Xilinx: Simply fabless, dahling!

Lack of manufacturing leaves programmable-logic developer free to focus on design and thrive in tough conditions.

By J.D. Mosley-Matchett -- Movers and Shakers, 6/15/2001

	AT A GLANCE
	Xilinx San Jose, CA www.xilinx.com 2000 revenue: $1.0 billion 2000 net income: $652.5 million Nasdaq symbol: XLNX Share price (as of 4/23/01): $44.80 52-week high: $98.31 52-week low: $29.79

In the five years since Willem “Wim” P Roelandts was named president and CEO of Xilinx, his company has faced three economic downturns and an investment marketplace that defies all logic. Yet Xilinx has thrived. Roelandts credits three elements as the key factors in that success: a world-class work environment, a customer-centered culture, and an absolutely fabless workplace.

By outsourcing the actual production of the programmable-logic devices that Xilinx develops, Roelandts can concentrate his people’s efforts on developing solutions for the company’s customers. However, Roelandts remembers when the wisdom of being a chip company without a manufacturing plant was hotly debated. The issue of control permeated the arguments presented by those who opposed the concept.

Fortunately, the lack of a captive fabrication facility has proven to be one of the principle elements in Xilinx’s success. In particular, the resulting freedom to specialize in developing innovative designs, rather than devoting precious resources to maintaining a production complex, gives Xilinx a huge advantage when the economy declines. Without the fixed costs and overhead associated with a manufacturing facility, it’s an easy business decision to adjust production volumes in response to customer demand.

Sales represents another area where Xilinx has been able to reduce its overhead. Roelandts explains that the company’s use of electronic component distributors and independent sales companies gives Xilinx a further benefit by eliminating the expense of maintaining a direct sales force. This, too, works to leverage Roelandts’ strategy of running a lean organization in order to remain prepared for alternating demand cycles. If sales drop, the cost of selling the products also drops.

Yet running lean does not mean cutting corners or mistreating workers. In fact, Roelandts proudly notes that Fortune magazine named Xilinx one of the top 100 best companies to work for. Attracting, retaining, and developing key people are critical focal points for Roelandts. He enjoys pointing out that last year, when so many Silicon Valley high-tech companies were experiencing attrition rates of 20 percent or more, Xilinx’s rate remained around 5 percent.

The secret is to strike an effective balance between extreme managerial styles. In Roelandts’ view, companies that embrace consensus management lack the ability to respond promptly to today’s increasingly dynamic business environment. On the other hand, companies with relentless schedules that intentionally “burn people out” while promising future riches tend to impose a coercive atmosphere that fails to treat people with respect.

	Willem P Roelandts, President and CEO, Xilinx

Instead, Roelandts advocates creating a challenging environment where people enjoy working. Teamwork is a central element in the Xilinx culture. No fault-finding. No finger-pointing. Instead, if someone makes a mistake, everyone is expected to chip in and help to rectify the situation.

Xilinx offers a hard, business-driven environment. But the driving force doesn’t come from upper management; instead, it comes from within the employees themselves. Roelandts shoulders the responsibility for fostering that environment because he recognizes that keeping employees satisfied leads directly to increased customer satisfaction.

Another clue as to how Roelandts boosts customer satisfaction lies in his emphatic assertion that Xilinx is not a chip company. Rather, he believes that it is more accurately recognized as a solutions company. “Time-to-market is the key we sell,” he says. By determining what advantage each customer is seeking and then meeting those desires, Xilinx has transformed itself from simply being a component supplier to being a strategic partner for every one of its client companies.

Such a tailored approach to customer needs is central to the Xilinx corporate culture. “We really create a lot of value for our customers,” Roelandts says. “That translates into high profit margins.” Greater profitability also translates into stable employment—an important incentive in light of the massive number of layoffs that have recently hit the high-tech arena.

So, what does it take to manage a company like Xilinx? Roelandts cites good organizational skills, stability, integrity, and efficiency. Well-honed communication skills cannot be discounted. But the most important factor is continuous education.

“You have to be better tomorrow than today,” he says. “Your job is to continue to expand your capabilities and your horizons.” Roelandts recommends reading and coaching, but declares that studying a successful mentor is the best way to learn how to succeed.

One of his personal mentors was Dave Packard, co-founder of Hewlett-Packard, where Roelandts served as a senior vice president and general manager for several different divisions. Another is Bernard Vonderschmitt, the co-founder and former CEO of Xilinx, who remains chairman of the board. Roelandts further observes that even customers can be great role models, as can leaders in industries other than one’s own.

In general, the advice that Roelandts offers captains of industry is applicable to anyone who hopes to succeed in a world of endless innovation. “Continue to expand your capabilities and your horizon,” he urges. “Always ask yourself, ‘How can we do this better? Are things changing? Are there new technologies that allow us to do a better job?’ You have to be open to new ideas.”