it is powerful and so rare >2 Building a strong team is possible but it is painfully difficult to put into practice day after day Keeping the collective results and the “best of the company” as THE only compass Organizations must overcome the behaviors that corrupt teams and produce dysfunctional politics within them Protecting “bad apples” always backfires, cause resentment and undermines trust an environment that does not help a company win 12
  • 13. The Five Dysfunctions of a Team Absence of trust leads to fear of conflict, lack of team commitment and avoidance of joint accountability. The outcome is inattention to collective results. Status & Ego Results Low Standards Accountability Ambiguity Commitment Conflict Artificial Harmony Trust Invulnerability Source: The Five Dysfunctions of a Team by Patrick Lencioni 13
  • 14. 9. Leadership does not mean being the smartest or knowing everything… "Good business leaders create a vision, articulate the vision, passionately own the vision, and relentlessly drive it to completion.” “A leader's role is to impart vision and a healthy corporate culture, build great people and great teams, and show them how to lead. A leader's job, is not to be ‘the smartest person in town’, but to hire and inspire the smartest people in town.” Jack Welch (1935- ) 14
  • 15. Thank You! avic.cohen@ecitele.com
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