Even though I work at Analog Devices, I never have the opportunity to interact with Ray Stata, founder and Chairman of Analog Devices as well as a revered figure in that company. I was really excited when I heard that he would be the keynote speaker at the Technology and Entrepreneurship Forum (TEF) at MIT. Yesterday, Eimear and I attended the event and I took notes of Stata's talk. Here is a summary of his talk:

• You have to have passion if you want to be an entrepreneur.
• Even before MIT, he has always been interested in math and was motivated to start a company.
• He worked for Hewlett Packard after graduating from MIT; but after a short stint there, he founded Analog Devices with his former MIT roommate.
• Analog Devices started as a company that designed and manufactured transistor modules. At the beginning, things didn't go well in the startup. By today's standards, you can conclude that Analog Devices then was a failure. But it started producing products and more importantly established a good relationship with a customer who ended funding the company.
• But even if you fail, you will learn and do it better later. Again, you have to have passion for what you are doing, especially starting a new enterprise.
• It is not the initial business model that the company survived but rather the competence of the organization, and the flexibility to identify opportunities and threats and then reacting accordingly.
• As a startup, Analog Devices struggled with funding and there weren't a lot of venture capitalists in the Boston area in the 60's. Nonetheless, Analog Devices negotiated a deal with a bank who provided $1 as loan for every $1 the company earned.
• When Fairchild Semiconductors introduced the first Integrated circuit operational amplifiers (IC op amps) in the mid 1960's, the performance of these devices were dismal but were very cheap to manufacture. Furthermore, Stata said that the new technology which enable thin films to be deposited on silicon and then be laser trimmed to adjust the circuit resistance was elegant. He was absolutely convinced that IC op amps are the way of the future. But engineers disagreed and complained that the performance of the device was inferior to performance of the transistor modules that the company was making. So they resisted his call to develop IC op amps at Analog Devices. He went to the board and told them about this new technology. Again, the board resisted his call citing that the company was doing well with their current product offerings and there is no reason to adopt a new technology especially when it was still unproven and not very profitable. Still convinced that IC is the way of the future, Stata proposed to the board that he would sell his personal shares of Analog Devices and use the proceedings to fund and start a company that specializes in developing IC op amps. He said that if the startup were successful, Analog Devices can always acquire it later. If the startup fails, it was his loss. The board approved his proposal and Stata started the company that develops IC. Some years later as the IC technology became the dominant design in the semiconductor industry and was fast becoming a highly profitable enterprise, Analog Devices acquired the company that Stata started with his own money. Stata joked: "Well, here is your first case of disruptive technologies, way before Clay Christensen coined the term in his book, The Innovator's Dilemma."
• On leadership, Stata mentioned the 4 pillars of leadership.
  • Sincerity - a good leader doesn't spin and is committed to people.
  • Competence - a good leader uses good judgment.
  • Trust - a good leader needs to know the people to gain trust.
  • Reliability - a good leader has to be consistent in his/her actions.
• Looking for someone who is competent but without the ego is hard.
• Entrepreneurship is hard work. He quoted Thomas Edison: "It's 10% inspiration and 90% aspiration." Yes, that's 90% of hard work.
• Stata is a huge fan of system thinking and has this to say: "Understand how parts work together not how they work individually."
• When creating an organization, create a culture where people play nice and are accessible.
• Building a board is tough. Venture capitalist (VC) is a good member but make sure you check his/her reference.
• VC used to be risk-tolerant but they have now become risk averse.
• Stata ended his talk by emphasizing that entrepreneurship requires passion and a lot of hard work. He has been very lucky to have a very supportive and understanding wife. He continued to give attributes to his wife and family for the support they have given him.

During the Q+A session of the talk, I couldn't resist but to ask Ray Stata the following question:

Startups rather than big companies are more likely to adopt disruptive technologies and take risk in developing business around them. Do you think Analog Devices still has the competence in this area? Also, what do you see the next technology and business model for Analog Devices?

He answered that not many big companies, past and present, have successfully adopted new technology. Strong leadership is needed in making such transition. He believes that Analog Devices can do it. As for the next big thing, he said that we need to follow where the money is. The government is funding research in energy and nanotechnology. He believes that these are hot areas. Overall, I don't think he answered the question fully but it was still a pleasure listening to his talk.

4/22/2006 1:10:15 PM (Eastern Daylight Time, UTC-04:00)

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