Successful companies usually have a way of doing things. We certainly did when I was at Maxim Integrated Products. Jack Gifford, our CEO, called it “The Maxim way.”
And our way was unbelievably successful. Every year, like a clock, revenue and profits grew at 40 percent per year. The company grew to $2 billion/year in revenue with close to 40% net margins. It was literally a cash machine.
But, and this is a big but, as we grew, our thinking became more entrenched too.
It’s natural and normal for a big, successful company to take less risk as it grows. Your startup can take advantage of this.
For example, we had a product evaluation process at Maxim that we called RODT (Return on Design Time). The idea was that design engineers were the most precious resource in the company, so you should optimize your new product choices for the best RODT.
On paper this was a great idea. In fact, it was such a great idea that I used this same basic process, with some tweaks, when I started my company. However, the system could be gamed. Let me explain.
The simple equation for RODT was the Return (the profitability over the lifetime of the product) divided by Design Time. So…
