National Instruments: Satisfying performance
National Instruments bases winning formula on customer and employee satisfaction
By Caitlin Kelly -- Movers & Shakers, 8/15/2002
It’s not hard to respect a company that achieved double-digit growth for the past 24 years, that Fortune magazine named among the 100 Best Companies to Work For in America three years in a row (1999 to 2002), and whose CEO, James Truchard, was named one of the country’s top CEOs by Worth magazine for the same three years.
 “We’re committed to keeping our research and development on track. We
didn’t cut a single project based on this economy.” James Truchard, CEO, National
Instruments |
“Fun is fundamental here,” says Truchard, a CEO as passionate about his company’s success as pruning and watering his home’s extensive gardens.
Founded in 1976, National Instruments has 2800 employees, many of whom are hired fresh out of college, skewing the average worker age to 32. Half the firm is under the age of 34, reflecting Truchard’s focus on grooming talent in-house. Using NI software and hardware, engineers and scientists worldwide can exchange information and collaborate on projects as if they were in the same room. The company’s products are used in R&D, manufacturing tests, and industrial control.
NI serves a wide array of industries, including communications, aerospace, petrochemicals, semiconductor, and automotive. No single industry represents more than 10 percent of revenues, and no customer amounts to more than 3 percent of revenue. In 2000, more than 24,000 companies around the world bought NI products.
Truchard increased the number of degreed engineers in NI’s sales force by 45 percent over the past two years. These critical staff members work closely with fellow engineers and scientists, the bulk of NI customers. “Our software really requires a technical engineer to help our customers,” Truchard says. Unlike its competitors, NI makes 86 percent of its sales directly, a potent a way to keep customers happy and to find out what new, additional products and applications they seek.
National Instruments has weathered the economic storm perhaps better than most. Revenue in 2001 dropped 6 percent, from $410 million in 2000, measured in US dollar terms; in local currency terms, it was down only 2 percent. Truchard says NI did significantly better than other players in tools and measurement. “Because we are lower-cost, when customers are short on cash they come to us,” he says.
Even with a shaky economy, NI hired 200 engineers last year. “We’re committed to keeping our research and development on track,” Truchard says. “We didn’t cut a single project based on this economy.”
Truchard says NI looks to automation as the company’s driver for growth over the next decade. As computers became even faster and more powerful, NI users will leverage that power to automate processes in their own industries, he says.
The company earned $94.7 million for the first quarter of 2002, thanks to sales of its LabVIEW Real-Time software, a graphical programming language that is NI’s flagship product, and PXI Hardware. Sales were down for the Americas by 15 percent; Europe 13 percent; Asia 1 percent and worldwide, 12 percent. At the end of 2001, revenue from the company’s computer-based measurement and automation products increased 14 percent from the previous quarter, and now represents 82 percent of revenue.
“You have to understand the company and its history, in contrast with much of the IT industry,” says Catherine Moore, a research analyst with C.E. Unterberg Towbin. “NI makes sure something works, they sell it for a reasonable price, make sure the customer is happy and then they sell them some more,” she says. This, she adds, is in contrast to many of NI’s competitors, who make “half-baked products” that force the customer to adapt.
| “They anticipate the sales cycle, and that’s where their competition is flat-footed.” Catherine Moore, C.E. Unterberg Towbin |
“The NI approach is much more conservative than any other firm I follow,” Moore says. “They don’t follow the fads, but see business as a marathon.” The company has taken its own self-reliant path to slow, steady growth, generating its own cash, Moore says. “They don’t go back to the Wall Street well.”
NI pioneered the concept of PC-based virtual instrumentation, using the inherent power of the PC for a wide variety of measurement and automation tasks—for much less than the cost of buying specialized instruments for each one. No companies compete directly with NI.
Long-term planning is NI’s strength, Moore says. “You can spend a lot of money on R&D, but you need to have leaders who are willing to invest in a market that may not be hot today. To make any car or piece of industrial machinery intelligent you’ve got to develop both the hardware and the software. NI is ready for the next generation of appliances today, although you won’t see these appliances on the market for the next five years. They anticipate the sales cycle, and that’s where their competition is flat-footed.”
“They’ve built technology for the years ahead,” Moore concludes. “I think the best is still to come.”
