Q: How do you double the size of ADI in the next five years and get it to $5 billion in annual sales?

Fishman: We have this base of 60,000 customers and they're in every market. For those customers, the key is having the highest performance and the best technology because the average usage of many applications is not very large. People are willing to pay more for performance. That is really the foundation important to our business which can probably grow it 10 to 15% a year.

On top of [the broader market] are verticals like digital TVs, PlayStations, cell phones, broadband and cars. Those businesses are more challenging because there are a lot fewer customers and they have a lot more to say about the price than in the horizontal markets where the price is set to performance. It's a balancing act.

Q: What's unique about your business, given such a relatively low percentage of your overall revenue comes from your top 12 to 15 companies?

Fishman: It's as much an art form as the technology we develop. What's unique is that customers don't often tell you what to do. It's not like you are Intel and you go out and visit five PC companies to find out what they want. We developed the technology and customers use it because it's there. The model of trying to service 60,000 customers who rarely know what their requirements are going to be in advance [is difficult]. That's an opportunity, but it's also a challenge because we have to run products for 20 years. You have a factory that's running new technology at the same factory that's running old technology. We run one fab with 350 different processes. It's different than running two microprocessors and some Flash memory chips.

Q: CEOs talk about listening to the customer. How much of that is marketing hyperbole and how much is real?

Fishman: There is some hyperbole there. It's a very different ear that you have to have out with the verticals and the horizontals. The concept is that all there is to figuring out the right product is going out and asking your customers what they want. Some of that is true. Some of it is not. You really want to address their needs, but customers often don't tell you that because they don't know them. Technology companies must have a good instinct about where technology is going to go. Every once in a while, you get input from customers what they want in the future. We, like most companies, all ran through the voice of the customer [thing]. I like to survey customers and ask them what they want. There is a role for that, but it's not enough.

Q: How do you shake up ADI's employees?

Fishman: We shove competitors down their throats. We are constantly looking at every competitor's event, margin, business models and products. Every time we lose a particular order or product to the competitor, we make a big deal about it. The latest thing with the sales force now is they need permission to lose an order. That caught on. Like if they sent a report and they said hey, we lost this, I'll say, "Well, who the hell authorized you to lose it?" That came out from [Motorola CEO] Ed Zander. You can't lose an order without permission.

Q: What happens if I lose an order?

Fishman: What it's really saying is it needs to be elevated. We are trying to say is you can't make that decision for us. So if you lose a significant situation and it hasn't been elevated and there's still a chance to try to win it, that's trouble.

Q: How do you motivate people when so many employees stay here for a long time?

Fishman: We challenge them by letting them work on technical things. You can yell and scream at them, but that isn't going to do much good. What most engineers really want to develop great products. They are not lazy, complacent people although there are some like that. They want to beat the ass off the competition. Some of the guys around for some time are every bit as good as they were 30 years ago. It's ego, pride, excitement and peer and industry recognition. Those things still work. We give them stock options and tell them one day they are going to be worth something. But I don't see these guys caring a whole heck of a lot about money. If anything, money is a scorecard.

Q: You said your job is managing through transitions. What transitions are you managing though now?

Fishman: The biggest one is how to take horizontal companies and build a vertical leg that has a good business model and is synergistic with the horizontal model.

Q: How are you addressing that?

Fishman: We are trying to get some common ideas up [to decide] which verticals we want to be in and how you marry the technology from horizontal markets into the verticals. You only have so many variables and dimensions on how you organize—by products, customers and geographies. If you organize around customers, there is a myriad of technology that goes to those customers, but you have to have people developing technology in different places. How do you get them all aligned around the customer? Which dimensions of the cube do you put it on? You have to figure other parts of the cube so they're not hurtful. That's the challenge.

Q: In which direction are you leaning?

Fishman: I don't know. Certain parts of the business lean toward one way and other parts the other.

Q: You've talked about the automotive business. Would that be a good vertical and what percentage of ADI's business does it represent presently?

Fishman: It's probably five percent of our sales, but you can easily see it becoming 10% or 15%. We are going to sell them a lot of sensors, integrated systems and things like telematic systems. Part of that business is product sales. Part is system sales. We are struggling trying to figure out if we should have an automotive group.

Q: What do you think?

Fishman: We are going to have to do that for automobiles because there are only about 10 customers out there that matter. Becoming an automotive supplier has so many common elements that I think that if we had 17 different product groups trying to hit those customers, we are not going to get anywhere. This is a classic example of a vertical where you could truly get to know your customer and define their needs. They would have much more input [than horizontal customers].

Q: Is China a threat or an opportunity?

Fishman: Both. It's an opportunity because there are about half a billion [consumers] over there. There's a huge market with a tremendous appetite for technology. In many ways, it's like the United States 50 years ago. There is every bit a large opportunity to build a horizontal franchise in China as there was in the U.S. or Europe. What we are trying to do in China is have balance. There are tens of thousands of companies there and those have to be our customers like they are in the U.S.

The threat side of China is not just to be a low-cost producer. China is very anxious to develop a technology infrastructure where they could develop their own products and be a world-class provider of technology, not just an importer. Eventually, there is always somebody who can build stuff at a lower per-hour wage. It used to be Taiwan. Then it was Korea and now it's China. There is always going to be another country that is going to come out and have lower wage laws. That's always a challenge for companies like us. How close and in what form do you deal with those countries? IP is has been a problem with Asian companies for the past 20 years. How much do we want teach them about our valued technologies? The real question is whether to infuse technology into customers today who you might be competing with tomorrow.

Q: What do you think of Chinese companies, some government-backed, buying American companies?

Fishman: I am a free market person. The market is going to decide and I think that government gets in the way. There is a market out there and everything eventually comes into balance. Even the currency comes into balance. We might have to wait for a while and there might be uncertainties along the way, but eventually the markets will settle it.

Q: You sound very cautious about forming partnerships in China.

Fishman: It's certainly something we can't go into without thinking about it. On the other hand, there is a huge opportunity so you can't coil up in the corner and say we are going to protect everything we have and lose opportunities.

Q: Do you see China become a center of innovation?

Fishman: I think so. The university system, which is a good indicator, is first class in China. The ambition levels of the young people coming out of universities [is high]. They're educated, hard working and aggressive. That's usually the precursor to becoming a very innovative technology market. The Chinese government is working well with industry and many companies to help them.

Q: Doesn't heavy government backing provide an unfair advantage that purely free market economies do not enjoy?

Fishman: Everybody has the same ingredients here. Everyone has a government. Everyone has an industry and everybody has a university. The question is if everybody is willing to work together rather than be at odds. Where there is a partnership between those contingencies will do the best.

Q: What other regions besides China do you see as emerging?

Fishman: I think Europe if you look at the university system and the technical abilities of the people of these countries. When it was an oppressed society, they couldn't do it. Societies are opening up so they can do it now. There are many areas in Asia such as Korea, sort of the way Japan was [years ago]. Samsung and LG are huge companies that have massive potential for takeovers. You go to the store and it's no longer bad to buy a Samsung TV. Thirty years ago, you'd buy a TV from RCA–if you wanted a piece of junk, you'd buy one from Samsung or from Japanese companies.