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Innovation as differentiation: A fireside chat with Wim Roelandts
On the eve of departing his long-held position, the now former president and CEO of programmable-logic vendor Xilinx spoke with EDN about the future of his company, FPGA technology, and the industry.
By Ron Wilson, Executive Editor -- EDN, 1/11/2008
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One of the issues all CEOs seem to discuss these days is the environment in which public companies must work. Between the growing intrusiveness of regulation and the incessant pressure for quarterly results, is there really any freedom left for the CEO of a public company to nurture a corporate culture and conduct a meaningful strategy?
Roelandts was aggressively optimistic. "I think there is a lot of freedom left for corporate culture," he said. "The pressures are often just excuses.
"In fact, we are at a transition point. The culture you usually see today emerged in the early 19th century, along with the industrial revolution. Except for improvements along the way, it really hasn't changed much. But the world around that culture has changed. People are more educated. And today, intellectual property is more valuable than tangible property—it is IP that creates our value. The return you get on your human capital is more important then the return on the physical equipment. If your people are motivated and passionate about what they are doing, you will see that return go up. That puts a whole new value on corporate culture."
Of course Roelandts speaks from a position of earned privilege. He has been able to show consistent long-term, if not always short-term, earnings and market-share growth, and has articulated a strategy that has made sense to investors. That does a great deal to ease the quarter-to-quarter pressure and make room for harder calls, like refusing to turn to layoffs during the post-bubble days in 2001. "You have to produce the results," he admitted. "Even then there will be grumbling. But if you believe what you are doing is the right thing, the grumbling will be temporary."
Innovation and location
A solid part of the culture from which Roelandts emerged—the HP Way—was a commitment to research and development. But, can that survive in today's climate?
It must, Roelandts said. "Innovation is the only long-term differentiation we have in the global economy," he stated. But Roelandts separated basic research, which is inherently precompetitive, from product development, which is in essence proprietary. He believes that the former is the proper role of industry organizations and consortia, such as the Semiconductor Industry Association, which drives consensus on research topics and then funds university research programs in the US; or IMEC, which performs basic research in cooperation with industrial clients in Belgium. Product development, he feels, must stay within the walls of the corporation.
Roelandts added that, while the US leads China and India in R&D today, that could be a short-term advantage. "If you look at the history of technology, those two cultures have a long history of innovation," he pointed out. "Today they are catching up to the US gradually, and I think it will be a long time before they are equal in R&D. But the statistics are on their side. If successful R&D requires the best minds, they graduate a lot more engineers than we do, so statistically they must be producing more of the best engineers than we are."
Roelandts went on to say that the shift in momentum from the US to China and India was more than a matter of sheer numbers. The brain drain that for so long brought the world's best technical minds to the US is now running the other way, he said. US immigration policies send the best graduates home after their education in the US. And high US corporate tax rates send fine experienced engineers who are ready to become entrepreneurs to other companies to reap the rewards of their risks.
Turning to the FPGA industry in particular, Roelandts offered an emphatic "No" when asked whether the FPGA industry is maturing. He pointed to high-end convergence consumer devices as a growth opportunity for FPGAs, and to indications that the growth in media traffic is forcing a new round of build-out in the FPGA industry's old sweet spot, the communications/networking space. And as he has done so often, Roelandts predicted a continuing intrusion of FPGAs into the ASIC and ASSP spaces, as chip-design costs force purpose-built chips into higher- and higher-volume applications. These factors, he said, will provide plenty of growth opportunity for the FPGA.
A different growth opportunity is more technical than market-related. "We have watched enthusiasm for in-circuit reconfigurability come and go several times," he said. "But this time it seems to be different. Today we are seeing users actually employing reconfiguration in their designs. Probably the need for multiprotocol hardware is driving it the most." Roelandts said that on-the-fly reconfiguration would be a true killer application in some areas, if the design tools can adequately support it. Today, recognizing the opportunity to replace one functional block with another during operation, and setting the system up to do that, is a purely manual process of considerable complexity. "For now, I'd be happy if the tools could just support the manual process," he said.
Board involvement
So what lies ahead for Roelandts himself? The Xilinx chairman said that in retrospect, his career has traversed an evolutionary course: from working as an individual contributor to managing a group to managing a company. Now, he's looking forward to spreading his experience across a number of companies by emphasizing his work on corporate boards, both in the electronics world and in the not-for-profit sector.
Roelandts sees corporate board memberships as active, not an honorary, positions. "The role of the board is changing," he said. "There is more scrutiny of the board now, but the board should also have more involvement in the operation of the company. I think the old notion of the noninvolved board was a mistake. The board has to stay involved to represent all of the stakeholders in the organization: first, the customers, second, the employees, and lastly, the investors.
"The boards are needed because, as I mentioned, we are at a time when management philosophy has to change. The biggest challenge now is managing the people—not just compensation, but the whole work-life scenario that makes people creative."
Asked if board work might lead to work within the venture-capital community, Roelandts left that door open, saying he had a lot of friends in the investment world and would consider things that might come up. "People management is as important to the best venture capitalists as it is to public companies," he said. "They also have to get the most out of the creative people in whom they've invested.
"I think change is coming," Roelandts concluded. "Creating a culture of innovation comes when management really believes that innovation is the ultimate differentiation."
